<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY , 1998
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
(EXACT NAME OF CO-REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 87-0365268
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
EAGLE & TAYLOR COMPANY FORTE, INC. WESTERN INSULATED GLASS, CO.
(EXACT NAME OF CO-REGISTRANT AS (EXACT NAME OF CO-REGISTRANT AS (EXACT NAME OF CO-REGISTRANT AS
SPECIFIED IN SPECIFIED IN SPECIFIED IN
ITS CHARTER) ITS CHARTER) ITS CHARTER)
DELAWARE OHIO ARIZONA
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION INCORPORATION INCORPORATION
OR ORGANIZATION) OR ORGANIZATION) OR ORGANIZATION)
34-1834358 34-1642023 86-0270495
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
THERMETIC GLASS, INC. BINNINGS BUILDING PRODUCTS, INC. DCI/DWC ACQUISITION CORPORATION
(EXACT NAME OF CO-REGISTRANT AS (EXACT NAME OF CO-REGISTRANT AS (EXACT NAME OF CO-REGISTRANT AS
SPECIFIED IN SPECIFIED IN SPECIFIED IN
ITS CHARTER) ITS CHARTER) ITS CHARTER)
DELAWARE DELAWARE DELAWARE
STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION INCORPORATION INCORPORATION
OR ORGANIZATION) OR ORGANIZATION) OR ORGANIZATION)
31-1545334 13-3325772 34-1851239
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
MODERN WINDOW ACQUISITION CORPORATION AMERICAN GLASSMITH ACQUISITION
(EXACT NAME OF CO-REGISTRANT AS CORPORATION
SPECIFIED IN (EXACT NAME OF CO-REGISTRANT AS
ITS CHARTER) SPECIFIED IN
DELAWARE ITS CHARTER)
(STATE OR OTHER JURISDICTION OF DELAWARE
INCORPORATION (STATE OR OTHER JURISDICTION OF
OR ORGANIZATION) INCORPORATION
31-1555134 OR ORGANIZATION)
(I.R.S. EMPLOYER IDENTIFICATION NO.) 34-1851339
(I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
2431
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
<TABLE>
<S> <C>
755 BOARDMAN-CANFIELD ROAD FRANK J. AMEDIA
BOARDMAN, OHIO 44512 755 BOARDMAN-CANFIELD ROAD
(330) 965-9910 BOARDMAN, OHIO 44512
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (330) 965-9910
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
------------------------
COPIES TO:
CHRISTOPHER D. JOHNSON
SQUIRE, SANDERS & DEMPSEY L.L.P.
40 NORTH CENTRAL AVENUE
PHOENIX, ARIZONA 85004
(602) 528-4000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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. [ ]
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF MAXIMUM OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO BE PRICE AMOUNT OF REGISTRATION
REGISTERED(1) REGISTERED PER NOTE OFFERING PRICE FEE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
11 3/4% Senior Notes due 2007 $125,000,000 100% $125,000,000 $36,875.00
- ------------------------------------------------------------------------------------------------------------------------
Guarantees of 11 3/4% Senior Notes due 2007 (2) (2) (2) (2)
========================================================================================================================
</TABLE>
(1) The issuer of the Notes registered hereby is American Architectural Products
Corporation. The guarantees registered hereby are made by Eagle & Taylor
Company, Forte, Inc., Western Insulated Glass, Co., Thermetic Glass, Inc.,
Binnings Building Products, Inc., DCI/DWC Acquisition Corporation, Modern
Window Acquisition Corporation and American Glassmith Acquisition
Corporation.
(2) No additional consideration will be received for the guarantees of the Notes
registered hereby.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
SUBJECT TO COMPLETION, DATED JANUARY , 1998
PROSPECTUS
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
[LOGO]
OFFER TO EXCHANGE ITS 11 3/4% SENIOR NOTES DUE 2007 THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
11 3/4% SENIOR NOTES DUE 2007
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED
American Architectural Products Corporation, a Delaware corporation (the
"Company"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus (as the same may be amended or supplemented from time
to time, this "Prospectus") and in the accompanying Letter of Transmittal (the
"Exchange Offer"), to exchange its 11 3/4 % Senior Notes due 2007 (the "Exchange
Notes") for a like aggregate principal amount of its outstanding 11 3/4% Senior
Notes due 2007 (the "Outstanding Notes"), of which an aggregate principal amount
of $125,000,000 is outstanding as of the date hereof. The form and the terms of
the Exchange Notes will be the same in all material respects as the form and
terms of each of the Outstanding Notes, except that (i) the Exchange Notes will
be registered under the Securities Act of 1933, as amended (the "Securities
Act"), and hence will not bear legends restricting the transfer thereof and (ii)
holders of the Exchange Notes will not be entitled to certain rights of holders
of Outstanding Notes under the Exchange and Registration Rights Agreement dated
December 10, 1997 (the "Registration Rights Agreement"). See "The Exchange
Offer -- Purpose and Effect of the Exchange Offer." The Exchange Notes will be
initially issued as a single, permanent global certificate. See "Description of
Exchange Notes."
The Outstanding Notes were issued and sold in a transaction exempt from the
registration requirements of the Securities Act and may not be offered or sold
in the United States unless so registered or pursuant to an applicable exemption
under the Securities Act. The Exchange Notes are being offered herewith in order
to satisfy certain obligations of the Company contained in the Registration
Rights Agreement. Based on no-action letters issued by the staff of the
Securities and Exchange Commission (the "Commission") to third parties, the
Company believes that the Exchange Notes to be issued pursuant to the Exchange
Offer may be offered for resale, resold and otherwise transferred by holders
thereof (other than (i) a broker-dealer who purchases such Exchange Notes from
the Company to resell pursuant to Rule 144A or any other available exemption
under the Securities Act, or (ii) a person 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 Exchange Notes are acquired in the ordinary course of such
holders' business and such holders have no arrangement with any person to
participate in the distribution of such Exchange Notes. However, the Company has
not sought a no-action letter with respect to the Exchange Offer and there can
be no assurance the staff of the Commission would make a similar determination
with respect to the Exchange Offer. Eligible holders wishing to accept the
Exchange Offer must represent to the Company that such conditions have been met.
Each broker-dealer that receives Exchange Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange 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. A broker-dealer may nonetheless be deemed to be an
"underwriter" under the Securities Act notwithstanding such disclaimer. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Outstanding Notes where such Outstanding Notes were acquired by
<PAGE> 3
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
Holders of Outstanding Notes whose Outstanding Notes are not tendered and
accepted in the Exchange Offer will continue to hold such Outstanding Notes and
will be entitled to all the rights and preferences and will be subject to the
limitations applicable thereto under the indenture governing the Outstanding
Notes and the Exchange Notes. Following consummation of the Exchange Offer, the
holders of Outstanding Notes will continue to be subject to the existing
restrictions upon transfer thereof and the Company will have no further
obligation to such holders to provide for the registration under the Securities
Act of the Outstanding Notes held by them. The Exchange Notes will evidence the
same debt as the Outstanding Notes and will be entitled to the benefits of the
indenture (the "Indenture"), dated December 10, 1997, governing the Outstanding
Notes and the Exchange Notes. The Outstanding Notes and the Exchange Notes are
sometimes referred to herein collectively as the "Notes."
The Notes will bear interest at the rate of 11 3/4% per annum, payable
semi-annually on June 1 and December 1, commencing June 1, 1998. The Notes will
mature on December 1, 2007. Except as described below, the Company may not
redeem the Notes prior to December 1, 2002. On or after such date, the Company
may redeem the Notes, in whole or in part, at any time, at the redemption prices
set forth herein, together with accrued and unpaid interest, if any, to the date
of redemption. In addition, at any time and from time to time on or prior to
December 1, 2000, the Company may, subject to certain requirements, redeem up to
35% of the aggregate principal amount of the Notes with the cash proceeds of one
or more public Equity Offerings (as defined) at a redemption price equal to
110.0% of the principal amount to be redeemed, together with accrued and unpaid
interest, if any, to the date of redemption, provided, that at least $82.0
million of the aggregate principal amount of the Notes remain outstanding
immediately after each such redemption. The Notes will not be subject to any
sinking fund requirement. Upon the occurrence of a Change of Control (as
defined), the Company will be required to make an offer to repurchase the Notes
at a price equal to 101% of the principal amount thereof, together with accrued
and unpaid interest, if any, to the date of repurchase. There can be no
assurance that the Company will have funds available to repurchase the Notes
upon the occurrence of a Change of Control. See "Description of Exchange
Notes -- Optional Redemption -- Optional Redemption Upon Equity Offering" and
"Risk Factors -- Change of Control." Other than change of control provisions and
other restrictive covenants, including limitations on indebtedness and
restricted payments, as applicable, the Indenture does not contain any
provisions that afford holders of the Notes protection in the event of a highly
leveraged or other transaction that may adversely affect such holders. See
"Description of Exchange Notes" and "Risk Factors -- Substantial Leverage;
Ability to Service Debt" and "-- Change of Control."
The Outstanding Notes are and the Exchange Notes will be senior obligations
of the Company. The Outstanding Notes rank and the Exchange Notes will rank pari
passu in right of payment with all existing and future Senior Indebtedness (as
defined) of the Company and senior to all existing and future Subordinated
Obligations (as defined) of the Company. The Outstanding Notes are, and the
Exchange Notes will be, unconditionally guaranteed (the "Guarantees") by each of
the Company's subsidiaries on the issue date of the Notes and by each subsidiary
(excluding Unrestricted Subsidiaries (as defined)) of the Company acquired
thereafter (collectively, the "Subsidiary Guarantors"). The Guarantees are and
will be senior unsecured obligations of the Subsidiary Guarantors and rank and
will rank pari passu in right of payment with all existing and future Senior
Indebtedness of the Subsidiary Guarantors and senior in right of payment to all
Subordinated Obligations of the Subsidiary Guarantors.
The Exchange Offer is not conditioned on any minimum aggregate principal
amount of Outstanding Notes being tendered for exchange. The Company will accept
for exchange any and all validly tendered Outstanding Notes not withdrawn prior
to 5:00 p.m., New York City time, on , 1998 unless extended by the
Company, (the "Expiration Date"). Tenders of Outstanding Notes may be withdrawn
at any time prior to the Expiration Date. The Exchange Offer is subject to
certain customary conditions. See "The Exchange Offer -- Conditions." The
Company has agreed to pay all expenses incident to the Exchange Offer. The
Company will not receive any proceeds from the Exchange Offer.
2
<PAGE> 4
The Outstanding Notes, which have been designated for trading on the PORTAL
Market, constitute securities for which there is no established trading market.
Any Outstanding Notes not tendered and accepted in the Exchange Offer will
remain outstanding. The Company does not currently intend to list the Exchange
Notes on any securities exchange. To the extent that any Outstanding Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Outstanding Notes could be adversely affected. No assurances can be
given as to the liquidity of the trading market for either the Outstanding Notes
or the Exchange Notes.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OUTSTANDING NOTES IN ANY JURISDICTION
IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
THE NOTES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY HOLDERS WHO TENDER THEIR OUTSTANDING NOTES IN THE EXCHANGE OFFER.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
3
<PAGE> 5
AVAILABLE INFORMATION
The Company and the Subsidiary Guarantors have filed with the Commission a
registration statement on Form S-4 (herein, together with all amendments and
exhibits, referred to as the "Registration Statement") under the Securities Act
with respect to the Exchange Notes offered hereby. This Prospectus, which forms
a part of the Registration Statement, does not contain all of the information
set forth in the Registration Statement and the exhibits thereto, certain parts
of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company, the Subsidiary
Guarantors and the Exchange Notes offered hereby, reference is made to the
Registration Statement. Any statements made in this Prospectus concerning the
provisions of certain documents 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 otherwise filed with the Commission.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder, and in accordance therewith files periodic
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as the following regional offices:
7 World Trade Center, Suite 1300, New York, NY 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60601. Copies of such
material may be obtained from the Public Reference Section of the Commission at
its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon
payment of the fees prescribed by the Commission. The Commission maintains a Web
site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants, such as the Company,
that file electronically with the Commission.
In addition, the Company has agreed that, whether or not it is required to
do so by the rules and regulations of the Commission, for so long as any Notes
remain outstanding, it will furnish to the holders of the Notes and, to the
extent permitted by applicable law or regulation, file with the Commission (i)
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 the Company
were required to file such Forms including, with respect to the annual
information only, a report thereof by the Company's independent certified public
accountants and (ii) all reports that would be required to be filed on Form 8-K
if the Company were required to file such reports. In addition, for so long as
any of the Notes remain outstanding, the Company has agreed to make available to
any prospective purchaser of the Notes or beneficial owner of the Notes, in
connection with any sale thereof, the information required by Rule 144A(d)(4)
under the Securities Act.
FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus under the captions "Prospectus
Summary," "Use of Proceeds," "Risk Factors," "Unaudited Pro Forma Consolidated
Financial Statements," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other important factors that could cause the
actual results, performance or achievements of the Company, or industry results,
to differ materially from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such risks,
uncertainties and other important factors include, among others: failure to
successfully integrate the Acquisitions into the Company's business; general
economic and business conditions; industry trends; competition; raw material
costs and availability; loss of any significant customers; changes in business
strategy or development plans; availability, terms and deployment of capital;
availability of qualified personnel and other factors referenced in this
Prospectus. See "Risk Factors." These forward-looking statements speak only as
of the date of this Prospectus, and the Company expressly disclaims any
obligation or undertaking to disseminate any updates or revisions to any
forward-looking statement contained herein to reflect any change
4
<PAGE> 6
in the Company's expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based.
INDUSTRY DATA AND CERTAIN DEFINED TERMS
Unless otherwise indicated, all references in this Prospectus to industry
market data are derived from sources believed by the Company to be reliable.
As used in this Prospectus, the following terms refer to the following
existing subsidiaries of the Company: "ETC" refers to Eagle & Taylor Company, a
Delaware corporation formerly known as American Architectural Products, Inc.;
"Forte" refers to Forte, Inc., an Ohio corporation; "Western" refers to Western
Insulated Glass, Co., an Arizona corporation; and "Thermetic" refers to
Thermetic Glass, Inc., a Delaware corporation. In 1996, Eagle Window & Door,
Inc. ("Eagle"), Taylor Building Products Company ("Taylor"), Mallyclad
Corporation ("Mallyclad") and Vyn-L Corporation ("Vyn-L") were merged into ETC.
Eagle, Taylor and Mallyclad currently are operating divisions of ETC.
TRADEMARKS
The Company and its subsidiaries have registered trademarks on brand names
contained in this Prospectus, including Eagle(R), Encore(R) and Perma-Door(R).
This Prospectus also contains brand names and trademarks of companies other than
the Company and its subsidiaries.
5
<PAGE> 7
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information and financial statements, including
the notes thereto, contained elsewhere in this Prospectus. Unless otherwise
indicated, all information contained herein assumes the consummation by the
Company of the acquisitions of Binnings Building Products, Inc. ("Binnings"),
Danvid Company, Inc. and Danvid Window Company (collectively, "Danvid"),
American Glassmith, Inc. ("American Glassmith") and Modern Window Corporation
("Modern") (each an "Acquisition" and, collectively, the "Acquisitions") which
occurred on December 10, 1997. "EBITDA" refers to earnings before interest,
taxes, depreciation and amortization. Investors should carefully consider the
information set forth under the heading "Risk Factors."
THE COMPANY
American Architectural Products Corporation (the "Company" or "AAPC") is a
leading manufacturer and distributor of a broadly diversified line of windows,
doors and related products (collectively, "fenestration products") designed to
meet a variety of residential consumer demands in both the new construction and
repair/remodel markets. The Company distributes its products regionally
throughout the United States under a number of well-established brand names that
are recognized for their quality, value, engineering and customer service,
including "Eagle", "Taylor", "Perma-Door", "Binnings", "Danvid", "Western" and
"Encore." This brand name recognition and reputation have enabled the Company to
establish long-standing relationships with leading wholesalers, lumberyards,
do-it-yourself home centers, architects and building contractors. The Company's
products are marketed and distributed in all 48 contiguous states and are
manufactured in 11 separate facilities. Management believes that the Company's
broad product line, recognized brand names and national geographic scope enable
the Company to satisfy distinct regional product preferences and target fast
growing markets, thereby minimizing the Company's reliance on any single
geographic region. Management believes that the Company is a leading supplier of
residential fenestration products in each of the major regional markets in which
it competes. The Company's pro forma net sales and pro forma EBITDA were $176.4
million and $12.7 million, respectively, for the year ended December 31, 1996,
and $144.3 million and $11.9 million, respectively, for the nine months ended
September 30, 1997.
Total U.S. construction expenditures in 1996 were approximately $451
billion, of which residential construction expenditures comprised approximately
$179 billion. Residential fenestration product sales totaled approximately $15.1
billion in 1996, $7.9 billion of which represented sales to the new construction
market and $7.2 billion of which represented sales to the repair/remodel market.
Of the Company's total 1996 pro forma net sales, approximately 86% was
attributable to residential fenestration products. The National Wood Window and
Door Association ("NWWDA") has estimated that total U.S. sales of residential
windows, which represented approximately 67% of the Company's pro forma net
sales in 1996, increased from 33.4 million units in 1991 to 46.6 million units
in 1996, representing a compound annual growth rate ("CAGR") of 6.9%, and that
sales of residential entry doors, which represented approximately 17% of the
Company's pro forma net sales in 1996, increased from 11.2 million units in 1994
to 12.5 million units in 1996, representing a CAGR of 5.6%. Residential window
and door sales are expected to continue to increase over the next several years,
with NWWDA forecasting sales of residential windows and entry doors of 51.9
million units and 13.8 million units, respectively, in the year 2000. Management
believes that the residential fenestration products market is generally faster
growing and more stable than the commercial fenestration products market, with
relatively greater resistance to economic downturns and changes in interest
rates, especially in the repair/remodel sector.
The residential market is highly fragmented, which provides the Company
with a competitive advantage in the regions it serves as a single source
supplier of a broad array of brand name products. In 1995, the single largest
fenestration company in the U.S. had annual revenues of less than 6% of total
industry sales, and the 100 largest fenestration companies in the aggregate
comprised less than 50% of total industry sales. This industry fragmentation
presents significant opportunities for growth through acquisitions, a strategy
that the Company has been successful in implementing to date.
6
<PAGE> 8
The Company is one of a limited number of window and door manufacturers
which offer a broadly diversified product line, consisting of aluminum windows,
wood windows, polyvinyl chloride ("vinyl") windows, doors and other fenestration
products. Aluminum windows, which tend to be less expensive but also less
thermally efficient than wood or vinyl, are used primarily in the Southeastern,
Southern and Southwestern regions where thermal efficiency is not as important
as in other regions. Vinyl windows, which are the fastest growing segment of the
window market, are gaining in popularity due to their thermal efficiency, price
advantage over wood windows and improved composition technologies. Wood windows
are generally more expensive, although also more thermally efficient, than vinyl
or aluminum, and remain the preferred choice in medium- to high-end residential
architectural applications. While the Company markets its aluminum, vinyl and
wood products to specific markets based on distinct geographic preferences, the
Company's national manufacturing and distribution network and its diverse
product line allow the Company to respond efficiently to shifts in regional
consumer preferences and reduce the Company's reliance on any single geographic
region. The following table summarizes the percentage of pro forma net sales for
the nine months ended September 30, 1997 contributed by each of the Company's
main product categories:
<TABLE>
<CAPTION>
PRODUCT CATEGORY SELECTED MAJOR BRAND NAMES GEOGRAPHIC FOCUS PERCENTAGE
-------------------- -------------------------- ----------------------------- ----------
<S> <C> <C> <C>
Aluminum Windows.... Binnings, Danvid, Western Southwest, Southeast, Midwest 36%
Wood Windows........ Eagle National 24
Vinyl Windows....... Vinyline, Modernview Southwest, Southeast, Midwest 15
Doors............... Taylor, Perma-Door, Encore National 19
Other Products...... Sumiglass National 6
---
Total 100%
===
</TABLE>
The Company was formed through the consolidation of a number of
well-established fenestration products companies. In December 1996, the Company
combined Eagle, Taylor and Mallyclad with Forte, which commenced operations in
1989. The Company subsequently acquired Western in March 1997, Thermetic in July
1997 and each of Binnings, Danvid, American Glassmith and Modern in December
1997. The Company's strategy in combining these companies is to capitalize on
recognized brand names, broad geographic presence, regional market leadership,
reputation for superior product quality and customer service and multi-channel
distribution capabilities. The Company has developed a detailed cost savings and
integration strategy with respect to acquired companies, which includes the
consolidation of certain purchasing, production, administrative, sales and
management functions. The Company integrates the marketing efforts and
distribution network of each acquired entity with the Company's systems to
generate a broader overall distribution system for all of its products. The
Company's business plan includes diversifying and strengthening its product base
by acquiring additional fenestration products companies and related material
manufacturers which complement and enhance the Company's existing product lines,
distribution capabilities and marketing strategy.
The Company's principal executive offices are located at 755
Boardman-Canfield Road, South Bridge Executive Center, Building G West,
Boardman, Ohio 44512 and its telephone number is (330) 965-9910.
COMPETITIVE STRENGTHS
The Company's market leadership and financial performance are attributable
to a number of factors, including the following:
- - LEADING SHARE IN PRIMARY MARKETS
The Company believes it is a leading supplier of windows and doors for
residential consumers in each of the major regional markets it serves. The
Company's market position provides significant advantages over the Company's
smaller competitors in these highly fragmented markets due to purchasing,
manufacturing and distribution efficiencies.
7
<PAGE> 9
- - ESTABLISHED AND RECOGNIZED BRAND NAMES
The Company believes many of its windows and doors receive national and
regional brand recognition, including products marketed under the "Eagle",
"Taylor", "Binnings", "Danvid", "Western", "Perma-Door", "Vinyline",
"Modernview", "Encore" and "Sumiglass" brand names. The Company believes that
each of these brands has an established reputation within the fenestration
products industry for high quality, precision engineering and superior customer
service. The Company believes the strength of its brand names and reputation
will assist the Company in penetrating new markets and expanding distribution in
existing markets.
- - BROAD RANGE OF COMPLEMENTARY PRODUCTS
The Company is one of a limited number of window and door manufacturers
that offers a diversified product line consisting of aluminum, vinyl and wood
products. This diversity allows the Company to capture a broader customer base
by targeting specific economic and geographic regions with products tailored to
meet each region's particular preferences. Additionally, the Company can offer
wholesalers and do-it-yourself home center buyers a "one-stop" shopping solution
for many of their window and door needs.
- - STRENGTH IN MULTIPLE DISTRIBUTION CHANNELS
The Company distributes its products through a combination of sales to
wholesalers, lumberyards and do-it-yourself home centers and direct sales to
architects and independent building contractors. The Company believes that this
distribution strategy maximizes the Company's market penetration and reduces
reliance upon any single distribution channel for the sale of its products. In
addition, the Company has developed many long-standing relationships with key
distributors, which management believes provides the Company with a competitive
advantage as the Company further develops its national sales strategy.
- - NATIONAL GEOGRAPHIC SCOPE
While the Company focuses on marketing its aluminum, vinyl and wood
products to specific regional markets based on distinct regional preferences,
the Company's operations form a strong national manufacturing and distribution
network. This national geographic scope, together with the Company's broad
product line, enables the Company to rapidly respond to shifts in regional
consumer demand and reduces the Company's reliance on any single geographic
region for the sale of its products.
- - EMPHASIS ON RESIDENTIAL MARKET
The Company targets its marketing and distribution efforts primarily to the
residential fenestration market. Management believes that the residential
fenestration products market is generally faster growing and more stable than
the commercial fenestration products market, with relatively greater resistance
to economic downturns and changes in interest rates, especially in the
repair/remodel sector. Further, the residential market is highly fragmented,
which offers the Company a competitive advantage as a single source supplier of
a broad array of brand name residential products.
- - EXPERIENCED ENTREPRENEURIAL MANAGEMENT
The Company's management team has extensive experience in the fenestration
products industry. Collectively, the Company's top five executive officers have
a total of 95 years of experience in manufacturing and distributing windows and
doors. In addition, management has a strong track record of acquiring businesses
and integrating them into the existing operations of the Company. Eagle and
Taylor, which were acquired by the Company in August 1996, have experienced
increases in EBITDA from $(4.0) million for the fiscal year ended December 31,
1995 to an annualized $8.2 million based on results for the nine months ended
September 30, 1997. The Company's officers, including the Chairman of the Board,
collectively have had significant involvement in more than 130 acquisition
transactions. As of September 30, 1997, the Company's executive officers and
directors collectively owned 83.9% of the Company's outstanding Common Stock.
8
<PAGE> 10
BUSINESS STRATEGY
In order to enhance its leading market position and to maximize
profitability and cash flow, the Company's principal strategic objectives are as
follows:
- - LEVERAGE NATIONAL DISTRIBUTION SYSTEM, PRODUCT LINES AND BRAND NAME
RECOGNITION
The Company will seek to use its nationwide distribution system and broad
product line to penetrate new markets and increase share in existing markets. In
addition, management plans to leverage the Company's national scope by targeting
fast growing regions, thereby enhancing growth potential and reducing the
Company's dependence on any single geographic market. The Company also plans to
continue to capitalize on its well-recognized brand names and reputation for
quality and service to increase revenues by cross-selling its products through
its multiple distribution channels.
- - CONSOLIDATE OPERATIONS TO ACHIEVE COST SAVINGS AND BROADEN DISTRIBUTION
The Company has developed a detailed cost savings and integration strategy
with respect to acquired companies, which includes the consolidation of certain
administrative, sales and management functions. As the Company continues to
expand through acquisitions and internal growth, it will benefit from increased
size and the ability to gain purchasing leverage with its suppliers, thereby
reducing the costs of raw materials used in the manufacturing process. The
Company integrates the marketing efforts and distribution network of each
acquired entity with the Company's existing marketing and distribution systems
to generate a broader overall distribution system for both its existing products
and the newly acquired products. Through these and other measures, the Company
believes that it can effectively enhance the productivity and profitability of
the businesses it acquires and develop synergies with its existing businesses.
- - PURSUE STRATEGIC, COMPLEMENTARY ACQUISITION OPPORTUNITIES
The Company's business plan is to increase the Company's market share and
geographic and product diversity through additional acquisitions of established
fenestration product companies and related material manufacturers. Because the
fenestration industry is highly fragmented, the Company believes that
significant opportunities exist to make selected strategic acquisitions at
attractive valuations. The Company seeks out acquisition candidates that are
leaders in national or regional markets and that possess recognized brand names,
established reputations for superior customer service, strong existing
management and stable customer bases. Strategic acquisitions will allow the
Company to (i) further leverage its highly recognized brand names, (ii) achieve
significant cost reductions through centralized purchasing, sharing central
administrative services and application of the Company's best operating and
management practices, and (iii) further diversify the Company's geographic,
product and market focus.
- - EXPANSION OF VINYL PRODUCTS BUSINESS
The Company plans to expand its presence in the vinyl window and door
market, which is projected to be the fastest growing sector for residential
fenestration product sales. The acquisitions of Binnings, Danvid, Thermetic and
Modern provide the Company with a significant platform of vinyl fenestration
products and customers. Management intends to use the Company's well-recognized
brand names and established distribution channels to help it further penetrate
the highly fragmented vinyl window and door market.
- - VERTICAL INTEGRATION AND PRODUCTION EFFICIENCIES
The Company believes that it can reduce its operating costs and improve its
margins through vertical integration of its aluminum extrusion and decorative
glass production capabilities, along with any vinyl extrusion capacity that the
Company may develop, with its window and door manufacturing operations.
Additional cost savings can be realized through rationalization of product
lines, reconfiguration of production processes, reduction of inventory levels
and implementation of uniform management information systems across the
Company's various operating divisions. Improved gross margins would provide
increased pricing flexibility in relation to the Company's competitors.
9
<PAGE> 11
THE EXCHANGE OFFER
Issuer..................... American Architectural Products Corporation
Outstanding Notes.......... The Outstanding Notes were sold by the Company on
December 10, 1997 to NatWest Capital Markets
Limited and McDonald & Company Securities, Inc.
(collectively, the "Initial Purchasers") pursuant
to a Purchase Agreement, dated December 4, 1997
(the "Purchase Agreement"). The Initial Purchasers
subsequently resold the Outstanding Notes to
qualified institutional buyers pursuant to Rule
144A under the Securities Act or institutional
"accredited investors" (as defined in Rule 501
(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) or outside the United States in
compliance with Regulation S under the Securities
Act.
Registration Rights
Agreement.................. Pursuant to the Purchase Agreement, the Company and
the Initial Purchasers entered into the
Registration Rights Agreement, which grants the
holders of the Outstanding Notes certain exchange
and registration rights. The Exchange Offer is
intended to satisfy such exchange and registration
rights which terminate upon the consummation of the
Exchange Offer.
Securities Offered......... $125,000,000 aggregate principal amount of 11 3/4%
Senior Notes due 2007 (the "Exchange Notes").
The Exchange Offer......... The Company is offering to exchange $1,000
principal amount of Exchange Notes for each $1,000
principal amount of Outstanding Notes that are
properly tendered and accepted. The Company will
issue Exchange Notes on or promptly after the
Expiration Date. As of the date hereof, there is
$125,000,000 aggregate principal amount of
Outstanding Notes outstanding. The terms of the
Exchange Notes are identical in all material
respects to the terms of the Outstanding Notes for
which they may be exchanged pursuant to the
Exchange Offer, except that the Exchange Notes are
freely transferable by holders thereof (other than
as provided herein), and are not subject to any
covenant restricting transfer absent registration
under the Securities Act. See "The Exchange Offer".
The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Outstanding
Notes being tendered for exchange.
Based on no-action letters issued by the staff of
the Commission to third parties with respect to
similar transactions, the Company believes that the
Exchange Notes issued pursuant to the Exchange
Offer in exchange for Outstanding Notes may be
offered for resale, resold and otherwise
transferred by holders thereof (other than (i) a
broker-dealer who purchases such Exchange Notes
from the Company to resell pursuant to Rule 144A or
any other available exemption under the Securities
Act, or (ii) a person that is an "affiliate" of the
Company within the meaning of Rule 405 of the
Securities Act) without compliance with the
registration and prospectus delivery requirements
of the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such
holders' business and such holders are not engaged
in, have no arrangement or understanding with any
person to participate in, and do not intend to
engage in, any distribution of the Exchange Notes.
However, the Company has not sought a no-action
letter with respect to the Exchange Offer and there
can be no assurance that the staff of the
Commission would make a similar determination with
respect to the
10
<PAGE> 12
Exchange Offer. Each holder of Exchange Notes,
other than a broker-dealer, must represent that
such conditions have been met. In addition, each
broker-dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
The Letter of Transmittal accompanying this
Prospectus 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. A
broker-dealer may nonetheless be deemed to be an
"underwriter" under the Securities Act
notwithstanding such disclaimer. This Prospectus,
as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange
for Outstanding Notes where such Outstanding Notes
were acquired by such broker-dealer as a result of
market-making activities or other trading
activities. Pursuant to the Registration Rights
Agreements, the Company has agreed that, for a
period of 180 days after the Expiration Date, it
will make this Prospectus available to any
broker-dealer for use in connection with any such
resale. See "The Exchange Offer -- Purpose and
Effect of the Exchange Offer" and "Plan of
Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the Exchange
Notes could not rely on the position of the staff
of the Commission enunciated in no-action letters
and, in the absence of an applicable exemption,
must comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. Failure to
comply with such requirements in such instance may
result in such holder incurring liability under the
Securities Act for which the holder is not
indemnified by the Company.
Expiration Date............ 5:00 p.m., New York City time, on , 1998,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended. See "The Exchange Offer -- Expiration
Date; Extensions; Amendments".
Accrued Interest on the
Exchange Notes........... Each Exchange Note will bear interest from the most
recent date to which interest has been paid on the
Outstanding Notes or, if no interest has been paid
on such Outstanding Notes, from December 10, 1997.
Exchange Date.............. As soon as practicable after the close of the
Exchange Offer, the Company will accept for
exchange all Outstanding Notes properly tendered
and not validly withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date. See "The
Exchange Offer -- Withdrawal of Tenders."
Conditions to the Exchange
Offer.................... The Exchange Offer is subject to customary
conditions, certain of which may be waived by the
Company. The Company reserves the right to
terminate or amend the Exchange Offer at any time
prior to the Expiration Date upon the occurrence of
any such condition. The Exchange Offer is not
conditioned on any minimum aggregate principal
amount of Outstanding Notes being tendered for
exchange. See "The Exchange Offer -- Conditions."
11
<PAGE> 13
Consequences of Failure to
Exchange................. Any Outstanding Notes not tendered pursuant to the
Exchange Offer will remain outstanding and continue
to accrue interest. Such Outstanding Notes will
remain "restricted securities" under the Securities
Act, subject to the transfer restrictions described
herein. As a result, the liquidity of the market
for such Outstanding Notes could be adversely
affected upon completion of the Exchange Offer. See
"Risk Factors -- Consequences of Failure to
Exchange" and "The Exchange Offer -- Consequences
of Failure to Exchange."
Certain Federal Income Tax
Considerations........... The exchange of the Outstanding Notes for Exchange
Notes by tendering holders should not be a taxable
exchange for U.S. Federal income tax purposes, and
such holders should not recognize any taxable gain
or loss for U.S. Federal income tax purposes as a
result of such exchange. Holders of Exchange Notes
will continue to be required to include interest on
such Exchange Notes in gross income in accordance
with their method of accounting for U.S. Federal
income tax purposes. Holders should review the
information set forth under "Certain U.S. Federal
Income Tax Consequences" for a discussion of
certain U.S. Federal income tax consequences
relating to the Outstanding Notes and the Exchange
Notes prior to tendering the Outstanding Notes in
the Exchange Offer.
Use of Proceeds............ There will be no cash proceeds to the Company from
the Exchange Offer. See "Use of Proceeds."
PROCEDURES FOR TENDERING OUTSTANDING NOTES
Tendering Outstanding
Notes...................... Each beneficial owner owning interests in
Outstanding Notes ("Beneficial Owner") through a
DTC Participant (as defined) must instruct such DTC
Participant to cause Outstanding Notes to be
tendered in accordance with the procedures set
forth in this Prospectus and in the applicable
Letter of Transmittal. See "The Exchange
Offer -- Procedures for Tendering -- Outstanding
Notes held through DTC."
Each participant (a "DTC Participant") in the
Depository Trust Company ("DTC") holding
Outstanding Notes through DTC must (i)
electronically transmit its acceptance to DTC
through the DTC Automated Tender Offer Program
("ATOP"), for which the transaction will be
eligible, and DTC will then verify the acceptance,
execute a book-entry delivery to the Exchange
Agent's (as defined herein) account at DTC and send
an Agent's Message (as defined herein) to the
Exchange Agent for its acceptance, or (ii) comply
with the guaranteed delivery procedures set forth
in this Prospectus and in the Letter of
Transmittal. By tendering through ATOP, DTC
Participants will expressly acknowledge receipt of
the accompanying Letter of Transmittal and agree to
be bound by its terms and the Company will be able
to enforce such agreement against such DTC
Participants. See "The Exchange Offer -- Procedures
for Tendering -- Outstanding Notes held through
DTC" and "-- Guaranteed Delivery
Procedures -- Outstanding Notes held through DTC."
Each Holder must (i) complete and sign a Letter of
Transmittal, and mail or deliver such Letter of
Transmittal, and all other documents
12
<PAGE> 14
required by the Letter of Transmittal, together
with certificate(s) representing all tendered
Outstanding Notes, to the Exchange Agent at its
address set forth in this Prospectus and in the
Letter of Transmittal, or (ii) comply with the
guaranteed delivery procedures set forth in this
Prospectus. See "The Exchange Offer -- Procedures
for Tendering," "-- Exchange Agent" and
"-- Guaranteed Delivery Procedures -- Outstanding
Notes held by Holders."
By tendering, each holder will represent to the
Company that, among other things, (i) it is not an
affiliate of the Company, (ii) it is not a
broker-dealer tendering Outstanding Notes acquired
directly from the Company for its own account,
(iii) the Exchange Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary
course of business of such holder and (iv) it has
no arrangements or understandings with any person
to participate in the Exchange Offer for the
purpose of distributing the Exchange Notes. See
"The Exchange Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures................. DTC Participants holding Outstanding Notes through
DTC who wish to cause their Outstanding Notes to be
tendered, but who cannot transmit their acceptances
through ATOP prior to the Expiration Date, may
effect a tender in accordance with the procedures
set forth in this Prospectus and in the Letter of
Transmittal. See "The Exchange Offer -- Guaranteed
Delivery Procedures." Holders who wish to tender
their Outstanding Notes but (i) whose Outstanding
Notes are not immediately available and will not be
available for tendering prior to the Expiration
Date, or (ii) who cannot deliver their Outstanding
Notes, the Letter of Transmittal or any other
required documents to the Exchange Agent prior to
the Expiration Date, may effect a tender in
accordance with the procedures set forth in this
Prospectus. See "The Exchange Offer -- Guaranteed
Delivery Procedures."
Withdrawal Rights.......... The tender of Outstanding Notes pursuant to the
Exchange Offer may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration
Date, in accordance with the procedures set forth
in this Prospectus. See "The Exchange
Offer -- Withdrawal of Tenders."
Exchange Agent............. United States Trust Company of New York is serving
as Exchange Agent in connection with the Exchange
Offer. See "The Exchange Offer -- Exchange Agent."
Shelf Registration
Statement.................. Under certain circumstances described in the
Registration Rights Agreement, certain holders of
Outstanding Notes (including holders who are not
permitted to participate in the Exchange Offer or
who may not freely resell Exchange Notes received
in the Exchange Offer) may require the Company to
file and use its best efforts to cause to become
effective, a shelf registration statement under the
Securities Act, which would cover resales of
Outstanding Notes by such holders. See "The
Exchange Offer -- Purpose and Effect of the
Exchange Offer."
13
<PAGE> 15
THE EXCHANGE NOTES
Securities Offered......... $125,000,000 aggregate principal amount of 11 3/4%
Senior Notes due 2007 that have been registered
under the Securities Act. The form and terms of the
Exchange Notes are identical in all material
respects to the terms of the Outstanding Notes for
which they may be exchanged pursuant to the
Exchange Offer, except for certain transfer
restrictions and registration rights relating to
the Outstanding Notes and except for certain
provisions providing for an increase in the
interest rate on the Outstanding Notes under
circumstances relating to the Exchange Offer. See
"Description of Exchange Notes."
Maturity Date.............. December 1, 2007.
Interest Payment Dates..... June 1 and December 1 of each year, commencing on
June 1, 1998.
Optional Redemption........ Except as described below and under "Change of
Control", the Company may not redeem the Notes
prior to December 1, 2002. On or after such date,
the Company may redeem the Notes, in whole or in
part, at any time at the redemption prices set
forth herein, together with accrued and unpaid
interest, if any, to the date of redemption. In
addition, at any time and from time to time on or
prior to November 1, 2000, the Company may, subject
to certain requirements, redeem up to 35% of the
aggregate principal amount of the Notes with the
cash proceeds received from one or more Equity
Offerings at a redemption price equal to 110% of
the principal amount to be redeemed, together with
accrued and unpaid interest, if any, to the date of
redemption, provided that at least $82 million of
the aggregate principal amount of the Notes remain
outstanding immediately after each such redemption.
Change of Control.......... Upon the occurrence of a Change of Control, the
Company will be required to make an offer to
repurchase the Notes at a price equal to 101% of
the principal amount thereof, together with accrued
and unpaid interest, if any, to the date of
repurchase.
Ranking.................... The Outstanding Notes are, and the Exchange Notes
will be, senior unsecured obligations of the
Company and will rank pari passu in right of
payment with all existing and future Senior
Indebtedness of the Company (including the
Outstanding Notes) and will rank senior in right of
payment to all existing and future Subordinated
Obligations of the Company.
Guarantees................. The Outstanding Notes are, and the Exchange Notes
will be, unconditionally guaranteed, jointly and
severally, by each of the Subsidiary Guarantors.
The Guarantees will be senior unsecured obligations
of the Subsidiary Guarantors and will rank pari
passu in right of payment with all existing and
future Senior Indebtedness of the Subsidiary
Guarantors and senior in right of payment to all
existing and future Subordinated Obligations of the
Subsidiary Guarantors. The Guarantees may be
released upon the occurrence of certain events.
Restrictive Covenants...... The indenture under which the Outstanding Notes
were, and the Exchange Notes will be, issued (the
"Indenture") contains certain covenants that, among
other things, limit (i) the incurrence of
additional indebtedness by the Company and its
subsidiaries, (ii) the payment of dividends on, and
redemption of, capital stock of the Company and the
redemption of certain subordinated obligations of
the Company,
14
<PAGE> 16
(iii) investments, (iv) sales of assets and
subsidiary stock, (v) transactions with affiliates
and (vi) consolidations, mergers and transfers of
all or substantially all of the assets of the
Company. The Indenture also prohibits certain
distributions from subsidiaries. However, all the
limitations and prohibitions are subject to a
number of important qualifications and exceptions.
Exchange Offer and Absence
of a Public Market for the
Notes.................... The Exchange Notes will generally be freely
transferable (subject to the restrictions discussed
elsewhere herein) but will be new securities for
which there will not initially be a market. The
Outstanding Notes have been designated for trading
in the PORTAL market. The Company does not intend
to apply for a listing of the Exchange Notes, on
any securities exchange or on any automated dealer
quotation system. See "Plan of Distribution."
FOR MORE COMPLETE INFORMATION REGARDING THE NOTES, SEE "DESCRIPTION OF EXCHANGE
NOTES"
AND "DESCRIPTION OF OUTSTANDING NOTES".
RISK FACTORS
Prospective acquirors of the Exchange Notes should consider carefully all
of the information set forth in this Prospectus and, in particular, should
evaluate the specific factors set forth under "Risk Factors" for risks involved
with an acquisition of the Exchange Notes.
15
<PAGE> 17
SUMMARY FINANCIAL DATA
The following table sets forth certain summary financial data of the
Company for the periods ended and as of the dates indicated and are derived from
and described in the unaudited pro forma consolidated financial statements and
in the Company's consolidated financial statements included elsewhere in this
Prospectus. The summary unaudited pro forma consolidated statement of operations
data give effect to the offering of the Outstanding Notes (the "Offering") and
the Acquisitions as if they had occurred at January 1, 1996. The summary
unaudited pro forma consolidated balance sheet data give effect to the Offering
and the Acquisitions as if they had occurred on September 30, 1997. The summary
unaudited pro forma consolidated financial data do not purport to represent what
the Company's results of operations or financial condition would have actually
been had the Offering and the Acquisitions been consummated as of such dates or
to project the Company's results of operations or financial condition for any
future period. The following information should be read in conjunction with the
consolidated financial statements and the unaudited pro forma consolidated
financial statements of the Company, the financial statements of Binnings
Building Products, Inc., the combined financial statements of Danvid Company,
Inc. and Danvid Window Company and, in each case, the notes thereto, included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ---------------------------
PRO FORMA(1) HISTORICAL PRO FORMA(1)
----------------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................................... $ 176,393 $ 65,020 $144,340
Income from operations............................ 8,494 2,857 7,953
Interest expense, net............................. 15,557 2,313 11,753
Provision for income taxes........................ 0 257 0
Net income (loss)................................. (7,234) 383 (3,642)
OTHER DATA:
EBITDA(2)......................................... 12,669 4,919 11,948
Depreciation and amortization..................... 4,346 1,966 3,837
Capital expenditures.............................. 3,302 919 2,126
Ratio of earnings to fixed charges(3)............. N/A(4) 1.26x N/A(4)
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------
HISTORICAL PRO FORMA(1)
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................................. $ 1,267 $ 38,772
Working capital...................................................... 233 60,223
Total assets......................................................... 57,049 163,214
Total debt(5)........................................................ 33,377 126,620
Stockholders' equity................................................. 6,214 5,851
</TABLE>
- ---------------
(1) The pro forma financial data of the Company were derived from the unaudited
pro forma consolidated financial statements included elsewhere in this
Prospectus.
(2) EBITDA represents income before interest, income taxes, depreciation and
amortization. EBITDA is presented here to provide additional information
about the Company's ability to meet its future debt service, capital
expenditure and working capital requirements. It is not a measure of
financial performance under generally accepted accounting principles and
should not be considered as an alternative either to net income as an
indicator of the Company's operating performance or to cash flows as an
indicator of the Company's liquidity.
(3) For purposes of calculating the ratio of earnings to fixed charges, earnings
represent income (loss) before income taxes, extraordinary charge and fixed
charges. Fixed charges consist of the total of (i) interest,
16
<PAGE> 18
including the amortization of deferred finance costs and (ii) that portion
of rental expense considered to represent interest cost (assumed to be
one-third).
(4) No ratio is presented for 1996 or for the nine months ended September 30,
1997 on a pro forma basis (see note(1)) since the earnings were less than
fixed charges by $7.2 million and $3.6 million, respectively.
(5) Total debt includes capital lease obligations.
17
<PAGE> 19
RISK FACTORS
An investment in the securities offered hereby involves a high degree of
risk, and this Prospectus and certain of the documents incorporated herein by
reference contain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in such forward-looking statements as a result of a variety of
factors, including those set forth in the following risk factors and elsewhere
in this Prospectus. Prospective investors should consider carefully the
following factors, in addition to the other information contained in this
Prospectus, prior to purchasing any of the securities offered hereby.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
The Company has substantial indebtedness. As of September 30, 1997, on a
pro forma basis after giving effect to the Offering and the refinancing of
certain existing indebtedness of the Company (the "Refinancing"), the Company
would have had total indebtedness, including current maturities, of
approximately $126.6 million. See "Selected Financial Data" and
"Capitalization". The Indenture permits the Company to incur additional
indebtedness, including up to $25 million of Secured Indebtedness, and the
Company intends to secure a new revolving credit facility. The Company's ability
to service, or to refinance, its indebtedness (including the Notes) depends on
its future performance, which is subject to a number of factors, some of which
are beyond the Company's control, including general economic and market
conditions and competition. For the nine-months ended September 30, 1997, the
Company's pro forma EBITDA was approximately $11.9 million.
The Company's high level of debt and debt service requirements will have
several important effects on its future operations, including the following: (1)
the Company will have significant cash requirements to service debt, reducing
funds available for operations and future business opportunities and increasing
the Company's vulnerability to adverse economic and industry conditions and
competition; (2) the Company's leveraged position will increase its
vulnerability to competitive pressures; (3) the financial covenants and other
restrictions contained in the Indenture and other agreements relating to the
Company's indebtedness will require the Company to meet certain financial tests
and will restrict its ability to borrow additional funds, to dispose of assets
or to pay cash dividends on, or repurchase, preferred or common stock; and (4)
funds available for working capital, capital expenditures, acquisitions and
general corporate purposes will be limited. Any default under the documents
governing indebtedness of the Company could have a significant adverse effect on
the market value of the Notes. Certain of the Company's competitors currently
operate on a less leveraged basis and may have greater operating and financial
flexibility than the Company.
A significant portion of the Company's cash flow will be required to
service indebtedness and will not be available for other purposes. After giving
pro forma effect to the Offering and the Acquisitions as if they had been
consummated on January 1, 1996, the Company's fixed charges exceeded its
earnings as indicated by the pro forma loss before income taxes of $7.2 million
for the year ended December 31, 1996. In the absence of adequate operating
results and cash flows, the Company may be required to dispose of material
assets or operations or refinance its indebtedness to meet its debt service
obligations. There can be no assurance that the Company will be successful in
this regard should such actions become necessary or that it will not be
restricted from such actions under the terms of its credit facilities, including
the Indenture.
RANKING OF THE NOTES
The Outstanding Notes rank and the Exchange Notes will rank pari passu in
right of payment with all other existing and future unsecured senior
indebtedness of the Company. However, the Notes will be effectively subordinated
to all future and existing secured indebtedness of the Company and the
Subsidiary Guarantors and to all future and existing indebtedness of the
Company's subsidiaries that are not Subsidiary Guarantors. As of September 30,
1997, after giving pro forma effect to the Offering and the Refinancing, the
Company and the Subsidiary Guarantors would have had approximately $1.6 million
of secured indebtedness outstanding and no other Senior Indebtedness outstanding
with the exception of the Notes. The Indenture will
18
<PAGE> 20
permit the Company and its subsidiaries to incur additional indebtedness,
subject to certain limitations, including up to an additional $25 million of
secured debt. See "Description of Exchange Notes -- Ranking."
CONSEQUENCES OF FAILURE TO EXCHANGE
The Outstanding Notes have not been registered under the Securities Act or
any state securities laws, and therefore, may not be offered, sold or otherwise
transferred 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 thereto, and in each case in
compliance with certain other conditions and restrictions, including the right
of the Company and the Trustee (as defined) in certain cases to require the
delivery of opinions of counsel, certifications and other information prior to
any such transfer. Outstanding Notes that remain outstanding after the
consummation of the Exchange Offer will continue to bear a legend reflecting
such restrictions on transfer. In addition, upon consummation of the Exchange
Offer, holders of Outstanding Notes that remain outstanding will not be entitled
to any rights to have such Outstanding Notes registered under the Securities Act
or to any similar rights under the Registration Rights Agreement (subject to
certain limited exceptions). The Company currently intends to register under the
Securities Act Outstanding Notes that remain outstanding after consummation of
the Exchange Offer only if such Outstanding Notes are held by Initial Purchasers
or persons ineligible to participate in the Exchange Offer (other than due
solely to the status of such holder as an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act). If Outstanding Notes are tendered
and accepted in the Exchange Offer, the market for untendered Outstanding Notes
is likely to diminish; accordingly, holders who do not tender their Outstanding
Notes may encounter difficulties in selling such notes following the Exchange
Offer. The Exchange Notes and any Outstanding Notes that remain outstanding
after consummation of the Exchange Offer will constitute a single series of debt
securities under the Indenture and, accordingly, will vote together as a single
class for purposes of determining whether holders of the requisite percentage in
outstanding principal amount of the Notes have taken certain actions or
exercised certain rights under the Indenture.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
offer to repurchase all or a portion of the outstanding Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest to the date of
repurchase. The source of funds for any such repurchase will be the Company's
available cash or cash generated from operating or other sources, including,
without limitation, borrowings, sales of assets or sales of equity securities of
the Company. There can be no assurance that sufficient funds will be available
to make any required repurchase. If an offer to repurchase the Notes is required
to be made and the Company does not have available sufficient funds to pay for
Notes tendered for repurchase, an event of default would occur under the
Indenture. The occurrence of an event of default could result in acceleration of
the maturity of the Notes. See "Description of Exchange Notes."
LACK OF PROFITABLE OPERATIONS
The Company was formed through the consolidation of a number of companies
in the fenestration products industry, some of which had historically incurred
substantial operating losses and, in certain periods, negative cash flows. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Company's pro forma net loss for the nine months ended
September 30, 1997 was $3.6 million, and there can be no assurance that the
Company will be able to achieve and maintain profitability. The Company's
ability to achieve profitability is dependent upon a number of factors,
including the successful integration of acquired businesses and implementation
of manufacturing improvement and cost reduction efforts, as well as various
factors beyond the Company's control, such as the impact of raw material price
fluctuations, the demand for the Company's products, the level of residential
and non-residential construction and remodeling activity and expenditures, and
the effect of general economic conditions on the Company's markets. The failure
of the Company to achieve profitability could, among other things, hinder its
ability to service its debt, to consummate future acquisition transactions, to
make capital expenditures and to take
19
<PAGE> 21
advantage of other business opportunities, any one of which could have a
material adverse effect on the Company's financial condition and results of
operations.
NO HISTORY OF COMBINED OPERATIONS; RISK OF TERMINATION OF CUSTOMER
RELATIONSHIPS; ACQUISITION RISKS
The operations of the Company, Binnings, Danvid and the other recently
acquired companies described herein have been conducted as separate and distinct
businesses, each with its own management team, sales force and operations. The
Company intends to manage its operations and the operations of the recently
acquired companies as an integrated entity. While the Company believes, based on
its history with prior acquisitions, that it can successfully integrate the
operations of the acquired companies, there can be no assurance that this will
be the case. There also can be no assurance that the Company will be able to
realize expected operating and economic efficiencies following the Acquisitions.
In many cases, the acquired companies have had longstanding relationships with
significant customers and distributors. There can be no assurance that these
relationships will continue on the same basis or at all following the
Acquisitions. The termination of major customer relationships would adversely
affect the Company's business.
The Company will continue to seek to acquire other complementary businesses
that will expand the Company's product offerings, distribution capabilities and
customer base. There is no assurance, however, that any future acquisition will
be successful or will achieve results comparable to the Company's existing
business. Furthermore, acquisitions of businesses entail the risk of assuming
contingent or unknown liabilities, such as environmental and tax liabilities not
reflected in financial statements. In light of certain potentially adverse tax
issues relating to the Acquisition of Danvid, the Company structured the
transaction as an asset purchase, which generally affords a lower risk of
successor liability than a stock acquisition. See "Business -- Business
Strategy" and " -- Company History."
ABILITY TO ACHIEVE ANTICIPATED COST SAVINGS
The Company has developed a detailed cost savings and integration strategy
with respect to acquired companies, which includes the consolidation of certain
purchasing, production, administrative, sales and management functions. The cost
savings anticipated by management of the Company reflect numerous assumptions as
to purchasing and other efficiencies. There can be no assurance that the Company
will be able to realize expected operating and economic efficiencies following
the Acquisitions. In addition, there can be no assurance that unforeseen costs
and expenses or other factors will not offset, in whole or in part, the expected
cost savings or other components of the Company's operating plan.
FRAUDULENT CONVEYANCE CONSIDERATIONS
The Outstanding Notes are and the Exchange Notes will be obligations of the
Company and the Outstanding Notes are and the Exchange Notes will be
unconditionally guaranteed, jointly and severally, by each of the Subsidiary
Guarantors. If a court in a lawsuit for the benefit of any unpaid creditor of
the Company or any of the Subsidiary Guarantors, or a representative of the
Company's or such Subsidiary Guarantor's creditors, were to find that, at the
time the Company issued the Notes or the Subsidiary Guarantor issued its Note
Guarantee, the Company or such Subsidiary Guarantor, as the case may be, (1)
intended to hinder, delay or defraud any existing or future creditor, or (2) did
not receive reasonably equivalent value for issuing the Notes or the Note
Guarantee, as the case may be, and (a) was insolvent, (b) became insolvent as a
result of the issuance of the Notes or such Note Guarantee, (c) was engaged or
about to engage in a business or a transaction for which its remaining assets
were unreasonably small in relation to the business or transaction, or (d)
intended to incur, or believed or reasonably should have believed that it would
incur, debts beyond its ability to pay as they became due, then such court could
void the Notes and the Note Guarantees and void such transactions.
Alternatively, in such event, a court could subordinate the claims of the
holders of Notes and the Note Guarantees to claims of other creditors of the
Company or such Subsidiary Guarantor, as the case may be, or take other action
detrimental to holders of the Notes and the Note Guarantees. The Company
believes that, after giving effect to the Exchange Offer, the Company and the
Subsidiary Guarantors taken as a whole will be (i) neither insolvent nor
rendered insolvent by the
20
<PAGE> 22
incurrence of indebtedness in connection with the Offering, (ii) in possession
of sufficient capital to run their businesses effectively and (iii) incurring
debts within their ability to pay as the same mature or become due.
HOLDING COMPANY STRUCTURE
AAPC is a holding company with no business operations of its own. The
Company's only material assets are the direct and indirect equity interests in
its subsidiaries, through which the Company conducts its business operations.
Accordingly, AAPC will be dependent upon the earnings and cash flows of, and
dividends and distributions from, its direct and indirect subsidiaries to pay
its expenses, meet its obligations and pay interest and principal on the Notes.
There can be no assurance that these direct and indirect equity interests in
AAPC's subsidiaries will generate sufficient earnings and cash flows to pay
dividends to distribute funds to the Company to enable it to pay its expenses
and meet its obligations to pay interest and principal on the Notes.
GOVERNMENTAL REGULATION; ENVIRONMENTAL MATTERS
The past and present business operations of the Company, and the past and
present ownership and operation of real property by the Company, are subject to
extensive federal, state, local and foreign laws and regulations, including laws
and regulations relating to the discharge of materials into the environment, the
handling and disposal of wastes or otherwise relating to the health, safety and
protection of the environment. Although the Company believes it is in
substantial compliance with all such material laws and regulations, there can be
no assurance that the Company will not incur costs to comply with, or claims or
liabilities under, such laws and regulations. The Company is subject to various
claims and contingent liabilities in the ordinary course of business, including
with respect to employment-related matters, tax matters and environmental
matters. Although there can be no assurance in this regard, the Company believes
that known claims or contingencies will not have a material adverse effect on
its business, results of operations or financial condition.
RELIANCE ON KEY PERSONNEL
The success of the Company depends to a large degree on a number of key
employees, and the loss of the services provided by any of them could have a
material adverse effect on the Company. In particular, the loss of the services
provided by Frank J. Amedia, the Chief Executive Officer and President and a
director of the Company, could have a material adverse effect on the Company.
Mr. Amedia has entered into an employment agreement with the Company for an
initial three-year period. In addition, the Company may from time to time enter
into employment agreements with certain other key employees. There can be no
assurance, however, that any such employment agreements will prevent the Company
from losing the services of any of its key employees. See "Management."
CHANGES IN DEMAND FOR PRODUCTS
Demand in the window and door manufacturing industry is influenced by the
level of residential and non-residential construction activity. Trends in each
of these sectors directly impact the financial performance of the Company.
Accordingly, the strength of the U.S. economy, the age of existing homes, job
growth and interest rates have a direct impact on the Company. Any declines in
new housing starts, non-residential construction activity and/or the demand for
replacement/remodeling products could materially adversely affect the Company.
In addition, the Company believes that in several markets there has been a shift
to vinyl windows and doors. Although the Company is beginning to shift its
manufacturing and distribution emphasis toward vinyl in these markets, the
majority of its operations remain dependent on continuing demand for aluminum
and wood products. See "Business -- Industry Overview."
FLUCTUATIONS IN OPERATING RESULTS AND SEASONALITY
The Company's business is seasonal since its primary revenues are driven by
residential construction. Inclement weather during the winter months,
particularly in the Northeast and Midwest regions of the United States, usually
reduces the level of building and remodeling activity in both the home
improvement and new construction markets and, accordingly, has an adverse impact
on the demand for the Company's products.
21
<PAGE> 23
Because a high percentage of the Company's manufacturing overhead and operating
expenses are relatively fixed throughout the year, operating income has
historically been lower in quarters with lower sales. Seasonal fluctuation in
the demand for the Company's products could have a material adverse effect on
the Company's results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
FLUCTUATIONS IN RAW MATERIALS COSTS AND SUPPLY; RELIANCE ON MANUFACTURING
FACILITIES AND SUPPLIERS
The Company purchases aluminum, steel, vinyl, wood, glass and other raw
materials from various suppliers. While such materials are available from
numerous sources, commodity raw materials are subject to fluctuations in price.
Because such materials in the aggregate constitute significant components of the
Company's cost of goods sold, such fluctuations could have a material adverse
effect on the Company's results of operations. Although the Company historically
has been able to pass on gradual increases in raw material prices, there can be
no assurance that the Company will continue to be able to do so in the future.
In addition, sharp increases in material prices are more difficult to pass
through to the customer in a short period of time and may negatively impact the
short-term financial performance of the Company. Loss of or interruptions of
operations at any of the Company's manufacturing facilities could adversely
affect the Company's operations. In addition, although there are numerous
suppliers of raw materials to the Company's operations, the shift to a new
supplier could result in delays or higher costs, which could adversely affect
operating results. See "Business -- Manufacturing."
COMPETITION
The Company has numerous competitors in the fenestration products market,
at both the manufacturing and the distribution level. Certain of the Company's
principal competitors have substantially less leverage than the Company, have
greater financial and other resources, and have greater brand recognition.
Accordingly, such competitors may be better able to withstand changes in
conditions within the industries in which the Company operates and have
significantly greater operating and financial flexibility than the Company. As a
result of the competitive environment in the markets in which the Company
operates, the Company faces (and will continue to face) pressure on sales prices
of its products from competitors, as well as from large customers. As a result
of such pricing pressures, the Company may in the future experience reductions
in the profit margins on its sales, or may be unable to pass future raw material
price or labor cost increases on to its customers (which would also reduce
profit margins). In addition, there can be no assurance that the Company will
not encounter increased competition in the future, which could have a material
adverse effect on the Company's business. See "Business -- Competition."
POTENTIAL LABOR DISPUTES
Approximately 100 of the Company's 1,503 hourly employees are covered by a
collective bargaining agreement which expires in February, 2002. In addition,
the Company has experienced union-organizing activities at its Eagle facility.
The Company believes that its relations with its employees are satisfactory.
There can be no assurance, however, that the Company will not experience work
stoppages or slowdowns in the future. There also can be no assurance that the
Company's non-union facilities will not become subject to successful labor union
organizational efforts or that labor costs will not materially increase. See
"Business -- Employees."
CONTROLLING SHAREHOLDER
AAP Holdings, Inc. ("AAPH") was, as of September 30, 1997, the direct owner
of 7,548,633 shares of the Common Stock, $.001 par value, of the Company (the
"Common Stock") (which constituted approximately 57.7% of the Company's issued
and outstanding Common Stock as of such date) and held options to purchase an
additional 707,655 shares of the Company's Common Stock. Due to its ownership of
a majority of the Company's Common Stock, AAPH will be able to direct and
control the policies of the Company, including mergers, sales of all or
substantially all of the Company's assets, and similar transactions,
22
<PAGE> 24
which transactions may result in a Change of Control under the Indenture or
otherwise adversely affect the interests of the holders of the Notes. See
"Description of Exchange Notes -- Change of Control."
ABSENCE OF PUBLIC MARKET
The Outstanding Notes were issued to, and the Company believes are
currently owned by, a relatively small number of beneficial owners. The
Outstanding Notes have not been registered under the Securities Act and will be
subject to restrictions on transferability to the extent that they are not
exchanged for Exchange Notes. See " -- Consequences of Failure to Exchange."
Although the Exchange Notes will generally be permitted to be resold or
otherwise transferred by the holders (who are not affiliates of the Company)
without compliance with the registration and prospectus delivery requirements
under the Securities Act, they will constitute a new issue of securities with no
established trading market. If the Exchange Notes are traded after their initial
issuance, they may trade at a discount from their initial offering price,
depending upon prevailing interest rates, the market for similar securities and
other factors including general economic conditions and the financial condition
of the Company. The Company does not intend to apply for a listing or quotation
of the Exchange Notes on any securities exchange or stock market. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the Exchange Notes. The liquidity of, and trading market for, the Notes also may
be adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Outstanding Notes, where such Outstanding Notes were acquired by
such broker-dealer 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 resale of such
Exchange Notes. Subject to certain provisions set forth in the Registration
Rights Agreement, the Company has agreed that, for a period of up to 180 days
after the consummation of the Exchange Offer, it will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any such
resale. However, under certain circumstance, the Company has the right to
require that Participating Broker-Dealers suspend the resale of Exchange Notes
pursuant to this Prospectus. Notwithstanding that the Company may cause the
resale of Exchange Notes pursuant to this Prospectus to be suspended, the
Company has no obligation to extend the 180-day period referred to above during
which Participating Broker-Dealers are entitled to use this Prospectus in
connection with such resales. See "The Exchange Offer -- Resale of the Exchange
Notes."
EXCHANGE OFFER ELIGIBILITY AND PROCEDURES
Any holder of the Outstanding Notes who is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act or any broker-dealer who
purchased Outstanding Notes from the Company to resell pursuant to Rule 144A or
any other available exemption under the Securities Act will not be permitted or
entitled to tender such Outstanding Notes in the Exchange Offer and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any sale or other transfer of such Outstanding Notes unless
such sale or transfer is made pursuant to an exemption from such requirements.
See "The Exchange Offer -- Resale of the Exchange Notes."
Each holder of Outstanding Notes who wishes to exchange its Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company set forth in "The Exchange Offer -- Purpose and
Effect of the Exchange Offer."
Issuance of the Exchange Notes in exchange for the Outstanding Notes
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of the required documents. Therefore, holders of the Outstanding
Notes desiring to tender such Outstanding Notes in exchange for Exchange Notes
should allow sufficient time to ensure timely delivery. The Company is under no
duty to give notification of defects or irregularities with respect to tenders
of Outstanding Notes for exchange. See "The Exchange Offer -- Procedures for
Tendering."
23
<PAGE> 25
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. Of the
approximately $118.5 million in net proceeds received by the Company from the
issuance of the Outstanding Notes, approximately $47.8 million was used to fund
the cash portion of the purchase price of the Acquisitions (including the
repayment of assumed debt) and approximately $33.8 million was used to repay
indebtedness. Approximately $36.9 million is intended to be used by the Company
for additional acquisitions, working capital and general corporate purposes.
24
<PAGE> 26
CAPITALIZATION
The following table presents the capitalization of the Company at September
30, 1997 (i) on an actual basis and (ii) giving effect to the Acquisitions and
to the Offering and the application of the estimated net proceeds from the
Offering described under "Use of Proceeds." The table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Unaudited Pro Forma Consolidated Financial
Statements" and the Financial Statements and notes thereto in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
---------------------------
HISTORICAL PRO FORMA(1)
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................................ $ 1,267 $ 38,772
======= ========
Long-term debt, including current maturities:
Existing senior debt............................................... $ 23,924 $ --
11 3/4% Senior Notes, due 2007..................................... -- 125,000
Capital lease obligations.......................................... 1,453 1,620
------- --------
Total senior debt.......................................... 25,377 126,620
Existing subordinated debt......................................... 8,000 --
------- --------
Total debt................................................. 33,377 126,620
Total stockholders' equity........................................... 6,214 5,851
------- --------
Total capitalization....................................... $ 39,591 $132,471
======= ========
</TABLE>
- ---------------
(1) The pro forma financial data of the Company were derived from the unaudited
pro forma consolidated financial statements included elsewhere in this
Prospectus.
25
<PAGE> 27
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
ETC was incorporated on June 19, 1996 and had no significant operations or
assets until it acquired two companies, Eagle and Taylor, from MascoTech, Inc.
on August 29, 1996. The acquisition of Eagle and Taylor was accounted for as a
purchase, with the assets acquired and liabilities assumed recorded at estimated
fair market values and the results of the Eagle and Taylor operations included
in ETC's consolidated financial statements from the date of acquisition.
ETC's ultimate controlling stockholder acquired 100% ownership of two other
companies, Mallyclad and Vyn-L, on June 25, 1996. On December 18, 1996,
Mallyclad and Vyn-L collectively were merged into ETC concurrently with the FCEI
combination described below. The merger was accounted for at historic cost in a
manner similar to a pooling of interests. The operating results of Mallyclad and
Vyn-L from the date of acquisition by ETC's ultimate controlling stockholder are
included in the consolidated financial statements. Eagle, Taylor, Mallyclad and
Vyn-L, are considered the predecessors of ETC for financial reporting purposes.
On December 18, 1996, ETC acquired and combined with Forte Computer Easy,
Inc. ("FCEI"). Subsequent to this transaction, the combined entity changed its
name to "American Architectural Products Corporation." On March 14, 1997, AAPC
acquired the stock of Western, and on July 18, 1997, AAPC acquired the stock of
Thermetic. The acquisitions were accounted for as purchases, with the purchase
prices allocated among the assets acquired and liabilities assumed based on
their estimated fair market values, and the results of their operations were
included in the consolidated financial statements from the respective dates of
acquisition.
Concurrently with the Offering, AAPC consummated the acquisitions of
Binnings, Danvid, American Glassmith, and Modern. The Acquisitions will be
accounted for as purchases, with the purchase prices allocated among the assets
acquired and liabilities assumed based on their estimated fair market values.
The results of operations of the Acquisitions will be included in the
consolidated financial statements of AAPC from the date of the Acquisitions.
The accompanying unaudited pro forma consolidated financial statements
illustrate the effects of the ETC acquisition of Eagle and Taylor; the
acquisition of Mallyclad and Vyn-L by the ETC ultimate controlling stockholder
and the subsequent merger of Mallyclad and Vyn-L into ETC; the ETC acquisition
of FCEI; the AAPC acquisitions of Western and Thermetic; and the Offering and
the Acquisitions (collectively, the "Transactions"). In the unaudited pro forma
consolidated financial statements, the historical operating results of Eagle and
Taylor, Mallyclad and Vyn-L, for the periods prior to inclusion in the AAPC
consolidated financial statements are presented as "Predecessors"; the
historical operating results of FCEI, Western and Thermetic for the periods
prior to their inclusion in the AAPC consolidated financial statements are
presented as "Completed Acquisitions"; and the historical balance sheets and
results of operations of Binnings, Danvid, American Glassmith and Modern for the
periods presented are included as "Acquisitions" (due to the significance of
Binnings and Danvid, their historical financial data is presented separately
under this heading).
The unaudited pro forma consolidated balance sheet as of September 30, 1997
gives effect to the Acquisitions as though each transaction had occurred on
September 30, 1997 and is based on the historical consolidated balance sheets of
AAPC and the Acquisitions at that date. The unaudited pro forma consolidated
statement of operations for the nine months ended September 30, 1997 is based on
the historical statement of operations of AAPC for that period, of the Completed
Acquisitions for the periods in 1997 prior to the dates such acquisitions were
consummated and of the Acquisitions for the period from January 1, 1997 through
September 30, 1997. The unaudited pro forma consolidated statement of operations
for the year ended December 31, 1996 is based on the historical statements of
operations of the Predecessors for the periods in 1996 prior to their
acquisitions, of AAPC for the period from June 19, 1996 to December 31, 1996, of
the Completed Acquisitions for the periods in 1996 prior to the dates such
acquisitions were consummated and of the Acquisitions for the year ended
December 31, 1996. The unaudited pro forma consolidated statements of operations
give effect to the Transactions as though each transaction had occurred on
January 1, 1996.
26
<PAGE> 28
The unaudited pro forma consolidated financial statements reflect pro forma
adjustments that are based upon available information and assumptions that the
Company believes are reasonable and do not necessarily reflect the results of
operations or the financial position of the Company that actually would have
resulted had the Completed Acquisitions and Acquisitions to which pro forma
effect is given been consummated as of the date or for the periods indicated. In
preparing the unaudited pro forma consolidated financial statements, the Company
believes it has utilized reasonable methods to conform the basis of
presentation. The pro forma adjustments reflect those adjustments appropriate to
present pro forma financial statements, pursuant to regulations prescribed by
the Commission.
The unaudited pro forma consolidated financial statements may not be
indicative of the actual results of the Transactions. In particular, the
unaudited pro forma consolidated financial statements are based on management's
current estimate of the allocations of purchase price, the actual allocation of
which may differ. Further, the unaudited pro forma consolidated financial
statements do not reflect certain changes in the operating cost structure of the
companies acquired that are contemplated in connection with the Transactions.
The accompanying unaudited pro forma consolidated financial statements
should be read in conjunction with the historical financial statements of AAPC,
Eagle and Taylor, Mallyclad and Vyn-L, FCEI, Western, Thermetic, Binnings and
Danvid. See "Note 2 -- Recapitalization and Acquisitions" to the AAPC
consolidated financial statements regarding the Company's historical acquisition
transactions.
27
<PAGE> 29
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
AAPC OFFERING
PRO FORMA ACQUISITIONS AND
COMPLETED PRO FORMA BEFORE -------------------------- ACQUISITION
AAPC ACQUISITIONS(1) ADJUSTMENTS ACQUISITIONS BINNINGS DANVID OTHERS ADJUSTMENTS
------- --------------- ----------- --------------- ------- ------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales........... $65,020 $ 3,969 $ 0 $68,989 $33,932 $33,013 $8,406 $ 0
Cost of sales....... 50,978 3,144 (23)(2) 54,099 24,653 26,869 6,445 85(6)
------- ------ ----- ------- ------- ------- ------ -------
Gross Profit...... 14,042 825 23 14,890 9,279 6,144 1,961 (85)
Selling, general and
administrative
expenses.......... 11,185 642 137(3) 11,964 7,342 4,317 1,995 (1,382)(7)
------- ------ ----- ------- ------- ------- ------ -------
Income (loss) from
operations...... 2,857 183 (114) 2,926 1,937 1,827 (34) 1,297
Interest expense.... 2,313 142 209(4) 2,664 1,574 17 122 7,376(8)
Other (income)
expense -- net.... (96) 6 0 (90) 27 (79) (16) 0
------- ------ ----- ------- ------- ------- ------ -------
Income (loss)
before income
taxes........... 640 35 (323) 352 336 1,889 (140) (6,079)
Income tax provision
(benefit)......... 257 (45) (71)(5) 141 8 720 0 (869)(5)
------- ------ ----- ------- ------- ------- ------ -------
Income (loss) from
continuing
operations...... 383 80 (252) 211 328 1,169 (140) (5,210)
Dividends on
Preferred Stock... (75) 0 0 (75) 0 0 0 0
------- ------ ----- ------- ------- ------- ------ -------
Income (loss)
available to
common
stockholders.... $ 308 $ 80 $(252) $ 136 $ 328 $ 1,169 $ (140) $(5,210)
======= ====== ===== ======= ======= ======= ====== =======
Earnings (loss) per
common share...... $0.01
Weighted average
number of shares
outstanding....... 13,359,578(9) 384,615(9)
SUPPLEMENTAL
INFORMATION
Depreciation and
amortization...... $1,966 $142 $65 $2,173 $492 $153 $266 $753
<CAPTION>
AAPC
PRO FORMA
---------
<S> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales........... $144,340
Cost of sales....... 112,151
--------
Gross Profit...... 32,189
Selling, general and
administrative
expenses.......... 24,236
--------
Income (loss) from
operations...... 7,953
Interest expense.... 11,753
Other (income)
expense -- net.... (158)
--------
Income (loss)
before income
taxes........... (3,642)
Income tax provision
(benefit)......... 0
--------
Income (loss) from
continuing
operations...... (3,642)
Dividends on
Preferred Stock... (75)
--------
Income (loss)
available to
common
stockholders.... $ (3,717)
========
Earnings (loss) per
common share...... $(0.27)
Weighted average
number of shares
outstanding....... 13,744,193(9)
SUPPLEMENTAL
INFORMATION
Depreciation and
amortization...... $3,837
</TABLE>
28
<PAGE> 30
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(1) Represents historical financial data of the Completed Acquisitions for
the periods prior to their inclusion in the AAPC consolidated financial
statements.
(2) Represents reduction in depreciation and amortization expense in cost
of sales resulting from adjustments to asset bases and useful lives
relating to the Completed Acquisitions as follows:
<TABLE>
<S> <C>
Depreciation and amortization in cost of sales based on asset
bases resulting from Completed Acquisitions.................... $ 120
Eliminate depreciation and amortization in historical cost of
sales.......................................................... (143)
-----
$ (23)
=====
</TABLE>
(3) Represents incremental selling, general and administrative costs
relating to the Completed Acquisitions as follows:
<TABLE>
<S> <C>
Depreciation and amortization in selling, general and
administrative expenses based on asset bases resulting from
Completed Acquisitions.......................................... $ 94
Elimination of depreciation and amortization in historical
selling, general and administrative expenses.................... (6)
----
Incremental depreciation and amortization in historical selling,
general and administrative expenses............................. 88
----
Additional compensation to officers under terms of employment
agreements entered into in connection with the Completed
Acquisitions.................................................... 49
----
$137
====
</TABLE>
(4) Represents incremental interest expense relating to the debt of the
Company resulting from the Completed Acquisitions as follows:
<TABLE>
<S> <C>
Interest on Western term loans at weighted average rate of
10.8%........................................................... $ 32
Interest on Western revolving credit facility at rate of 9.5%.... 12
Interest on AAPC unsecured promissory notes at rate of 10%....... 20
Interest on $2,500,000 Convertible Debenture at rate of 7%....... 96
Interest expense relating to the obligation to issue additional
shares of common stock on the first anniversary date of the
Thermetic acquisition........................................... 47
Amortization of debt issue costs................................. 4
Elimination of historical interest expense....................... (2)
----
$209
====
</TABLE>
(5) Adjustment is made to provide for income taxes at the effective rate of
40 percent in determining pro forma income from continuing operations
when income before income taxes is presented. Adjustment is made to
eliminate tax provision (benefit) in determining pro forma loss from
continuing operations when a loss before income taxes is presented.
Management believes that sufficient evidence would not have existed to
recognize a deferred tax asset relating to these losses.
29
<PAGE> 31
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS -- (CONTINUED)
(6) Represents incremental depreciation and amortization expense in cost of
sales resulting from adjustments to asset bases and useful lives
relating to the Acquisitions as follows:
<TABLE>
<S> <C>
Depreciation and amortization in cost of sales based on asset
bases resulting from Acquisitions.............................. $ 754
Elimination of depreciation and amortization in historical cost
of sales....................................................... (669)
-----
$ 85
=====
</TABLE>
(7) Represents incremental costs (savings) in selling, general and
administrative expenses as follows:
<TABLE>
<S> <C>
Depreciation and amortization in selling, general and
administrative expenses based on asset bases resulting from
the Acquisitions............................................. $ 891
Elimination of depreciation and amortization in historical
selling, general and administrative expenses................. (223)
-------
Incremental depreciation and amortization in selling, general
and administrative expenses.................................. $ 668
-------
Savings on insurance costs due to the use of lower contractual
rates of the Company to provide insurance coverage on the
Acquisitions................................................. (301)
Elimination of compensation to executive officers, former
owners and members of the boards of directors which will be
nonrecurring as a result of the Acquisitions................. (1,749)
-------
$(1,382)
=======
</TABLE>
(8) Adjustment for interest represents the recording of interest expense on
the Notes issued in the Offering and the elimination of historical
interest expense as follows:
<TABLE>
<S> <C>
Interest on Notes issued in the Offering...................... $11,016
Amortization of deferred financing costs relating to the Notes
from the Offering............................................ 456
Other interest relating to the Acquisitions................... 100
Elimination of historical interest expense.................... (4,196)
-------
$ 7,376
=======
</TABLE>
(9) Weighted average number of shares used in pro forma presentation
includes shares outstanding at September 30, 1997, shares issued in
connection with the Acquisitions and shares the Company is committed to
issue under terms of the Thermetic acquisition. Common stock
equivalents are excluded as the effect would be anti-dilutive.
30
<PAGE> 32
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
COMPLETED AAPC PRO ACQUISITIONS OFFERING AND
PREDECESSORS ACQUISITIONS PRO FORMA FORMA BEFORE -------------------------- ACQUISITION
(1) AAPC (2) ADJUSTMENTS ACQUISITIONS BINNINGS DANVID OTHERS ADJUSTMENTS
------------ ------- ------------ ----------- ------------ -------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $ 41,887 $25,249 $ 14,051 $ 0 $ 81,187 $43,060 $41,870 $10,276 $ 0
Cost of sales........... 35,430 19,027 11,276 (1,683)(3) 64,050 30,191 34,026 7,538 811(7)
---------- ------- ------- ------- ---------- ------- ------- ------- -------
Gross profit........ 6,457 6,222 2,775 1,683 17,137 12,869 7,844 2,738 (811)
Selling, general and
administrative
expenses.............. 7,440 4,060 3,460 540(4) 15,500 8,778 5,586 2,351 (932)(8)
---------- ------- ------- ------- ---------- ------- ------- ------- -------
Income (loss) from
operations.......... (983) 2,162 (685) 1,143 1,637 4,091 2,258 387 121
Interest expense........ 1,143 756 633 869(5) 3,401 2,370 3 193 9,590(9)
Other (income)
expense -- net........ 480 5 (227) 0 258 54 (99) (42) 0
---------- ------- ------- ------- ---------- ------- ------- ------- -------
Income (loss) before
income taxes........ (2,606) 1,401 (1,091) 274 (2,022) 1,667 2,354 236 (9,469)
Income tax provision
(benefit)............. (908) 640 494 (226)(6) 0 29 902 0 (931)(6)
---------- ------- ------- ------- ---------- ------- ------- ------- -------
Income (loss) from
continuing
operations.......... (1,698) 761 (1,585) 500 (2,022) 1,638 1,452 236 (8,538)
Dividends on Preferred
Stock................. 0 0 0 0 0 0 0 0 0
---------- ------- ------- ------- ---------- ------- ------- ------- -------
Income (loss)
available to common
stockholders........ $ (1,698) $ 761 $ (1,585) $ 500 $ (2,022) $ 1,638 $ 1,452 $ 236 $ (8,538)
========== ======= ======= ======= ========== ======= ======= ======= =======
Earnings (loss) per
share................. $ (0.15)
Weighted average number
of shares
outstanding........... 13,359,578 (10 384,615 (10
SUPPLEMENTAL
INFORMATION:
Depreciation and
amortization.......... $ 2,698 $ 442 $ 573 $(1,521) $ 2,192 $ 707 $ 201 $ 257 $ 989
<CAPTION>
AAPC PRO
FORMA
----------
<S> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $ 176,393
Cost of sales........... 136,616
---------
Gross profit........ 39,777
Selling, general and
administrative
expenses.............. 31,283
---------
Income (loss) from
operations.......... 8,494
Interest expense........ 15,557
Other (income)
expense -- net........ 171
---------
Income (loss) before
income taxes........ (7,234)
Income tax provision
(benefit)............. 0
---------
Income (loss) from
continuing
operations.......... (7,234)
Dividends on Preferred
Stock................. 0
---------
Income (loss)
available to common
stockholders........ $ (7,234)
=========
Earnings (loss) per
share................. $ (0.53)
Weighted average number
of shares
outstanding........... 13,744,193(10)
SUPPLEMENTAL
INFORMATION:
Depreciation and
amortization.......... $ 4,346
</TABLE>
31
<PAGE> 33
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(1) Represents historical financial data of the Predecessors for the periods
prior to their inclusion in the AAPC consolidated financial statements.
(2) Represents historical financial data of the Completed Acquisitions for the
periods prior to their inclusion in the AAPC consolidated financial
statements.
(3) Represents reduction in depreciation and amortization expense in cost of
sales resulting from adjustments to asset bases and useful lives relating
to the Predecessors and the Completed Acquisitions as follows:
<TABLE>
<S> <C>
Depreciation and amortization in cost of sales based on asset bases
resulting from the acquisitions of the Predecessors and the
Completed Acquisitions............................................. $ 1,152
Elimination of depreciation and amortization in historical cost of
sales.............................................................. (2,835)
-------
$(1,683)
=======
</TABLE>
(4) Represents incremental selling, general and administrative costs relating
to the Predecessors and the Completed Acquisitions as follows:
<TABLE>
<S> <C>
Depreciation and amortization in selling, general and administrative
expenses based on asset bases resulting from the acquisitions of the
Predecessors and the Completed Acquisitions.......................... $ 598
Elimination of depreciation and amortization in historical selling,
general and administrative expenses.................................. (437)
-----
Incremental depreciation and amortization in selling, general and
administrative expenses.............................................. $ 161
-----
Management fee to AAP Holdings, Inc., in accordance with agreement
dated December 18, 1996.............................................. 250
Additional compensation to officers under terms of employment
agreements entered into in connection with the Completed
Acquisitions......................................................... 129
-----
$ 540
=====
</TABLE>
(5) Represents incremental interest expense relating to the debt of the Company
resulting from the acquisitions of the Predecessors and the Completed
Acquisitions as follows:
<TABLE>
<S> <C>
Adjustments to interest expense relating to Eagle & Taylor and
Mallyclad & Vyn-L for periods prior to their acquisition:
Interest on term loans at rate of 9.75%............................ $ 202
Interest on revolving credit facility at rate of 9.75%............. 729
9.75% Interest on subordinated note at rate of 10.0%............... 533
Amortization of debt issue costs................................... 77
Elimination of historical interest................................. (1,143)
-------
398
-------
Adjustments to AAPC interest expense relating to acquisition of
Western and Thermetic:
Interest on Western term loans at weighted average rate of 10.8%... 100
Interest on Western revolving credit facility at rate of 9.5%...... 40
Interest on AAPC unsecured promissory notes at rate of 10.0%....... 70
Increase in amortization of debt issue costs....................... 17
Interest on $2,500,000 Convertible Debenture at rate of 7.0%....... 175
Interest expense relating to the obligation to issue additional
shares of common stock on the first anniversary date of the
Thermetic acquisition........................................... 85
Elimination of historical interest expense......................... (16)
-------
471
-------
$ 869
=======
</TABLE>
32
<PAGE> 34
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS -- (CONTINUED)
(6) Adjustment to eliminate tax provision in determining pro forma loss from
continuing operations. Management believes that sufficient evidence would
not have existed to recognize a deferred tax asset relating to these
losses.
(7) Represents incremental cost of sales as follows:
<TABLE>
<S> <C>
Additional cost of sales relating to the use of the first-in,
first-out (FIFO) method to determine inventory value at Binnings
compared to the last-in, first- out (LIFO) method historically
used................................................................ $ 679
------
Incremental depreciation and amortization expense in cost of sales
resulting from adjustments to asset bases and useful lives relating
to the Acquisitions as follows:
Depreciation and amortization in cost of sales based on asset bases
resulting from Acquisitions...................................... 1,016
Elimination of depreciation and amortization in historical cost of
sales............................................................ (884)
------
132
------
$ 811
======
</TABLE>
(8) Represents incremental costs (savings) in selling, general and
administrative expenses as follows:
<TABLE>
<S> <C>
Additional depreciation and amortization relating to adjustments to
asset bases and useful lives resulting from the Acquisitions....... $ 1,138
Elimination of depreciation and amortization in historical selling,
general and administrative expenses................................ (281)
-------
Incremental depreciation and amortization in selling, general and
administrative expenses............................................ 857
-------
Savings on insurance costs due to the use of lower contractual rates
of the Company to provide insurance coverage on the Acquisitions... (402)
Elimination of compensation to executive officers, former owners and
members of the boards of directors which will be nonrecurring as a
result of the Acquisitions......................................... (1,387)
-------
$ (932)
=======
</TABLE>
(9) Adjustment for interest represents the recording of interest expense on the
Notes issued in the Offering and the elimination of historical interest
expense as follows:
<TABLE>
<S> <C>
Interest on Notes issued in the Offering............................. $14,688
Amortization of deferred financing costs relating to the Notes from
the Offering....................................................... 608
Other interest relating to the Acquisitions.......................... 134
Elimination of historical interest expense........................... (5,840)
-------
$ 9,590
=======
</TABLE>
(10) Weighted average number of shares used in pro forma presentation includes
shares outstanding at September 30, 1997, shares issued in connection with
the Acquisitions and shares that the Company is committed to issue under
terms of the Thermetic acquisition. Common stock equivalents are excluded
as the effect would be anti-dilutive.
33
<PAGE> 35
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUISITIONS PRO FORMA PRO FORMA
-------------------------- OFFERING ACQUISITION AAPC PRO
AAPC BINNINGS DANVID OTHERS ADJUSTMENTS(1) ADJUSTMENTS(2) FORMA
------- -------- ------ ------ -------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash..................... $ 1,267 $ 1,074 $2,574 $ (18) $ 86,216 $(52,341) $ 38,772
Accounts receivable,
net.................... 10,389 5,101 4,554 1,360 0 0 21,404
Inventories.............. 13,526 5,351 1,152 1,332 0 679 22,040
Prepaid expenses and
other current assets... 1,446 585 108 55 0 (35) 2,159
------- ------- ------ ------ -------- -------- --------
Total current
assets....... 26,628 12,111 8,388 2,729 86,216 (51,697) 84,375
------- ------- ------ ------ -------- -------- --------
Property and equipment,
net.................... 18,902 9,930 443 2,141 0 9,139 40,555
Cost in excess of net
assets acquired, net... 10,594 0 0 0 0 20,525 31,119
Other.................... 925 448 289 85 5,555 (137) 7,165
------- ------- ------ ------ -------- -------- --------
Total assets... $57,049 $ 22,489 $9,120 $4,955 $ 91,771 $(22,170) $163,214
======= ======= ====== ====== ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Revolving lines of
credit................. $ 9,932 $ 0 $ 0 $3,047 $ (9,932) $ (3,047) $ 0
Accounts payable......... 7,624 1,557 2,258 1,040 0 0 12,479
Accrued Expenses......... 3,982 2,104 2,016 547 0 881 9,530
Accrued warranty
obligations -- current
portion................ 1,500 0 73 0 0 0 1,573
Long term debt -- current
portion................ 2,857 14,269 39 0 (2,857) (14,308) 0
Capital lease
obligations -- current
portion................ 500 70 0 0 0 0 570
------- ------- ------ ------ -------- -------- --------
Total current
liabilities... 26,395 18,000 4,386 4,634 (12,789) (16,474) 24,152
------- ------- ------ ------ -------- -------- --------
Senior Notes, due 2007... 0 0 0 0 125,000 0 125,000
Long term debt, less
current portion........ 11,135 6,651 80 900 (11,135) (7,631) 0
Subordinated debt........ 8,000 0 0 0 (8,000) 0 0
Capital lease
obligations, less
current portion........ 953 52 0 45 0 0 1,050
Accrued warranty
obligations, less
current portion........ 2,871 0 440 0 0 0 3,311
Other.................... 1,481 218 0 0 0 2,151 3,850
------- ------- ------ ------ -------- -------- --------
Total
liabilities... 50,835 24,921 4,906 5,579 93,076 (21,954) 157,363
Stockholder's equity..... 6,214 (2,432) 4,214 (624) (1,305) (216) 5,851
------- ------- ------ ------ -------- -------- --------
Total liabilities and
stockholders' equity... $57,049 $ 22,489 $9,120 $4,955 $ 91,771 $(22,170) $163,214
======= ======= ====== ====== ======== ======== ========
</TABLE>
34
<PAGE> 36
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(1) Represents the receipt of proceeds from the Offering net of fees and
expenses relating to the Offering and the use of proceeds from the Offering
to retire debt of the Company existing at the time of the Offering including
a prepayment penalty as follows:
<TABLE>
<S> <C>
Proceeds from Senior Notes, 11 3/4%, due 2007..................... $125,000
Retirement of Company's existing debt:
Revolving lines of credit....................................... (9,932)
Term debt....................................................... (13,992)
Subordinated debt............................................... (8,000)
Prepayment penalty................................................ (360)
Fees and expenses relating to the Offering........................ (6,500)
--------
Cash.............................................................. $ 86,216
========
</TABLE>
Fees and expenses relating to the Offering include special bonuses of $425
to employees of the Company which are to be recorded as a charge to the
Company's statement of operations and reflected as a reduction in equity in
the accompanying unaudited pro forma balance sheet. The remainder of the
fees and expenses will be recorded as deferred financing costs and will be
amortized to interest expense over the 10-year term of the underlying Notes.
In connection with the Offering, the Company will record an extraordinary
charge -- loss on retirement of debt -- consisting of the write-off of
deferred financing costs of $520 relating to the debt of the Company retired
with the proceeds of the Offering and the above-noted $360 prepayment
penalty. This extraordinary charge is reflected as a reduction in equity in
the accompanying unaudited pro forma balance sheet.
(2) To reflect the acquisitions of Binnings, Danvid, American Glassmith and
Modern and the adjustments relating to the allocation of purchase price on
the basis of the estimated fair market values of the assets acquired and
liabilities assumed. The components of purchase price and adjustments to
reflect the related allocation to the assets and liabilities of the
Acquisitions are as follows:
<TABLE>
<S> <C>
Components of purchase price:
Cash............................................................ $ 51,033
AAPC common shares issued....................................... 942
Assumption of debt.............................................. 1,308
Present value of noncompete agreement with former owner of
one of the Acquisitions...................................... 2,151
--------
Total purchase price.............................................. $ 55,434
Adjustments relating to the allocation of purchase price:
Elimination of stockholders' equity of acquired companies....... $ (1,158)
Increase in property, plant and equipment....................... (9,139)
Elimination of debt not assumed................................. (23,678)
Elimination of debt retired..................................... (1,308)
Liabilities not assumed......................................... (319)
Elimination of LIFO reserve from inventory...................... (679)
Assets not acquired............................................. 172
Adjustment to accrued expenses including estimate of acquisition
costs........................................................ 1,200
--------
Cost in excess of net assets acquired............................. $ 20,525
========
</TABLE>
Cost in excess of net assets acquired will be amortized over 25 years.
35
<PAGE> 37
SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the Company and
its Predecessors for the five years ended December 31, 1996, and for the nine
months ended September 30, 1997 and 1996. The selected historical financial data
for the Company for 1996 were derived from the audited consolidated financial
statements of the Company for the period from June 19, 1996 (inception) through
December 31, 1996, included elsewhere in this Prospectus. The selected
historical financial data for the Company for the nine months ended September
30, 1997 and 1996 were derived from the unaudited consolidated financial
statements of the Company included elsewhere in this Prospectus. In the opinion
of management, the unaudited Company financial statements include all
adjustments, including only normal recurring adjustments, necessary for a fair
presentation of the Company's financial position and results of operations for
the period. The results of operations for interim periods may not be indicative
of the results to be expected for the full year.
The selected historical financial data for the Predecessors for 1996, 1995
and 1994 were derived from the audited combined financial statements of Eagle
Window & Door, Inc. and Subsidiaries and Taylor Building Products Company
included elsewhere in this Prospectus, and the audited combined financial
statements of Mallyclad Corporation and Vyn-L Corporation included elsewhere in
this Prospectus. The selected historical financial data for the Predecessors for
1993 and 1992 were derived from the unaudited combined financial statements of
Eagle Window & Door, Inc. and Subsidiaries and Taylor Building Products Company
that are not included in this Prospectus; the unaudited financial statements of
Mallyclad Corporation that are not included in this Prospectus; and the
unaudited financial statements of Vyn-L Corporation that are not included in
this Prospectus.
The following table also sets forth pro forma financial data of the Company
which were derived from the unaudited pro forma consolidated financial
statements included elsewhere in this Prospectus.
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Unaudited Pro Forma Consolidated Financial Statements," and the
historical financial statements and the notes thereto of the Company, Eagle
Window & Door, Inc. and Subsidiaries and Taylor Building Products Company, and
Mallyclad Corporation and Vyn-L Corporation included elsewhere in this
Prospectus.
36
<PAGE> 38
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSORS(2)
-----------------------------------------------------
1992 1993 1994 1995 1996
------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $93,873 $116,809 $97,209 $ 76,955 $41,887
Cost of sales....................... 76,984 103,260 87,181 71,164 35,430
------- -------- ------- ------- -------
Gross profit..................... 16,889 13,549 10,028 5,791 6,457
Selling, general and admin.
expenses........................... 14,370 20,211 14,929 12,983 7,440
Restructuring charge................ 0 0 0 840 0
------- -------- ------- ------- -------
Income (loss) from operations.... 2,519 (6,662) (4,901) (8,032) (983)
Interest expense.................... 1,368 2,023 2,040 1,755 1,143
Other (income) expense -- net....... 914 (192) (93) 299 480
------- -------- ------- ------- -------
Income (loss) before income
taxes.......................... 237 (8,493) (6,848) (10,086) (2,606)
Income tax provision (benefit)...... 148 (2,975) (2,509) (3,578) (908)
------- -------- ------- ------- -------
Net income (loss)................ 89 (5,518) (4,339) (6,508) (1,698)
Dividends on Preferred Stock........ 0 0 0 0 0
------- -------- ------- ------- -------
Net income (loss) available to
common stockholders............ $ 89 $ (5,518) $(4,339) $ (6,508) $(1,698)
======= ======== ======= ======= =======
Net income (loss) per common
share..............................
Weighted average shares
outstanding........................
OTHER DATA:
EBITDA(6)........................... $ 4,399 $ (3,116) $ (832) $ (4,939) $ 1,235
Depreciation and amortization....... 2,794 3,354 3,976 3,392 2,698
Capital expenditures................ 3,951 2,229 1,993 2,621 1,683
Ratio of earnings to fixed
charges(7)......................... 1.14x N/A(8) N/A(8) N/A(8) N/A(8)
<CAPTION>
COMPANY(1)(3)
--------------------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------------
COMBINED PRO FORMA COMBINED PRO FORMA
1996 1996(4) 1996(5) 1996(4) 1997 1997(5)
-------- -------- --------- ------------ --------- ---------
<S> <<C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $ 25,249 $67,136 $176,393 $ 48,770 $65,020 $144,340
Cost of sales....................... 19,027 54,457 136,616 40,659 50,978 112,151
-------- -------- -------- -------- -------- --------
Gross profit..................... 6,222 12,679 39,777 8,111 14,042 32,189
Selling, general and admin.
expenses........................... 4,060 11,500 31,283 8,574 11,185 24,236
Restructuring charge................ 0 0 0 0 0 0
-------- -------- -------- -------- -------- --------
Income (loss) from operations.... 2,162 1,179 8,494 (463) 2,857 7,953
Interest expense.................... 756 1,899 15,557 1,324 2,313 11,753
Other (income) expense -- net....... 5 485 171 477 (96) (158)
-------- -------- -------- -------- -------- --------
Income (loss) before income
taxes.......................... 1,401 (1,205) (7,234) (2,264) 640 (3,642)
Income tax provision (benefit)...... 640 (268) 0 (722) 257 0
-------- -------- -------- -------- -------- --------
Net income (loss)................ 761 (937) (7,234) (1,542) 383 (3,642)
Dividends on Preferred Stock........ 0 0 0 0 (75) (75)
-------- -------- -------- -------- -------- --------
Net income (loss) available to
common stockholders............ $ 761 $ (937) $ (7,234) $ (1,542) $ 308 $ (3,717)
======== ======== ======== ======== ======== ========
Net income (loss) per common
share.............................. $ (0.53) $ (0.27)
Weighted average shares
outstanding........................ 13,744,193 13,744,193
OTHER DATA:
EBITDA(6)........................... $ 2,599 $ 3,834 $ 12,669 $ 1,830 $ 4,919 $ 11,948
Depreciation and amortization....... 442 3,140 4,346 2,770 1,966 3,837
Capital expenditures................ 429 2,112 3,302 1,824 919 2,126
Ratio of earnings to fixed
charges(7)......................... 2.69x N/A (9) N/A (10) N/A(9) 1.26x N/A (10)
</TABLE>
<TABLE>
<CAPTION>
PREDECESSORS(2)
------------------------------
DECEMBER 31,
-------------------------------------------
1992 1993 1994 1995
------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................. $ 430 $ 250 $ 288 $ 861
Working capital (deficit)................................................. 24,576 29,047 (5,276) (9,736)
Total assets.............................................................. 81,038 102,505 39,440 26,629
Total debt(11)............................................................ 96 22 0 0
Stockholders' equity...................................................... 74,781 93,487 2,540 (3,969)
<CAPTION>
COMPANY(1)(3)
------------------------ PRO FORMA
DECEMBER 31, SEPT. 30, SEPT. 30,
1996 1997 1997(5)
------------ --------- ---------
<S> <<C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..... $ 964 $ 1,267 $ 38,772
Working capital (deficit)..... 176 233 60,223
Total assets.................. 42,744 57,049 163,214
Total debt(11)................ 23,010 33,377 126,620
Stockholders' equity.......... 4,277 6,214 5,851
</TABLE>
37
<PAGE> 39
- ---------------
(1) For financial reporting purposes, the Company represents AAPC after giving
effect to the series of transactions described below.
ETC was formed in June 1996. Effective June 25, 1996, ETC's ultimate
controlling shareholder acquired Mallyclad and Vyn-L. Subsequently, on
December 18, 1996, Mallyclad and Vyn-L were merged into ETC. Based on the
control maintained by this shareholder, the merger was considered a
transaction among companies under common control and, accordingly,
accounted for at the shareholder's historical cost and included in the
accounts of ETC effective June 25, 1996.
Effective August 29, 1996, ETC acquired Eagle and Taylor. The acquisition
was accounted for as a purchase with the assets acquired and the
liabilities assumed recorded at estimated fair values and the results of
operations included in ETC's financial statements from the date of
acquisition.
Effective December 18, 1996, ETC acquired and combined with FCEI. The
acquisition was accounted for as a purchase and, accordingly, the assets
acquired and liabilities assumed by ETC were recorded at their estimated
fair values and the results of FCEI's operations are included in the
financial statements of ETC from the date of the acquisition. The merged
entity subsequently changed its name to American Architectural Products
Corporation (AAPC).
For purposes of presenting the selected financial data, Eagle and Taylor,
and Mallyclad and Vyn-L are considered to be Predecessors and their
financial data are presented on a combined basis. The financial data for
the period after the acquisitions are presented on a different cost basis
than the financial data before the acquisitions and, therefore, are not
comparable.
(2) Selected financial data for the Predecessors for 1992 through 1995 were
derived from the audited combined financial statements of Eagle and Taylor
for 1994 and 1995, and the unaudited combined financial statements of Eagle
and Taylor for 1992 and 1993; the unaudited financial statements of
Mallyclad for the fiscal years ended November 30, 1992 and 1993; the
unaudited financial statements of Vyn-L for the fiscal years ended February
28, 1993 and 1994; and the audited combined financial statements of
Mallyclad and Vyn-L for the years ended November 30, 1994 and 1995.
Selected financial data for the Predecessors for 1996 were derived from the
audited combined financial statements of Eagle and Taylor for the period
January 1, 1996 through August 29, 1996, and the audited combined financial
statements of Mallyclad and Vyn-L for the period December 1, 1995 through
June 30, 1996.
(3) Selected financial data for the Company for 1996 and 1997 were derived from
the audited financial statements of the Company for the period from June
1996 (inception) through December 31, 1996, and the unaudited financial
statements for the nine months ended September 30, 1997. These financial
statements include the operations of Mallyclad and Vyn-L from June 25,
1996, and the operations of Eagle and Taylor from August 29, 1996. The
results of operations of Forte are included in the Company's 1996 selected
financial data from December 18, 1996. The results of operations of Western
and Thermetic are included in the Company's 1997 selected financial data
from March 14, 1997 and July 18, 1997, respectively, their acquisition
dates.
(4) Selected financial data for Combined 1996 include the 1996 selected
financial data of the Predecessors (note (2) above) and the 1996 selected
financial data of the Company (notes (1) and (3) above) without giving
effect to purchase accounting or the impact of financing and capitalization
relating to the acquisitions of Eagle, Taylor, Mallyclad, Vyn-L and Forte.
(5) The pro forma financial data of the Company were derived from the unaudited
pro forma consolidated financial statements included elsewhere in this
Prospectus and do not necessarily reflect the results of operations or the
financial position of the Company that actually would have resulted had the
Completed Acquisitions and the Acquisitions to which pro forma effect is
given been consummated as of the date or for the periods indicated. In
preparing the unaudited pro forma consolidated financial statements, the
Company believes it has utilized reasonable methods to conform the basis of
presentation. The pro forma adjustments reflect those adjustments
appropriate to present pro forma financial statements pursuant to
regulations prescribed by the Commission.
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<PAGE> 40
(6) EBITDA represents income (loss) from continuing operations before interest,
income taxes, and depreciation and amortization. EBITDA is presented here
to provide additional information about the Company's ability to meet its
future debt service, capital expenditure and working capital requirements.
EBITDA is not a measure of financial performance under generally accepted
accounting principles and should not be considered as an alternative either
to net income as an indicator of the Company's operating performance or to
cash flows as a measure of the Company's liquidity.
(7) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent income (loss) before income taxes, extraordinary charges
and fixed charges. Fixed charges consist of the total of (i) interest,
including the amortization of deferred finance costs and (ii) that portion
of rental expense considered to represent interest cost (assumed to be
one-third).
(8) No ratio is presented for this period as the earnings were inadequate to
cover fixed charges. Earnings were less than fixed charges by $8.5 million,
$6.8 million, $10.1 million and $2.6 million for the Predecessors' fiscal
years 1993, 1994 and 1995 and for periods in fiscal 1996 prior to their
acquisitions by the Company, respectively.
(9) No ratio is presented for 1996 or for the nine months ended September 30,
1996 on a combined basis (see note (4)) as the earnings were less than the
fixed charges by $1.2 million and $2.3 million, respectively.
(10) No ratio is presented for 1996 or for the nine months ended September 30,
1997 on a pro forma basis (see note(5)) as the earnings were less than
fixed charges by $7.2 million and $3.6 million, respectively.
(11) Includes capital lease obligations and excludes intercompany payable.
39
<PAGE> 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
In August 1996, Eagle and Taylor were acquired by ETC as the foundation for
the consolidation of a series of acquisitions in the fenestration industry. In
December 1996, ETC acquired and combined with Forte Computer Easy, Inc.
("FCEI"), a publicly held company whose wholly owned subsidiary, Forte, is a
manufacturer of commercial aluminum windows. Subsequent to this transaction, the
entity changed its name to "American Architectural Products Corporation". ETC
and Forte became wholly-owned subsidiaries of the Company. AAPC has since
acquired Western and Thermetic. Concurrently with the Offering, AAPC consummated
the acquisitions of Binnings, Danvid, American Glassmith and Modern. See Note 2
to the AAPC consolidated financial statements regarding AAPC's acquisition
activity.
ETC was incorporated on June 19, 1996 and had no significant operations or
assets until it acquired two companies, Eagle and Taylor, from MascoTech, Inc.
on August 29, 1996. The acquisition of Eagle and Taylor was accounted for as a
purchase, with the assets acquired and liabilities assumed recorded at estimated
fair market values and the results of the Eagle and Taylor operations included
in ETC's consolidated financial statements from the date of acquisition.
ETC's ultimate controlling stockholder acquired 100% ownership of two other
companies, Mallyclad and Vyn-L, on June 25, 1996. On December 18, 1996,
Mallyclad and Vyn-L collectively were merged into ETC concurrently with the FCEI
combination described below. The merger was accounted for at historic cost in a
manner similar to a pooling of interests. The operating results of Mallyclad and
Vyn-L from the date of its acquisition by ETC's ultimate controlling stockholder
are included in the consolidated financial statements. Eagle, Taylor, Mallyclad
and Vyn-L, are considered the Predecessors of ETC for financial reporting
purposes.
On December 18, 1996, ETC acquired and combined with FCEI. Subsequent to
this transaction, the combined entity changed its name to "American
Architectural Products Corporation." On March 14, 1997, AAPC acquired the stock
of Western, and on July 18, 1997, AAPC acquired the stock of Thermetic. The
acquisitions were accounted for as purchases, with the purchase prices allocated
among the assets acquired and liabilities assumed based on their estimated fair
market values, and the results of their operations were included in the
consolidated financial statements from the respective dates of acquisition.
Concurrently with the Offering, AAPC consummated the acquisitions of
Binnings, Danvid, American Glassmith and Modern. These acquisitions will be
accounted for as purchases, with purchase prices allocated among the assets
acquired and liabilities assumed based on their estimated fair market values.
The results of their operations will be included in the AAPC consolidated
financial statements from the December 10, 1997 acquisition date and,
accordingly, are not included in the financial data presented below. See the
financial statements of Binnings Building Products Company and of Danvid
Company, Inc. and Danvid Window Company included elsewhere in this Prospectus.
RESULTS OF OPERATIONS
Results of operations for the periods presented reflect a number of
significant events or factors. In 1995, the operations at Taylor were
restructured by eliminating non-core product lines and closing related
manufacturing and distribution facilities (the "Taylor Restructuring"). The near
term impact of these measures was a significant decrease in total sales and a
nonrecurring restructuring charge; however, in recent periods these measures
have produced an increase in gross margins at this operation. Gross profit from
Taylor was negatively impacted by the introduction of an automated door line
which was installed in 1993. While attempting to reach targeted operational
efficiencies, Taylor was required to run a dual line for manufacturing doors
from 1993 until 1995 which adversely affected gross margins. Also, during the
majority of the period for which the results of operations are presented, Eagle
and Taylor were being marketed for sale by their former parent. This had a
negative effect on sales at both divisions since distributors and their
customers were concerned about the future of these businesses. The sale of these
facilities to the Company in August 1996 permitted the divisions to stabilize
their long-standing relationships with customers by eliminating the
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<PAGE> 42
uncertainty concerning the direction and strategy of these businesses. This
resulted in increased sales at Eagle during 1996 and 1997.
The future operations of the Company will depend on a number of factors,
including the successful integration of the acquired companies to take advantage
of their increased purchasing power, distribution capabilities and product
lines; continued improvements in manufacturing processes, including greater
vertical integration; establishment of company-wide management information
systems; increased penetration of fast growing markets, both product (such as
vinyl) and geographic; continued growth in the new home and repair/ remodel
markets; stability in raw materials prices; continuation of key customer and
distributor relationships; and the other factors described elsewhere in this
Prospectus.
The following table sets forth net sales and expenses in aggregate dollars
and as a percentage of net sales for the Company and its predecessors -- Eagle,
Taylor, Mallyclad and Vyn-L -- for the years 1994, 1995 and 1996; for the
Company and its predecessors -- Eagle, Taylor, Mallyclad and Vyn-L -- for the
nine months ended September 30, 1996; and the Company for the nine months ended
September 30, 1997. As a result of the acquisitions discussed above, and the
related differences in cost bases of the assets and liabilities of the Company
after the acquisitions and the cost bases of the Predecessors, the results of
operations for the past three years are not comparable. Such lack of
comparability is explained in the discussion below. The following financial data
should be read in conjunction with the historical financial statements along
with the notes thereto of the Company, Eagle Window & Door, Inc. and
Subsidiaries and Taylor Building Products Company, and Mallyclad Corporation and
Vyn-L Corporation included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------
1994(1) 1995(1) 1996(2) 1996(3) 1997(4)
--------------- ---------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT FOOTNOTES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... $97,209 100.0% $ 76,955 100.0% $67,136 100.0% $48,770 100.0% $65,020 100.0%
Cost of sales................. 87,181 89.7% 71,164 92.5% 54,457 81.1% 40,659 83.4% 50,978 78.4%
------- ------ -------- ------ ------- ------ ------- ----- ------- -----
Gross profit.......... 10,028 10.3% 5,791 7.5% 12,679 18.9% 8,111 16.6% 14,042 21.6%
Selling, general and
administrative
expenses(5)................. 14,929 15.4% 12,983 16.9% 11,500 17.1% 8,574 17.6% 11,185 17.2%
Restructuring charge.......... 0 0.0% 840 1.1% 0 0.0% 0 0.0% 0 0.0%
------- ------ -------- ------ ------- ------ ------- ----- ------- -----
Operating income
(loss).............. (4,901) (5.1)% (8,032) (10.5)% 1,179 1.8% (463) (1.0)% 2,857 4.4%
Interest expense(5)........... 2,040 2.1% 1,755 2.3% 1,899 2.8% 1,324 2.7% 2,313 3.6%
Other (income) expense........ (93) (0.1)% 299 0.4% 485 0.7% 477 1.0% (96) (0.2)%
------- ------ -------- ------ ------- ------ ------- ----- ------- -----
Income (loss) before
income taxes........ (6,848) (7.1)% (10,086) (13.2)% (1,205) (1.7)% (2,264) (4.7)% 640 1.0%
Income tax provision
(benefit)(5)................ (2,509) (2.6)% (3,578) (4.7)% (268) (0.4)% (722) (1.5)% 257 0.4%
------- ------ -------- ------ ------- ------ ------- ----- ------- -----
Net income (loss)..... $(4,339) (4.5)% $ (6,508) (8.5)% $ (937) (1.3)% $(1,542) (3.2)% $ 383 0.6%
======= ====== ======== ====== ======= ====== ======= ===== ======= =====
</TABLE>
- ---------------
(1) Financial data for 1994 and 1995 are that of the Predecessors and were
derived from the audited combined financial statements of Eagle and Taylor
for those years, and the audited combined financial statements of Mallyclad
and Vyn-L for the fiscal years ended November 30, 1994 and 1995. Because the
financial data of the Predecessors are presented on cost bases different
from that of the Company after the acquisitions, the 1994 and 1995 financial
data are not comparable to the 1996 financial data (see note (2) below).
(2) Financial data presented for 1996 include the combination of financial data
of the Company and its predecessors -- Eagle and Taylor, Mallyclad and
Vyn-L. Financial data for the Company for 1996 were derived from the audited
consolidated financial statements of the Company for the period from June
19, 1996 (inception) through December 31, 1996. These financial statements
include the operations of Mallyclad and Vyn-L from June 25, 1996, and the
operations of Eagle and Taylor from August 29, 1996. Financial data for
Eagle and Taylor for 1996 were derived from the audited combined financial
statements of Eagle Window & Door, Inc. and Subsidiaries and Taylor Building
Products Company for the period from January 1, 1996 to August 29, 1996.
Financial data for Mallyclad and Vyn-L for 1996 were derived from the
audited combined financial statements of Mallyclad and Vyn-L for the period
December 1, 1995 to June 25, 1996. Because the financial data for 1996
include data of the Company and
41
<PAGE> 43
its Predecessors which are presented on different cost bases, such data are
not comparable to the financial data for 1994 and 1995.
(3) Financial data for the nine months ended September 30, 1996 include the
Predecessors for the eight months ended August 29, 1996 (derived from the
audited combined financial statements of Eagle and Taylor for that period),
the seven months ended June 30, 1996 (derived from the audited combined
financial statements of Mallyclad and Vyn-L for that period) and the Company
for the period from June 19, 1996 (inception) to September 30, 1996 (derived
from the unaudited consolidated financial statements of the Company for that
period). Because the financial data of the Predecessors are presented on
cost bases different from that of the Company after the acquisitions, the
September 30, 1996 financial data are not comparable to the 1997 financial
data.
(4) Financial data for the nine months ended September 30, 1997 were derived
from the unaudited consolidated financial statements of the Company for that
period.
(5) In addition to comparability issues relating to differences in asset and
liability bases described in notes (1) through (4) above, other factors
affect the comparability of financial data from year to year. The former
parent of Eagle and Taylor provided treasury function and allocated various
general and administrative expenses. Interest expense allocated by the
former parent to Eagle and Taylor approximated $2.0 million and $1.8 million
in 1994 and 1995, respectively; interest expense for the eight months ended
August 29, 1996 approximated $1.1 million and was treated as contributed to
capital of Eagle and Taylor by the former parent. A management fee based on
budgeted sales was charged by the former parent to Eagle and Taylor,
approximating $1.5 million, $1.3 million and $1.0 million for the years
ended December 31, 1994 and 1995, and the eight months ended August 29,
1996, respectively. Other expenses charged to Eagle and Taylor by the former
parent that were specifically incurred for those companies for items such as
general insurance, health insurance and workers compensation insurance
approximated $4.4 million, $3.6 million and $1.7 million for the years ended
December 31, 1994 and 1995, and the eight months ended August 29, 1996,
respectively. Eagle and Taylor filed their tax returns on a consolidated
basis with their former parent and all provisions for federal and state
income taxes, including provisions for deferred taxes, were provided through
intercompany accounts. Because these charges to Eagle and Taylor from their
former parent may differ from such charges for those entities as part of the
Company, comparison of 1994 and 1995 financial data to 1996 financial data
may not be meaningful.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1997 TO COMBINED NINE MONTHS
ENDED SEPTEMBER 30, 1996
Net Sales. Net sales increased 33.2% to $65.0 million for the nine months
ended September 30, 1997 as compared to $48.8 million for the same period of the
previous year. The $16.2 million increase was attributable to higher volume
levels at Eagle, whose sales increased from $29.9 million to $38.6 million. The
sales growth at Eagle was due to increased marketing in certain targeted
geographic areas and the addition of new distribution channels. Additionally,
the increase reflects $7.0 million of net sales contribution from acquired
subsidiaries including Forte, Western and Thermetic. None of these companies
were included in the nine months ended September 30, 1996.
Cost of Sales. Cost of sales increased $10.3 million, or 25.3%, to $51.0
million for the nine months ended September 30, 1997, from $40.7 million for the
same period in 1996, due to an increase in net sales. However, cost of sales as
a percentage of sales decreased from 83.4% for the nine months ended September
30, 1996 to 78.4% for the months ended September 30, 1997. The decrease was
primarily due to the increase in net sales and efficiencies gained from the
Taylor Restructuring. The total decrease in Taylor cost of sales was $1.7
million.
Gross Profit. Gross profit for the nine months ended September 30, 1997
was $14.0 million, representing an increase of $5.9 million, or 72.9%, over
1996. This was primarily a result of increased sales in the nine months ended
September 30, 1997 compared to the same period in 1996. Gross profit as a
percentage of net sales increased from 16.6% for the nine months ended September
30, 1996 to 21.6% for the nine months ended
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<PAGE> 44
September 30, 1997 due to improved margins at both Eagle and Taylor as a result
of an increase in sales and the Taylor Restructuring.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased $2.6 million or 30.2% to $11.2
million for the nine months ended September 30, 1997 as compared to $8.6 million
for the nine months ended September 30, 1996. The increase reflects
consolidation of senior management to a central corporate office and related
build up of the Company's management team to oversee and coordinate the
Company's growth strategy and increased operations. The inclusion of Forte,
Western and Thermetic resulted in additional SG&A expenses of $1.3 million. SG&A
expenses as a percent of sales decreased to 17.2% for the nine months ended
September 30, 1997 from 17.6% for the comparable 1996 period.
Operating Income (Loss). Operating income (loss) increased $3.3 million
from an operating loss of $0.5 million for the nine months ended September 30,
1996 to operating income of $2.8 million for the same period in 1997. The
increase is attributable to the positive effects of the Taylor Restructuring,
the increase in sales, and the addition of the acquired companies offset by the
increase in SG&A.
Interest Expense. Interest expense for the nine months ended September 30,
1997 and 1996 was $2.3 million and $1.3 million, respectively. The $1.0 million,
or 76.9%, increase is attributable to interest expense from the debt associated
with the acquisition of the Eagle and Taylor operating units and the additional
interest expense due to the acquisitions of Forte, Western and Thermetic. The
previous parent of Eagle and Taylor allocated interest expense to the entities
during the eight months ended August 29, 1996 (predecessor period), and
accordingly, interest for the nine months ended September 30, 1997 is not
comparable with the same period in 1996.
Income Taxes. The Company has recorded a provision for income taxes of
$0.3 million for the nine months ended September 30, 1997 on income before
income taxes of $0.6 million, resulting in an effective tax rate of 40.2%. Prior
to their acquisitions, Eagle and Taylor were included in the consolidated tax
return of their former parent and, accordingly, the provision for income taxes
for the nine months ended September 30, 1996 is not indicative of the amounts
that would have been recorded on a separate basis and are not comparable.
COMPARISON OF COMBINED YEAR ENDED DECEMBER 31, 1996 TO COMBINED YEAR ENDED
DECEMBER 31, 1995
Net Sales. Net sales decreased 12.9%, to $67.1 million, for 1996 as
compared to $77.0 million for 1995. The decrease was primarily a result of the
Taylor Restructuring. This was offset by nominal increases in net sales for the
remaining operations as a result of increases in volume and pricing during the
year.
Cost of Sales. Cost of sales decreased from $71.2 million, or 92.5% of net
sales, for the year ended December 31, 1995, to $54.5 million, or 81.1% of net
sales, for the year ended December 31, 1996. The $16.7 million, or 23.5%,
decrease in cost of sales is primarily due to the $15.5 million decrease in cost
of sales at Taylor due to the Taylor Restructuring which was substantially
completed in 1995. The decrease in cost of sales as a percentage of sales
reflects efficiencies gained from the Taylor Restructuring and production
efficiencies arising from the increased use of automated manufacturing equipment
at Taylor.
Gross Profit. Gross profit for the year ended December 31, 1996 was $12.7
million, representing an increase of $6.9 million, or 119.0%, from 1995. Gross
profit as a percentage of sales increased from 7.5% in 1995 to 18.9% in 1996 due
to margin improvements resulting from the Taylor Restructuring. In addition,
lower depreciation for the period subsequent to the acquisition of Eagle and
Taylor due to lower bases of assets, based on the allocation of purchase price,
compared to the historical bases of assets prior to the acquisition, improved
gross profit.
Selling, General, and Administrative Expenses. SG&A expenses, as a
percentage of sales, were 17.1% in 1996 compared to 16.9% in 1995. The
percentage increase was due primarily to the decrease in revenues between years
while SG&A expenses did not decline proportionately due to the fixed nature of
certain expenditures in this category. Although SG&A as a percentage of sales
increased, total SG&A expenses decreased by $1.5 million, or 11.5%, to $11.5
million in 1996. The Taylor Restructuring accounted for a $2.7 million reduction
in SG&A expenses, which was offset by an increase in SG&A expenses for Eagle of
$1.1 million.
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<PAGE> 45
Operating Income (Loss). Operating income, excluding the nonrecurring
restructuring charges in 1995, increased by $8.4 million from the operating loss
of $7.2 million in 1995. This is attributable to the improved operating profit
resulting from the Taylor Restructuring and the reduction in SG&A expenses.
Interest Expense. Interest expense, as a percentage of sales, was 2.8% in
1996 compared to 2.3% in 1995. Interest expense increased by approximately $0.1
million, or 5.6%, to $1.9 million in 1996. The former parent of Eagle and Taylor
provided cash management services to Eagle and Taylor and charged interest
expense relating to the amounts payable to affiliates. This interest expense
approximated $1.8 million in 1995 and $1.1 million for the eight months ended
August 29, 1996. Interest expense for the combined year ended December 31, 1996
also includes approximately $0.8 million incurred by the Company during its
ownership.
Income Taxes. The Company has recorded a tax benefit of $0.3 million on a
loss before taxes of $1.2 million for the combined year ended December 31, 1996.
The benefit results from income tax expense recorded at an effective rate of 46%
on income before taxes for the period under the Company's ownership and an
income tax benefit recorded at an effective rate of 35% on losses before taxes
of the Predecessors. The effective rate for the period under the Company's
ownership was determined using the Company's operating results and the bases of
its assets and liabilities adjusted for purchase accounting for the
acquisitions, and differs from the statutory tax rates as a result of a
valuation allowance adjustment, non-deductible expenses and state taxes. Prior
to the acquisitions, Eagle and Taylor were included in the consolidated income
tax returns of their parent and recorded income taxes in their accounts at a
prescribed effective rate. Accordingly, income taxes for the combined year ended
December 31, 1996 are not indicative of the amounts that would have been
recorded on a stand-alone basis and are not comparable to prior years.
Net Loss. The Company's consolidated net loss decreased by $5.6 million,
or 86.2%, to $0.9 million in 1996 compared to the $6.5 million net loss incurred
in 1995. The Company reported net income of $0.8 million for the period under
its ownership. The factors cited above were responsible for the decrease in net
loss of the Company.
COMPARISON OF COMBINED YEAR ENDED DECEMBER 31, 1995 TO COMBINED YEAR ENDED
DECEMBER 31, 1994
Net Sales. Net sales decreased 20.8%, to $77.0 million for 1995 as
compared to $97.2 million for 1994. The decrease was primarily a result of two
major elements. Sales at Taylor decreased by $17.8 million primarily due to the
Taylor Restructuring. Eagle also experienced a sales volume decrease of $1.9
million, which included the net effect of a price increase for certain of its
products. The decline in volume was a result of the loss of certain key
customers.
Cost of Sales. Cost of sales decreased $16.0 million, or 18.3%, from $87.2
million for the year ended December 31, 1994, to $71.2 million in 1995. However,
cost of sales as a percentage of net sales increased from 89.7% for the year
ended December 31, 1994 to 92.5% for the comparable period in 1995. Cost of
sales for these periods reflects the effect of one time costs associated with
the discontinuance of certain operations in connection with the Taylor
Restructuring.
Gross Profit. Gross profit for the year ended December 31, 1995 was $5.8
million, representing a decrease of $4.2 million, or 42.0%, from 1994. The
decrease was due to the reduction in sales volume, particularly at the Taylor
facility. Gross profit as a percentage of sales declined from 10.3% in 1994 to
7.5% in 1995, as a result of increases in the cost of sales due primarily to the
Taylor Restructuring.
Selling, General, and Administrative Expenses. SG&A expenses, as a
percentage of sales, were 16.9% in 1995 and 15.4% in 1994. SG&A expenses
declined by $2.0 million, or 13.4%, to $13.0 million in 1995. The Taylor
Restructuring accounted for a majority of this decrease and included a reduction
of sales and administrative salaries in addition to lower sales promotion
expenses.
Restructuring Charge. Taylor's management adopted a restructuring plan in
September of 1995 to address recurring operating losses. The plan was
implemented to reduce overhead through a plan of business consolidation and
simplification. The major components of the nonrecurring restructuring charge
consisted of closing select locations, eliminating non-core product lines, and
improving overall proficiency of its remaining product lines. Taylor's
restructuring activities also affected other financial statement components
including
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<PAGE> 46
sales, cost of sales and gross profits, each of which decreased. (See Eagle and
Taylor audited combined financial statements for the year ended December 31,
1995).
Operating Income (Loss). The operating loss for 1995, before the
nonrecurring restructuring charge of $0.8 million, increased 46.9% to $7.2
million compared to $4.9 million in 1994. The loss, as a percentage of sales,
increased from 5.1% in 1994 to 9.3% in 1995 due to the reduced gross profit and
the increase in SG&A as a percentage of revenues.
Interest Expense. Interest expense as a percentage of sales was 2.3% in
1995 and 2.1% in 1994. Interest expense declined by approximately $0.3 million,
or 14.3%, to $1.8 million during 1995. Interest expense decreased due to lower
intercompany debt levels for Eagle and Taylor in 1995 offset by slightly higher
interest rates than in 1994.
Income Taxes. The effective income tax rate for 1995 was 35% compared to
37% for 1994. Eagle and Taylor were included in the consolidated income tax
returns of their parent and recorded income taxes in their accounts at a
prescribed effective rate in 1994 and 1995.
Net Loss. The net loss increased $2.2 million, or 51.2%, to $6.5 million
in 1995 compared to $4.3 million in 1994 primarily due to the Taylor
Restructuring.
LIQUIDITY AND CAPITAL RESOURCES
During the years ended December 31, 1994, 1995 and 1996, and the nine
months ended September 30, 1997, the Company's principal sources of funds
consisted of cash from operations and financing activities. Prior to the
Offering, the Company financed acquisitions primarily through secured senior
debt facilities.
The Company's principal liquidity requirements will be for debt service
under the Notes and for working capital needs and capital expenditures. The
Company's annual debt service requirements, including capital lease obligations,
following the consummation of the Offering will increase from $6.4 million to
$15.4 million.
Approximately $33.8 million of the net proceeds of the Offering were used
to repay indebtedness under existing debt agreements, including prepayment
penalties. The weighted average interest rate of the indebtedness to be repaid
was 9.7% as of September 30, 1997. The Company used approximately $47.8 million
of the net proceeds to pay the cash portion of the purchase price for the
Acquisitions.
The Company plans to secure a revolving credit facility of $25 million to
provide additional liquidity. In addition, the Company has approximately $38.8
million of cash remaining after giving effect to the Offering. The Company
believes that cash generated from operations together with proceeds from the
Offering and the expected proceeds from the revolving credit facility will be
sufficient to permit the Company to meet its expected operating needs, planned
capital expenditures and debt service requirements. However, there can be no
assurance that sufficient funds will be available from operations or under
future revolving credit or other borrowing arrangements to meet the Company's
cash needs. Future acquisitions may require additional third party financing and
there can be no assurance that such funds would be available on terms
satisfactory to the Company, if at all. In addition, the Company's future
operating performance and ability to meet its financial obligations will be
subject to future economic conditions and to financial, business and other
factors, many of which will be beyond the Company's control.
Cash provided by operations was $1.9 million, $2.6 million, $4.5 million
and $0.2 million for the years ended December 31, 1994, 1995 and 1996 and for
the nine months ended September 30, 1997, respectively. The decrease in cash
provided by operations for the nine months ended September 30, 1997 relative to
previous years reflects increases in the Company's working capital accounts. The
increase in cash from operations between years resulted primarily from higher
volumes of operating activities. The Company's working capital requirements for
inventory and accounts receivable are impacted by changes in raw material costs,
the availability of raw materials, growth of the Company's business and
seasonality. As a result, such requirements may fluctuate significantly.
The Company's capital expenditures for the years ended December 31, 1994,
1995, and 1996 and for the nine months ended September 30, 1997 were $2.0
million, $2.6 million, $2.1 million and $0.9 million, respectively. Capital
outlays included manufacturing equipment and computer software and hardware. In
addition, in 1996 the Company entered into a $1.6 million capital lease to
purchase computer hardware and
45
<PAGE> 47
software. Management expects that its capital expenditure program will continue
at a sufficient level to support the strategic and operating needs of the
Company's operating subsidiaries. Future capital expenditures are expected to be
funded from internally generated funds, leasing programs and the Company's
credit facilities.
SEASONALITY
The Company's business is seasonal since its primary revenues are driven by
residential construction. Inclement weather during the winter months,
particularly in the Northeast and Midwest regions of the United States, usually
reduces the level of building and remodeling activity in both the home
improvement and new construction markets and, accordingly, has an adverse impact
on the demand for fenestration products. Traditionally, the Company's lowest
sales levels usually occur during the first and fourth quarters. Because a high
percentage of the Company's manufacturing overhead and operating expenses are
relatively fixed throughout the year, operating income has historically been
lower in quarters with lower sales. Working capital, and borrowings to satisfy
working capital requirements, are usually at their highest level during the
second and third quarters.
CYCLICALITY
Demand in the window and door manufacturing industry is influenced by new
home construction activity and the demand for replacement products. Trends in
the housing sector directly impact the financial performance of the Company.
Accordingly, the strength of the U.S. economy, the age of existing home stock,
job growth, consumer confidence, consumer credit, interest rates and migration
of the inter/intra U.S. population have a direct impact on the Company. Any
declines in new housing starts and/or demand for replacement products may
adversely impact the Company and there can be no assurance that any such adverse
effects would not be material.
INFLATION AND RAW MATERIAL COSTS
During the past several years, the rate of inflation has been relatively
low and has not had a significant impact on the Company's operations. However,
the Company purchases raw materials, such as aluminum, wood, vinyl and glass,
that are subject to fluctuations in price that may not reflect the general rate
of inflation, and are more closely tied to the supply of and demand for the
particular commodity. Specifically, there have been periods of significant and
rapid changes in aluminum prices, with a concurrent short-term impact on the
Company's operating margins. In some cases, generally where the increases have
been modest, the Company has been able to mitigate the effect of these price
increases over the long-term by passing them on to customers. The Company also
plans to consolidate its sources of supply for certain raw materials and to
pursue pricing arrangements with its suppliers which may reduce the short term
impact of raw material price increases.
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<PAGE> 48
BUSINESS
THE COMPANY
The Company is a leading manufacturer and distributor of a broadly
diversified line of windows, doors and related products designed to meet a
variety of residential consumer demands in both the new construction and
repair/remodel markets. The Company distributes its products regionally
throughout the United States under a number of well-established brand names that
are recognized for their quality, value, engineering and customer service,
including "Eagle", "Taylor", "Perma-Door", "Binnings", "Danvid", "Western",
"Modernview", "Vinyline", "Encore" and "Sumiglass". This brand name recognition
and reputation have enabled the Company to establish long-standing relationships
with leading wholesalers, lumberyards, do-it-yourself home centers, architects
and building contractors. The Company's products are marketed and distributed in
all 48 contiguous states and are manufactured in 11 separate facilities.
Management believes that the Company's broad product line, recognized brand
names and national geographic scope enable the Company to satisfy distinct
regional product preferences, target fast growing markets, thereby minimizing
the Company's reliance on any single geographic region. Management believes that
the Company is a leading supplier of residential fenestration products in each
of the major regional markets in which it competes. The Company's pro forma net
sales and pro forma EBITDA were $176.4 million and $12.7 million, respectively,
for the year ended December 31, 1996, and $144.3 million and $11.9 million,
respectively, for the nine months ended September 30, 1997.
Total U.S. construction expenditures in 1996 were approximately $451
billion, of which residential construction expenditures comprised approximately
$179 billion. Residential fenestration product sales totaled approximately $15.1
billion in 1996, $7.9 billion of which represented sales to the new construction
market and $7.2 billion of which represented sales to the repair/remodel market.
Of the Company's total 1996 pro forma net sales, approximately 86% was
attributable to residential fenestration products. The NWWDA has estimated that
total U.S. sales of residential windows, which represented approximately 67% of
the Company's pro forma net sales in 1996, increased from 33.4 million units in
1991 to 46.6 million units in 1996, representing a CAGR of 6.9%, and that sales
of residential entry doors, which represented approximately 17% of the Company's
pro forma net sales in 1996, increased from 11.2 million units in 1994 to 12.5
million units in 1996, representing a CAGR of 5.6%. Residential window and door
sales are expected to continue to increase over the next several years, with
NWWDA forecasting sales of residential windows and entry doors of 51.9 million
units and 13.8 million units, respectively, in the year 2000. Management
believes that the residential fenestration products market is generally faster
growing and more stable than the commercial fenestration products market, with
relatively greater resistance to economic downturns and changes in interest
rates, especially in the repair/remodel sector.
The residential market is highly fragmented, which provides the Company
with a competitive advantage in the regions it serves as a single source
supplier of a broad array of brand name products. In 1995, the single largest
fenestration company in the U.S. had annual revenues of less than 6% of total
industry sales, and the 100 largest fenestration companies in the aggregate
comprised less than 50% of total industry sales. This industry fragmentation
presents significant opportunities for growth through acquisitions, a strategy
that the Company has been successful in implementing to date.
The Company is one of a limited number of window and door manufacturers
which offer a broadly diversified product line, consisting of aluminum windows,
wood windows, polyvinyl chloride ("vinyl") windows, doors and other fenestration
products. Aluminum windows, which tend to be less expensive but also less
thermally efficient than wood or vinyl, are used primarily in the Southeastern,
Southern and Southwestern regions where thermal efficiency is not as important
as in other regions. Vinyl windows, which are the fastest growing segment of the
window market, are gaining in popularity due to their thermal efficiency, price
advantage over wood windows and improved composition technologies. Wood windows
are generally more expensive, although also more thermally efficient, than vinyl
or aluminum, and remain the preferred choice in medium- to high-end residential
architectural applications. While the Company markets its aluminum, vinyl and
wood products to specific markets based on distinct geographical preferences,
the Company's national manufacturing and distribution network and its diverse
product line allow the Company to respond efficiently
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<PAGE> 49
to shifts in regional consumer preferences and reduce the Company's reliance on
any single geographic region. The following table summarizes the percentage of
the Company's pro forma net sales for the nine months ended September 30, 1997
contributed by each of the Company's main product categories:
<TABLE>
<CAPTION>
PRODUCT CATEGORY SELECTED MAJOR BRAND NAMES GEOGRAPHIC FOCUS PERCENTAGE
----------------------- --------------------------- ------------------------------ ----------
<S> <C> <C> <C>
Aluminum Windows....... Binnings, Danvid, Western Southwest, Southeast, Midwest 36%
Wood Windows........... Eagle National 24
Vinyl Windows.......... Vinyline, Modernview Southwest, Southeast, Midwest 15
Doors.................. Taylor, Perma-Door, Encore National 19
Other Products......... Sumiglass National 6
---
Total 100%
===
</TABLE>
The Company was formed through the consolidation of a number of
well-established fenestration products companies. In December 1996, the Company
combined Eagle, Taylor and Mallyclad with Forte, which commenced operations in
1989. The Company subsequently acquired Western in March 1997, Thermetic in July
1997 and each of Binnings, Danvid, American Glassmith and Modern concurrently
with the closing of the Offering of the Outstanding Notes. The Company's
strategy in combining these companies is to capitalize on recognized brand
names, broad geographic presence, regional market leadership, reputation for
superior product quality and customer service and multi-channel distribution
capabilities. The Company has developed a detailed cost savings and integration
strategy with respect to acquired companies, which includes the consolidation of
certain purchasing, production, administrative, sales and management functions.
The Company integrates the marketing efforts and distribution network of each
acquired entity with the Company's systems to generate a broader overall
distribution system for all of its products. The Company's business plan
includes diversifying and strengthening its product base by acquiring additional
fenestration products companies and related material manufacturers which
complement and enhance the Company's existing product lines, distribution
capabilities and marketing strategy.
COMPETITIVE STRENGTHS
The Company's market leadership and financial performance are attributable
to a number of factors, including the following:
- - LEADING SHARE IN PRIMARY MARKETS
The Company believes it is a leading supplier of windows and doors for
residential consumers in each of the major regional markets it serves. The
Company's market position provides significant advantages over the Company's
smaller competitors in these highly fragmented markets due to purchasing,
manufacturing and distribution efficiencies.
- - ESTABLISHED AND RECOGNIZED BRAND NAMES
The Company believes many of its windows and doors receive national and
regional brand recognitions, including products marketed under the "Eagle",
"Taylor", "Binnings", "Danvid", "Western", "Perma-Door", "Vinyline",
"Modernview", "Encore" and "Sumiglass" brand names. The Company believes that
each of these brands has an established reputation within the fenestration
products industry for high quality, precision engineering and superior customer
service. The Company believes the strength of its brand names and reputation
will assist the Company in penetrating new markets and expanding distribution in
existing markets.
- - BROAD RANGE OF COMPLEMENTARY PRODUCTS
The Company is one of a limited number of window and door manufacturers
that offers a diversified product line consisting of aluminum, vinyl and wood
products. This diversity allows the Company to capture a broader customer base
by targeting specific economic and geographic regions with products tailored to
meet
48
<PAGE> 50
each region's particular preferences. Additionally, the Company can offer
wholesalers and do-it-yourself home center buyers a "one-stop" shopping solution
for many of their window and door needs.
- - STRENGTH IN MULTIPLE DISTRIBUTION CHANNELS
The Company distributes its products through a combination of sales to
wholesalers, lumberyards and do-it-yourself home centers and direct sales to
architects and independent building contractors. The Company believes that this
distribution strategy maximizes the Company's market penetration and reduces
reliance upon any single distribution channel for the sale of its products. In
addition, the Company has developed many long-standing relationships with key
distributors, which management believes provides the Company with a competitive
advantage as the Company further develops its national sales strategy.
- - NATIONAL GEOGRAPHIC SCOPE
While the Company focuses on marketing its aluminum, vinyl and wood
products to specific regional markets based on distinct regional preferences,
the Company's operations form a strong national manufacturing and distribution
network. This national geographic scope, together with the Company's broad
product line, enables the Company to rapidly respond to shifts in regional
consumer demand and reduces the Company's reliance on any single geographic
region for the sale of its products.
- - EMPHASIS ON RESIDENTIAL MARKET
The Company targets its marketing and distribution efforts primarily to the
residential fenestration market. Management believes that the residential
fenestration products market is generally faster growing and more stable than
the commercial fenestration products market, with relatively greater resistance
to economic downturns and changes in interest rates, especially in the
repair/remodel sector. Further, the residential market is highly fragmented,
which offers the Company a competitive advantage as a single source supplier of
a broad array of brand name residential products.
- - EXPERIENCED ENTREPRENEURIAL MANAGEMENT
The Company's management team has extensive experience in the fenestration
products industry. Collectively, the Company's top five executive officers have
a total of 95 years of experience in manufacturing and distributing windows and
doors. In addition, management has a strong track record of acquiring businesses
and integrating them into the existing operations of the Company. Eagle and
Taylor, which were acquired by the Company in August 1996, have experienced
increases in EBITDA from ($4.0) million for the fiscal year ended December 31,
1995 to an annualized $8.2 million based on the nine months ended September 30,
1997. The Company's officers, including the Chairman of the Board, collectively
have had significant involvement in more than 130 acquisition transactions. As
of September 30, 1997, the Company's executive officers and directors
collectively owned 83.9% of the Company's outstanding Common Stock.
BUSINESS STRATEGY
In order to enhance its leading market position and to maximize
profitability and cash flow, the Company's principal strategic objectives are as
follows:
- - LEVERAGE NATIONAL DISTRIBUTION SYSTEM, PRODUCT LINES AND BRAND NAME
RECOGNITION
The Company will use its nationwide distribution system and broad product
line to penetrate new markets and increase share in existing markets. In
addition, management will leverage the Company's national scope by targeting
fast growing regions, thereby enhancing growth potential and reducing the
Company's dependence on any single geographic market. The Company also plans to
continue to capitalize on its well-recognized brand names and reputation for
quality and service to increase revenues by cross-selling its products through
its multiple distribution channels.
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<PAGE> 51
- - CONSOLIDATE OPERATIONS TO ACHIEVE COST SAVINGS AND BROADEN DISTRIBUTION
The Company has developed a detailed cost savings and integration strategy
with respect to acquired companies, which includes the consolidation of certain
administrative, sales and management functions. As the Company continues to
expand through acquisitions and internal growth, it will benefit from increased
size and the ability to gain purchasing leverage with its suppliers, thereby
reducing the costs of raw materials used in the manufacturing process. The
Company integrates the marketing efforts and distribution network of each
acquired entity with the Company's existing marketing and distribution systems
to generate a broader overall distribution system for both its existing products
and the newly acquired products. Through these and other measures, the Company
believes that it can effectively enhance the productivity and profitability of
the businesses it acquires and develop synergies with its existing businesses.
- - PURSUE STRATEGIC, COMPLEMENTARY ACQUISITION OPPORTUNITIES
The Company's business plan is to increase the Company's market share and
geographic and product diversity through additional acquisitions of established
fenestration product companies and related material manufacturers. Because the
fenestration industry is highly fragmented, the Company believes that
significant opportunities exist to make selected strategic acquisitions at
attractive valuations. The Company seeks out acquisition candidates that are
leaders in national or regional markets and that possess recognized brand names,
established reputations for superior customer service, strong existing
management and stable customer bases. Strategic acquisitions will allow the
Company to (i) further leverage its highly recognized brand names, (ii) achieve
significant cost reductions through centralized purchasing, sharing central
administrative services and application of the Company's best operating and
management practices, and (iii) further diversify the Company's geographic,
product and market focus.
- - EXPANSION OF VINYL PRODUCTS BUSINESS
The Company plans to expand its presence in the vinyl window and door
market, which is projected to be the fastest growing sector for residential
fenestration product sales. The acquisitions of Binnings, Danvid, Thermetic and
Modern provide the Company with a significant platform of vinyl fenestration
products and customers. Management intends to use the Company's well-recognized
brand names and established distribution channels to help it further penetrate
the highly fragmented vinyl window and door market.
- - VERTICAL INTEGRATION AND PRODUCTION EFFICIENCIES
The Company believes that it can reduce its operating costs and improve its
margins through vertical integration of its aluminum extrusion and decorative
glass production capabilities, along with any vinyl extrusion capacity that the
Company may develop, with its window and door manufacturing operations.
Additional cost savings can be realized through rationalization of product
lines, reconfiguration of production processes, reduction of inventory levels
and implementation of uniform management information systems across the
Company's various operating divisions. Improved gross margins would provide
increased pricing flexibility in relation to the Company's competitors.
COMPANY HISTORY
The Company was formed through the consolidation of a number of
established, well-known fenestration companies. Eagle and Taylor, which have
been engaged in manufacturing fenestration products since 1977 and 1946,
respectively, were acquired by the Company in August 1996. Concurrent with the
acquisition of Eagle and Taylor, the Company also acquired Mallyclad and Vyn-L,
which are engaged in steel processing and vinyl-metal laminates manufacturing.
The operations of Eagle, Taylor, Mallyclad and Vyn-L were combined with the
operations of Forte, Inc., an existing subsidiary of the Company that has been
engaged in the manufacture and distribution of residential and non-residential
windows, window and door security screens, and storm windows and doors since
1990.
The Company continued the expansion of its fenestration products business
through the acquisitions of Western on March 14, 1997 and Thermetic on July 18,
1997. Western primarily markets aluminum windows
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<PAGE> 52
and doors for medium- and high-end residential applications in the Southwestern
U.S., and Thermetic's vinyl windows and doors are sold primarily in the Midwest.
The Company consummated the acquisitions of each of Binnings, Danvid, American
Glassmith and Modern concurrently with the closing of the Offering of the
Outstanding Notes. Both Binnings and Danvid produce aluminum and vinyl windows
and doors, with Binnings' sales concentrated in the Southeastern and Eastern
regions and Danvid's sales concentrated in the Southern and Southwestern
regions. American Glassmith designs, manufactures and assembles a wide variety
of decorative glass lites for residential fenestration applications. Modern
produces vinyl windows for sale in the Midwest region. Unless otherwise
indicated, all information contained herein assumes the consummation by the
Company of each of the Acquisitions.
The corporate organizational structure of the Company and its subsidiaries
is as follows:
<TABLE>
<CAPTION>
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Eagle & Taylor Forte Western Thermetic Binnings Danvid American Modern
Company Glassmith
Operating Divisions:
Eagle, Taylor,
Mallyclad, Vyn-L
</TABLE>
INDUSTRY OVERVIEW
General
Total U.S. construction expenditures in 1996 were approximately $451
billion, of which residential construction expenditures were approximately $179
billion. The demand for residential fenestration products is influenced
significantly by both the level of new home construction activity as well as the
level of construction activity in the replacement/remodel sector. In 1996,
spending on residential fenestration products in the U.S. totaled approximately
$15.1 billion, consisting of approximately $7.9 billion in new construction
spending and $7.2 billion in repair/remodel spending. As indicated in the table
below, generally favorable economic conditions have resulted in robust
construction activity in both of these sectors, and these favorable trends in
the U.S. housing and construction industry have, in turn, resulted in strong
demand for residential fenestration products.
KEY INDUSTRY DATA
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996E 1997F 1998F 1999F 2000F
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
(ALL FIGURES IN MILLIONS, EXCEPT DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential prime window sales
(units)............................... 33.4 39.1 42.4 45.2 44.5 47.7 46.1 45.3 48.8 51.9
Residential entry door sales (units).... * * * 11.2 11.5 12.5 10.5 12.0 12.5 13.8
Steel residential entry door sales
(units)............................... * * * 7.6 7.9 7.7 7.5 9.0 9.6 10.7
New single-family housing starts
(units)............................... .840 1.030 1.126 1.196 1.076 1.160 1.100 1.050 1.160 1.180
Residential improvement expenditures ($
in billions).......................... $40.7 $47.9 $58.3 $61.6 $59.8 $68.0 $67.0 $72.3 $75.5 $78.6
</TABLE>
- ---------------
* Data not available.
Source: NWWDA 1996 Industry Statistical Review and Forecast
The demand for residential fenestration products has also increased as a
result of changes in design trends and consumer preferences in recent years.
Homeowners seeking to differentiate their residences are demanding more
elaborate windows and doors as well as a greater number of windows and doors.
Heightened demand for feature windows, massive entryways, greater design options
on interior doors, and decorative glass have all contributed to the industry's
growth.
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<PAGE> 53
While the fenestration industry remains highly sensitive to the level of
new home construction activity, spending on residential remodeling and
replacement activity has increased and is currently comparable to the level of
spending on new home construction activity. Both the short-term and long-term
outlook for remodeling is positive due to the continued growth in the inventory
of existing homes and the aging of the housing stock. The increase in remodeling
and repair benefits all fenestration product lines, including interior and entry
doors, energy efficient and custom windows and garage doors and decorative
glass. Spending on each increases as a result of the shift in consumer attitudes
toward windows and doors from merely a functional component of a house to an
important element in the design of the home.
Product Composition
The percentage of total residential windows and doors made of wood,
aluminum or vinyl varies significantly by region. A homeowner's or homebuilder's
choice of construction materials is based on factors such as cost, thermal
efficiency, ease of maintenance, architectural taste and regional custom. In the
Southern, Southeastern and Southwestern regions, aluminum windows are
historically the most widely used product because of their low cost, durability
and suitability to warm climates. Since aluminum is the least costly window
alternative, homebuilders often prefer aluminum products to control costs.
Aluminum is not used as frequently in the Northern and Northeastern regions
because of historical architectural trends and the usually superior insulating
qualities of wood and vinyl windows.
Of the three primary construction materials used in residential windows and
doors, wood is the most thermally efficient material. Wood windows and doors
generally are more expensive and require more maintenance than aluminum or vinyl
products. Total U.S. sales of all-wood windows have declined slightly in the
1990s, while sales of aluminum-clad wood windows and vinyl-clad wood windows
have grown. Exterior cladding allows vinyl-clad and aluminum-clad wood windows
to offer greater durability and less maintenance along with an aesthetically
pleasing wooden interior.
The vinyl window and door market is projected to be the fastest growing
area for fenestration product sales over the next several years. Vinyl windows
began to increase in popularity in the mid-1980s as a replacement product in the
Northern regions and, because of favorable pricing and product improvements,
they are also becoming a popular choice in new construction. Vinyl windows and
doors are generally more expensive than aluminum windows and doors but less
expensive than wood products. Historically, vinyl windows have been less popular
than aluminum windows in warmer climates because of the higher cost of vinyl and
because initial models of vinyl windows were unable to withstand prolonged solar
exposure. However, recent advances in vinyl composition technology have
increased the quality and durability of vinyl windows and doors.
The following charts illustrate the estimated unit market shares of
aluminum, wood and vinyl residential windows in the new residential construction
segment, the repair/remodel segment and the total residential construction
market:
[GRAPHICS IN PROSPECTUS]
<TABLE>
<CAPTION>
TOTAL
RESIDENTIAL
NEW CONSTRUCTION REPAIR/REMODEL CONSTRUCTION
- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Aluminum 18.2% Aluminum 15.0% Aluminum 16.5%
Vinyl 27.7% Vinyl 45.2% Vinyl 36.7%
Wood 54.1% Wood 39.8% Wood 46.8%
</TABLE>
- ---------------
Source: NWWDA 1996 Industry Statistical Review and Forecast.
Industry Fragmentation
The fenestration products market is highly fragmented and historically has
been characterized by small, entrepreneurial businesses. In 1995, the single
largest fenestration company posted sales of approximately
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<PAGE> 54
$1.4 billion, and management believes that no single manufacturer of vinyl, wood
and metal doors and windows currently has annual revenues exceeding 6% of total
industry sales. The 100 largest fenestration manufacturing companies accounted
for less than 50% of total industry sales in 1995.
More recently, growing public demand for higher performance and more
elaborate windows and doors has resulted in increased manufacturing costs. These
increased costs, as well as competitive pressures arising from better
technology, higher levels of computerization and enhanced marketing efforts,
have led to a shift away from small, independent manufacturers toward larger
manufacturers that have the ability to spread higher costs across broader
product lines and greater sales volumes and better respond to accelerated lead
times. This industry fragmentation presents significant opportunities for growth
through acquisitions, a strategy the Company has been successful in implementing
to date. In particular, the Company intends to focus on expanding its presence
in the fast-growing vinyl window and door market.
PRODUCTS
The Company's multiple product lines can generally be separated into the
following categories: (i) aluminum windows; (ii) wood windows; (iii) vinyl
windows; (iv) doors; and (v) other fenestration products.
Aluminum Windows. The Company produces aluminum windows, including
single/double hung, horizontal rolling, fixed light and specialty windows, at
its Binnings and Danvid facilities. In addition, Western manufactures a full
line of aluminum products designed for the luxury home market in Arizona,
California and Nevada. Western's aluminum products include horizontal rolling
windows, casement windows, arched configurations and window wall systems. Forte
manufactures aluminum double-hung windows, projection windows and casement
windows at its Youngstown, Ohio plant, which are primarily targeted for use in
office buildings, schools and other non-residential buildings in the upper
Midwest and mid-Atlantic states.
Wood Windows. Eagle, located in Dubuque, Iowa, manufactures a full line of
wood windows and doors. The Company's wood windows are all preservative treated
to withstand harsh weather conditions and are targeted at the higher priced
segment of the residential window market. Since Eagle's products are available
with primed, unprimed, stained or painted exteriors and interiors, consumers
have flexibility in choosing the finish they prefer. Eagle's products, which
include casement and double hung windows, picture windows and geometrically
shaped windows, are generally purchased for use in high-end custom residential
construction and renovation. Unlike most of its competitors who use thin-rolled
aluminum in the manufacture of aluminum-clad windows, the Company manufactures
extruded aluminum-clad casement and double hung windows and auxiliary windows.
The thicker extruded aluminum cladding, a layer of aluminum attached to a wooden
interior framework, is designed to provide superior frame rigidity, long product
life, resistance to warping and easy maintenance. The Company's aluminum-clad
windows are available in 50 different colors and offer greater customization
options than many competitive products. The customer has the option of selecting
from stained, primed, painted or unfinished interior surfaces and from a number
of pre-finished exterior surfaces, certain of which are resistant to ultraviolet
(UV) ray degradation and salt spray. The Company's aluminum-clad wood windows
are designed for use in high-end residential and non-residential construction
and renovation.
Vinyl Windows. Thermetic and Modern manufacture vinyl replacement windows
sold under the trade name Vinyline and vinyl windows and doors for use in new
construction under the trade name Modernview. Vinyl windows manufactured by
Binnings are sold throughout the Southeast as less expensive alternatives to
wood windows. Danvid also manufactures vinyl windows that are sold primarily in
the Southern and Southwestern U.S. The Company's business strategy includes
continued emphasis on expanding its vinyl fenestration products business through
additional acquisitions and through internal growth.
Doors. Taylor designs and manufactures a complete line of steel entry
doors and advanced steel patio door systems. These products are sold under the
trade names Taylor and Perma-Door. The Taylor stainable steel entry door models
are manufactured with a special surface texture in order to allow durable
staining. The steel entry systems are insulated using a urethane core to enhance
energy efficiency. The Company also manufactures and markets insulated steel
garage door panels under the trade names Encore and Taylor. The
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<PAGE> 55
Encore garage door panels are constructed from galvanized, roll-formed laminated
steel and feature multicoat rust protection, rigid foam core insulation and
18-gauge steel hinge reinforcements for extra strength and durability. The
Company manufactures vinyl-clad steel doors from vinyl-metal laminates produced
at its Mallyclad facility. Currently, the Company sells its vinyl-clad steel
doors primarily to the manufactured housing market. At its Eagle division, the
Company produces wood patio doors and French doors for use in high-end custom
residential new construction and renovation, and Western's aluminum products
include sliding glass doors.
Other Fenestration Products. The Company's other fenestration products
include security screens and security screen doors, aluminum storm windows and
storm doors and decorative glass lites. One of Forte's key products is a
unitized security screen and window combination, designed to be functional and
aesthetically pleasing, which it markets to schools, institutions and other
office buildings. American Glassmith designs, manufactures and assembles
decorative glass lites for a variety of residential applications, including
windows, doors, transoms, cabinets, and sidelites. The decorative glass lites
are primarily distributed in the Northern United States. The American Glassmith
division also manufactures laminated glass which is sold under the Sumiglass
trademark. Sumiglass products are used in doors, windows, sidelites, room
partitions, office dividers, skylights and glass handrails. Sumiglass products
are distributed nationally.
Within most of its product lines, the Company offers a variety of options
in terms of price and performance characteristics. The Company markets certain
lines to high-end custom home builders and contractors and to several niche
non-residential markets, including hotels and motels, schools, colleges,
restaurants, and nursing homes. These premium product lines are characterized by
superior cladding and performance characteristics (i.e., strength, durability
and low water/air infiltration), decorative glass and a variety of flexible
options. The premium aluminum-clad windows and doors offer high levels of frame
rigidity, longevity, warping resistance, and easy maintenance. All of the
Company's premium products are designed to promote energy efficiency. Customers
may select either clear insulated glass or low-E glass for more extreme
climates. The Company also offers more moderately priced and lower priced
options for window and door consumers.
Some of the Company's products are currently manufactured for selected
regional distribution. For example, the Company manufactures a full line of
aluminum window and door products designed primarily for the luxury home market
in Arizona, Southern California and Nevada. This line includes horizontal
rolling windows, casement windows, sliding glass doors, Duo-Pane insulating
glass, retro-fit and conversion systems, sound control products, multi-slide
doors, geometric shaped configurations, and window wall systems. Danvid's
aluminum windows target the tract housing market in Texas and the Southeast,
where the lower cost of aluminum windows and the temperate climate make aluminum
windows the product of choice.
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<PAGE> 56
DISTRIBUTION AND MARKETING
The Company uses multiple distribution channels and brand names to maximize
market penetration. The Company distributes its windows and doors through (i)
one-step distribution to major do-it-yourself home centers, lumberyards and
specialty window and door stores; (ii) two-step distribution to wholesalers who
resell to do-it-yourself home centers and lumberyards; and (iii) direct sales to
homebuilders, remodelers and contractors. The following charts summarize the
Company's various distribution channels:
<TABLE>
<CAPTION>
DIRECT ONE-STEP TWO-STEP
DISTRIBUTION DISTRIBUTION DISTRIBUTION
- ------------ ------------ ------------
<S> <C> <C>
AAPC AAPC AAPC
Wholesaler
Retailer* Retailer*
End User** End User** End User**
</TABLE>
- ---------------
* Retailers typically include retail home centers, lumberyards and, in one-step
distribution, Company-owned distribution centers.
** End users typically include remodelers, contractors, homeowners and
homebuilders.
In one-step distribution, the Company distributes to do-it-yourself home
centers and lumberyards and specialty window and door stores. These customers
maintain low levels of inventory and therefore require more frequent deliveries
and generally require higher levels of customer service than two-step
distributors. In two-step distribution, the Company sells to wholesalers who
resell the products to lumberyards and do-it-yourself home centers. Two-step
distributors are primarily utilized to service smaller retailers in rural areas
that do not generate sufficient volume to purchase directly from the Company. In
contrast to one-step distributors, two-step distributors often carry large
inventory positions in order to service the needs of its retail customers who
generally carry limited amounts of inventory.
The Company markets its products on a national basis, in all 48 contiguous
states, and in Mexico through a sales force consisting of salaried and
commissioned sales representatives. Divisional sales managers coordinate the
marketing activities among the Company and the sales representatives. The sales
representatives concentrate on serving the Company's one-step, two-step,
remodeler, and non-residential contractor customers with marketing, sales and
service support. The Company's marketing strategy emphasizes customer service
and support. Management believes the key to effectively addressing changing
customer requirements, expanding existing customer base, and building supply
relationships with new distributors is the ability to respond with product,
delivery, and service in a complete and time-sensitive fashion.
As a long-time manufacturer and distributor of windows and doors, the
Company has developed long-standing relationships with many key distributors.
The Company believes that the strength of these relationships is a competitive
advantage as the Company further develops its national sales strategy. By
combining its regional leadership position with its broad offering of well-known
products, the Company strives to use the distributor relationships to increase
the penetration of its products into new geographic markets. For example, a
regional distributor who is familiar with the Company's products that have
historically been sold in that region may have a need for some of the Company's
products that are not well-known in that region. Distributors tend to
concentrate their business with a relatively small number of suppliers, and an
existing relationship with a distributor often will provide the Company with an
advantage over other potential suppliers. Accordingly, the Company's marketing
efforts focus on both "cross-selling" to its existing customers as well as
introducing new customers to its extensive product line.
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<PAGE> 57
PROPERTIES
The Company's manufacturing facilities and administrative offices are
located at the following sites:
<TABLE>
<CAPTION>
SIZE OWNED/
LOCATION (FT Squared) LEASED PRODUCTS MANUFACTURED/SERVICES PERFORMED
- -------------------------------- ---------- ------- -----------------------------------------
<S> <C> <C> <C>
Eagle
Dubuque, Iowa................... 320,000 Owned Wood windows and doors and aluminum-clad
windows and doors; administration
Eagle
Dubuque, Iowa................... 12,000 Leased Sales and Purchasing
Taylor
West Branch, Michigan........... 210,000 Owned Custom insulated steel entry systems,
steel garage doors and vinyl-clad doors;
administration
Mallyclad
Madison Heights, Michigan....... 39,000 Leased Vinyl-metal laminates, steel processing
Forte
Youngstown, Ohio................ 156,000 Owned Aluminum windows and security windows,
screens and doors; administration
Western
Phoenix, Arizona................ 46,600 Leased Custom aluminum-clad windows and doors
Corporate Headquarters
Boardman, Ohio.................. 6,400 Leased Executive offices; administration
Thermetic
Toluca, Illinois................ 70,000 Owned Vinyl doors and windows
Danvid
Carrollton, Texas............... 169,000 Leased Aluminum windows and doors; vinyl windows
Binnings
Lexington, North Carolina....... 268,000 Owned Vinyl windows, aluminum windows and storm
windows and doors; administration
Binnings
North Miami Beach, Florida...... 158,000 Owned Aluminum windows and aluminum-clad patio
doors; distribution
American Glassmith
Columbus, Ohio.................. 60,000 Leased Decorative glass lites and laminated
glass products; administration
Modern
Detroit, Michigan............... 28,000 Owned Vinyl doors and windows
---------
TOTAL...................... 1,543,000
</TABLE>
The Company also operates six distribution centers in Florida and one in
Colorado. Management believes the Company's manufacturing, distribution and
administrative facilities are sufficient to meet its current needs.
MANUFACTURING
Wood, extruded aluminum, steel, polyvinyl chloride and glass are the
primary raw materials used in the Company's manufacturing process. These raw
materials are readily available and may be procured from numerous suppliers. The
Company believes there are currently sufficient alternative sources of raw
materials
56
<PAGE> 58
to support its foreseeable manufacturing needs. The Company generally
manufactures products to fill specific purchase orders, and the purchase of raw
materials is usually closely linked to specific purchase orders. The Company is
often able to reduce its exposure to raw materials price increases through
purchasing controls and its ability to pass on price increases to its customers.
See "Risk Factors -- Fluctuations in Raw Materials Costs and Supply."
The Company manufactures and distributes a broad line of aluminum, vinyl
and wood windows and doors. In the aluminum window fabrication process,
extrusions are cut to size and notched and mechanically fastened to form frames,
comprised of sills and jambs, and sashes, comprised of center bars, lock rails,
lift rails and sash rails. Raw glass, purchased cut-to-size or sized in-house,
is insulated and finished. Prepared glass and component parts are assembled by
product type and transferred to a staged shipping area. In the vinyl fabrication
process, vinyl frame extrusions are cut, notched and welded. The frame is then
placed on assembly lines on which insulated glass and sashes are installed. In
the fabrication of wood window and door products, pre-cut, precision-milled wood
components are glued and screwed together, sanded and affixed with appropriate
hardware. These units are then glazed and packaged for final shipment.
The Company acts primarily as a designer, manufacturer, and finisher of its
end products. Except for custom molding the wood components of its windows and
doors and manufacturing decorative glass lites, the Company does not generally
manufacture the component parts used in the manufacture of its products. Among
the component parts purchased from third-party suppliers are extruded aluminum
and PVC. The Company extrudes aluminum at its Binnings facility and intends to
further vertically integrate to increase its internal aluminum extrusion
capacity and add PVC extrusion capacity. The outsourcing of select component
parts manufacturing allows the Company to focus on designing and assembling high
quality products for their target consumers. In addition, the Company intends to
consolidate the operations of Forte and Modern, which is expected to result in
increased production efficiency and cost savings.
In addition, the Company manufactures vinyl-metal laminates for sale to
other manufacturers for a number of uses, including non-residential roofing, and
extrudes small quantities of aluminum for sale to third parties.
COMPETITION
The fenestration products industry traditionally has been highly fragmented
and competitive. In 1995, the single largest fenestration company had annual
revenues of less than 6% of total industry sales, and the 100 largest
fenestration companies in the aggregate comprised less than 50% of total
industry sales. The Company believes that it competes with other fenestration
product manufacturers primarily on the basis of the breadth of its product
lines, the reliability and speed of its services, and the quality, design and
cost of its products. The Company's main competitors include such firms as
Andersen Windows, JELD-WEN, and Pella Corporation that manufacture products
which compete with many of the Company's product lines on a nationwide basis, as
well as other firms that manufacture a more limited array of products or
distribute their products on a regional or local level only. As consolidation in
the fenestration industry continues, competition on a nationwide basis is also
likely to increase. In addition, any decreases in total market demand for
residential fenestration products would be likely to result in increased
industry competition.
BACKLOG
The Company has no material long-term customer supply contracts. The
Company's products are ordinarily manufactured to fill specific purchase orders,
and orders are generally filled within 60 days of submission of the purchase
order. Accordingly, the Company typically does not maintain significant backlog.
INTELLECTUAL PROPERTY
As of the date of this Prospectus, the Company owned 16 domestic patents, 4
foreign patents and 10 domestic patent applications. Additionally, the Company
owned 29 domestic trademark registrations, 6 foreign trademark registrations, 13
domestic trademark applications and 2 foreign trademark applications. The
patents are of the design, manufacturing, and process types and the trademark
protection applies to entity
57
<PAGE> 59
name protection, as well as product names. There can be no assurance that other
parties will not independently duplicate or develop similar technologies or
design around patented aspects of the Company's technologies, or that any of the
Company's patents, trademarks or pending applications will afford the Company
meaningful protection against competitors. Litigation may also be necessary to
enforce the Company's intellectual property rights or to determine the scope and
validity of others' proprietary rights, which could result in substantial costs
to the Company. The failure of the Company's to protect its proprietary
information could have a material adverse effect on the Company's business.
GOVERNMENTAL REGULATION AND INDUSTRY STANDARDS
The Company is subject to federal and state laws and regulations governing
the emission of particulate matter and the use, storage, handling and disposal
of certain paints, solvents and other chemicals used in the production of vinyl
cladding and adhesion. Although the Company believes that its activities comply
with the current standards prescribed by law, the risk of accidental
contamination to the environment or injury cannot be eliminated. In the event of
such an accident, the Company could be held liable for any damages that result
and any such liability could exceed the available resources of the Company. In
addition, each of the Company's production facilities is subject to regulation
by a number of governmental authorities, including regulations relating to
occupational health and safety, as well as federal and state laws governing such
matters as overtime and minimum wages. The Company believes that its operations
comply in all material respects with all applicable regulatory requirements.
However, any failure to comply with applicable regulations, or the adoption of
new regulations or changes in existing regulations, could impose additional
compliance costs on the Company, require a cessation of certain activities or
otherwise have a material adverse impact on the Company's business and results
of operations.
The Company also adheres to voluntary fenestration industry performance
guidelines established by the NWWDA and the American Architectural
Manufacturers' Association which, in turn, are used by the architectural
community for establishing window and door performance standards for both
residential and non-residential applications. Both of these organizations
establish threshold performance criteria, which qualify products for specific
levels of performance in the categories of water penetration, air infiltration,
and structural window and door integrity. Although the Company has historically
used commercial facilities to carry out product testing, the Company is
establishing a testing facility in its Youngstown, Ohio facility that will be
capable of performing these tests.
EMPLOYEES
As of December 15, 1997, the Company employed approximately 2,000 persons.
Of these, approximately 1,500 are hourly and approximately 500 are salaried.
Approximately 100 of the Company's hourly employees are covered by a collective
bargaining agreement which expires in February, 2002. The Company believes that
its relations with its employees are satisfactory. There can be no assurance,
however, that the Company will not experience work stoppages or slowdowns in the
future. In addition, there can be no assurance that the Company's non-union
facilities will not become subject to labor union organizational efforts or that
labor costs will not materially increase.
The Company is a party to an action before the National Labor Relations
Board (the "NLRB"). In early 1996, the International Association of Machinists
(the "IAM") attempted to organize the employees at Eagle. The IAM contested 47
voters, arguing that they were not eligible to vote. The Company disputed this
challenge, and the 8th Circuit Court of Appeals ruled in favor of the Company.
Although the unionization proposal failed to pass on the initial vote, the NLRB
is in the process of determining whether to require the Company to hold a second
election.
LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising in the
ordinary course of its business, none of which, after giving effect to the
Company's existing insurance coverage, is expected to have a material adverse
effect on the Company.
58
<PAGE> 60
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the names, ages (as of September 1, 1997)
and positions of directors and executive officers of the Company. The Board of
Directors of the Company currently consists of nine (9) members. Directors hold
office until their successors have been duly elected and qualified. Officers are
chosen by and serve at the discretion of the Board of Directors. A summary of
the background and experience of each of these individuals is set forth after
the table.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- ------------------------------------------------
<S> <C> <C>
George S. Hofmeister....................... 45 Chairman of the Board
Frank J. Amedia............................ 44 President, Chief Executive Officer and Director
Joseph Dominijanni......................... 40 Treasurer and Director
Richard L. Kovach.......................... 35 Vice President and Chief Financial Officer
Jeffrey V. Miller.......................... 50 Acting Chief Operating Officer
Donald E. Lambrix, Jr...................... 55 Vice President -- Manufacturing
J. Larry Powell............................ 54 Vice President -- Marketing & Sales
Jonathan K. Schoenike...................... 37 General Counsel and Secretary
John J. Cafaro............................. 45 Director
William R. Jackson, Jr..................... 64 Director
John Masternick............................ 71 Director
James E. Phillips.......................... 41 Director
Charles E. Trebilcock...................... 70 Director
James K. Warren............................ 32 Director
</TABLE>
George S. Hofmeister has served as the Chief Executive Officer and Chairman
of the Board since December 19, 1996. Mr. Hofmeister has served as Chief
Executive Officer and Chairman of the Board of American Commercial Holdings,
Inc. ("ACH"), the parent company of AAPH, since January 1996 and continues to
serve in such roles. Mr. Hofmeister also continues to serve as Vice Chairman of
Tube Products, Inc., a manufacturer of automobile exhaust systems. Mr.
Hofmeister has held that position since February 14, 1996. From June 1, 1991
until December 15, 1995, Mr. Hofmeister served as Chief Executive Officer and
Chairman of the Board of EWI, Inc., a manufacturer of automotive metal
stampings.
Frank J. Amedia joined the Company's Board of Directors on June 8, 1994
following the acquisition of Forte, Inc. by the Company, and has served as its
President and Chief Executive Officer since that date. From June 8, 1994 until
December 19, 1996, Mr. Amedia also served as the Chairman of the Board of
Directors of the Company. Prior to joining the Company, Mr. Amedia was President
and Chief Executive Officer of Forte, which he founded in 1989 in Youngstown,
Ohio as a welded aluminum security screen and storm door fabricator and expanded
through various acquisitions. Forte's products were distributed through a
manufacturers' representative distribution business established by Mr. Amedia in
1986. Prior to founding the manufacturers' representative business, Mr. Amedia
served in various capacities for the Youngstown Metropolitan Housing Authority.
Joseph Dominijanni has served as the Company's Treasurer since December 19,
1996. Mr. Dominijanni has also served as the Vice President -- Finance of ETC
since its inception. Mr. Dominijanni also currently serves as Vice
President -- Finance of ACH, the parent corporation of AAPH, and American
Commercial Industries, Inc., ("ACI"), which is principally engaged in the
manufacturing of automotive components. Mr. Dominijanni joined ACH and ACI in
May 1996. Mr. Dominijanni served as Vice President -- Finance of EWI, Inc. a
manufacturer of automotive metal stampings, from June 1990 until April 1996.
Prior to 1990, Mr. Dominijanni was a Senior Manager with the accounting firm of
Price Waterhouse.
Richard L. Kovach joined the Company in January 1997 as its Vice President
and Chief Financial Officer. From 1991 until joining the Company, Mr. Kovach
assisted clients with finance and operations
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<PAGE> 61
management issues in the Financial Advisory Services and Management Consulting
practice of Ernst & Young. From 1988 until 1991, Mr. Kovach was Manager of
Financial Planning at Ferro Corporation. Prior to joining Ferro Corporation, Mr.
Kovach was a staff auditor with Arthur Andersen & Co.'s Small Business Group.
Jeffrey V. Miller joined the Company in May 1997 as Acting Chief Operating
Officer. From 1995 to 1997, Mr. Miller served as President of the North American
Window Division of Gentek Building Products. From 1992 through 1994, Mr. Miller
was Director of Vinyl Operations for SNE Corporation, a division of Ply Gem
Industries. Mr. Miller was general manager of the New Construction Window
Division and Vice President of Technology and Corporate Development for Chelsea
Building Products from 1989 to 1992.
Donald E. Lambrix, Jr. became the Company's Vice President -- Manufacturing
in December 1996 after serving as Vice President of Operations for the Company's
Forte subsidiary since 1990. Mr. Lambrix previously served as Vice President of
a multiple facility fenestration products manufacturer. Mr. Lambrix has received
industry recognition for his development of state-of-the-art welding, testing
and certification procedures.
Jonathan K. Schoenike joined the Company in August 1997 as General Counsel
and has served as Secretary since November 1997. Prior to joining the Company,
Mr. Schoenike served for over 5 years as Assistant Counsel for The Cafaro
Company, a major domestic shopping mall developer engaged in the ownership,
operation and management of enclosed regional shopping centers.
J. Larry Powell, the Company's Vice President -- Marketing and Sales,
joined the Company in October 1996. Mr. Powell co-founded Blackhawk Industries,
a manufacturer of steel security screen and storm door products, in 1992 and
served on its Board of Directors and as its Vice President until 1996. From 1987
to 1991, Mr. Powell served as Vice President -- Marketing and Sales for
Sugarcreek Window & Door. Mr. Powell has been employed in the fenestration
industry since the early 1970s, principally in the marketing of residential and
commercial steel and aluminum window products and doors. In addition, Mr. Powell
founded and developed a nationwide marketing representative group that sells a
full range of fenestration products.
John J. Cafaro joined the Board of Directors in December 1996. Mr. Cafaro
also serves as the Executive Vice President of The Cafaro Company, a major
domestic shopping mall developer engaged in the ownership, operation and
management of enclosed regional shopping centers. Mr. Cafaro has been a
principal officer of The Cafaro Company for the past 20 years.
William R. Jackson, Jr. has served as a director of the Company since
December 19, 1996. Mr. Jackson has also served since 1982 on the Board of
Directors of Pitt-Des Moines, Inc., a steel construction, engineering and metal
products manufacturer. Mr. Jackson was also President and Treasurer of Pitt-Des
Moines, Inc. from 1983-87.
John Masternick has been a director of the Company since June 14, 1994. Mr.
Masternick is a practicing attorney in Girard, Ohio, and is the Chairman of the
Board of Directors of Omni Manor, Inc. and Windsor House, Inc., owners and
operators of skilled nursing and extended care facilities in northeastern Ohio
and western Pennsylvania.
James E. Phillips has been a member of the Company's Board of Directors
since December 19, 1996. Mr. Phillips is also an attorney and has practiced with
the law firm of Arter & Hadden since 1985. Additionally, Mr. Phillips has served
as President and director of GPI Incorporated ("GPI") and Profile Extrusion
Company ("PEC") since April 1, 1994 and of Daymonex Limited ("Daymonex") since
May 2, 1996. GPI, PEC and Daymonex are engaged in the aluminum extrusion
industry. Mr. Phillips is also Vice Chairman of ACH.
Charles E. Trebilcock has been a director of the Company since June 14,
1994. Since 1964, Mr. Trebilcock has served as Chairman of Liberty Industries,
Inc., an Ohio-based manufacturer of industrial lumber packaging products and
equipment. Mr. Trebilcock is also a partner in Kings Company, which is also a
manufacturer of industrial lumber packaging products and equipment.
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<PAGE> 62
James K. Warren has been a director of the Company since February 28, 1997.
Mr. Warren holds the office of Vice President -- Corporate Planning of ETC.
Since February 1, 1996, Mr. Warren has been employed by ACI, most recently as
its Chief Financial Officer. During the same time, Mr. Warren has also held the
position of Vice President -- Corporate Planning for ACH, the parent company of
ACI and AAPH. Mr. Warren was previously a practicing attorney with the law firm
of Arter & Hadden.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding annual and
long-term compensation for services rendered to the Company during the fiscal
years ended December 31, 1996, 1995 and 1994 by Frank J. Amedia. No other
executive officers of the Company had a total salary and bonus in fiscal 1996,
1995 or 1994 that exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
FISCAL ------------------ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2)
- -------------------------------------------------- ------ -------- ----- ---------------
<S> <C> <C> <C> <C>
Frank J. Amedia................................... 1996 $168,718 $ 0 --
Chief Executive Officer and President(1) 1995 $198,315 $ 0 --
1994 $137,294 $ 0 --
</TABLE>
- ---------------
(1) The amount of compensation paid to Mr. Amedia for 1994 consists of $47,384
paid from October 1, 1993 through June 7, 1994 (paid by Forte, Inc.) and an
additional $89,910 paid to Mr. Amedia following the closing of the
acquisition of Forte on June 7, 1994.
(2) Other compensation to Mr. Amedia did not exceed $50,000 or 10% of his total
annual salary and bonus during any fiscal year.
In connection with the Acquisitions, the Board of Directors has approved
the payment of special bonuses and fees, which were contingent upon successful
consummation of the Acquisitions, to eleven key officers, employees and
consultants of the Company. The aggregate amount of such bonuses and fees
approved by the Board of Directors is $905,000, including $250,000 allocated to
Mr. Amedia.
EMPLOYMENT AGREEMENT
The Company has entered into an employment agreement with Frank J. Amedia
for services as Chief Executive Officer and President. This agreement requires
Mr. Amedia to devote his full time to the Company during normal business hours
in exchange for a base annual salary of $350,000, subject to annual increases at
the discretion of the Board of Directors. In addition, Mr. Amedia is entitled to
receive bonuses at the discretion of the Board of Directors in accordance with
the Company's bonus plans in effect from time to time, and the Company will pay
certain life and disability insurance premiums on behalf of Mr. Amedia. The
agreement has an initial three-year term and provides that Mr. Amedia may not
compete with the Company anywhere in the United States while he is employed by
the Company and for a two-year period following the termination of Mr. Amedia's
employment. In addition, the Board of Directors has approved the payment to Mr.
Amedia of a bonus equal to 0.39% of the total consideration paid by the Company
for each acquisition transaction consummated during 1998.
STOCK OPTION GRANTS
No stock options, stock appreciation rights or restricted stock awards were
granted to or exercised by any officers, directors or employees of the Company
or its subsidiaries during the fiscal year ended December 31, 1996. The Company
entered into definitive stock option agreements with Mr. Amedia and Mr.
Masternick dated December 18, 1996, memorializing the terms of stock options
granted in 1994. On December 19, 1996, the Board of Directors of the Company
granted options to purchase 2,000 shares of common stock to each of Anthony E.
DePrima, Arnold Parnell and Dr. Chester Amedia, former members of the Board of
Directors of
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<PAGE> 63
the Company, in recognition of their many years of service to the Company. These
options have an exercise price of $4.69 per share and expire on December 19,
2001. Dr. Amedia is the brother of Frank J. Amedia, the President and Chief
Executive Officer of the Company.
OPTION VALUES
The following table sets forth certain information concerning each exercise
of stock options during the year ended December 31, 1996 by each of the Named
Executive Officers and the aggregated fiscal year-end value of the unexercised
options of each such Named Executive Officer.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE FISCAL YEAR END(#) FISCAL YEAR
ACQUIRED ON REALIZED --------------------------- ---------------------------
END($)(1) EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank J. Amedia................ 0 $0 426,244 0 $ 932,409 $ 0
</TABLE>
- ---------------
(1) Based on average of reported bid and ask prices for the Company's common
stock on December 31, 1996.
As of September 30, 1997, options to purchase a total of 1,644,425 shares
of the Company's common stock were outstanding, including options to purchase
707,655 shares issued to AAPH on December 18, 1996, with exercise prices ranging
from $3.75 to $6.19 per share.
STOCK OPTION PLANS
In May of 1992, the Board of Directors of the Company adopted an Employee
Incentive Stock Option Plan (the "Option Plan"). Options to purchase an
aggregate of up to 500,000 shares of the Company's common stock were authorized
under the Option Plan. Options granted under the Option Plan have a maximum
duration of ten years from the date of grant.
The Company has also adopted the 1996 Stock Option Plan (the "1996 Plan"),
which authorizes the Board to grant options to Directors and employees of the
Company to purchase in the aggregate an amount of shares of common stock equal
to 10% of the shares of common stock issued and outstanding from time to time,
but which aggregate amount shall in no event exceed 10,000,000 shares of common
stock. Directors, officers and other employees of the Company who, in the
opinion of the Board of Directors, are responsible for the continued growth and
development and the financial success of the Company are eligible to be granted
options under the 1996 Plan at the discretion of the Board of Directors. Options
may be nonqualified options, incentive stock options, or any combination of the
foregoing. In general, options granted under the 1996 Plan are not transferable
and expire ten (10) years after the date of grant. The per share exercise price
of an incentive stock option granted under the 1996 Plan may not be less than
the fair market value of the common stock on the date of grant. Incentive stock
options granted to persons who have voting control over 10% or more of the
Company's capital stock are granted at 110% of the fair market value of the
underlying shares on the date of grant and expire five years after the date of
grant. No option may be granted after December 19, 2006.
The 1996 Plan provides the Board of Directors with the discretion to
determine when options granted thereunder will become exercisable. Generally,
such options may be exercised after a period of time specified by the Board of
Directors at any time prior to expiration, so long as the optionee remains
employed by the Company. No option granted under the 1996 Plan is transferable
by the optionee other than by will or the laws of descent and distribution, and
each option is exercisable during the lifetime of the optionee only by the
optionee.
As of September 30, 1997, options to purchase a total of 309,000 shares of
common stock were outstanding under the 1996 Plan, at exercise prices ranging
from $4.69 to $6.19 per share.
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<PAGE> 64
401(k) PLAN
Eligible employees of the Company may direct that a portion of their
compensation, up to a legally established maximum, be withheld by the Company
and contributed to a 401(k) plan. All 401(k) plan contributions are placed in a
trust fund to be invested by the 401(k) plan's trustee, except that the 401(k)
plan permits participants to direct the investment of their account balances
among mutual or investment funds available under the Plan. The 401(k) plan
provides a matching contribution of 50% of a participant's contributions up to a
maximum of seven percent of the participant's annual salary. Amounts contributed
to participant accounts under the 401(k) plan and any earnings or interest
accrued on the participant accounts are generally not subject to federal income
tax until distributed to the participant and may not be withdrawn until death,
retirement or termination of employment.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Audit Committee, which is comprised of William R. Jackson,
Jr., Charles E. Trebilcock and Joseph Dominijanni, is responsible for reviewing
and making recommendations regarding the Company's employment of independent
auditors, the annual audit of the Company's financial statements and the
Company's internal accounting controls, practices and policies.
The Company's Compensation Committee is responsible for making
recommendations to the Board of Directors regarding compensation arrangements
for executive officers of the Company, including annual bonus compensation, and
consults with management of the Company regarding compensation policies and
practices. The Compensation Committee also makes recommendations concerning the
adoption of any compensation plans in which management is eligible to
participate, including the granting of stock options and other benefits under
such plans. The Compensation Committee is comprised of George S. Hofmeister,
Frank J. Amedia, and John Masternick.
DIRECTORS' TERMS AND COMPENSATION
The Company's Board of Directors is currently comprised of nine members.
Each director is elected for a period of one year at the Company's annual
meeting of shareholders and serves until his or her successor is duly elected
and qualified. Directors who are not employees of the Company or affiliates of
AAPH, which currently consists of Messrs. Cafaro, Jackson, Masternick and
Trebilcock, currently receive the following annual compensation: (i) options to
purchase 2,000 shares of common stock at an exercise price equal to the average
of the reported closing bid and asked prices on the date of grant, vesting in
full after one year if the director attends at least four of the regularly
scheduled meetings of the Board of Directors and at least 75% of all meetings of
the Board of Directors in 1997 (such options will be exercisable for a period of
five years following the vesting date and will be issued pursuant to the
Company's 1996 Stock Option Plan); and (ii) a fee of $1,000 for each Board of
Directors meeting attended in person. All directors are reimbursed for expenses
incurred in connection with attendance at meetings of the Board of Directors or
committees thereof. Directors who are also officers of the Company are not
compensated for their services as a director.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1990, the U.S. Small Business Administration loaned $409,000 to
Forte (the "SBA Loan"). Mr. Amedia and his wife were personally liable on the
SBA Loan. As of September 30, 1997, the balance owed on the SBA Loan was
approximately $173,000. The Company used a portion of the net proceeds of the
Offering to repay this loan.
The Company acquired all of the issued and outstanding common stock of
Forte from Frank Amedia and John Masternick on June 8, 1994, in exchange for
3,311,010 shares of the Company's common stock and options to acquire 475,770
shares of the Company's common stock.
On October 20, 1994, Forte borrowed $850,000 from The City of Youngstown,
Ohio. Mr. Amedia and his wife were guarantors of this loan. As of September 30,
1997, the balance owed to The City of Youngstown
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<PAGE> 65
under the loan agreement was approximately $850,000. The Company used a portion
of the net proceeds of the Offering to repay this loan.
In December 1994, Mr. Amedia and Mr. Masternick and their wives executed
guarantees in favor of the Second National Bank of Warren with respect to a loan
to Forte in the original principal amount of $647,030. The proceeds of this loan
were used to finance improvements to Forte's manufacturing facilities. As of
September 30, 1997, the balance owed on this loan was approximately $522,000.
The Company used a portion of the net proceeds of the Offering to repay this
loan.
Pursuant to the reorganization of the Company and ETC on December 18, 1996
(the "Reorganization") the Company acquired all of the issued and outstanding
stock of ETC in exchange for 1,000,000 shares of Series A Preferred Stock of the
Company. In April 1997, AAPH converted the Series A Preferred Stock pursuant to
its terms into 7,548,633 shares of common stock of the Company. In addition, the
Company issued to AAPH options to purchase up to 879,834 shares of common stock,
of which options to purchase 172,178 shares have subsequently terminated. Such
options are identical in price and exercise terms to the previously outstanding
options.
In connection with the Reorganization of the Company and AAPH, the Company
and its subsidiary, ETC, agreed to use their best efforts to secure the release
of Amedia, Masternick and Hofmeister from all obligations as either a co-obligor
or guarantor of Company or ETC debt. In addition, the Company agreed to
indemnify, defend and hold harmless Amedia, Masternick and Hofmeister against
any loss, cost or expense which any of them may incur as a result of being a
co-obligor or guarantor of any Company or ETC debt. Furthermore, the Company and
AAPH agreed not to dispose of assets securing any Company or ETC debt without
the prior written consent of any person who is a co-obligor or guarantor of such
debt.
In addition, in connection with the Reorganization, the Company agreed that
ETC would pay a management fee to AAPH of $250,000 during 1997 and to reimburse
AAPH and its affiliates for out-of-pocket expenses incurred in providing
services to ETC. The management fee agreement terminated on December 31, 1997.
The Company agreed to pay AAPH an acquisition consulting fee of one percent (1%)
of the transaction price of each acquisition transaction consummated by the
Company with respect to which AAPH or its affiliates provides acquisition
consulting services. For purposes of calculating the acquisition fee, the
transaction price means the aggregate amount of consideration paid by the
Company or its affiliates for the acquisition in the form of cash, stock, stock
options, warrants, debt instruments and other assumed liabilities. The
acquisition consulting fee agreement will terminate on December 18, 1998, except
with respect to acquisition transactions already in progress at such date.
As security for certain promissory notes dated August 29, 1996 (the
"MascoTech Notes") in the aggregate original principal amount of $8,000,000
which were issued by ETC to MascoTech, Inc. ("MascoTech"), AAPH granted
MascoTech an option to purchase up to 20% of the shares of the Company's common
stock held by AAPH. The Company agreed that if the MascoTech Notes were not
repaid in full on or before December 31, 1997 and MascoTech exercised its option
with respect to any shares of the Company's common stock held by AAPH, the
Company would issue to AAPH, without payment therefor, a number of additional
shares of common stock equal to the number of shares as to which such option was
exercised. The Company also agreed to use its best efforts to cause all amounts
owed under the MascoTech Notes to be repaid in full on or before December 31,
1997. The Company used a portion of the net proceeds of the Offering to repay in
full the MascoTech Notes.
In connection with the acquisition of Western in March 1997, Mr. Amedia and
Mr. Hofmeister co-signed unsecured promissory notes in the aggregate original
principal amount of $453,753 payable to the former shareholders of Western and
the organization that brokered the acquisition. As of September 30, 1997, the
outstanding balance on the notes was $453,753. In addition, Mr. Amedia co-signed
a promissory note to one of the former shareholders of Western in the original
principal amount of $100,000. The amount outstanding under this Note was
approximately $100,000 as of September 30, 1997. The Company used a portion of
the net proceeds of the Offering to repay these notes.
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<PAGE> 66
Profile Extrusion Company ("PEC") loaned the Company $92,537 on May 19,
1997 and an additional $5,203 on September 28, 1997. In connection therewith,
the Company issued to PEC warrants to purchase a total of 27,926 shares of
common stock at an exercise price of $3.50 per share, expiring on September 1,
1998. The Company used a portion of the net proceeds of the Offering to repay
this loan. PEC is a wholly-owned subsidiary of ACH.
In June 1997, Mr. Amedia pledged 133,333 shares of common stock to secure
the repayment of a short-term debt incurred by the Company in the original
principal amount of $250,000. The Company agreed to issue shares of common stock
to Mr. Amedia to replace any shares as to which the lender exercises its
security interest. The Company used a portion of the net proceeds of the
Offering to repay this loan.
In September 1997, William R. Jackson, Jr., a director of the Company,
loaned the Company $200,000. In connection therewith, the Company issued to Mr.
Jackson warrants to purchase a total of 57,143 shares of common stock at an
exercise price of $3.50 per share, expiring in September 1998. The Company used
a portion of the net proceeds of the Offering to repay this loan.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of September 30,
1997, concerning the beneficial ownership of the Company's Common Stock by (i)
each beneficial owner of more than 5% of the Company's common stock, (ii) each
director and the Chief Executive Officer of the Company, and (iii) all directors
and the Chief Executive Officer of the Company as a group. To the knowledge of
the Company, all persons listed below have sole voting and investment power with
respect to their shares, except to the extent that authority is shared by their
respective spouses under applicable law.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
------------------------
NAME OF BENEFICIAL OWNER(1) NUMBER PERCENT
- ---------------------------------------------------------------------- ---------- -------
<S> <C> <C>
AAP Holdings, Inc..................................................... 10,907,959(2)(3) 80.8%
George S. Hofmeister.................................................. 10,910,459(3)(4) 80.8%
Frank J. Amedia....................................................... 3,359,326(5) 24.9%
John Masternick....................................................... 371,680(6) 2.8%
William R. Jackson, Jr................................................ 73,287(7) *
Charles E. Trebilcock................................................. 52,832(8) *
Joseph Dominijanni.................................................... 2,000 *
James K. Warren....................................................... 400 *
John J. Cafaro........................................................ 0 0
James E. Phillips..................................................... 0 0
All directors and the Chief Executive Officer of the Company as a
group (9 persons)................................................... 11,410,658(9) 83.9%
</TABLE>
- ---------------
* Less than 1%
(1) The address of each beneficial owner is c/o American Architectural Products
Corporation, 755 Boardman-Canfield Road, Building G West, Boardman, Ohio
44512.
(2) Does not include 707,655 shares of Common Stock which are subject to
unexercised options that are exercisable only upon the occurrence of certain
contingencies. Includes 2,933,082 shares of common stock owned by Mr.
Amedia, and 426,244 shares of Common Stock subject to unexercised options
that were exercisable on June 30, 1997 or within sixty days thereafter. In
connection with the Reorganization, Mr. Amedia granted AAP Holdings, Inc. an
irrevocable proxy to vote all shares of Common Stock currently or hereafter
owned by Mr. Amedia with respect to certain matters, including any matter
submitted to the shareholders of the Company relating to the repayment of
amounts owing to MascoTech, Inc. under those certain Promissory Notes dated
August 29, 1996 in the original principal amount of $8,000,000. The proxy
expired on December 31, 1997.
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(3) George S. Hofmeister, Chairman of the Board of Directors of the Company, is
the controlling shareholder of the corporate parent of AAP Holdings, Inc.
(4) Includes 10,907,959 shares of Common Stock beneficially owned by AAP
Holdings, Inc. (see footnote (2) above). Mr. Hofmeister is the controlling
shareholder of the corporate parent of AAP Holdings, Inc.
(5) Includes 426,244 shares of Common Stock which are subject to unexercised
options that were exercisable on September 30, 1997 or within sixty days
thereafter. Does not include 100,000 shares of Common Stock which are
subject to unvested options.
(6) Includes 47,526 shares of Common Stock which are subject to unexercised
options that were exercisable on September 30, 1997 or within sixty days
thereafter.
(7) Includes 57,143 shares of Common Stock which are subject to unexercised
warrants that were exercisable on September 30, 1997 or within sixty days
thereafter.
(8) Includes 25,832 shares of Common Stock owned individually and 25,000 shares
held by a custodian for the benefit of an individual retirement account of
Mr. Trebilcock. Also includes 2,000 shares of Common Stock which are subject
to unexercised options that were exercisable on September 30, 1997 or within
sixty days thereafter.
(9) Includes 532,913 shares of Common Stock which are subject to unexercised
options that were exercisable on September 30, 1997 or within sixty days
thereafter as described above.
SHARES ELIGIBLE FOR FUTURE SALE
As of November 30, 1997, the Company had a total of 12,987,386 shares of
Common Stock outstanding. As of November 30, 1997, the Company had outstanding
warrants and options (including options outstanding under the Company's stock
option plans) entitling the holders thereof to acquire an aggregate of 1,800,922
shares of Common Stock, of which warrants, options and exchange rights covering
1,495,922 shares are currently exercisable. Various holders of Common Stock,
warrants and options have "piggyback" and demand registration rights to register
such Common Stock and shares issuable upon exercise of such warrants and options
for public sale under the Securities Act. See "Description of Capital Stock."
The preparation and filing of any registration statements filed in connection
with the exercise of registration rights will be at the expense of the Company.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is a Delaware corporation and its affairs are governed by its
Certificate of Incorporation and Bylaws and by the Delaware General Corporation
Law. The following description of the Company's capital stock is qualified in
its entirety by reference to the provisions of the Company's Certificate of
Incorporation and Bylaws. The authorized capital stock of the Company consists
of 100,000,000 shares of common stock, par value $.001 per share ("Common
Stock"), and 20,000,000 shares of preferred stock, par value $.001 per share
(the "Preferred Stock"). As of November 30, 1997, there were 12,987,386 shares
of Common Stock issued and outstanding, which were held of record by 456
shareholders, and there were no shares of Preferred Stock issued and
outstanding. In addition, 1,800,922 shares of Common Stock have been reserved
for issuance by the Company upon exercise of stock options and common stock
purchase warrants.
COMMON STOCK
Holders of shares of Common Stock are entitled to one vote per share on all
matters to be voted on by shareholders and do not have cumulative voting rights.
Subject to the rights of holders of outstanding shares of Preferred Stock, if
any, the holders of Common Stock are entitled to share ratably in dividends, if
any, as may be declared from time to time by the Board of Directors in its
discretion from funds legally available therefor. In the event of the
liquidation, dissolution, or winding up of the Company, subject to the rights of
holders of outstanding Preferred Stock, if any, the holders of Common Stock are
entitled to share ratably in all assets
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available for distribution to the shareholders after payment of the Company's
liabilities. The Common Stock has no preemptive or other subscription rights,
and there are no conversion rights or redemption or sinking fund provisions with
respect to such shares. All of the outstanding shares of Common Stock are fully
paid and nonassessable. The transfer agent and registrar for the Common Stock is
American Securities Transfer and Trust, Inc. of Denver, Colorado.
PREFERRED STOCK
The Board of Directors, without any vote or action of the shareholders, has
the authority to issue up to 20,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges, qualifications,
limitations and restrictions thereof, including dividend rights, conversion and
voting rights, terms of redemption, redemption prices, liquidation preferences
and the number of shares constituting any series or the designation of such
series. The issuance of Preferred Stock may have the effect of delaying,
deterring or preventing a change in control of the Company. Further, the
issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. The Company has no present plans to issue any shares
of Preferred Stock.
OTHER SECURITIES
Options and Warrants. The Company has issued options to purchase an
aggregate of 1,644,425 shares of Common Stock, with exercise prices ranging from
$3.75 to $6.19 per share and various expiration dates through February 27, 2007.
See "Management -- Stock Option Plans." In connection with a June 1997 financing
transaction, the Company also issued warrants to purchase 71,428 shares of
Common Stock at an exercise price of $3.50 per share, expiring on June 5, 1998,
and in connection with a September 1997 financing transaction the Company issued
warrants to purchase 57,143 shares of Common Stock at an exercise price of $3.50
per share, expiring in September 1998. Furthermore, in connection with an
additional series of financing transactions, the Company issued warrants to
purchase 27,926 shares of Common Stock at an exercise price of $3.50 per share,
expiring on September 1, 1998. Finally, the Company is obligated to issue to the
former shareholders of Thermetic an amount of Common Stock with a market price
of $1,000,000 on January 18, 1999. Each of the foregoing options and warrants
provide, among other things, for the adjustment of the price per share and
number of shares issuable upon exercise of such options or warrants upon a
merger or consolidation of the Company, reclassification of the Company's
securities, or a stock split, subdivision or combination of the Company's
securities. No warrant holder or optionee has any stockholder rights with
respect to the shares issuable upon exercise of the warrants or options held by
such holder until such warrants or options are exercised and the purchase price
is paid for the shares.
Registration Rights. Pursuant to agreements by and among the Company and
certain holders of Common Stock (the "Holders"), the Holders may request that
the Company file a registration statement under the Securities Act and, upon
such request and subject to certain conditions, the Company generally will be
required to use its best efforts to effect any such registration. In addition,
if the Company proposes to register any of its securities, either for its own
account or for the account of other stockholders, the Company is required, with
certain exceptions, to notify the Holders and, subject to certain conditions and
limitations, to include in such registration all of the shares of Common Stock
requested to be included by the Holders. Various stockholders have demand and
"piggyback" registration rights with respect to a total of 7,548,633 shares of
Common Stock, and various holders of options and warrants have "piggyback"
registration rights with respect to a total of 150,000 shares of common stock
underlying such options and warrants. In addition, the former shareholders of
Thermetic have demand and "piggyback" registration rights with respect to
384,000 shares of Common Stock and an aggregate number of additional shares of
Common Stock issuable in January 1999 having a fair market value of $1,000,000
at that time.
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DESCRIPTION OF EXCHANGE NOTES
GENERAL
The Outstanding Notes were, and the Exchange Notes are to be, issued under
the Indenture, dated as of December 10, 1997, among the Company, the Subsidiary
Guarantors and United States Trust Company of New York, as Notes Trustee (the
"Notes Trustee"), a copy of which is available upon request to the Company. The
Exchange Notes and the Outstanding Notes will constitute a single series of debt
securities under the Indenture. The following is a summary of certain provisions
of the Indenture and the Notes and does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the provisions
of the Indenture (including the definitions of certain terms therein and those
terms made a part thereof by the Trust Indenture Act of 1939, as amended) and
the Notes
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Notes Trustee in New York, New York),
except that, at the option of the Company, payment of interest may be made by
check mailed to the address of the holders as such address appears in the Note
Register. Initially, the Notes Trustee will act as Paying Agent and Registrar
for the Notes. The Notes may be presented for registration of transfer and
exchange at the offices of the Registrar, which initially will be the Notes
Trustee's corporate trust office. The Company may change any Paying Agent and
Registrar without notice to holders of the Notes.
For each Outstanding Note accepted for exchange, the holder of such
Outstanding Note will receive an Exchange Note having a principal amount equal
to that of the surrendered Outstanding Note.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF NOTES
The Notes will mature on December 1, 2007. Each Note will bear interest at
the rate of 11 3/4% per annum from the date of issuance, or from the most
recent date to which interest has been paid or provided for, and will be payable
semiannually on June 1 and December 1 of each year (each an "Interest Payment
Date"), commencing on June 1, 1998, to holders of record at the close of
business on the May 15 or November 15 immediately preceding the Interest Payment
Date. The interest rate on the Notes is subject to increase under certain
circumstances. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. The Notes will not be entitled to the benefit
of any sinking fund.
OPTIONAL REDEMPTION
Except as set forth below, the Notes will not be redeemable at the option
of the Company prior to December 1, 2002. On and after such date, the Notes will
be redeemable, at the Company's option, in whole or in part, at any time upon
not less than 30 nor more than 60 days' prior notice mailed by first-class mail
to each holder's registered address, at the following redemption prices
(expressed in percentages of principal amount), if redeemed during the 12-month
period commencing on December 1 of the years set forth below, plus accrued and
unpaid interest to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
Interest Payment Date):
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
---------------------------------------------------------- ----------
<S> <C>
2002...................................................... 105.000%
2003...................................................... 103.333%
2004...................................................... 101.667%
2005 and thereafter....................................... 100.000%
</TABLE>
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<PAGE> 70
Optional Redemption Upon Equity Offering. In addition, at any time prior
to December 1, 2000, the Company may, at its option, redeem up to 35% of the
aggregate principal amount of the Notes, with net cash proceeds of one or more
Equity Offerings so long as there is a Public Market at the time of such
redemption, at a redemption price equal to 110% of the principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the date of redemption;
provided, however, that after any such redemption the aggregate principal amount
of the Notes outstanding must equal at least $82 million. In order to effect the
foregoing redemption with the proceeds of any Equity Offering, the Company shall
make such redemption not more than 90 days after the consummation of any such
Equity Offering.
Selection. In the case of any partial redemption, selection of the Notes
for redemption will be made by the Notes Trustee on a pro rata basis, by lot or
by such other method as the Notes Trustee in its sole discretion shall deem to
be fair and appropriate; provided, however, that if a partial redemption is made
with proceeds of an Equity Offering, selection of the Notes or portion thereof
for redemption shall be made by the Notes Trustee only on a pro rata basis,
unless such method is otherwise prohibited. Notes may be redeemed in part in
multiples of $1,000 principal amount only. Notice of redemption will be sent, by
first class mail, postage prepaid, at least 45 days (unless a shorter period is
acceptable to the Notes Trustee) prior to the date fixed for redemption to each
holder whose Notes are to be redeemed at the last address for such holder then
shown on the registry books. If any Note is to be redeemed in part only, the
notice of redemption that relates to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal to
the unredeemed portion thereof will be issued in the name of the holder thereof
upon cancellation of the original Note. On and after any redemption date,
interest will cease to accrue on the Notes or part thereof called for redemption
as long as the Company has deposited with the Paying Agent funds in satisfaction
of the redemption price pursuant to the Indenture.
RANKING
The Outstanding Notes are, and the Exchange Notes will be, senior unsecured
obligations of the Company and the Outstanding Notes rank and the Exchange Notes
will rank pari passu in right of payment with all existing and future Senior
Indebtedness of the Company (i.e., all indebtedness that is not by its terms
expressly subordinate or junior in right of payment to any other Indebtedness of
the Company) and senior in right of payment to any existing and future
Subordinated Obligations of the Company that is not Senior Debt of the Company.
The Notes (and the Note Guarantees) will be effectively subordinated to any
secured debt of the Company and the Subsidiary Guarantors, to the extent of the
assets serving as security therefor. As of September 30, 1997, on a pro forma
basis after giving effect to the Offering and the Refinancing, the aggregate
principal amount of outstanding Senior Indebtedness of the Company and the
Subsidiary Guarantors to which the Notes would have been effectively
subordinated would have been approximately $1.6 million. The Indenture provides
that the Company may Incur up to $25 million of senior Secured Indebtedness.
NOTE GUARANTEES
Each Subsidiary Guarantor unconditionally guarantees on a senior basis,
jointly and severally, to each holder and the Notes Trustee, as primary obligor
and not as a surety, the full and prompt payment of principal of and interest on
the Notes, and of all other obligations of the Company under the Indenture.
The obligations of each Subsidiary Guarantor are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor (and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Note Guarantee or pursuant to its contribution obligations under the
Indenture) result in the obligations of such Subsidiary Guarantor under the Note
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. Each Subsidiary Guarantor that makes a payment or
distribution under a Note Guarantee shall be entitled to contribution from each
other Subsidiary Guarantor in pro rata amount based on the Adjusted Net Assets
of each Subsidiary Guarantor.
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Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Company or another Subsidiary Guarantor without limitation.
Subject to certain conditions, each Subsidiary Guarantor may also consolidate
with or merge into or sell all or substantially all its assets to a corporation,
partnership or trust other than the Company or another Subsidiary Guarantor
(whether or not affiliated with the Subsidiary Guarantor). Upon the sale or
disposition of a Subsidiary Guarantor (or all or substantially all of its
assets) to a Person (whether or not an Affiliate of the Subsidiary Guarantor)
which is not a Subsidiary of the Company, which sale or disposition is otherwise
in compliance with the Indenture (including the covenant described under
"-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock"),
such Subsidiary Guarantor shall be deemed released from all its obligations
under the Indenture and its Note Guarantee and such Note Guarantee shall
terminate; provided, however, that any such termination shall occur only to the
extent that all obligations of such Subsidiary Guarantor under and all of its
guarantees of, and under all of its pledges of assets or other security
interests which secure, any other Indebtedness of the Company shall also
terminate upon such release, sale or transfer.
Subsequent to the Issue Date, separate financial information for the
Subsidiary Guarantors will not be provided except to the extent required by
Regulation S-X under the Securities Act.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each holder will have the right to require the Company to repurchase
all or any part of such holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant Interest Payment Date): (i)
any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of the Company
and its Subsidiaries; or (ii) a majority of the Board of Directors of the
Company or of any direct or indirect holding company thereof shall consist of
Persons who are not Continuing Directors of the Company; or (iii) the
acquisition by any Person or Group (other than the Management Group) of the
power, directly or indirectly, to vote or direct the voting of securities having
more than 35% of the ordinary voting power for the election of directors of the
Company or of any direct or indirect holding company thereof; provided that no
Change of Control shall be deemed to occur pursuant to this clause (iii) so long
as the Management Group owns an amount of securities representing the power,
directly or indirectly, to vote or direct the voting of securities having more
than 50.0% of the ordinary voting power for the election of directors of the
Company or of any direct or indirect holding company thereof.
Within 20 days following any Change of Control, unless the Company has
mailed a redemption notice with respect to all the outstanding Notes in
connection with such Change of Control, the Company shall mail a notice to each
holder with a copy to the Notes Trustee stating: (1) that a Change of Control
has occurred and that such holder has the right to require the Company to
purchase such holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on a record date to
receive interest on the relevant Interest Payment Date); (2) the repurchase date
(which shall be no earlier than 50 days nor later than 60 days from the date
such notice is mailed); and (3) the procedures determined by the Company,
consistent with the Indenture, that a holder must follow in order to have its
Notes purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in the Indenture by virtue thereof.
The definition of "Change of Control" includes, among other transactions, a
disposition of all or substantially all of the property and assets of the
Company and its Subsidiaries. With respect to the disposition of property or
assets, the phrase "all or substantially all" as used in the Indenture varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under New York law (which
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is the law which governs the Indenture) and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the property or assets of a Person,
and therefore it may be unclear as to whether a Change of Control has occurred
and whether the Company is required to make an offer to repurchase the Notes as
described above.
Future Senior Indebtedness of the Company and its Subsidiaries may contain
prohibitions of certain events that would constitute a Change of Control or
require such Senior Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the holders of their right to require the Company to
repurchase the Notes could cause a default under such Senior Indebtedness, even
if the Change of Control itself does not, due to the financial effect of such
repurchase on the Company. Finally, the Company's ability to pay cash to the
holders upon a repurchase may be limited by the Company's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any required repurchases.
CERTAIN COVENANTS
The Indenture contains certain covenants including, among others, the
following:
Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness; provided, however, that: (i) the
Company and its Restricted Subsidiaries may Incur Indebtedness which is
expressly subordinate and junior in right of payment to, the Notes, if no
Default or Event of Default shall have occurred and be continuing at the time of
such Incurrence or would occur as a consequence of such Incurrence and the
Consolidated Coverage Ratio would be equal to at least 2.00 to 1.00; and (ii)
the Company and its Restricted Subsidiaries may Incur Senior Indebtedness if no
Default or Event of Default shall have occurred and be continuing at the time of
such Incurrence or would occur as a consequence of such Incurrence and the
Consolidated Coverage Ratio would be at least equal to (x) 2.25 to 1.00 if such
Indebtedness is Incurred prior to December 1, 1999, and (y) 2.00 to 1.00 if such
Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(i) Secured Indebtedness (including, without limitation, any renewal,
extension, refunding, restructuring, replacement or refinancing thereof
referred to in the definition thereof); provided, however, that the
aggregate principal amount of all Secured Indebtedness Incurred pursuant to
this clause (i) does not exceed $25.0 million at any time outstanding, less
the aggregate principal amount thereof repaid with the net proceeds of
Asset Dispositions;
(ii) Indebtedness represented by Capitalized Lease Obligations,
mortgage financing or purchase money obligations, in each case Incurred for
the purpose of financing all or any part of the purchase price or cost of
construction or improvement of property used in a Permitted Business or
Incurred to refinance any such purchase price or cost of construction or
improvement, in each case Incurred no later than 365 days after the date of
such acquisition or the date of completion of such construction or
improvement; provided, however, that the principal amount of any
Indebtedness Incurred pursuant to this clause (ii) shall not exceed $5.0
million at any time outstanding;
(iii) Indebtedness of the Company owing to and held by any
Wholly-Owned Subsidiary or Indebtedness of a Restricted Subsidiary owing to
and held by the Company or any Wholly-Owned Subsidiary; provided, however,
that any subsequent issuance or transfer of any Capital Stock or any other
event which results in any such Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary or any subsequent transfer of any such Indebtedness
(except to the Company or any Wholly-Owned Subsidiary) shall be deemed, in
each case, to constitute the Incurrence of such Indebtedness by the issuer
thereof;
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(iv) Indebtedness represented by (a) the Notes, (b) the Note
Guarantees, (c) Existing Indebtedness and (d) any Refinancing Indebtedness
Incurred in respect of any Indebtedness described in this clause (iv) or
Incurred pursuant to paragraph (a) above;
(v) (A) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on the date on which such Restricted Subsidiary was acquired by
the Company (other than Indebtedness Incurred in anticipation of, or to
provide all or any portion of the funds or credit support utilized to
consummate the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Subsidiary or was otherwise
acquired by the Company); provided, however, that at the time such
Restricted Subsidiary is acquired by the Company, the Company would have
been able to Incur $1.00 of additional Indebtedness pursuant to paragraph
(a) above after giving effect to the Incurrence of such Indebtedness
pursuant to this clause (v) and (B) Refinancing Indebtedness Incurred by a
Restricted Subsidiary in respect of Indebtedness Incurred by such
Restricted Subsidiary pursuant to this clause (v);
(vi) Indebtedness (A) in respect of performance bonds, bankers'
acceptances and surety or appeal bonds provided by the Company or any of
its Restricted Subsidiaries to their customers in the ordinary course of
their business, (B) in respect of performance bonds or similar obligations
of the Company or any of its Restricted Subsidiaries for or in connection
with pledges, deposits or payments made or given in the ordinary course of
business in connection with or to secure statutory, regulatory or similar
obligations, including obligations under health, safety or environmental
obligations and (C) arising from Guarantees to suppliers, lessors,
licensees, contractors, franchises or customers of obligations (other than
Indebtedness) incurred in the ordinary course of business;
(vii) Indebtedness under Currency Agreements and Interest Rate
Agreements; provided, however, that in the case of Currency Agreements and
Interest Rate Agreements, such Currency Agreements and Interest Rate
Agreements are entered into for bona fide hedging purposes of the Company
or its Restricted Subsidiaries (as determined in good faith by the Board of
Directors of the Company) and correspond in terms of notional amount,
duration, currencies and interest rates as applicable, to Indebtedness of
the Company or its Restricted Subsidiaries Incurred without violation of
the Indenture or to business transactions of the Company or its Restricted
Subsidiaries on customary terms entered into in the ordinary course of
business;
(viii) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from Guarantees or letters of credits, surety bonds or performance bonds
securing any obligations of the Company or any of its Restricted
Subsidiaries pursuant to such agreements, in each case Incurred in
connection with the disposition of any business assets or Restricted
Subsidiary of the Company (other than Guarantees of Indebtedness or other
obligations incurred by any Person acquiring all or any portion of such
business assets or Restricted Subsidiary of the Company for the purpose of
financing such acquisition) in a principal amount not to exceed the gross
proceeds actually received by the Company or any of its Restricted
Subsidiaries in connection with such disposition; provided, however, that
the principal amount of any Indebtedness Incurred pursuant to this clause
(viii) when taken together with all Indebtedness Incurred pursuant to this
clause (viii) and then outstanding, shall not exceed $2.0 million;
(ix) Indebtedness consisting of (A) Guarantees by the Company (so long
as the Company could have Incurred such Indebtedness directly without
violation of the Indenture) and (B) Guarantees by a Restricted Subsidiary
of Senior Indebtedness incurred by the Company without violation of the
Indenture (so long as such Restricted Subsidiary could have Incurred such
Indebtedness directly without violation of the Indenture);
(x) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument issued by the
Company or its Subsidiaries drawn against insufficient funds in the
ordinary course of business in an amount not to exceed $250,000 at any
time, provided that such Indebtedness is extinguished within two business
days of its incurrence; and
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(xi) Indebtedness (other than Indebtedness described in clauses
(i) - (x)) in a principal amount which, when taken together with the
principal amount of all other Indebtedness Incurred pursuant to this clause
(xi) and then outstanding, will not exceed $10.0 million (it being
understood that any Indebtedness Incurred under this clause (xi) shall
cease to be deemed Incurred or outstanding for purposes of this clause (xi)
(but shall be deemed to be Incurred for purposes of paragraph (a)) from and
after the first date on which the Company or its Restricted Subsidiaries
could have Incurred such Indebtedness under the foregoing paragraph (a)
without reliance upon this clause (xi)).
(c) Neither the Company nor any Restricted Subsidiary shall Incur any
Indebtedness under paragraph (b) above if the proceeds thereof are used,
directly or indirectly, to refinance any Subordinated Obligations of the Company
unless such Indebtedness shall be subordinated to the Notes to at least the same
extent as such Subordinated Obligations. No Restricted Subsidiary shall Incur
any Indebtedness under paragraph (b) above if the proceeds thereof are used,
directly or indirectly, to refinance any Guarantor Subordinated Obligation of
such Subsidiary Guarantor unless such Indebtedness shall be subordinated to the
obligations of such Subsidiary Guarantor under the Subsidiary Guarantee to at
least the same extent as such Guarantor Subordinated Obligation.
(d) The Company will not permit any Unrestricted Subsidiary to Incur any
Indebtedness other than Non-Recourse Debt.
Limitation on Restricted Payments. (a) The Company shall not, and shall
not permit any of its Restricted Subsidiaries, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving the Company or any of its Restricted Subsidiaries)
except (A) dividends or distributions payable in its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to purchase such
Capital Stock and (B) dividends or distributions payable to the Company or a
Restricted Subsidiary of the Company which holds any equity interest in the
paying Restricted Subsidiary (and if the Restricted Subsidiary paying the
dividend or making the distribution is not a Wholly-Owned Subsidiary, to its
other holders of Capital Stock on a pro rata basis), (ii) purchase, redeem,
retire or otherwise acquire for value any Capital Stock of the Company held by
Persons other than a Wholly-Owned Subsidiary of the Company or any Capital Stock
of a Restricted Subsidiary of the Company held by any Affiliate of the Company,
other than a Wholly-Owned Subsidiary (in either case, other than in exchange for
its Capital Stock (other than Disqualified Stock)), (iii) purchase, repurchase,
redeem, defease or otherwise acquire or retire for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations or (iv) make any Investment (other than a Permitted
Investment) in any Person (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, other acquisition, retirement or Investment
as described in preceding clauses (i) through (iv) being referred to as a
"Restricted Payment"); if at the time the Company or such Restricted Subsidiary
makes such Restricted Payment: (1) a Default shall have occurred and be
continuing (or would result therefrom); or (2) the Company is not able to incur
an additional $1.00 of Indebtedness pursuant to paragraph (a) under "Limitation
on Indebtedness"; or (3) the aggregate amount of such Restricted Payment and all
other Restricted Payments declared or made subsequent to the Issue Date would
exceed the sum of (A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the first day of the fiscal
quarter beginning on or after the Issue Date to the end of the most recent
fiscal quarter ending prior to the date of such Restricted Payment as to which
financial results are available (but in no event ending more than 135 days prior
to the date of such Restricted Payment) (or, in case such Consolidated Net
Income shall be a deficit, minus 100% of such deficit); (B) the aggregate net
proceeds received by the Company from the issue or sale of its Capital Stock
(other than Disqualified Stock) or other capital contributions subsequent to the
Issue Date (other than net proceeds received from an issuance or sale of such
Capital Stock to (x) a Subsidiary of the Company, (y) an employee stock
ownership plan or similar trust or (z) management employees of the Company or
any Subsidiary of the Company (other than sales of Capital Stock (other than
Disqualified Stock) to management employees of the Company pursuant to bona fide
employee stock option plans of the Company); provided, however, that the value
of any non-cash net proceeds shall be as determined by the Board of Directors in
good faith, except that in the event the value of any noncash net proceeds shall
be $2.0 million or more, the value shall be as
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determined in writing by an independent investment banking firm of nationally
recognized standing); (C) the amount by which Indebtedness of the Company is
reduced on the Company's balance sheet upon the conversion or exchange (other
than by a Restricted Subsidiary of the Company) subsequent to the Issue Date of
any Indebtedness of the Company convertible or exchangeable for Capital Stock of
the Company (less the amount of any cash, or other property, distributed by the
Company upon such conversion or exchange); and (D) the amount equal to the net
reduction in Investments (other than Permitted Investments) made after the Issue
Date by the Company or any of its Restricted Subsidiaries in any Person
resulting from (i) repurchases or redemptions of such Investments by such
Person, proceeds realized upon the sale of such Investment to an unaffiliated
purchaser, repayments of loans or advances or other transfers of assets by such
Person to the Company or any Restricted Subsidiary of the Company or (ii) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in
each case as provided in the definition of "Investment") not to exceed, in the
case of any Unrestricted Subsidiary, the amount of Investments previously
included in the calculation of the amount of Restricted Payments; provided,
however, that no amount shall be included under this Clause (D) to the extent it
is already included in Consolidated Net Income.
(b) The provisions of paragraph (a) shall not prohibit: (i) any purchase or
redemption of Capital Stock or Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary, an employee stock ownership plan
or similar trust or management employees of the Company or any Subsidiary of the
Company); provided, however, that (A) such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments and (B) the Net
Cash Proceeds from such sale shall be excluded from clause (3) (B) of paragraph
(a); (ii) any purchase or redemption of Subordinated Obligations of the Company
made by exchange for, or out of the proceeds of the substantially concurrent
sale of, Subordinated Obligations of the Company in compliance with the
"Limitation on Indebtedness" covenant; provided, further, that such purchase or
redemption shall be excluded in the calculation of the amount of Restricted
Payments; (iii) any purchase or redemption of Subordinated Obligations as a
result of a Change of Control (provided that the covenant described in
"Limitation on Repayment upon a Change of Control" is complied with) and (iv)
any purchase or redemption of Subordinated Obligations from Net Available Cash
to the extent permitted under "Limitation on Sales of Assets and Subsidiary
Stock" below; provided, further, that such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments; and (iv)
dividends paid within 60 days after the date of declaration if at such date of
declaration such dividend would have complied with this provision; provided,
however, that such dividend shall be included in the calculation of the amount
of Restricted Payments; provided, however, that in the case of clauses (i),
(ii), (iii) and (iv) no Default or Event of Default shall have occurred or be
continuing at the time of such payment or as a result thereof.
(c) For purposes of determining compliance with the foregoing covenant,
Restricted Payments may be made with cash or non-cash assets, provided that any
Restricted Payment made other than in cash shall be valued at the fair market
value (determined, subject to the additional requirements of the immediately
succeeding proviso, in good faith by the Board of Directors) of the assets so
utilized in making such Restricted Payment, provided, however that (i) in the
case of any Restricted Payment made with capital stock or indebtedness, such
Restricted Payment shall be deemed to be made in an amount equal to the greater
of the fair market value thereof and the liquidation preference (if any) or
principal amount of the capital stock or indebtedness, as the case may be, so
utilized, and (ii) in the case of any Restricted Payment in an aggregate amount
in excess of $2.0 million, a written opinion as to the fairness of the valuation
thereof (as determined by the Company) for purposes of determining compliance
with the "Limitation on Restricted Payments" covenant in the Indenture shall be
issued by an independent investment banking firm of national standing.
(d) Not later than the date of making any Restricted Payment, the Company
shall deliver to the Notes Trustee an officer's certificate stating that such
Restricted Payment complies with the Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available quarterly
financial statements, and a copy of any required investment banker's opinion.
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Limitation on Liens. The Indenture will provide that the Company will not
and will not permit any Restricted Subsidiary to, directly or indirectly, create
or permit to exist any Liens except for Permitted Liens.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any such Restricted Subsidiary to
(i) pay dividends or make any other distributions on its Capital Stock or pay
any Indebtedness or other obligation owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company, except: (a) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date; (b) any encumbrance or restriction
with respect to such a Restricted Subsidiary pursuant to an agreement relating
to any Indebtedness issued by such Restricted Subsidiary on or prior to the date
on which such Restricted Subsidiary was acquired by the Company and outstanding
on such date (other than Indebtedness Incurred in anticipation of, or to provide
all or any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary of the Company or was acquired by the
Company); (c) any encumbrance or restriction with respect to such a Restricted
Subsidiary pursuant to an agreement evidencing Indebtedness Incurred without
violation of the Indenture or effecting a refinancing of Indebtedness issued
pursuant to an agreement referred to in clauses (a) or (b) or this clause (c) or
contained in any amendment to an agreement referred to in clauses (a) or (b) or
this clause (c); provided, however, that the encumbrances and restrictions with
respect to such Restricted Subsidiary contained in any of such agreement,
refinancing agreement or amendment, taken as a whole, are no less favorable to
the holders of the Notes in any material respect, as determined in good faith by
the Board of Directors of the Company, than encumbrances and restrictions with
respect to such Restricted Subsidiary contained in agreements in effect at, or
entered into on, the Issue Date; (d) in the case of clause (iii), any
encumbrance or restriction (A) that restricts in a customary manner the
subletting, assignment or transfer of any property or asset that is a lease,
license, conveyance or contract or similar property or asset, (B) by virtue of
any transfer of, agreement to transfer, option or right with respect to, or Lien
on, any property or assets of the Company or any Restricted Subsidiary not
otherwise prohibited by the Indenture, (C) that is included in a licensing
agreement to the extent such restrictions limit the transfer of the property
subject to such licensing agreement or (D) arising or agreed to in the ordinary
course of business and that does not, individually or in the aggregate, detract
from the value of property or assets of the Company or any of its Subsidiaries
in any manner material to the Company or any such Restricted Subsidiary; (e) in
the case of clause (iii) above, restrictions contained in security agreements,
mortgages or similar documents securing Indebtedness of a Restricted Subsidiary
to the extent such restrictions restrict the transfer of the property subject to
such security agreements; (f) in the case of clause (iii) above, any instrument
governing or evidencing Indebtedness of a Person acquired by the Company or any
Restricted Subsidiary of the Company at the time of such acquisition, which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person so acquired; provided, however, that
such Indebtedness is not incurred in connection with or in contemplation of such
acquisition; (g) any restriction with respect to such a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and (h) encumbrances or
restrictions arising or existing by reason of applicable law.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall
not, and shall not permit any of its Restricted Subsidiaries to, make any Asset
Disposition unless (i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the fair
market value, as determined in good faith by the Company's Board of Directors
(including as to the value of all non-cash consideration), of the shares and
assets subject to such Asset Disposition, (ii) at least 80% of the consideration
thereof received by the Company or such Restricted Subsidiary is in the form of
cash or Cash Equivalents and (iii) an amount equal to 100% of the Net Available
Cash from such Asset Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be) (A) first, to the extent the Company or any
Restricted Subsidiary elects (or is required by the terms of any Secured
Indebtedness), (x) to prepay, repay or purchase Secured Indebtedness or (y) to
the investment in or acquisition of Additional Assets within 270 days from the
later of the date of such Asset Disposition or the receipt of such Net
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Available Cash; (B) second, within 270 days from the receipt of such Net
Available Cash, to the extent of the balance of such Net Available Cash after
application in accordance with clause (A), to make an offer to purchase Notes at
101% of their principal amount plus accrued and unpaid interest, if any,
thereon; (C) third, within 90 days after the later of the application of Net
Available Cash in accordance with clauses (A) and (B) and the date that is one
year from the receipt of such Net Available Cash, to the extent of the balance
of such Net Available Cash after application in accordance with clauses (A) and
(B), to prepay, repay or repurchase Indebtedness (other than Preferred Stock) of
the Company or of a Wholly-Owned Subsidiary (in each case other than
Indebtedness owed to the Company); and (D) fourth, to the extent of the balance
of such Net Available Cash after application in accordance with clauses (A), (B)
and (C), to the investment in or acquisition of Additional Assets, (x) the
making of Temporary Cash Investments, (y) the prepayment, repayment or purchase
of Indebtedness of the Company (other than Indebtedness owing to any Subsidiary
of the Company) or Indebtedness of any Subsidiary (other than Indebtedness owed
to the Company or any of its Subsidiaries) or (z) any other purpose otherwise
permitted under the Indenture, in each case within the later of 45 days after
the application of Net Available Cash in accordance with clauses (A), (B) and
(C) or the date that is one year from the receipt of such Net Available Cash;
provided, however, that, in connection with any prepayment, repayment or
purchase of Indebtedness pursuant to clause (A), (B), (C) or (D) above, the
Company or such Restricted Subsidiary shall retire such Indebtedness and shall
cause the related loan commitment (if any) to be permanently reduced in an
amount equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions, the Company and its Restricted
Subsidiaries shall not be required to apply any Net Available Cash in accordance
herewith except to the extent that the aggregate Net Available Cash from all
Asset Dispositions which are not applied in accordance with this covenant at any
time exceed $5 million. The Company shall not be required to make an offer for
Notes pursuant to this covenant if the Net Available Cash available therefor
(after application of the proceeds as provided in clause (A)) is less than $5
million for any particular Asset Disposition (which lesser amounts shall be
carried forward for purposes of determining whether an offer is required with
respect to the Net Available Cash from any subsequent Asset Disposition).
For the purposes of this covenant, the following will be deemed to be cash:
(x) the assumption by the transferee of Senior Indebtedness of the Company or
Senior Indebtedness of any Restricted Subsidiary of the Company and the release
of the Company or such Restricted Subsidiary from all liability on such Senior
Indebtedness in connection with such Asset Disposition (in which case the
Company shall, without further action, be deemed to have applied such assumed
Indebtedness in accordance with clause (A) of the preceding paragraph) and (y)
securities received by the Company or any Restricted Subsidiary of the Company
from the transferee that are promptly (and in any event within 60 days)
converted by the Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of
Notes pursuant to clause (a) (iii) (B), the Company will be required to purchase
Notes tendered pursuant to an offer by the Company for the Notes at a purchase
price of 101% of their principal amount plus accrued and unpaid interest, if
any, to the purchase date in accordance with the procedures (including prorating
in the event of oversubscription) set forth in the Indenture. If the aggregate
purchase price of the Notes tendered pursuant to the offer is less than the Net
Available Cash allotted to the purchase of the Notes, the Company will apply the
remaining Net Available Cash in accordance with clauses (a)(iii)(C) or (D)
above.
(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to the
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under the Indenture by virtue thereof.
Limitation on Affiliate Transactions. (a) The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into or conduct any transaction or series of related transactions (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with or for the benefit of any Affiliate of the Company, other than a
Wholly-Owned Subsidiary (an "Affiliate Transaction") unless: (i) the terms of
such Affiliate Transaction are no less favorable to the Company or such
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Restricted Subsidiary, as the case may be, than those that could be obtained at
the time of such transaction in arm's length dealings with a Person who is not
such an Affiliate; (ii) in the event such Affiliate Transaction involves an
aggregate amount in excess of $1.0 million, the terms of such transaction have
been approved by a majority of the members of the Board of Directors of the
Company and by a majority of the disinterested members of such Board, if any
(and such majority or majorities, as the case may be, determines that such
Affiliate Transaction satisfies the criteria in (i) above); and (iii) in the
event such Affiliate Transaction involves an aggregate amount in excess of $2.0
million, the Company has received a written opinion from an independent
investment banking firm of nationally recognized standing that such Affiliate
Transaction is fair to the Company or such Restricted Subsidiary, as the case
may be, from a financial point of view.
(b) The foregoing paragraph (a) shall not apply to (i) any Restricted
Payment permitted to be made pursuant to the covenant described under
"Limitation on Restricted Payments," (ii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, or any stock options and stock ownership
plans for the benefit of employees, officers and directors, consultants and
advisors approved by the Board of Directors of the Company, (iii) loans or
advances to employees in the ordinary course of business of the Company or any
of its Restricted Subsidiaries in aggregate amount outstanding not to exceed
$250,000 to any employee or $500,000 in the aggregate at any time, (iv) any
transaction between Wholly-Owned Subsidiaries, (v) indemnification agreements
with, and the payment of fees and indemnities to, directors, officers and
employees of the Company and its Restricted Subsidiaries, in each case in the
ordinary course of business, (vi) transactions pursuant to agreements in
existence on the Issue Date which are (x) described in the Prospectus or (y)
otherwise, in the aggregate, immaterial to the Company and its Restricted
Subsidiaries taken as a whole, (vii) any employment, non-competition or
confidentiality agreements entered into by the Company or any of its Restricted
Subsidiaries with its employees in the ordinary course of business, or (viii)
the issuance of Capital Stock of the Company (other than Disqualified Stock).
Limitation on Issuances of Capital Stock of Restricted Subsidiaries. The
Company will not permit any of its Restricted Subsidiaries to issue any Capital
Stock to any Person (other than to the Company or a Wholly-Owned Subsidiary of
the Company) or permit any Person (other than the Company or a Wholly-Owned
Subsidiary of the Company) to own any Capital Stock of a Restricted Subsidiary
of the Company, if in either case as a result thereof such Restricted Subsidiary
would no longer be a Restricted Subsidiary of the Company; provided, however,
that this provision shall not prohibit (x) the Company or any of its Restricted
Subsidiaries from selling, leasing or otherwise disposing of all of the Capital
Stock of any Restricted Subsidiary or (y) the designation of a Restricted
Subsidiary as an Unrestricted Subsidiary in compliance with the Indenture.
Limitation on Repayment upon a Change of Control. The Company will not
make an offer to repurchase any Subordinated Obligations if they are required to
do so pursuant to a Change of Control until at least 60 days after the
occurrence of such Change of Control and shall not purchase any Subordinated
Obligations for 30 days following the time the Company is required to make
purchases of the Notes under the Indenture following such Change of Control.
Limitation on Sale/Leaseback Transactions. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into,
Guarantee or otherwise become liable with respect to any Sale/Leaseback
Transaction with respect to any property or assets unless (i) the Company or
such Restricted Subsidiary, as the case may be, would be entitled pursuant to
the Indenture to Incur Indebtedness secured by a Permitted Lien on such property
or assets in an amount equal to the Attributable Indebtedness with respect to
such Sale/Leaseback Transaction, (ii) the Net Cash Proceeds from such
Sale/Leaseback Transaction are at least equal to the fair market value of the
property or assets subject to such Sale/Leaseback Transaction (such fair market
value determined, in the event such property or assets have a fair market value
in excess of $1.0 million, no more than 30 days prior to the effective date of
such Sale/Leaseback Transaction, by the Board of Directors of the Company as
evidenced by a resolution of such Board) and (iii) the net cash proceeds of such
Sale/Leaseback Transaction are applied in accordance with the provisions
described under "Limitation on Sales of Assets and Subsidiary Stock."
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SEC Reports. The Company will file with the Notes Trustee and provide to
the holders of the Notes, within 15 days after it files them with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) which the Company files with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act. In the event
that the Company is not required to file such reports with the Commission
pursuant to the Exchange Act, the Company will nevertheless deliver such
Exchange Act information to the holders of the Notes within 15 days after it
would have been required to file it with the Commission.
Limitation on Designations of Unrestricted Subsidiaries. The Company may
designate any Subsidiary of the Company (other than a Subsidiary of the Company
which owns Capital Stock of a Restricted Subsidiary) as an "Unrestricted
Subsidiary" under the Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation; and
(b) the Company would be permitted under the Indenture to make an
Investment at the time of Designation (assuming the effectiveness of such
Designation) in an amount (the "Designation Amount") equal to the sum of
(i) fair market value of the Capital Stock of such Subsidiary owned by the
Company and the Restricted Subsidiaries on such date and (ii) the aggregate
amount of other Investments of the Company and the Restricted Subsidiaries
in such Subsidiary on such date; and
(c) the Company would be permitted to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the covenant
described under "-- Limitation on Indebtedness" at the time of Designation
(assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
described under "-- Limitation on Restricted Payments" for all purposes of the
Indenture in the Designation Amount. The Indenture further provides that the
Company shall not, and shall not permit any Restricted Subsidiary to, at any
time (x) provide direct or indirect credit support for or a guarantee of any
Indebtedness of any Unrestricted Subsidiary (including of any undertaking,
agreement or instrument evidencing such Indebtedness), (y) be directly or
indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z) be
directly or indirectly liable for any Indebtedness which provides that the
holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to its
final scheduled maturity upon the occurrence of a default with respect to any
Indebtedness of any Unrestricted Subsidiary (including any right to take
enforcement action against such Unrestricted Subsidiary), except, in the case of
clause (x) or (y), to the extent permitted under the covenant described under
"-- Limitation on Restricted Payments."
The Indenture further provides that the Company may revoke any Designation
of a Subsidiary as an Unrestricted Subsidiary (a "Revocation"), whereupon such
Subsidiary shall then constitute a Restricted Subsidiary, if:
(a) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
Indenture.
All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the Notes Trustee certifying compliance with the
foregoing provisions.
Taxes. The Company will, and will cause its Restricted Subsidiaries to,
pay and discharge when due and payable all taxes, levies, imposts, duties or
other governmental charges ("Taxes") imposed on it or on its income or profits
or on any of its properties except such Taxes which are being contested in good
faith in appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP.
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Merger and Consolidation. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease all or substantially all of its
assets to, any Person, unless: (i) the resulting, surviving or transferee Person
(the "Successor Company") shall be a corporation, partnership, trust or limited
liability company organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and the Successor Company
(if not the Company) shall expressly assume, by supplemental indenture, executed
and delivered to the Notes Trustee, in form satisfactory to the Notes Trustee,
all the obligations of the Company under the Notes and the Indenture; (ii)
immediately after giving effect to such transaction (and treating any
Indebtedness that becomes an obligation of the Successor Company or any
Subsidiary of the Successor Company as a result of such transaction as having
been incurred by the Successor Company or such Restricted Subsidiary at the time
of such transaction), no Default or Event of Default shall have occurred and be
continuing; (iii) immediately after giving effect to such transaction, the
Successor Company (A) shall have a Consolidated Net Worth equal or greater to
the Consolidated Net Worth of the Company immediately prior to such transaction
and (B) shall be able to incur at least an additional $1.00 of Indebtedness
pursuant to paragraph (a) of "Limitation on Indebtedness"; (iv) the Company
shall have delivered to the Notes Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer and
such supplemental indenture (if any) comply with the Indenture; and (v) there
has been delivered to the Notes Trustee an Opinion of Counsel to the effect that
holders of the Notes will not recognize income, gain or loss for U.S. Federal
income tax purposes as a result of such consolidation, merger, conveyance,
transfer or lease and will be subject to U.S. Federal income tax on the same
amount and in the same manner and at the same times as would have been the case
if such consolidation, merger, conveyance, transfer or lease had not occurred.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but, in the
case of a lease of all or substantially all its assets, the Company will not be
released from the obligation to pay the principal of and interest on the Notes.
Notwithstanding the foregoing clauses (ii) and (iii), any Restricted
Subsidiary of the Company may consolidate with, merge into or transfer all or
part of its properties and assets to the Company.
EVENTS OF DEFAULT
Each of the following constitutes an Event of Default under the Indenture:
(i) a default in any payment of interest on any Note when due, continued for 30
days, (ii) a default in the payment of principal of any Note when due at its
Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise, (iii) the failure by the Company to comply with its
obligations under the "Merger and Consolidation" covenant described under
"Certain Covenants" above, (iv) the failure by the Company to comply for 30 days
after notice with any of its obligations under the covenants described under
"Change of Control" above or under covenants described under "Certain Covenants"
above (in each case, other than a failure to purchase Notes which shall
constitute an Event of Default under clause (ii) above), other than "Merger and
Consolidation," (v) the failure by the Company or any Subsidiary Guarantor to
comply for 60 days after notice with its other agreements contained in the
Indenture, (vi) Indebtedness of the Company or any Restricted Subsidiary is not
paid within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $2.0 million and such default shall
not have been cured or such acceleration rescinded after a 10-day period, (vii)
certain events of bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary (the "bankruptcy provisions"), (viii) any judgment or
decree for the payment of money in excess of $2.0 million (to the extent not
covered by insurance) is rendered against the Company or a Significant
Subsidiary and such judgment or decree shall remain undischarged or unstayed for
a period of 60 days after such judgment becomes final and non-appealable (the
"judgment default provision"), or (ix) any Note Guarantee by a Significant
Subsidiary ceases to be in full force and effect (except as contemplated by the
terms of the Indenture) or any Subsidiary Guarantor that is a Significant
Subsidiary denies or disaffirms its obligations under the Indenture or its Note
Guarantee and such Default continues for 10 days. However, a default under
clause (iv) or (v) will not constitute an Event of Default until the Notes
Trustee or the holders
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of 25% in principal amount of the outstanding Notes notify the Company of the
default and the Company does not cure such default within the time specified in
clause (iv) or (v) after receipt of such notice.
If an Event of Default occurs and is continuing, the Notes Trustee or the
holders of at least 25% in principal amount of the outstanding Notes by notice
to the Company may declare the principal of and accrued and unpaid interest, if
any, on all the Notes to be due and payable. Upon such a declaration, such
principal and accrued and unpaid interest shall be due and payable immediately.
If an Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs, the principal of and accrued and unpaid
interest on all the Notes will become and be immediately due and payable without
any declaration or other act on the part of the Notes Trustee or any holders.
Under certain circumstances, the holders of a majority in principal amount of
the outstanding Notes may rescind any such acceleration with respect to the
Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Notes Trustee, if an Event of Default occurs and is continuing, the Notes
Trustee will be under no obligation to exercise any of the rights or powers
under the Indenture at the request or direction of any of the holders unless
such holders have offered to the Notes Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no holder may
pursue any remedy with respect to the Indenture or the Notes unless (i) such
holder has previously given the Notes Trustee notice that an Event of Default is
continuing, (ii) holders of at least 25% in principal amount of the outstanding
Notes have requested the Notes Trustee to pursue the remedy, (iii) such holders
have offered the Notes Trustee reasonable security or indemnity against any
loss, liability or expense, (iv) the Notes Trustee has not complied with such
request within 60 days after the receipt of the request and the offer of
security or indemnity and (v) the holders of a majority in principal amount of
the outstanding Notes have not given the Notes Trustee a direction that, in the
opinion of the Notes Trustee, is inconsistent with such request within such
60-day period. Subject to certain restrictions, the holders of a majority in
principal amount of the outstanding Notes are given the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Notes Trustee or of exercising any trust or power conferred on the Notes
Trustee. The Notes Trustee, however, may refuse to follow any direction that
conflicts with law or the Indenture or that the Notes Trustee determines is
unduly prejudicial to the rights of any other holder or that would involve the
Notes Trustee in personal liability. Prior to taking any action under the
Indenture, the Notes Trustee shall be entitled to indemnification satisfactory
to it in its sole discretion against all losses and expenses caused by taking or
not taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Notes Trustee, the Notes Trustee must mail to each holder notice of
the Default within 90 days after it occurs. Except in the case of a Default in
the payment of principal of, premium (if any) or interest on any Note, the Notes
Trustee may withhold notice if and so long as its board of directors, a
committee of its board of directors or a committee of its Trust officers in good
faith determines that withholding notice is in the interests of the holders of
the Notes. In addition, the Company is required to deliver to the Notes Trustee,
within 90 days after the end of each fiscal year, a certificate indicating
whether the signers thereof know of any Default that occurred during the
previous year. The Company also is required to deliver to the Notes Trustee,
within 30 days after the occurrence thereof, written notice of any events which
would constitute certain Defaults.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding and any past default or compliance with any provisions may be waived
with the consent of the holders of a majority in principal amount of the Notes
then outstanding. However, without the consent of each holder of an outstanding
Note affected, no amendment may, among other things, (i) reduce the amount of
Notes whose holders must consent to an amendment, (ii) reduce the stated rate of
or extend the stated time for payment of interest on any Note, (iii) reduce the
principal of or extend the Stated Maturity of any Note, (iv) reduce the premium
payable upon the redemption or repurchase of any Note or change the time at
which any Note may be redeemed as described under "Optional Redemption" above,
(v) make any Note payable in money other than that stated in the Note,
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(vi) impair the right of any holder to receive payment of principal of and
interest on such holder's Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
holder's Notes or (vii) make any change in the amendment provisions which
require each holder's consent or in the waiver provisions.
Without the consent of any holder, the Company and the Notes Trustee may
amend the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation, partnership, trust or
limited liability company of the obligations of the Company under the Indenture,
to provide for uncertificated Notes in addition to or in place of certificated
Notes (provided that the uncertificated Notes are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Notes are described in Section 163(f)(2)(B) of the Code), to add
further Guarantees with respect to the Notes, to secure the Notes, to add to the
covenants of the Company for the benefit of the holders or to surrender any
right or power conferred upon the Company, to make any change that does not
adversely affect the rights of any holder or to comply with any requirement of
the Commission in connection with the qualification of the Indenture under the
Trust Indenture Act.
The consent of the holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to the holders a notice briefly describing such amendment.
However, the failure to give such notice to all the holders, or any defect
therein, will not impair or affect the validity of the amendment.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under covenants
described under "Certain Covenants" (other than "Merger and Consolidation"), the
operation of the cross acceleration provision, the bankruptcy provisions with
respect to Significant Subsidiaries, the judgment default provision and the Note
Guarantee provision described under "Events of Default" above and the
limitations contained in clauses (iii) and (iv) under "Certain
Covenants -- Merger and Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries), (viii) or (ix) under "Events of Default" above or
because of the failure of the Company to comply with clause (iii) or (iv) under
"Certain Covenants -- Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Notes Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Notes Trustee of
an Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
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SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will cease to be of further effect (except as otherwise
expressly provided for in the Indenture) when either (i) all outstanding Notes
have been delivered (other than lost, stolen or destroyed Notes which have been
replaced) to the Notes Trustee for cancellation or (ii) all outstanding Notes
have become due and payable, whether at maturity or as a result of the mailing
of a notice of redemption pursuant to the terms of the Indenture and the Company
has irrevocably deposited with the Notes Trustee funds sufficient to pay at
maturity or upon redemption all outstanding Notes, including interest thereon
(other than lost, stolen, mutilated or destroyed Notes which have been
replaced), and, in either case, the Company has paid all other sums payable
under the Indenture. The Notes Trustee is required to acknowledge satisfaction
and discharge of the Indenture on demand of the Company accompanied by an
Officer's Certificate and an Opinion of Counsel at the cost and expense of the
Company.
TRANSFER AND EXCHANGE
Upon any transfer of a Note, the registrar may require a holder, among
other things, to furnish appropriate endorsements and transfer documents, and to
pay any taxes and fees required by law or permitted by the Indenture. The
registrar is not required to transfer or exchange any Notes selected for
redemption nor is the registrar required to transfer or exchange any Notes for a
period of 15 days before a selection of Notes to be redeemed. The registered
holder of a Note may be treated as the owner of it for all purposes.
CONCERNING THE NOTES TRUSTEE
United States Trust Company of New York is the Notes Trustee under the
Indenture and has been appointed by the Company as registrar and paying agent
with regard to the Notes. The Notes Trustee's current address is 114 West 47th
Street, New York, New York 10036.
The Indenture contains certain limitations on the rights of the Notes
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim a security or otherwise. The Notes Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
(as defined) it must eliminate such conflict or resign.
The holders of a majority in aggregate principal amount of the then
outstanding Notes issued under the Indenture will have the right to direct the
time, method and place of conducting any proceeding for exercising any remedy
available to the Notes Trustee. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured) the Notes Trustee will be
required, in the exercise of its power, to use the degree of care of a prudent
man in the conduct of his own affairs. Subject to such provisions, the Notes
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any of the holders of the Notes issued
thereunder unless they shall have offered to the Notes Trustee security and
indemnity satisfactory to it.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Permitted Business; (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Company or a Restricted Subsidiary of the Company;
(iii) Capital Stock constituting a minority interest in any Person that at such
time is a Restricted Subsidiary of the Company; or (iv) Permitted Investments of
the type and in the amounts described in clause (viii) of the
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definition thereof; provided, however, that, in the case of clauses (ii) and
(iii), such Restricted Subsidiary is primarily engaged in a Permitted Business.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the
lesser of the amount by which (x) the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including, without
limitation, the probable liability of such Subsidiary Guarantor with respect to
its contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Note Guarantees, of such Subsidiary Guarantor at such date
and (y) the present fair salable value of the assets of such Subsidiary
Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Subsidiary Guarantor on its debts (after giving
effect to all other fixed and contingent liabilities incurred or assumed on such
date and after giving effect to any collection from any Subsidiary by such
Subsidiary Guarantor in respect of the obligations of such Subsidiary under the
Note Guarantees), excluding debt in respect of the Note Guarantees, as they
become absolute and matured.
"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 the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of (or
any other equity interests in) a Restricted Subsidiary (other than directors'
qualifying shares) or of any other property or other assets (each referred to
for the purposes of this definition as a "disposition") by the Company or any of
its Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly-Owned Subsidiary, (ii) a disposition of inventory in the
ordinary course of business, (iii) a disposition of obsolete or worn out
equipment or equipment that is no longer useful in the conduct of the business
of the Company and its Restricted Subsidiaries and that is disposed of in each
case in the ordinary course of business, (iv) dispositions of property for net
proceeds which, when taken collectively with the net proceeds of any other such
dispositions under this clause (iv) that were consummated since the beginning of
the calendar year in which such disposition is consummated, do not exceed $1.0
million, and (v) transactions permitted under "Certain Covenants -- Merger and
Consolidation" above. Notwithstanding anything to the contrary contained above,
a Restricted Payment made in compliance with the "Limitation on Restricted
Payments" covenant shall not constitute an Asset Disposition except for purposes
of determinations of the Consolidated Coverage Ratio.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Notes, compounded annually) of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in such Sale/Leaseback Transaction (including any period for which such
lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
indebtedness, the quotient obtained by dividing (i) the sum of the product of
the numbers of years (rounded upwards to the nearest month) from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption multiplied by the amount of such payment by (ii)
the sum of all such payments.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date such lease may be terminated without penalty.
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"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof, (iii) certificates of deposit, time
deposits 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 commercial bank having
capital and surplus in excess of $500 million, (iv) repurchase obligations for
underlying securities of the types described in clauses (ii) and (iii) entered
into with any financial institution meeting the qualifications specified in
clause (iii) above, (v) commercial paper rated A-1 or the equivalent thereof by
Moody's Investors Service, Inc. ("Moody's") or Standard and Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. ("S&P") and in each case
maturing within one year after the date of acquisition, (vi) investment funds
investing 95% of their assets in securities of the types described in clauses
(i)-(v) above, (vii) readily marketable direct obligations issued by any state
of the United States of America or any political subdivision thereof having one
of the two highest rating categories obtainable from either Moody's or S&P and
(viii) Indebtedness or preferred stock issued by Persons with a rating of "A" or
higher from S&P or "A2" or higher from Moody's.
"Consolidated Cash Flow" for any period means the Consolidated Net Income
for such period, plus the following to the extent deducted in calculating such
Consolidated Net Income (i) income tax expense, (ii) Consolidated Interest
Expense, (iii) depreciation expense, (iv) amortization expense, and (v) all
other non-cash items reducing Consolidated Net Income (excluding any non-cash
item to the extent it represents an accrual of or reserve for cash disbursements
for any subsequent period prior to the stated maturity of the Notes) and less
(x) the aggregate amount of contingent and "earnout" payments in respect of any
Permitted Business acquired by the Company or any Restricted Subsidiary that are
paid in cash during such period and (y) to the extent added in calculating
Consolidated Net Income, non-cash items (excluding such non-cash items to the
extent they represent an accrual for cash receipts reasonably expected to be
received prior to the Stated Maturity of the Notes), in each case for such
period. Notwithstanding the foregoing, the income tax expense, depreciation
expense and amortization expense of a Subsidiary of the Company shall be
included in Consolidated Cash Flow only to the extent (and in the same
proportion) that the net income of such Subsidiary was included in calculating
Consolidated Net Income.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated Cash Flow for the period of
the most recent four consecutive fiscal quarters ending prior to the date of
such determination and as to which financial statements are available to (ii)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that (A) if the Company or any of its Restricted Subsidiaries has incurred any
Indebtedness since the beginning of such period and through the date of
determination of the Consolidated Coverage Ratio that remains outstanding or if
the transaction giving rise to the need to calculate Consolidated Coverage Ratio
is an incurrence of Indebtedness, or both, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to (1) such Indebtedness as if such Indebtedness had
been incurred on the first day of such period (provided that if such
Indebtedness is incurred under a revolving credit facility (or similar
arrangement or under any predecessor revolving credit or similar arrangement)
only that portion of such Indebtedness that constitutes the one year projected
average balance of such Indebtedness (as determined in good faith by the Board
of Directors of the Company) shall be deemed outstanding for purposes of this
calculation), and (2) the discharge of any other Indebtedness repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new
Indebtedness as if such discharge had occurred on the first day of such period,
(B) if since the beginning of such period any Indebtedness of the Company or any
of its Restricted Subsidiaries has been repaid, repurchased, defeased or
otherwise discharged (other than Indebtedness under a revolving credit or
similar arrangement unless such revolving credit Indebtedness has been
permanently repaid and the underlying commitment terminated and has not been
replaced), Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto as if such Indebtedness had been repaid,
repurchased, defeased or otherwise discharged on the first day of such period,
(C) if since the beginning of such period the Company or any of its Restricted
Subsidiaries shall have made any Asset Disposition or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Asset
Disposition, Consolidated Cash Flow for such period shall be reduced by an
amount equal to the Consolidated Cash Flow (if positive) attributable to the
assets which are the subject of such Asset Disposition for such period or
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increased by an amount equal to the Consolidated Cash Flow (if negative)
attributable thereto for such period, and Consolidated Interest Expense for such
period shall be (i) reduced by an amount equal to the Consolidated Interest
Expense attributable to any Indebtedness of the Company or any of its Restricted
Subsidiaries repaid, repurchased, defeased or otherwise discharged with respect
to the Company and its continuing Restricted Subsidiaries in connection with
such Asset Disposition for such period (or, if the Capital Stock of any
Restricted Subsidiary of the Company is sold, the Consolidated Interest Expense
for such period directly attributable to the Indebtedness of such Restricted
Subsidiary to the extent the Company and its continuing Restricted Subsidiaries
are no longer liable for such Indebtedness after such sale) and (ii) increased
by interest income attributable to the assets which are the subject of such
Asset Disposition for such period, (D) if since the beginning of such period the
Company or any of its Restricted Subsidiaries (by merger or otherwise) shall
have made an Investment in any Restricted Subsidiary of the Company (or any
Person which becomes a Restricted Subsidiary of the Company as a result thereof)
or an acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder which constitutes all or substantially all of
an operating unit of a business, Consolidated Cash Flow and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto (including the incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such period and (E) if
since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary of the Company or was merged with or into the Company or
any Restricted Subsidiary of the Company since the beginning of such period)
shall have made any Asset Disposition, Investment or acquisition of assets that
would have required an adjustment pursuant to clause (C) or (D) above if made by
the Company or a Restricted Subsidiary of the Company during such period,
Consolidated Cash Flow and Consolidated Interest Expense for such period shall
be calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest expense on such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its Restricted Subsidiaries determined in accordance
with GAAP, plus, to the extent not included in such interest expense (i)
interest expense attributable to Capitalized Lease Obligations, (ii) capitalized
interest, (iii) amortization of debt discount, (iv) non-cash interest expense,
(v) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, (vi) interest actually paid
by the Company or any such Restricted Subsidiary under any Guarantee of
Indebtedness or other obligation of any other Person, (vii) net payments
(whether positive or negative) pursuant to Interest Rate Agreements, (viii) the
cash contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any Person (other than the Company) in connection with Indebtedness Incurred
by such plan or trust and (ix) cash and Disqualified Stock dividends in respect
of all Preferred Stock of Subsidiaries and Disqualified Stock of the Company
held by Persons other than the Company or a Wholly-Owned Subsidiary and less (a)
to the extent included in such interest expense, the amortization of capitalized
debt issuance costs and (b) interest income. Notwithstanding the foregoing, the
Consolidated Interest Expense with respect to any Restricted Subsidiary of the
Company, that was not a Wholly-Owned Subsidiary, shall be included only to the
extent (and in the same proportion) that the net income of such Restricted
Subsidiary was included in calculating Consolidated Net Income.
"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Company and its consolidated Subsidiaries determined in
accordance with GAAP; provided, however, that there shall not be included in
such Consolidated Net Income (i) any net income (loss) of any person acquired by
the Company or any of its Restricted Subsidiaries in a pooling of interests
transaction for any period prior to the date of such acquisition, (ii) any net
income of any Restricted Subsidiary of the Company if such Restricted
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Subsidiary is subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Restricted Subsidiary, directly
or indirectly, to the Company (other than restrictions in effect on the Issue
Date with respect to a Restricted Subsidiary of the Company and other than
restrictions that are created or exist in compliance with the "Limitation on
Restrictions on Distributions from Restricted Subsidiaries" covenant), (iii) any
gain or loss realized upon the sale or other disposition of any assets of the
Company or its consolidated Restricted Subsidiaries (including pursuant to any
Sale/Leaseback Transaction) which are not sold or otherwise disposed of in the
ordinary course of business and any gain or loss realized upon the sale or other
disposition of any Capital Stock of any Person, (iv) any extraordinary gain or
loss, (v) the cumulative effect of a change in accounting principles, (vi) the
net income of any Person, other than a Restricted Subsidiary, except to the
extent of the lesser of (A) cash dividends or distributions actually paid to the
Company or any of its Restricted Subsidiaries by such Person and (B) the net
income of such Person (but in no event less than zero), and the net loss of such
Person (other than an Unrestricted Subsidiary) shall be included only to the
extent of the aggregate Investment of the Company or any of its Restricted
Subsidiaries in such Person and (vii) any non-cash expenses attributable to
grants or exercises of employee stock options. Notwithstanding the foregoing,
for the purpose of the covenant described under "Certain Covenants -- Limitation
on Restricted Payments" only, there shall be excluded from Consolidated Net
Income any dividends, repayments of loans or advances or other transfers of
assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary
to the extent such dividends, repayments or transfers increase the amount of
Restricted Payments permitted under such covenant pursuant to clause (a)(3)(D)
thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Company ending prior to the taking of any
action for the purpose of which the determination is being made and for which
financial statements are available (but in no event ending more than 135 days
prior to the taking of such action), as (i) the par or stated value of all
outstanding Capital Stock of the Company plus (ii) paid in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (A) any accumulated deficit and (B) any amounts attributable
to Disqualified Stock.
"Continuing Director" of any Person means, as of the date of determination,
any Person who (i) was a member of the Board of Directors of such Person on the
date of the Indenture or (ii) was nominated for election or elected to the Board
of Directors of such Person with the affirmative vote of a majority of the
Continuing Directors of such Person who were members of such Board of Directors
at the time of such nomination or election.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock which, 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 an event which
would constitute a Change of Control), (i) matures (excluding any maturity as
the result of an optional redemption by the issuer thereof) or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final Stated Maturity of the Notes, or (ii) is convertible into or exchangeable
(unless at the sole option of the issuer thereof) for (a) debt securities or (b)
any Capital Stock referred to in (i) above, in each case at any time prior to
the final Stated Maturity of the Notes.
"Equity Offering" means an offering for cash by the Company of its common
stock, or options, warrants or rights with respect to its common stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
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"Existing Indebtedness" means Indebtedness of the Company or its Restricted
Subsidiaries in existence on the Issue Date, plus interest accrued, thereon,
after application of the net proceeds of the Outstanding Notes as described in
the Prospectus.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Notes Trustee.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of the Indenture, including those 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 approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
the Indenture shall be computed in conformity with GAAP.
"Group" shall mean any "group" for purposes of Section 13(d) of the
Exchange Act.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor Subordinated Obligation" means, with respect to a Subsidiary
Guarantor, any Indebtedness of such Subsidiary Guarantor (whether outstanding on
the Issue Date or thereafter incurred) which is expressly subordinate or junior
in right of payment to the obligations of such Subsidiary Guarantor under the
Note Guarantee pursuant to a written agreement.
"Incur" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be incurred
by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto) (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in clauses (i), (ii) and (v)) entered into in the ordinary
course of business of such Person to the extent that such letters of credit are
not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed
no later than the third business day following receipt by such Person of a
demand for reimbursement following payment on the letter of credit), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services (except (x) trade payables and accrued expenses incurred in
the ordinary course of business and (y) contingent or "earnout" payment
obligations in respect of any Permitted Business acquired by the Company or any
Restricted Subsidiary), which purchase price is due more than six months after
the date of placing such property in service or taking delivery and title
thereto or the completion of such services, (v) all Capitalized Lease
Obligations and all Attributable Indebtedness of such Person, (vi) all
Indebtedness of other Persons secured by a Lien on any asset of such Person,
whether or not such
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Indebtedness is assumed by such Person, (vii) all Indebtedness of other Persons
to the extent Guaranteed by such Person, (viii) the amount of all obligations of
such Person with respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Restricted Subsidiary of the Company,
any Preferred Stock of such Restricted Subsidiary to the extent such obligation
arises on or before the Stated Maturity of the Notes (but excluding, in each
case, accrued dividends) with the amount of Indebtedness represented by such
Disqualified Stock or Preferred Stock, as the case may be, being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price; provided that, for purposes hereof the "maximum fixed
repurchase price" of any Disqualified Stock or Preferred Stock, as the case may
be, which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Stock or Preferred Stock, as the
case may be, as if such Disqualified Stock or Preferred Stock, as the case may
be, were purchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture, and if such price is based on the fair
market value of such Disqualified Stock or Preferred Stock, as the case may be,
such fair market value shall be determined in good faith by the Board of
Directors of the Company and (ix) to the extent not otherwise included in this
definition, obligations under Currency Agreements and Interest Rate Agreements.
Unless specifically set forth above, the amount of Indebtedness of any Person at
any date shall be the outstanding principal amount of all unconditional
obligations as described above, as such amount would be reflected on a balance
sheet prepared in accordance with GAAP, and the maximum liability of such
Person, upon the occurrence of the contingency giving rise to the obligation, of
any contingent obligations described above at such date.
"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts payable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar arrangement, but
excluding any debt or extension of credit represented by a bank deposit other
than a time deposit) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person. For purposes of
the "Limitation on Restricted Payments" covenant, (i) "Investment" shall include
the portion (proportionate to the Company's equity interest in a Restricted
Subsidiary to be designated as an Unrestricted Subsidiary) of the fair market
value of the net assets of such Restricted Subsidiary of the Company at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time that such Subsidiary is so redesignated a Restricted
Subsidiary; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors and
evidenced by a resolution of such Board of Directors certified in an Officers'
Certificate to the Notes Trustee.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Group" means George S. Hofmeister, Frank J. Amedia and AAP
Holdings, Inc. and each member of the immediate family of any of the foregoing
natural persons and any trust or similar device created for the benefit of any
one or more of the foregoing and each Person which acquires a direct or indirect
beneficial ownership interest in shares of stock of the Company as an executor
or administrator for or by way of inheritance or bequest from one or more of the
foregoing natural persons following the death of such Person.
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"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets subject to such Asset Disposition) therefrom in each
case net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all Federal, state, foreign and local
taxes required to be paid or accrued as a liability under GAAP, as a consequence
of such Asset Disposition, (ii) all distributions and other payments required to
be made to any Person owning a beneficial interest in assets subject to sale or
minority interest holders in Subsidiaries or joint ventures as a result of such
Asset Disposition, (iii) the deduction of appropriate amounts to be provided by
the seller as a reserve, in accordance with GAAP, against any liabilities
associated with the assets disposed of in such Asset Disposition, provided
however, that upon any reduction in such reserves (other than to the extent
resulting from payments of the respective reserved liabilities), Net Available
Cash shall be increased by the amount of such reduction to reserves, and
retained by the Company or any Restricted Subsidiary of the Company after such
Asset Disposition and (iv) any portion of the purchase price from an Asset
Disposition placed in escrow (whether as a reserve for adjustment of the
purchase price, for satisfaction of indemnities in respect of such Asset
Disposition or otherwise in connection with such Asset Disposition) provided,
however, that upon the termination of such escrow, Net Available Cash shall be
increased by any portion of funds therein released to the Company or any
Restricted Subsidiary.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result of such issuance or sale.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any Restricted Subsidiary (a) provides any guarantee or credit support of
any kind (including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute Indebtedness) or (b) is directly or indirectly
liable (as a guarantor, general partner or otherwise) 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 of the
Company or any Restricted Subsidiary to declare a default under such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"Officer" means the Chairman of the Board, the Vice-Chairman of the Board,
the Chief Executive Officer, the Chief Financial Officer, the President, any
Vice-President, the Treasurer or the Secretary of the Company.
"Note Guarantee" means the Guarantee of the Notes by a Subsidiary
Guarantor.
"Officer's Certificate" shall mean a certificate signed by two Officers of
the Company, at least one of whom shall be the principal executive, financial or
accounting officer of the Company.
"Opinion of Counsel" means a written opinion, in form and substance
acceptable to the Notes Trustee, from legal counsel who is acceptable to the
Notes Trustee.
"Permitted Business" means any business which is the same as or related,
ancillary or complementary to any of the businesses of the Company and its
Restricted Subsidiaries on the date of the Indenture, as reasonably determined
by the Company's Board of Directors.
"Permitted Investment" means an Investment by the Company or any of its
Restricted Subsidiaries in (i) a Wholly-Owned Subsidiary of the Company;
provided, however, that the primary business of such Wholly-Owned Subsidiary is
a Permitted Business; (ii) another Person if as a result of such Investment such
other Person becomes a Wholly-Owned Subsidiary of the Company or is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Company or a Wholly-Owned Subsidiary of the Company; provided,
however, that in each case such Person's primary business is a Permitted
Business; (iii) Temporary Cash Investments; (iv) receivables owing to the
Company or any of its Restricted Subsidiaries, created or acquired in the
ordinary course of business and payable or dischargeable in accordance
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with customary trade terms; (v) payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be treated
as expenses for accounting purposes and that are made in the ordinary course of
business; (vi) loans and advances to employees made in the ordinary course of
business consistent with past practices of the Company or such Restricted
Subsidiary in an aggregate amount outstanding at any one time not to exceed
$250,000 to any one employee or $1.0 million in the aggregate; (vii) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any of its Restricted
Subsidiaries or in satisfaction of judgments or claims; (viii) a Person engaged
in a Permitted Business or a loan or advance by the Company the proceeds of
which are used solely to make an investment in a Person engaged in a Permitted
Business or a Guarantee by the Company of Indebtedness of any Person in which
such Investment has been made provided, however, that no Permitted Investments
may be made pursuant to this clause (viii) to the extent the amount thereof
would, when taken together with all other Permitted Investments made pursuant to
this clause (viii), exceed $5.0 million in the aggregate (plus, to the extent
not previously reinvested, any return of capital realized on Permitted
Investments made pursuant to this clause (viii), or any release or other
cancellation of any Guarantee constituting such Permitted Investment); (ix)
Persons to the extent such Investment is received by the Company or any
Restricted Subsidiary as consideration for asset dispositions effected in
compliance with the covenant described under "Limitations on Sales of Assets and
Subsidiary Stock"; (x) prepayments and other credits to suppliers made in the
ordinary course of business consistent with the past practices of the Company
and its Restricted Subsidiaries; and (xi) Investments in connection with
pledges, deposits, payments or performance bonds made or given in the ordinary
course of business in connection with or to secure statutory, regulatory or
similar obligations, including obligations under health, safety or environmental
obligations.
"Permitted Liens" means: (i) Liens granted by the Company and the
Guarantors which secure Indebtedness to the extent the Indebtedness is incurred
pursuant to clause (i) of paragraph (b) under the "Limitation on Indebtedness"
covenant; (ii) Liens in favor of the Company; (iii) Liens on property of a
Person existing at the time such Person is acquired by or merged into or
consolidated with the Company or any Restricted Subsidiary thereof; provided
that such Liens were in existence prior to the contemplation of such acquisition
and do not extend to any assets of the Company or its Restricted Subsidiaries
other than those acquired in connection with such merger or consolidation; (iv)
Liens to secure the performance of obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature incurred in the ordinary
course of business; (v) Liens existing on the Issue Date; (vi) Liens in respect
of extensions, renewals, refundings or refinancings of any Indebtedness secured
by the Liens referred to in clauses (i), (ii), (iii) and (v) above and (viii)
below; provided that the Liens in connection with such extensions, renewals,
refundings or refinancings shall be limited to all or part of the specific
property which was subject to the original Lien; (vii) 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 that any reserve or other
appropriate provisions as shall be required in conformity with GAAP shall have
been made therefor; (viii) any Lien securing purchase money obligations incurred
in compliance with paragraph (b)(ii) of the "Limitation on Indebtedness"
covenant, provided that such Liens do not extend to any property (other than the
property so purchased) owned by the company or its Restricted Subsidiaries and
is not incurred more than 30 days after the incurrence of such Indebtedness
secured by such Lien; (ix) Liens to secure Capitalized Lease Obligations (except
in respect of Sale/Leaseback Transactions) on real or personal property of the
Company to the extent consummated in compliance with paragraph (b)(ii) of the
"Limitation on Indebtedness" covenant, provided that such Liens do not extend to
or cover any property of the Company of any of its Subsidiaries other than the
property subject to such Capitalized Lease Obligation; and (x) Liens incurred in
the ordinary course of business of the company or any Restricted Subsidiary
thereof with respect to obligations that do not exceed $1 million at any one
time outstanding and that (A) are not incurred in connection with the borrowing
of money or the obtaining of 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 property or materially impair the use thereof in the
operation of the business by the Company or such Restricted Subsidiary.
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"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision hereof or any
other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
A "Public Market" exists at any time with respect to the common stock of
the Company if (a) the common stock of the Company is then registered with the
Securities and Exchange Commission pursuant to Section 12(b) or 12(g) of the
Exchange Act and traded either on a national securities exchange or in the
National Association of Securities Dealers Automated Quotation System and (b) at
least 15% of the total issued and outstanding common stock of the Company as
applicable, has been distributed prior to such time by means of an effective
registration statement under the Securities Act of 1933.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances,
replaces, renews, repays or extends (including pursuant to any defeasance or
discharge mechanism) (collectively, "refinances," and "refinanced" shall have a
correlative meaning) any Indebtedness existing on the date of the Indenture or
Incurred in compliance with the Indenture (including Indebtedness of the Company
that refinances Indebtedness of any Restricted Subsidiary and Indebtedness of
any Restricted Subsidiary that refinances Indebtedness of another Restricted
Subsidiary) including Indebtedness that refinances Refinancing Indebtedness;
provided, however, that (i) the Refinancing Indebtedness has a Stated Maturity
no earlier than the earlier of (A) the first anniversary of the Stated Maturity
of the Notes and (B) Stated Maturity of the Indebtedness being refinanced, (ii)
the Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the lesser of (A) the
Average Life of the Notes and (B) the Average Life of the Indebtedness being
refinanced and, (iii) the Refinancing Indebtedness is in an aggregate principal
amount (or if issued with original issue discount, an aggregate issue price)
that is equal to (or 101% of, in the case of a refinancing of the Notes in
connection with a Change of Control) or less than the sum of the aggregate
principal amount (or if issued with original issue discount, the aggregate
accredited value) then outstanding of the Indebtedness being refinanced (plus
the amount of any premium required to be paid in connection therewith and
reasonable fees and expenses therewith) provided, further, that Refinancing
Indebtedness shall not include Indebtedness of a Subsidiary which refinances
Indebtedness of the Company.
"Restricted Subsidiary" means any Subsidiary of the Company other an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Subsidiary leases it
from such Person.
"Secured Indebtedness" means any Senior Indebtedness of the Company or a
Subsidiary Guarantor secured by a Lien.
"Senior Indebtedness" in the case of the Notes means Indebtedness that is
not by its terms expressly subordinate or junior in right of payment to any
other Indebtedness of the Company or the Note Guarantee of a Restricted
Subsidiary.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision.
"Subordinated Obligations" means Indebtedness that is expressly subordinate
or junior in right of payment to any other Indebtedness of the Company or the
Note Guarantee of a Restricted Subsidiary.
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"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
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 (i) such Person, (ii) such Person and one
or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such
Person. Unless otherwise specified herein, each reference to a Subsidiary shall
refer to a Subsidiary of the Company.
"Subsidiary Guarantor" means each Subsidiary of the Company in existence on
the Issue Date and each Subsidiary (other than Unrestricted Subsidiaries)
created or acquired by the Company after the Issue Date.
"Temporary Cash Investments" means any of the following: (i) any Investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America having capital surplus and undivided profits
aggregating in excess of $250 million (or the foreign currency equivalent
thereof) and whose long-term debt, or whose parent holding company's long-term
debt, is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act), (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) Investments in commercial paper, maturing not more than 180
days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P,
(v) Investments in securities with maturities of six months or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's and
(vi) Investments in mutual funds whose investment guidelines restrict such
funds' investments to those satisfying the provisions of clauses (i) through (v)
above.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any Restricted Subsidiary of the Company
that is not a Subsidiary of the Subsidiary to be so designated; provided,
however, that each Subsidiary to be so designated and each of its Subsidiaries
has not at the time of such designation, and does not thereafter create, Incur,
issue, assume, guarantee or otherwise becomes liable with respect to any
Indebtedness other than Non-Recourse Debt and either (A) the Subsidiary to be so
designated has total consolidated assets of $10,000 or less or (B) if such
Subsidiary has consolidated assets greater than $10,000, then such designation
would be permitted under "Limitation on Restricted Payments." The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary subject to the limitations contained in "Limitation on Designations
of Unrestricted Subsidiaries."
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Wholly-Owned Subsidiary" means a Restricted Subsidiary of the Company, at
least 99% of the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or another Wholly-Owned Subsidiary.
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DESCRIPTION OF OUTSTANDING NOTES
The terms of the Outstanding Notes are identical in all material respects
to the Exchange Notes, except that the Outstanding Notes have not been
registered under the Securities Act, are subject to certain restrictions on
transfer and are entitled to certain registration rights under the Registration
Rights Agreement (which rights terminate upon the consummation of the Exchange
Offer, except under limited circumstances) (see "Description of Exchange
Notes"). In addition, the Registration Rights Agreement provides that if (i)
within 60 days of the Issue Date (as defined herein) or a Shelf Request (as
defined herein), neither an exchange offer registration statement nor a resale
shelf registration statement has been filed, (ii) within 150 days of the Issue
Date or a Shelf Request, neither an exchange offer registration statement nor a
resale shelf registration statement has been declared effective, (iii) within
180 days of the Issue Date, an exchange offer has not been consummated or (iv)
either the exchange offer registration statement or the resale shelf
registration statement has been declared effective and such registration
statement ceases to be effective or usable (subject to certain exceptions) in
connection with resales of Outstanding Notes during periods specified in the
Registration Rights Agreement (each such event referred to in clauses (i)
through (iv), a "Registration Default"), interest ("Additional Interest") will
accrue on the Outstanding Notes (in addition to the stated interest on the
Outstanding Notes) from and including the date on which any such Registration
Default shall occur to but excluding the date on which all Registration Defaults
have been cured. Additional Interest will accrue at a rate of 0.50% per annum
during the 30-day period immediately following the occurrence of any
Registration Default and shall increase by 0.50% per annum with respect to each
subsequent 30-day period, but in no event shall such rate exceed 2.0% per annum.
The Exchange Notes are not entitled to any such Additional Interest (subject to
certain limited exceptions). The Outstanding Notes and the Exchange Notes will
constitute a single series of debt securities under the Indenture. See
"Description of Exchange Notes."
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Outstanding Notes were originally sold by the Company on December 10,
1997 to the Initial Purchasers pursuant to the Purchase Agreement among the
Company, the Subsidiary Guarantors and the Initial Purchasers. The Initial
Purchasers subsequently resold the Outstanding Notes to qualified institutional
buyers pursuant to Rule 144A under the Securities Act, or institutional
"accredited investors" (as defined in Rule 501(a) (1), (2), (3) or (7) of
Regulation D under the Securities Act) or outside the United States in
compliance with Regulation S under the Securities Act. Pursuant to the Purchase
Agreement, the Company entered into the Registration Rights Agreement, pursuant
to which the Company has agreed, for the benefit of the holders of the
Outstanding Notes, at the Company's cost, to use its best efforts to (i) file a
registration statement with the Commission within 60 days after the Issue Date
of the Outstanding Notes with respect to the Exchange Offer for the Outstanding
Notes, and (ii) cause the registration statement to be declared effective under
the Securities Act within 150 days after the Issue Date. Upon the registration
statement being declared effective, the Company will offer the Exchange Notes in
exchange for the Outstanding Notes. The Company will keep the Exchange Offer
open for no less than 30 business days (or longer if required by applicable law)
after the date on which notice of the Exchange Offer is mailed to the holders of
the Outstanding Notes.
For each Outstanding Note properly tendered and accepted pursuant to the
Exchange Offer, the holder of such Outstanding Note will receive an Exchange
Note having a principal amount equal to that of the Outstanding Note tendered.
Interest on each Exchange Note will accrue from the last respective interest
date on which interest was paid on the Outstanding Note tendered in exchange
therefor or, if no interest has been paid on such Outstanding Note, from the
Issue Date.
Each holder of the Outstanding Notes who wishes to exchange the Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to represent in
the Letter of Transmittal that (i) it is not an affiliate of the Company or the
Subsidiary Guarantors, (ii) the Exchange Notes to be received by it were
acquired in the ordinary course of its business and (iii) at the time of
commencement of the Exchange Offer, it has no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes.
In the event that applicable interpretations of the staff of the Commission
do not permit the Company to effect the Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 180 days after the Issue
Date, or, under certain circumstances, if the Initial Purchasers or any holder
of Outstanding Notes (other than the Initial Purchasers) who is not eligible to
participate in the Exchange Offer shall so request (each a "Shelf Request"), the
Company will at its cost, (a) within 60 days of such Shelf Request, file a shelf
registration statement covering resales of the Outstanding Notes (a "Shelf
Registration Statement"), (b) use its best efforts to cause such Shelf
Registration Statement to be declared effective under the Securities Act no
later than 150 days following a Shelf Request and (c) use its best efforts to
keep effective such Shelf Registration Statement until the earlier of two years
after the Issue Date and such time as all of the applicable Outstanding Notes
have been sold thereunder. The Company will, in the event of the filing of a
Shelf Registration Statement, provide to each holder of the Outstanding Notes
copies of the prospectus which is a part of such Shelf Registration Statement,
notify each such holder when such Shelf Registration Statement has become
effective and take certain other actions as are required to permit unrestricted
resales of the Outstanding Notes. A holder that sells its Outstanding Notes
pursuant to a Shelf Registration Statement generally will be required to be
named as a selling securityholder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement which are
applicable to such holder (including certain indemnification obligations).
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If the Company or the Subsidiary Guarantors fail to comply with the above
provisions or if such Shelf Registration Statement fails to become effective,
then, as liquidated damages, Additional Interest shall become payable with
respect to the Outstanding Notes as follows:
(i) if the registration statement for the Exchange Offer or the Shelf
Registration Statement is not filed within 60 days following the Issue
Date, the Additional Interest shall accrue on the Outstanding Notes over
and above the stated interest percentage at a rate of 0.50% per annum for
the first 30 days commencing on the 61st day after the Issue Date, such
Additional Interest increasing by an additional 0.50% per annum at the
beginning of each subsequent 30-day period;
(ii) if the registration statement for the Exchange Offer or the Shelf
Registration Statement is not declared effective within 150 days following
the Issue Date, the Additional Interest shall accrue on the Outstanding
Notes over and above the stated interest percentage at a rate of 0.50% per
annum for the first 30 days commencing on the 151st day after the Issue
Date, such Additional Interest increasing by an additional 0.50% per annum
at the beginning of each subsequent 30-day period; or
(iii) if (A) the Company has not exchanged all Outstanding Notes
validly tendered in accordance with the terms of the Exchange Offer on or
prior to 180 days after the Issue Date or (B) the registration statement
for the Exchange Offer ceases to be effective at any time prior to the time
that the Exchange Offer is consummated or (C) if applicable, the Shelf
Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the
second anniversary of the Issue Date (unless all the Outstanding Notes have
been sold thereunder or as otherwise provided herein), then the Additional
Interest shall accrue on the Outstanding Notes over and above the stated
interest percentage of 0.50% per annum for the first 30 days commencing on
(x) the 181st day after the Issue Date with respect to the Notes validly
tendered and not exchanged by the Company, in the case of (A) above, or (y)
the day of the registration statement for the Exchange Offer ceases to be
effective or usable for its intended purpose in the case of (B) above, or
(z) the day the Shelf Registration Statement ceases to be effective in the
case of (C) above, the rate of such Additional Interest increasing by an
additional 0.50% per annum at the beginning of each subsequent 30-day
period;
provided, however, that the Additional Interest payable on the Outstanding Notes
may not exceed in the aggregate 2.0% per annum; and provided further, that (1)
upon the filing of the registration statement for the Exchange Offer or the
Shelf Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of such registration statement for the Exchange Offer or the Shelf
Registration Statement (in the case of (ii) above), or (3) upon the exchange of
Exchange Notes for all Outstanding Notes tendered (in the case of clause (iii)
(A) above), or upon the effectiveness of the registration statement which had
ceased to remain effective in the case of clause (iii) (B) above, or upon the
effectiveness of the Shelf Registration Statement which had ceased to remain
effective (in the case of clause (iii) (C) above), the Additional Interest
accruing on the Outstanding Notes as a result of such clause (or the relevant
subclause thereof) shall cease to accrue.
Any Additional Interest due pursuant to clauses (i), (ii) or (iii) above
will be payable in cash, on the same original interest payment dates as interest
on the Outstanding Notes. The aggregate Additional Interest will be determined
by multiplying the applicable rate of such Additional Interest by the principal
amount of the Outstanding Notes multiplied by a fraction, the numerator of which
is the number of days such Additional Interest was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months),
and the denominator of which is 360.
The summary herein of all material provisions of the Registration Rights
Agreement does not purport to be exhaustive and is subject to, and is qualified
in its entirety by, all the provisions of the Registration Rights Agreement, a
copy of which is available upon request to the Company.
Following the consummation of the Exchange Offer, holders of the
Outstanding Notes who were eligible to participate in the Exchange Offer but who
did not tender their Outstanding Notes will not have any further exchange or
registration rights and such Outstanding Notes will continue to be subject to
certain restrictions on transfer. Accordingly, the liquidity of the market for
such Outstanding Notes could be adversely affected.
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TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all
Outstanding Notes validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date. The Company will issue $1,000 principal
amount of Exchange Notes in exchange for each $1,000 principal amount of
Outstanding Notes accepted in the Exchange Offer. Holders may tender some or all
of their Outstanding Notes pursuant to the Exchange Offer. However, Outstanding
Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Outstanding Notes except that the Exchange Notes have been registered
under the Securities Act and hence will not bear legends restricting the
transfer thereof. The Exchange Notes will evidence the same debt as the
Outstanding Notes and will be entitled to the benefits of the Indenture.
As of the date of this Prospectus $125,000,000 aggregate principal amount
of Outstanding Notes are outstanding. The Company has fixed the close of
business , 1998 as the record date for the Exchange Offer for purposes of
determining the person to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of the Outstanding Notes do not have any appraisal or dissenters'
rights under the General Corporation Law of Delaware or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Outstanding
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders for the purpose of receiving the Outstanding Notes from the Company.
If any tendered Outstanding Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Outstanding Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Outstanding Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions of
the Letter of Transmittal, transfer taxes with respect to the exchange of
Outstanding Notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than the transfer taxes in certain circumstances, in
connection with the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, extends 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, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
The Company reserves the right, (i) to delay accepting any Outstanding
Notes, to extend the Exchange Offer or to terminate the Exchange Offer if any of
the conditions set forth below under "-- Conditions" shall not have been
satisfied, by giving oral or written notice of such delay, extension or
termination to the Exchange Agent or (ii) 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 oral or written notice
thereof to the registered holders.
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PROCEDURES FOR TENDERING
The tender of Outstanding Notes pursuant to any of the procedures set forth
in this Prospectus and in the Letter of Transmittal will constitute a binding
agreement between the Tendering Holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal. The tender of Outstanding Notes will constitute an agreement to
deliver good and marketable title to all tendered Outstanding Notes prior to the
Expiration Date free and clear of all liens, charges, claims, encumbrances,
interests and restrictions of any kind. Holders must follow the procedures set
forth in this Prospectus in order to properly and effectively tender Outstanding
Notes.
EXCEPT AS PROVIDED IN "-- GUARANTEED DELIVERY PROCEDURES," UNLESS THE
OUTSTANDING NOTES BEING TENDERED ARE DEPOSITED BY THE HOLDER WITH THE EXCHANGE
AGENT PRIOR TO THE EXPIRATION DATE (ACCOMPANIED BY A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL), THE COMPANY MAY, AT ITS OPTION, REJECT SUCH
TENDER. ISSUANCE OF OUTSTANDING NOTES WILL BE MADE ONLY AGAINST DEPOSIT OF
TENDERED OUTSTANDING NOTES AND DELIVERY OF ALL OTHER REQUIRED DOCUMENTS.
NOTWITHSTANDING THE FOREGOING, DTC PARTICIPANTS TENDERING THROUGH ATOP WILL BE
DEEMED TO HAVE MADE VALID DELIVERY WHERE THE EXCHANGE AGENT RECEIVES AN AGENT'S
MESSAGE (DEFINED BELOW) PRIOR TO THE EXPIRATION DATE.
Outstanding Notes held through DTC. Each Beneficial Owner holding
Outstanding Notes through a DTC Participant must instruct such DTC Participant
to cause its Outstanding Notes to be tendered in accordance with the procedures
set forth in this Prospectus.
Pursuant to an authorization given by DTC to the DTC Participants, each DTC
Participant holding Outstanding Notes through DTC must (i) electronically
transmit its acceptance through ATOP, and DTC will then verify the acceptance,
execute a book-entry delivery to the Exchange Agent's account at DTC and send an
Agent's Message to the Exchange Agent for its acceptance, or (ii) comply with
the guaranteed delivery procedures set forth below and in the Notice of
Guaranteed Delivery. See "-- Guaranteed Delivery Procedures."
The Exchange Agent will (promptly after the date of this Prospectus)
establish accounts at DTC for purposes of the Exchange Offer with respect to
Outstanding Notes held through DTC, and any financial institution that is a DTC
Participant may make book-entry delivery of interests in Outstanding Notes into
the Exchange Agent's account through ATOP. However, although delivery of
interests in the Outstanding Notes may be effected through book-entry transfer
into the Exchange Agent's account through ATOP, an Agent's Message in connection
with such book-entry transfer, and any other required documents, must be
transmitted to and received by the Exchange Agent at its address set forth under
"-- Exchange Agent," or the guaranteed delivery procedures set forth below must
be complied with, in each case, prior to the Expiration Date. Delivery of
documents to DTC does not constitute delivery to the Exchange Agent. The
confirmation of a book-entry transfer into the Exchange Agent's account at DTC
as described above is referred to herein as a "Book-Entry Confirmation."
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that DTC has received an express acknowledgment from
each DTC Participant tendering through ATOP that such DTC Participants have
received a Letter of Transmittal and agree to be bound by the terms of the
Letter of Transmittal and that the Company may enforce such agreement against
such DTC Participants.
Cede & Co., as the Holder of the global certificates representing the
Outstanding Notes (a "Global Security"), will tender a portion of each Global
Security equal to the aggregate principal amount due at the stated maturity or
number of shares for which instructions to tender are given by DTC Participants.
Outstanding Notes held by Holders. Each Holder must (i) complete and sign
and mail or deliver the accompanying Letter of Transmittal, and any other
documents required by the Letter of Transmittal, together with certificate(s)
representing all tendered Outstanding Notes, to the Exchange Agent at its
address set forth
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under "-- Exchange Agent," or (ii) comply with the guaranteed delivery
procedures set forth below and in the Notice of Guaranteed Delivery. See
"-- Guaranteed Delivery Procedures."
All signatures on a Letter of Transmittal must be guaranteed by any member
firm of a registered national securities exchange or of the National Association
of Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor" institution
within the meaning of Rule 17Ad-15 under the Exchange Act (each an "Eligible
Institution"); provided, however, that signatures on a Letter of Transmittal
need not be guaranteed if such Outstanding Notes are tendered for the account of
an Eligible Institution including (as such terms are defined in Rule 17Ad-15):
(i) a bank; (ii) a broker, dealer, municipal securities dealer, municipal
securities broker, government securities dealer or government securities broker;
(iii) a credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings institution that is a
participant in a Securities Transfer Association recognized program.
If a Letter of Transmittal or any Outstanding Note is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, agent, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person must so indicate when signing, and proper evidence satisfactory to
the Company of the authority of such person so to act must be submitted.
Holders should indicate in the applicable box in the Letter of Transmittal
the name and address to which substitute certificates evidencing Outstanding
Notes for amounts not tendered are to be issued or sent, if different from the
name and address of the person signing the Letter of Transmittal. In the case of
issuance in a different name, the employer identification or social security
number of the person named must also be indicated. If no instructions are given,
such Outstanding Notes not tendered, as the case may be, will be returned to the
person signing the Letter of Transmittal.
By tendering, each Holder and each DTC Participant will make to the Company
the representations set forth in the third paragraph under the heading
"-- Purpose and Effect of the Exchange Offer."
No alternative, conditional, irregular or contingent tenders will be
accepted (unless waived). By executing a Letter of Transmittal or transmitting
an acceptance through ATOP, as the case may be, each Tendering Holder waives any
right to receive any notice of the acceptance for purchase of its Outstanding
Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Outstanding Notes will be resolved by the
Company, whose determination will be final and binding. The Company reserves the
absolute right to reject any or all tenders that are not in proper form or the
acceptance of which may, in the opinion of counsel for the Company, be unlawful.
The Company also reserves the absolute right to waive any condition to the
Exchange Offer and any irregularities or conditions of tender as to particular
Outstanding Notes. The Company's interpretation of the terms and conditions of
the Exchange Offer (including the instructions in the Letter of Transmittal)
will be final and binding. Unless waived, any irregularities in connection with
tenders must be cured within such time as the Company shall determine. The
Company and the Exchange Agent shall not be under any duty to give notification
of defects in such tenders and shall not incur liabilities for failure to give
such notification. Tenders of Outstanding Notes will not be deemed to have been
made until such irregularities have been cured or waived. Any Outstanding Notes
received by the Exchange Agent that are not properly tendered and as to which
the irregularities have not been cured or waived will be returned by the
Exchange Agent to the tendering Holder, unless otherwise provided in the Letter
of Transmittal, as soon as practicable following the Expiration Date.
LETTERS OF TRANSMITTAL AND OUTSTANDING NOTES MUST BE SENT ONLY TO THE
EXCHANGE AGENT. DO NOT SEND LETTERS OF TRANSMITTAL OR OUTSTANDING NOTES TO THE
COMPANY OR DTC.
The method of delivery of Outstanding Notes and Letters of Transmittal, any
required signature guarantees and all other required documents, including
delivery through DTC and any acceptance through ATOP, is at the election and
risk of the persons tendering and delivering acceptances or Letters of
Transmittal and, except as otherwise provided in the applicable Letter of
Transmittal, delivery will be deemed made only
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when actually received by the Exchange Agent. If delivery is by mail, it is
suggested that the Holder use properly insured, registered mail with return
receipt requested, and that the mailing be made sufficiently in advance of the
Expiration Date to permit delivery to the Exchange Agent prior to the Expiration
Date.
GUARANTEED DELIVERY PROCEDURES
Outstanding Notes held through DTC. DTC Participants holding Outstanding
Notes through DTC who wish to cause their Outstanding Notes to be tendered, but
who cannot transmit their acceptances through ATOP prior to the Expiration Date,
may cause a tender to be effected if:
(a) guaranteed delivery is made by or through an Eligible Institution;
(b) prior to 5:00 p.m., New York City time on the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by mail, hand delivery,
facsimile transmission or overnight courier) substantially in the form
provided by the Company herewith; and
(c) Book-Entry Confirmation and an Agent's Message in connection
therewith (as described above) are received by the Exchange Agent within
three New York Stock Exchange ("NYSE") trading days after the date of the
execution of the Notice of Guaranteed Delivery.
Outstanding Notes held by Holders. Holders who wish to tender their
Outstanding Notes and (i) whose Outstanding Notes are not immediately available,
(ii) who cannot deliver their Outstanding Notes, the Letter of Transmittal or
any other required documents to the Exchange Agent or (iii) who cannot complete
the procedures for book-entry transfer, prior to the Expiration Date, may effect
a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to 5:00 p.m., New York City time on the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the holder,
the certificate number(s) of such Outstanding Notes and the principal
amount of Outstanding Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three NYSE trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof) together
with the certificate(s) representing the Outstanding Notes (or a
confirmation of book-entry transfer of such Outstanding Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility), and any
other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Outstanding Notes in proper form for transfer (or a confirmation or
book-entry transfer of such Outstanding Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility), and all other documents
required by the Letter of Transmittal are received by the Exchange Agent
upon three NYSE trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Outstanding Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
Outstanding Notes held through DTC. DTC Participants holding Outstanding
Notes who have transmitted their acceptances through ATOP may, prior to 5:00
p.m., New York City time, on the Expiration Date, withdraw the instruction given
thereby by delivering to the Exchange Agent, at its address set forth under
"-- Exchange Agent," a written, telegraphic or facsimile notice of withdrawal of
such instruction. Such notice of withdrawal must contain the name and number of
the DTC Participant, the principal amount due at
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the Stated Maturity date of the Outstanding Notes to which such withdrawal
related and the signature of the DTC Participant. Withdrawal of such an
instruction will be effective upon receipt of such written notice of withdrawal
by the Exchange Agent.
Outstanding Notes held by Holders. Holders may withdraw a tender of
Outstanding Notes in the Exchange Offer, by a telegram, telex, letter or
facsimile transmission notice of withdrawal received by the Exchange Agent at
its address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Outstanding Notes to be withdrawn (the "Depositor"),
(ii) identify the Outstanding Notes to be withdrawn (including the certificate
number(s) and principal amount due at the Stated Maturity of such Outstanding
Notes, or, in the case of Outstanding Notes transferred by book-entry transfer,
the name and number of the account at the Book-Entry Transfer Facility to be
credited), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Outstanding Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the
Outstanding Notes register the transfer of such Outstanding Notes into the name
of the person withdrawing the tender and (iv) specify the name in which any such
Outstanding Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Outstanding Notes so withdrawn
will be deemed not to have been validly tendered for purposes of the Exchange
Offer and no Exchange Notes will be issued with respect thereto unless the
Outstanding Notes so withdrawn are validly retendered. Any Outstanding Notes
which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Outstanding Notes may be retendered by following one
of the procedures described above under "-- Procedures for Tendering" at any
time prior to the Expiration Date.
All signatures on a notice of withdrawal must be guaranteed by an Eligible
Institution; provided, however, that signatures on the notice of withdrawal need
not be guaranteed if the Outstanding Notes being withdrawn are held for the
account of an Eligible Institution.
A withdrawal of an instruction or a withdrawal of a tender must be executed
by a DTC Participant or a Holder, as the case may be, in the same manner as the
person's name appears on its transmission through ATOP or Letter of Transmittal,
as the case may be, to which such withdrawal relates. If a notice of withdrawal
is signed by a trustee, partner, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person must so indicate when signing
and must submit with the revocation appropriate evidence of authority to execute
the notice of withdrawal. A DTC Participant or a Holder may withdraw an
instruction or a tender, as the case may be, only if such withdrawal complies
with the provisions of this Prospectus.
A withdrawal of a tender of Outstanding Notes by a DTC Participant or a
Holder, as the case may be, may be rescinded only by a new transmission of an
acceptance through ATOP or execution and delivery of a new Letter of
Transmittal, as the case may be, in accordance with the procedures described
herein.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange securities for, any Outstanding
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Outstanding Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the judgment of the Company upon written advice of counsel, could
reasonably be expected to materially impair the ability of the Company to
proceed with the Exchange Offer or any material adverse development has
occurred in any existing action or proceeding with respect to the Company
or any of the subsidiaries; or
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(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the judgment
of the company and based on written advice of counsel, could reasonably be
expected to materially impair the ability of the Company to proceed with
the Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in its discretion and based on written advice of
counsel, deem necessary for the consummation of the Exchange Offer as
contemplated hereby.
If any of the conditions are not satisfied, the Company may (i) refuse to
accept any Outstanding Notes and return all tendered Outstanding Notes to the
tendering holders, (ii) extend the Exchange Offer and retain all Outstanding
Notes tendered prior to the expiration of the Exchange Offer, subject, however,
to the rights of holders to withdraw such Outstanding Notes (see "-- Withdrawal
of Tenders") or (iii) waive such unsatisfied conditions with respect to the
Exchange Offer and accept all properly tendered Outstanding Notes which have not
been withdrawn.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, NY 10036-1532
Attention: James Nesci
Delivery to an address other than as set forth above, or transmission of
instructions via a facsimile number other than the one set forth above, will not
constitute a valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company will pay the Exchange
Agent reasonable and customary fees for its services and will reimburse it for
its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Outstanding Notes, as reflected in the Company's accounting records on the date
of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Outstanding Notes that are not exchanged for Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such
Outstanding Notes may be resold only (i) to the Company (upon redemption thereof
or otherwise), (ii) so long as the Outstanding Notes are eligible for resale
pursuant
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to Rule 144A, to a person inside the United States whom the seller reasonably
believes is a qualified institutional buyer within the meaning of Rule 144A
under the Securities Act in a transaction meeting the requirements of Rule 144A,
in accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel reasonably acceptable to the Company), (iii) outside
the United States to a foreign person in a transaction meeting the requirements
of Rule 904 under the Securities Act, or (iv) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with
any applicable securities laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that a holder or other person who receives Exchange Notes
in the ordinary course of business, whether or not such person is the holder
(other than (i) a broker-dealer who purchases such Exchange Notes from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act) who receives Exchange Notes in
exchange for Outstanding Notes, and who is not participating, does not intend to
participate, and has no arrangement or understanding with person to participate,
in the distribution of the Exchange Notes, will be allowed to resell the
Exchange Notes to the public without further registration under the Securities
Act and without delivering to the purchasers of the Exchange Notes a prospectus
that satisfies the requirements of Section 10 of the Securities Act. However, if
any holder acquires Exchange Notes in the Exchange Offer for the purpose of
distributing or participating in a distribution of the Exchange Notes, such
holder cannot rely on the position of the staff of the Commission enunciated in
such no-action letters or any similar interpretive letters, and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Further, each Participating Broker-Dealer that receives
Exchange Notes for its own account in exchange for Exchange Notes, where such
Securities were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the Exchange Notes are to be
acquired by the holder or the person receiving such Exchange Notes, whether or
not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, and (v) the holder or any such other person acknowledges that if
such holder or other person participates in the Exchange Offer for the purpose
of distributing the Exchange Notes it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the Exchange Notes and cannot rely on those no-action letters. As
indicated above, each Participating Broker-Dealer that receives Exchange Notes
for its own account in exchange for Outstanding Notes must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
For a description of the procedures for such resales by Participating
Broker-Dealers, see "Plan of Distribution."
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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
U.S. FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATING IN THE EXCHANGE OFFER AND
OWNING AND DISPOSING OF OUTSTANDING NOTES OR EXCHANGE NOTES
The following is a general discussion of the material U.S. Federal income
tax considerations applicable to a holder that exchanges Outstanding Notes for
Exchange Notes pursuant to the Exchange Offer, but does not purport to be a
complete analysis of all the potential tax considerations relating thereto. This
summary is based upon current provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), final, temporary, and proposed regulations of the
Treasury Department, administrative rulings and pronouncements of the Internal
Revenue Service (the "IRS") and judicial decisions currently in effect, all of
which are subject to different interpretations and to change, possibly with
retroactive effect. The discussion does not deal with all aspects of U.S.
Federal income taxation that may be relevant to particular investors in light of
their personal investment circumstances (for example, to persons holding
Outstanding Notes or Exchange Notes as part of a "conversion" transaction or as
a part of a "hedge" or "hedging" transaction, "integrated" transaction, or as a
position in a "straddle" for U.S. Federal income tax purposes), nor does it
discuss U.S. Federal income tax considerations applicable to certain types of
investors subject to special treatment under the U.S. Federal income tax laws
(for example, insurance companies, tax-exempt organizations, financial
institutions, traders or dealers in securities or currencies or persons that
have a "functional currency" other than the U.S. dollar, and taxpayers subject
to the alternative minimum tax). In addition, the discussion does not consider
the effect of any foreign, state, local, gift, estate or other tax laws that may
be applicable to a particular investor. The Company has not sought any ruling
from the IRS with respect to the statements made and the conclusions reached in
the following summary, and there can be no assurance that the IRS will agree
with such statements and conclusions. The discussion assumes that investors hold
Outstanding Notes and will hold Exchange Notes as capital assets within the
meaning of Section 1221 of the Code.
EACH INVESTOR CONSIDERING THE EXCHANGE OF OUTSTANDING NOTES FOR EXCHANGE
NOTES PURSUANT TO THE EXCHANGE OFFER SHOULD CONSULT ITS TAX ADVISOR REGARDING
THE PARTICULAR TAX CONSEQUENCES OF PARTICIPATING IN THE EXCHANGE OFFER AND
OWNING AND DISPOSING OF THE EXCHANGE NOTES, AND THE EFFECT THAT ITS PARTICULAR
CIRCUMSTANCES MAY HAVE ON SUCH CONSEQUENCES, INCLUDING THE APPLICABILITY AND
EFFECT OF STATE, LOCAL, GIFT, ESTATE, AND FOREIGN TAX LAWS.
U.S. HOLDERS
The following discussion is limited to the U.S. Federal income tax
consequences relevant to a holder of Outstanding Notes and Exchange Notes that
is (i) a citizen or resident (as defined in Section 7701(b)(1) of the Code) of
the United States or any state thereof, (ii) a corporation or partnership
created or organized under the laws of the United States or any political
subdivision thereof (including the District of Columbia) (including any other
partnership treated as a United States person under any applicable U.S. Treasury
regulations, but excluding a partnership that meets the definition contained in
this clause (ii) but is not treated as a United States person under any such
U.S. Treasury regulations), (iii) an estate or trust described in Section
7701(a)(30) of the Code, or (iv) a person whose worldwide income or gain is
otherwise subject to U.S. Federal income taxation on a net income basis (a "U.S.
Holder").
Outstanding Notes and Exchange Notes
The Exchange Offer. The exchange of Outstanding Notes for Exchange Notes
pursuant to the Exchange Offer should not constitute a significant modification
of the terms of the Outstanding Notes and, accordingly, such exchange should not
be treated as a taxable event for U.S. Federal income tax purposes. Therefore,
such exchange should have no U.S. Federal income tax consequences to U.S.
Holders of Outstanding Notes, and each U.S. Holder of Exchange Notes will
continue to be required to include interest on the Exchange Notes in its gross
income in accordance with its method of accounting for U.S. Federal income tax
purposes.
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Payment of Interest and Additional Interest. Interest on an Outstanding
Note or Exchange Note generally will be includable in the income of a U.S.
Holder as ordinary income at the time such interest is received or accrued, in
accordance with such U.S. Holder's method of accounting for U.S. Federal income
tax purposes. The Outstanding Notes were treated by the Company as issued
without original issue discount ("OID") within the meaning of the Code.
Additional Interest will accrue on the Outstanding Notes upon the occurrence of
certain events described under "The Exchange Offer -- Purpose and Effect of the
Exchange Offer." Because the Company determined that, when the Outstanding Notes
were issued, there was only a remote possibility that such events would occur,
the Company determined that Additional Interest should not be taken into account
in concluding that the Outstanding Notes were issued without OID.
Amortizable Bond Premium
Generally, the excess of a U.S. Holder's tax basis in an Outstanding Note
or Exchange Note over the amount payable at maturity is bond premium that the
U.S. Holder may elect to amortize under Section 171 of the Code on a yield to
maturity basis over the period from the U.S. Holder's acquisition date to the
maturity date of the Outstanding Note or Exchange Note. The amortizable bond
premium is treated as an offset to interest income on the Outstanding Note or
Exchange Note for United States Federal income tax purposes. A U.S. Holder who
elects to amortize bond premium must reduce its tax basis in the Outstanding
Note or Exchange Note by the deductions allowable for amortizable bond premium.
An election to amortize bond premium is revocable only with the consent of the
IRS and applies to all obligations owned or acquired by the U.S. Holder on or
after the first day of the taxable year to which the election applies.
An Outstanding Note or Exchange Note may be called or submitted for
redemption at a premium prior to maturity. See "Description of Exchange
Notes -- Optional Redemption." An earlier call date is treated as the maturity
date of the Outstanding Note or Exchange Note and the amount of bond premium is
determined by treating the amount payable on such call date as the amount
payable at maturity, if such a calculation produces a smaller bond premium than
the method described in the preceding paragraph. If a U.S. Holder is required to
amortize and deduct the bond premium by reference to a certain call date, the
Outstanding Note or Exchange Note will be treated as maturing on that date for
the amount then payable. If the Outstanding Note or Exchange Note is not
redeemed on that call date, the Outstanding Note or Exchange Note will be
treated as reissued on that date for the amount of the call price on that date.
If an Outstanding Note or Exchange Note purchased at a premium is redeemed prior
to its maturity, a U.S. Holder who has elected to deduct the bond premium may be
permitted to deduct any remaining unamortized bond premium as an ordinary loss
in the taxable year of the redemption.
Market Discount
The resale of Outstanding Notes or Exchange Notes may be affected by the
market discount provisions of the Code. A U.S. Holder has market discount if an
Outstanding Note or Exchange Note is purchased (other than at original issue) at
an amount below the stated redemption price at maturity of the Outstanding Note
or Exchange Note. A de minimis amount of market discount is ignored. A U.S.
Holder of an Outstanding Note or Exchange Note with market discount must either
elect to include market discount in income as it accrues or treat a portion of
the gain recognized on the disposition or retirement of the Outstanding Note or
Exchange Note as ordinary income. The amount of gain treated as ordinary income
would equal the lesser of (i) the gain recognized (or the appreciation, in the
case of a nontaxable transaction such as a gift) or (ii) the portion of the
market discount that accrued on a ratable basis (or, if elected, on a constant
interest rate basis) while the Outstanding Note or Exchange Note was held by the
U.S. Holder.
A U.S. Holder who acquires an Outstanding Note or Exchange Note at a market
discount also may be required to defer a portion of any interest expense that
otherwise may be deductible on any indebtedness incurred or maintained to
purchase or carry such Outstanding Note or Exchange Note until the U.S. Holder
disposes of the Outstanding Note or Exchange Note in a taxable transaction.
Moreover, to the extent of any accrued market discount on such Outstanding Note
or Exchange Note, (i) any partial principal payment received with respect to an
Outstanding Note or Exchange Note will be includible as ordinary income and
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(ii) the fair market value of the Outstanding Note or Exchange Note on certain
otherwise non-taxable transfers (such as gifts) will be includible as ordinary
income.
A U.S. Holder of Outstanding Notes or Exchange Notes acquired at a market
discount may elect for United States Federal income tax purposes to include
market discount in gross income as the discount accrues, either on a
straight-line basis or on a constant interest rate basis. This current inclusion
election, once made, applies to all market discount obligations acquired by the
U.S. Holder on or after the first day of the first taxable year to which the
election applies, and may not be revoked without the consent of the IRS. If a
U.S. Holder of Outstanding Notes or Exchange Notes makes such an election, the
foregoing rules with respect to the recognition of ordinary income on sales and
other dispositions of such debt instruments and on any partial principal payment
with respect to the Outstanding Notes or Exchange Notes, and the deferral of
interest deductions on indebtedness incurred or maintained to purchase or carry
such debt instruments, would not apply.
Sale, Exchange or Redemption of the Outstanding Notes or Exchange Notes.
Subject to the discussion of the Exchange Offer above, upon the sale,
exchange or redemption of an Outstanding Note or Exchange Note, a U.S. Holder
generally will recognize capital gain or loss equal to the difference between
(i) the amount of cash proceeds and the fair market value of any property
received on the sale, exchange or redemption (except to the extent such amount
is attributable to accrued interest income or market discount not previously
included in income which is taxable as ordinary income) and (ii) such U.S.
Holder's adjusted tax basis in the Outstanding Note or Exchange Note. A U.S.
Holder's adjusted tax basis in an Outstanding Note or Exchange Note generally
will equal the cost of the Outstanding Note or Exchange Note to such U.S. Holder
increased by the amount of interest income on the Outstanding Note or Exchange
Note previously taken into income by the U.S. Holder but not yet received by the
U.S. Holder and by the amount of any market discount previously taken into
income by the U.S. Holder and reduced by the amount of any bond premium
amortized by the U.S. Holder with respect to the Outstanding Notes or Exchange
Notes and by any principal payments on an Outstanding Note or Exchange Note.
Gain or loss realized by a U.S. Holder on the sale, exchange, redemption or
other disposition of an Outstanding Note or Exchange Note generally will be
capital gain or loss. Such capital gain will be taxed at a reduced rate for a
U.S. Holder who is not a corporation and who holds an Outstanding Note or
Exchange Note for greater than one year and at a further reduced rate for a U.S.
Holder who is not a corporation and who holds an Outstanding Note or Exchange
Note for more than eighteen months (subject to the market discount rules
discussed above).
NON-U.S. HOLDERS
The following discussion is limited to the U.S. Federal income tax
consequences relevant to a holder of Outstanding Notes and Exchange Notes who is
not a U.S. Holder (a "Non-U.S. Holder").
Interest on Outstanding Notes or Exchange Notes. Payments of interest on
the Outstanding Notes or the Exchange Notes by the Company or any agent of the
Company to any Non-U.S. Holder will not be subject to U.S. Federal withholding
tax, provided that such interest income is not effectively connected with the
conduct of a United States trade or business of the Non-U.S. Holder and provided
that (i) the Non-U.S. Holder does not actually or constructively own 10% or more
of the total combined voting power of all classes of stock of the Company
entitled to vote; (ii) the Non-U.S. Holder is not a controlled foreign
corporation that is related to the Company through stock ownership; (iii) either
(A) the beneficial owner of the Outstanding Notes or the Exchange Notes
certifies (by submitting to the Company or its agent a Form W-8 (or a suitable
substitute form)) in compliance with applicable laws and regulations to the
Company or its agent, under penalties of perjury, that it is not a "United
States person" as defined in the Code and provides its name and address or (B) a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution"), holds the Outstanding Notes or the Exchange Notes on
behalf of the beneficial owner and provides a statement to the Company or its
agent in which it certifies that a Form W-8 (or a suitable substitute form) has
been received from the beneficial owner by it or by a financial institution
between it and the beneficial owner and furnishes the payor with a copy thereof;
and (iv) the Non-U.S. Holder is not a bank which acquired the Outstanding Notes
or the
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Exchange Notes in consideration for an extension of credit made pursuant to a
loan agreement entered into in the ordinary course of business. Recently
promulgated Treasury regulations that will be effective January 1, 1999 (the
"1999 Regulations"), provide alternative methods for establishing exemptions
from withholding on payments to foreign persons. Under the 1999 Regulations, the
furnishing of the names of the beneficial owners of Outstanding Notes or
Exchange Notes and a copy of such beneficial owner's Form W-8 by a financial
institution with respect to beneficial owners, described in clause (iii)(B)
above, will not be required where the financial institution is a "qualified
intermediary" which has entered into a withholding agreement with the IRS
pursuant to such regulations. A Non-U.S. Holder that is not exempt from tax
under these rules will be subject to U.S. Federal income tax withholding at a
rate of 30% unless the interest is effectively connected with the conduct of a
United States trade or business, in which case the interest will be subject to
the U.S. Federal income tax on net income that applies to United States persons
generally. Non-U.S. Holders should consult applicable income tax treaties, which
may provide different rules, subject to compliance with certain requirements, to
document entitlement to treaty benefits.
Prior to the effective date of the 1999 Regulations, payments of interest
to a Non-U.S. Holder that is a foreign partnership are subject to the rules
described in the prior paragraph. The 1999 regulations will require, in the case
of Outstanding Notes or Exchange Notes held by a foreign partnership, that the
certification described in clause (iii) of the preceding paragraph be provided
by the partners rather than by the foreign partnership unless the foreign
partnership has entered into a withholding agreement with the United States as a
"withholding foreign partnership." A look-through rule will apply in the case of
tiered partnerships.
Except to the extent that an applicable treaty otherwise provides, a
Non-U.S. Holder generally will be taxed in the same manner as a U.S. Holder with
respect to interest if the interest income is effectively connected with the
conduct of a United States trade or business of the Non-U.S. Holder. Effectively
connected interest received by a corporate Non-U.S. Holder may also, under
certain circumstances, be subject to an additional "branch profits tax" at a 30%
rate (or, if applicable, a lower treaty rate). Even though such effectively
connected interest is subject to income tax, and may be subject to the branch
profits tax, it is not subject to withholding tax if the Non-U.S. Holder
delivers to the payor a withholding certificate stating that the income is
effectively connected with a U.S. trade or business.
Sale of Outstanding Notes or Exchange Notes. A Non-U.S. Holder generally
will not be subject to U.S. Federal income tax on gain recognized, if any, upon
the sale or exchange of Outstanding Notes or Exchange Notes unless (i) the gain
is effectively connected with the conduct of a trade or business within the
United States by the Non-U.S. Holder, (ii) in the case of a Non-U.S. Holder who
is a nonresident alien individual and holds the Outstanding Notes or Exchange
Notes as a capital asset, such Non-U.S. Holder is present in the United States
for 183 or more days in the taxable year and certain other circumstances are
present, or (iii) the Non-U.S. Holder is subject to tax pursuant to the
provisions of the Code applicable to certain United States expatriates.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Information reporting and backup withholding may apply to certain
noncorporate holders with respect to (i) principal and interest payments on an
Outstanding Note or Exchange Note or (ii) proceeds of a sale of an Outstanding
Note or Exchange Note. Such payments generally will be subject to backup
withholding at a rate of 31% unless the payee of such payments supplies the
payor or its agent with a taxpayer identification number, certified under
penalties of perjury, and certain other information, or otherwise establishes,
in the manner prescribed by law, an exemption from backup withholding.
The 1999 Regulations would modify certain of the rules discussed above
generally with respect to payments on the Outstanding Notes and Exchange Notes
made after December 31, 1998. In particular, in the case of payments to foreign
partnerships (other than payments to foreign partnerships that qualify as
"withholding foreign partnerships" within the meaning of such Treasury
regulations and payments to foreign partnerships that are effectively connected
with the conduct of a trade or business in the United States), the partners of
such partnership will be required to provide the certification discussed above
in order to provide an exemption from backup withholding tax and information
reporting requirements.
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Any amount withheld under such backup withholding rules from a payment to a
holder will be allowed as a credit against the holder's U.S. Federal income tax,
provided that the holder furnishes the required information to the IRS. In
addition, certain penalties may be imposed by the IRS on a holder who is
required to supply information but does not do so in the proper manner.
THE FOREGOING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, EACH PARTICIPANT IN THE EXCHANGE OFFER SHOULD CONSULT WITH ITS OWN
TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH PARTICIPANT OF
PARTICIPATING IN THE EXCHANGE OFFER AND OWNING AND DISPOSING OF THE EXCHANGE
NOTES, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN INCOME
AND OTHER TAX LAWS.
PLAN OF DISTRIBUTION
Based on interpretations of the staff of the Division of Corporation
Finance of the SEC set forth in no-action letters issued to third parties, the
Company believes that, except as described below, Exchange Notes issued pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by the respective holders thereof without further compliance with
the registration and prospectus delivery requirements of the Securities Act,
provided that (i) such Exchange Notes are acquired in the ordinary course of
such holder's business and (ii) such holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
of the Exchange Notes. A holder of Outstanding Notes that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act or that is a
broker-dealer that purchased Outstanding Notes from the Company to resell
pursuant to an exemption from registration under the Securities Act (a) cannot
rely on such interpretations by the staff of the Division of Corporation Finance
of the SEC, (b) will not be permitted or entitled to tender such Outstanding
Notes in the Exchange Offer and (c) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or other transfer of such Outstanding Notes unless such sale or transfer is
made pursuant to an exemption from such requirements. In addition, any holder
who tenders Outstanding Notes in the Exchange Offer with the intention or for
the purpose of participating in a distribution of the Exchange Notes cannot rely
on such interpretations by the staff of the Division of Corporation Finance of
the SEC and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with the secondary resale
transaction. Unless an exemption from registration is otherwise available, any
such resale transaction should be covered by an effective registration statement
containing selling security holders information required by Item 507 of
Regulation S-K under the Securities Act. To date, the staff of the Division of
Corporation Finance of the SEC has taken the position that a broker-dealer that
has acquired securities in exchange for securities that were acquired by such
broker-dealer as a result of market-making activities or other trading
activities may fulfill the prospectus delivery requirements with the prospectus
contained in an exchange offer registration statement.
Each holder of Outstanding Notes who wishes to exchange its Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company set forth in "The Exchange Offer -- Purpose and
Effect of the Exchange Offer."
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. This Prospectus may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Outstanding
Notes where such Outstanding Notes were acquired as a result of market-making
activities or other trading activities. Subject to certain provisions set forth
in the Registration Rights Agreement, the Company has agreed that, for a period
of up to 180 days after the consummation of the Exchange Offer, it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Risk Factors -- Absence of Public Market" and "The Exchange
Offer -- Resale of the Exchange Notes."
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold
107
<PAGE> 109
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 Exchange 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 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 such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
from any such resale of Exchange Notes and any commissions or concessions
received by any such person 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.
Subject to certain provisions set forth in the Registration Rights
Agreement, for a period of 180 days after the date the Exchange Offer is
consummated, the Company will promptly send additional copies of this Prospectus
and any amendment or supplement to this Prospectus to any Participating
Broker-Dealer that requests such documents in the Letter of Transmittal. The
Company has agreed to pay the expenses incident to the Exchange Offer, other
than any discounts or commissions incurred upon the sale of the Exchange Notes.
The Company will indemnify each Participating Broker-Dealer selling Exchange
Notes against certain liabilities, including liabilities under the Securities
Act.
LEGAL MATTERS
The validity of the Exchange Notes issued pursuant to the Exchange Offer
will be passed upon for the Company by Squire, Sanders & Dempsey L.L.P.,
Phoenix, Arizona.
EXPERTS
The financial statements and schedules included in this Prospectus and in
the Registration Statement have been audited by BDO Seidman, LLP; Semple &
Cooper, P.L.C.; Clifton Gunderson, L.L.C.; Fox, Byrd & Golden P.C.; and Arthur
Andersen LLP, independent public accountants, to the extent and for the periods
set forth in the respective reports of such firms contained herein and in the
Registration Statement. All such financial statements and schedules have been
included herein in reliance upon such reports given upon the authority of such
firms as experts in auditing and accounting.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
As reported on Form 8-K dated February 17, 1997 (the "Form 8-K"), the
Company engaged BDO Seidman, LLP as its independent auditors to replace the firm
of Semple & Cooper, P.L.C., who was dismissed at the same time. The decision to
change accountants was approved by the Board of Directors of the Company. The
reports of Semple & Cooper, P.L.C. on the Company's financial statements for the
past two fiscal years did not contain an adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles.
In connection with the audits of the Company's financial statements for
each of the two fiscal years ended December 31, 1994 and 1995, and in subsequent
interim periods, there were no disagreements with Semple & Cooper, P.L.C. on any
matters of accounting principles or practices, financial statement disclosure or
auditing scope or procedures which, if not resolved to the satisfaction of
Semple & Cooper, P.L.C., would have caused Semple & Cooper, P.L.C. not to
respond fully to any inquiries from BDO Seidman, LLP.
The Company requested Semple & Cooper, P.L.C. to furnish it a letter
addressed to the Securities and Exchange Commission stating whether it agrees
with the above statement. Semple & Cooper, P.L.C. furnished the Company with a
copy of a letter dated February 20, 1997 containing such a statement, which was
filed as Exhibit 1 to Amendment No. 1 to the Company's Current Report on Form
8-K dated February 17, 1997 regarding the dismissal of Semple & Cooper, P.L.C.
108
<PAGE> 110
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION AND SUBSIDIARIES
Report of Independent Certified Public Accountants............................... F-3
Consolidated Balance Sheets at December 31, 1996 and September 30, 1997
(Unaudited)................................................................... F-4
Consolidated Statements of Operations for the period from June 19, 1996 (date of
inception) to December 31, 1996, the period from June 19, 1996 (date of
inception) to September 30, 1996 (Unaudited), and the nine months ended
September 30, 1997 (Unaudited)................................................ F-6
Consolidated Statements of Stockholders' Equity for the period from June 19, 1996
(date of inception) to December 31, 1996, and the nine months ended September
30, 1997 (Unaudited).......................................................... F-7
Consolidated Statements of Cash Flows for the period from June 19, 1996 (date of
inception) to December 31, 1996, the period from June 19, 1996 (date of
inception) to September 30, 1996 (Unaudited) and the nine months ended
September 30, 1997 (Unaudited)................................................ F-8
Notes to Consolidated Financial Statements....................................... F-9
EAGLE WINDOW AND DOOR, INC. AND SUBSIDIARIES AND TAYLOR BUILDING PRODUCTS COMPANY
Independent Auditors' Report..................................................... F-22
Combined Balance Sheets at December 31, 1994 and 1995 and August 29, 1996........ F-23
Combined Statements of Operations and Accumulated Deficit for the years ended
December 31, 1994 and 1995, for the eight months ended August 29, 1996........ F-24
Combined Statements of Cash Flows for the years ended December 31, 1994 and 1995,
for the eight months ended August 29, 1996.................................... F-25
Notes to Combined Financial Statements........................................... F-26
MALLYCLAD CORPORATION AND VYN-L CORPORATION
Report of Independent Certified Public Accountants............................... F-32
Combined Balance Sheets at November 30, 1994 and 1995 and June 30, 1996.......... F-33
Combined Statements of Operations and Retained Earnings for the years ended
November 30, 1994 and 1995, and for the seven months ended June 30, 1996...... F-34
Combined Statements of Cash Flows for the years ended November 30, 1994 and 1995,
and for the seven months ended June 30, 1996.................................. F-35
Notes to Combined Financial Statements........................................... F-36
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
Independent Auditors' Report..................................................... F-39
Consolidated Balance Sheets at December 31, 1995 and September 30, 1996
(Unaudited)................................................................... F-41
Consolidated Statements of Operations for the year ended December 31, 1995 and
for the nine months ended September 30, 1995 and 1996 (Unaudited)............. F-43
Consolidated Statements of Changes in Stockholders' Equity for the year ended
December 31, 1995, and for the nine months ended September 30, 1996
(Unaudited)................................................................... F-44
Consolidated Statements of Cash Flows for the year ended December 31, 1995, and
for the nine months ended September 30, 1995 and 1996 (Unaudited)............. F-45
Notes to Consolidated Financial Statements....................................... F-48
</TABLE>
F-1
<PAGE> 111
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
WESTERN INSULATED GLASS, CO.
Independent Auditors' Report..................................................... F-58
Balance Sheets at October 31, 1996 and January 31, 1997 (Unaudited).............. F-59
Statement of Income and Retained Earnings for the year ended October 31, 1996,
and for the three months ended January 31, 1996 and 1997 (Unaudited).......... F-60
Statements of Cash Flows for the year ended October 31, 1996, and for the three
months ended January 31, 1996 and 1997 (Unaudited)............................ F-61
Notes to Financial Statements.................................................... F-62
THERMETIC GLASS, INC.
Independent Auditor's Report..................................................... F-65
Balance Sheets at December 31, 1996 and June 30, 1997 (Unaudited)................ F-66
Statements of Operations and Accumulated Deficit for the year ended December 31,
1996 and for the six months ended June 30, 1996 and 1997 (Unaudited).......... F-67
Statements of Cash Flows for the year ended December 31, 1996, and for the six
months ended June 30, 1996 and 1997 (Unaudited)............................... F-68
Notes to Financial Statements.................................................... F-70
BINNINGS BUILDING PRODUCTS, INC.
Report of Independent Public Accountants......................................... F-75
Balance Sheets at December 31, 1995 and 1996, and September 30, 1997
(Unaudited)................................................................... F-76
Statements of Operations for the years ended December 31, 1994, 1995 and 1996 and
for the nine months ended September 30, 1997 (Unaudited)...................... F-77
Statements of Stockholders' Deficit for the years ended December 31, 1994, 1995
and 1996, and for the nine months ended September 30, 1997 (Unaudited)........ F-78
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and
for the nine months ended September 30, 1997 (Unaudited)...................... F-79
Notes to Financial Statements.................................................... F-80
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
Report of Independent Certified Public Accountants............................... F-91
Combined Balance Sheets at July 28, 1996 and July 27, 1997....................... F-92
Combined Statements of Income and Retained Earnings for the years ended July 28,
1996 and July 27, 1997........................................................ F-93
Combined Statements of Cash Flows for the years ended July 28, 1996 and July 27,
1997.......................................................................... F-94
Notes to Combined Financial Statements........................................... F-98
Independent Auditor's Report..................................................... F-102
Combined Balance Sheet at July 31, 1995.......................................... F-103
Combined Statement of Operations and Retained Earnings for the year ended July
31, 1995...................................................................... F-104
Combined Statement of Cash Flows for the year ended July 31, 1995................ F-105
Notes to the Combined Financial Statements....................................... F-107
</TABLE>
F-2
<PAGE> 112
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
American Architectural Products Corporation
We have audited the accompanying consolidated balance sheet of American
Architectural Products Corporation as of December 31, 1996 and the related
consolidated statements of operations, stockholders' equity, and cash flows from
the date of inception (June 19, 1996) to December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Architectural Products Corporation as of December 31, 1996, and the results of
its operations and its cash flows from the date of inception (June 19, 1996) to
December 31, 1996 in conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
Troy, Michigan
March 14, 1997 except for Note 5
which is as of March 31, 1997
F-3
<PAGE> 113
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER
DECEMBER 31, 30,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS (Notes 4 and 5)
CURRENT ASSETS
Cash.............................................................. $ 964,062 $ 1,266,992
Accounts receivable, less allowance for doubtful accounts of
$439,000 and $643,000.......................................... 6,302,694 10,389,186
Advances to affiliates............................................ 463,750 437,900
Inventories (Note 3).............................................. 10,971,144 13,525,627
Prepaid expenses and other current assets......................... 664,401 1,008,296
------------ ------------
TOTAL CURRENT ASSETS................................................ 19,366,051 26,628,001
------------ ------------
PROPERTY AND EQUIPMENT (Note 6)
Land and improvements............................................. 281,096 285,754
Buildings and improvements........................................ 5,409,631 6,353,528
Machinery, tools and equipment.................................... 8,244,548 11,195,623
Computers and office equipment.................................... 2,524,884 2,904,856
------------ ------------
16,460,159 20,739,761
Less accumulated depreciation..................................... (321,315) (1,838,088)
------------ ------------
NET PROPERTY AND EQUIPMENT.......................................... 16,138,844 18,901,673
------------ ------------
OTHER
Cost in excess of net assets acquired, net of accumulated
amortization of $74,000 and $284,000 (Note 2).................. 6,850,059 10,593,510
Other............................................................. 388,937 925,690
------------ ------------
TOTAL OTHER ASSETS.................................................. 7,238,996 11,519,200
------------ ------------
$ 42,743,891 $ 57,048,874
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 114
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER
DECEMBER 31, 30,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving lines-of-credit (Note 4)................................ $ 5,476,759 $ 9,931,452
Accounts payable -- trade......................................... 5,766,803 7,624,115
Payable to seller for purchase price adjustment................... 1,462,500 --
Accrued expenses.................................................. 3,397,618 3,982,829
Accrued warranty obligations -- current portion................... 1,100,000 1,500,000
Current portion of capital lease obligations (Note 6)............. 488,984 499,879
Current maturities of long-term debt (Note 5)..................... 1,497,653 2,857,398
------------ ------------
TOTAL CURRENT LIABILITIES........................................... 19,190,317 26,395,673
LONG-TERM DEBT, less current maturities (Note 5).................... 14,478,317 19,134,260
LONG-TERM CAPITAL LEASE OBLIGATIONS, less current portion (Note
6)................................................................ 1,067,616 952,657
ACCRUED WARRANTY OBLIGATIONS, less current portion.................. 3,281,079 2,871,411
OTHER............................................................... 450,000 1,481,180
------------ ------------
TOTAL LIABILITIES................................................... 38,467,329 50,835,181
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (NOTES 8 AND 9)
Preferred stock, Series A convertible, $.01 par, 20,000,000 shares
authorized; 1,000,000 shares outstanding in 1996............... 10,000 --
Preferred stock, Series B convertible, $.01 par, 30,000 shares
authorized; no shares outstanding.............................. -- --
Common stock, $.001 par, 100,000,000 shares authorized; 4,860,580
and 13,073,864 shares outstanding.............................. 4,861 13,074
Additional paid-in capital........................................ 3,670,612 5,301,413
Retained earnings................................................. 591,089 899,206
------------ ------------
TOTAL STOCKHOLDERS' EQUITY.......................................... 4,276,562 6,213,693
------------ ------------
$ 42,743,891 $ 57,048,874
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 115
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FROM DATE OF INCEPTION FROM DATE OF INCEPTION NINE MONTHS ENDED
(JUNE 19, 1996) TO (JUNE 19, 1996) TO SEPTEMBER 30,
DECEMBER 31, 1996 SEPTEMBER 30, 1996 1997
---------------------- ---------------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
NET SALES.......................... $ 25,248,908 $6,883,399 $65,019,846
COST OF SALES...................... 19,026,604 5,229,435 50,977,914
----------- ---------- -----------
GROSS PROFIT....................... 6,222,304 1,653,964 14,041,932
SELLING EXPENSE.................... 1,908,900 464,700 4,928,532
GENERAL AND ADMINISTRATIVE
EXPENSES......................... 2,150,968 668,558 6,255,760
----------- ---------- -----------
INCOME FROM OPERATIONS............. 2,162,436 520,706 2,857,640
----------- ---------- -----------
OTHER INCOME (EXPENSE)
Interest expense................. (755,758) (181,307) (2,313,057)
Miscellaneous.................... (5,589) 3,100 95,674
----------- ---------- -----------
Total Other Income (Expense)....... (761,347) (178,207) (2,217,383)
----------- ---------- -----------
INCOME BEFORE INCOME TAXES......... 1,401,089 342,499 640,257
INCOME TAXES (Note 10)............. 640,000 186,400 256,928
----------- ---------- -----------
NET INCOME......................... 761,089 156,099 383,329
DIVIDENDS ON PREFERRED STOCK....... -- -- (75,212)
----------- ---------- -----------
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS..................... $ 761,089 $ 156,099 $ 308,117
=========== ========== ===========
NET INCOME PER COMMON SHARE........ $ .09 $ .06 $ .02
=========== ========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING
(Note 1)......................... 8,159,800 2,731,497 12,742,665
=========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 116
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FROM DATE OF INCEPTION (JUNE 19, 1996) TO DECEMBER 31, 1996 AND
NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCK PREFERRED STOCK
SERIES A SERIES B COMMON STOCK ADDITIONAL TOTAL
---------------------- ------------------ ---------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY
---------- -------- ------ -------- ---------- -------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital
contribution
in
connection
with
acquisition
of
Mallyclad
and Vyn-L
(Note 2)... -- $ -- -- $ -- -- $ -- $ 77,473 $ -- $ 77,473
Distribution
to
stockholder
of
Mallyclad... -- -- -- -- -- -- -- (170,000) (170,000)
Issuance of
common
stock for
cash....... -- -- -- -- 10 1 604,999 -- 605,000
Recapitalization
(Note 2)... 1,000,000 10,000 -- -- (10) (1) (9,999) -- --
Issuance of
shares in
reverse
acquisition
(Note 2)... -- -- -- -- 4,860,580 4,861 2,998,139 -- 3,003,000
Net income
for the
period..... -- -- -- -- -- -- -- 761,089 761,089
---------- -------- ------ -------- ---------- -------- ---------- --------- ----------
BALANCE,
DECEMBER
31, 1996... 1,000,000 10,000 -- -- 4,860,580 4,861 3,670,612 591,089 4,276,562
Conversion of
preferred
stock,
Series A to
common
stock...... (1,000,000) (10,000) -- -- 7,548,632 7,548 2,452 -- --
Issuance of
shares to
an officer
(Note 1)... -- -- -- -- 171,842 172 (172) -- --
Issuance of
preferred
stock,
Series B... -- -- 4,250 43 -- -- 500,169 -- 500,212
Issuance of
warrants to
purchase
common
stock...... -- -- -- -- -- -- 120,500 -- 120,500
Conversion of
preferred
stock,
Series B to
common
stock...... -- -- (4,250) (43) 108,810 109 (66) -- --
Issuance of
common
stock
options in
exchange
for
services... -- -- -- -- -- -- 68,000 -- 68,000
Issuance of
shares in
connection
with
acquisition
(Note 2)... -- -- -- -- 384,000 384 939,918 -- 940,302
Dividends on
preferred
stock,
Series B... -- -- -- -- -- -- -- (75,212) (75,212)
Net income
for the
period..... -- -- -- -- -- -- -- 383,329 383,329
---------- -------- ------ -------- ---------- -------- ---------- --------- ----------
BALANCE,
SEPTEMBER
30, 1997
(unaudited)... -- $ -- -- $ -- 13,073,864 $ 13,074 $5,301,413 $ 899,206 $ 6,213,693
========== ======== ====== ======== ========== ======== ========== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 117
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FROM DATE OF INCEPTION FROM DATE OF INCEPTION NINE MONTHS ENDED
(JUNE 19, 1996) TO (JUNE 19, 1996) TO SEPTEMBER 30,
DECEMBER 31, 1996 SEPTEMBER 30, 1996 1997
---------------------- ---------------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income....................... $ 761,089 $ 156,099 $ 383,329
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation.................. 325,460 28,255 1,512,557
Amortization of intangible
assets...................... 117,038 44,122 453,422
Gain on sale of equipment..... (29,400) -- (67,616)
Deferred income taxes......... 311,469 186,400 --
Changes in assets and liabilities
Accounts
receivable -- trade......... 1,771,004 896,264 (2,824,970)
Advances to affiliates........ (463,750) -- 25,850
Inventories................... (793,164) 167,004 (492,620)
Prepaid and other current
assets...................... (86,800) (290,526) (250,138)
Other assets.................. (431,703) 175,571 (417,590)
Accounts payable.............. 2,312,844 1,497,612 1,211,487
Accrued expenses.............. 1,031,527 579,823 693,000
----------- ---------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES....................... 4,825,614 3,440,624 226,711
----------- ---------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from the sale of
equipment..................... 98,200 -- 127,350
Purchase of property and
equipment..................... (429,048) (141,274) (918,708)
Payments for acquisition costs... -- -- (203,193)
Acquisitions of businesses, net
of cash acquired.............. (12,781,372) (12,768,965) (3,167,687)
----------- ---------- -----------
NET CASH USED IN INVESTING
ACTIVITIES....................... (13,112,220) (12,910,239) (4,162,238)
----------- ---------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Net borrowings on revolving
lines-of-credit............... 5,476,759 5,916,369 3,994,693
Proceeds from long-term debt..... 4,213,000 3,003,000 1,844,806
Payments on long-term debt and
capital lease obligations..... (1,121,564) (34,082) (1,930,952)
Payments for debt issue costs.... -- -- (165,890)
Issuance of common and preferred
stock and capital
contributions................. 682,473 605,000 495,800
----------- ---------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES....................... 9,250,668 9,490,287 4,238,457
----------- ---------- -----------
NET INCREASE IN CASH............... 964,062 20,672 302,930
CASH, beginning of period.......... -- -- 964,062
----------- ---------- -----------
CASH, end of period................ $ 964,062 $ 20,672 $ 1,266,992
=========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 118
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE PERIOD FROM DATE OF INCEPTION (JUNE 19, 1996)
TO SEPTEMBER 30, 1996 AND THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND BASIS OF PRESENTATION
American Architectural Products Corporation (AAPC or the Company) is
principally engaged in the business of manufacturing residential, commercial and
architectural windows and doors through its wholly-owned subsidiaries, Eagle &
Taylor Company (formerly known as American Architectural Products, Inc. -- AAP),
Forte, Inc. (Forte), Western Insulated Glass Co. (Western) and Thermetic Glass,
Inc. (Thermetic).
Prior to December 18, 1996, Forte Computer Easy, Inc. (FCEI) had a single
wholly-owned operating subsidiary, Forte, based in Youngstown, Ohio. On December
18, 1996, pursuant to an Agreement and Plan of Reorganization dated October 25,
1996 between FCEI and AAP Holdings, Inc. (the Agreement), FCEI acquired all of
the issued and outstanding shares of capital stock of AAP in exchange for
1,000,000 shares of Series A Convertible Preferred Stock of FCEI (the Series A
Preferred). Under the terms of the Agreement and the Series A Preferred, AAP
Holdings, Inc. obtained 60 percent of the voting control of FCEI. Although FCEI
is the parent of AAP following the transaction, the transaction was accounted
for as a recapitalization of AAP and a purchase by AAP of FCEI because the
stockholders of AAP obtained a majority of the voting rights in FCEI as a result
of the transaction (see Note 2). The 1996 consolidated financial statements
include the accounts of AAP for the period from its inception (June 19, 1996),
and the accounts of FCEI from December 18, 1996, the effective date of the
acquisition.
At a special stockholders' meeting held on April 1, 1997, the FCEI
stockholders approved the reincorporation of the FCEI in Delaware. Consequences
of the reincorporation plan included the change of the FCEI's name to American
Architectural Products Corporation; an increase in the authorized common stock
of the Company to 100,000,000 shares, a ten for one reverse stock split of the
Company's common stock; the conversion of 1,000,000 shares of Series A Preferred
held by AAP Holdings, Inc. into 7,548,632 shares of common stock; and the
issuance of 171,842 shares of common stock to an officer to satisfy a commitment
of the Company. The reincorporation did not result in any substantive change to
the Company's business, assets, liabilities, net worth or operations, nor did it
result in any change in the ownership interest of any stockholder of the
Company. The number of shares and per share amounts give retroactive recognition
to the change in capital structure for all periods presented.
AAP was incorporated on June 19, 1996 and had no significant operations or
assets until it acquired Eagle Window and Door, Inc. (Eagle) and Taylor Building
Products Company (Taylor) on August 29, 1996 (see Note 2). Eagle is based in
Dubuque, Iowa and manufactures and distributes aluminum clad and all wood
windows and doors. Taylor is based in West Branch, Michigan and manufactures
entry and garage doors. The accounts of Eagle and Taylor are included in the
consolidated financial statements from the August 29, 1996 acquisition date. AAP
subsequently changed its name to Eagle & Taylor Company.
On June 25, 1996, AAP's ultimate controlling stockholder acquired ownership
of Mallyclad Corp. (Mallyclad) and Vyn-L Corporation (Vyn-L). Mallyclad and
Vyn-L are based in Madison Heights, Michigan and process and manufacture vinyl
clad steel and aluminum coils and cut-to-length sheets. On December 18, 1996,
Mallyclad and Vyn-L were merged into AAP. Based on the control maintained by
this stockholder over AAP, Mallyclad and Vyn-L, the merger was considered to be
a transaction among companies under common control and was accounted for at
historical cost in a manner similar to a pooling of interests. Accordingly, the
accounts of Mallyclad and Vyn-L are included in the consolidated financial
statements from the June 25, 1996 acquisition date.
F-9
<PAGE> 119
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of AAPC and its
wholly-owned subsidiaries, Eagle & Taylor Company, Forte, Western and Thermetic.
All significant intercompany transactions and accounts have been eliminated in
consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of accounts receivable, payables and accrued expenses
approximate fair value because of the short maturity of these items. Based on
the borrowing rates currently available to the Company, the carrying amounts of
notes payable and long-term debt approximate fair value.
REVENUE RECOGNITION
Revenues from sales and the corresponding receivables are recorded upon the
shipment of product to the customer.
INVENTORIES
Inventories are stated at the lower of cost, determined by the first-in,
first-out (FIFO) method, or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company provides for
depreciation using the straight-line method over the following estimated useful
lives:
<TABLE>
<S> <C>
Buildings and improvements........................................... 20-25
Machinery and equipment.............................................. 7-10
Computers and office equipment....................................... 3-7
Tools, dies and fixtures............................................. 3-7
</TABLE>
Expenditures for renewals and betterments are capitalized. Expenditures for
maintenance and repairs are charged against income as incurred.
LONG-LIVED ASSETS
The Company reviews the carrying values of its long-lived assets for
possible impairment whenever events or changes in circumstances indicate that
the carrying amount of the assets may not be recoverable. Any long-lived assets
held for disposal are reported at the lower of these carrying amounts or fair
value less costs to sell.
COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired is being amortized over 25 years
using the straight-line method. The Company periodically evaluates the
recoverability of the cost in excess of net assets acquired by comparing
F-10
<PAGE> 120
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
anticipated undiscounted future cash flows from operating activities with the
carrying amounts of the related assets. The factors considered by management in
performing this assessment include current operating results, business
prospects, market trends, competitive activities and other economic factors.
WARRANTY OBLIGATIONS
Eagle, Taylor and Thermetic sell the majority of their products with
limited warranties of two to 25 years. Accrued warranty obligations are
estimated based on claims experience and levels of production. Warranty
obligations estimated to be incurred within one year are classified as current
liabilities in the accompanying consolidated balance sheets.
INCOME TAXES
The income tax provision is computed using the liability method. Deferred
taxes are recorded for the expected future tax consequences of temporary
differences between the financial reporting and the tax bases of the Company's
assets and liabilities.
The income tax provision for interim reporting purposes is based upon the
Company's estimate of the effective tax rate expected to be applicable for the
full fiscal year.
AAP filed its income tax return on a consolidated basis with its former
parent company until December 18, 1996, the date of acquisition by FCEI.
ADVERTISING
The cost of advertising is charged against income as incurred. Advertising
expense was $263,000 for the period from inception to December 31, 1996.
NET INCOME PER COMMON SHARE
Net income per common share amounts were computed by dividing net income
less the preferred stock dividends by the weighted average number of common
shares outstanding, after giving effect to dilutive common stock equivalents
outstanding. The weighted average number of common shares includes the 7,548,632
common shares issued upon the conversion of all of the Series A Preferred
(which, based on its terms, the Company believed was common stock in substance)
and the 171,842 shares issued by the Company to fulfill an obligation to an
officer.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). SFAS
128 modifies the computation, presentation and disclosure requirements for
earnings per share. SFAS 128 is effective for periods ending after December 15,
1997, including interim periods. This statement would not have a material impact
on the Company's computation of earnings per share.
UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited interim consolidated financial statements for the period from
date of inception (June 19, 1996) to September 30, 1996 and for the nine months
ended September 30, 1997 include all adjustments, consisting of normal recurring
accruals, which the Company considers necessary for a fair presentation of the
consolidated results of operations for the period presented. The interim period
results are not necessarily indicative of the results of operations for a full
fiscal year.
F-11
<PAGE> 121
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130), which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS 130 is effective for financial statements for periods beginning
after December 15, 1997 and requires comparative information for earlier years
to be restated.
Additionally, in June 1997, the Financial Accounting Standards Board issued
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," (SFAS 131) which supersedes SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise." SFAS 131 establishes standards for the
reporting by public companies of information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements. It also establishes
standards for disclosures regarding products and services, geographic areas and
major customers. SFAS 131 is effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated.
Because of the recent issuance of these standards, management has been
unable to fully evaluate the impact, if any, they may have on future financial
statement disclosures. Results of operations and financial position, however,
will be unaffected by implementation of these two standards.
2. RECAPITALIZATION AND ACQUISITIONS
RECAPITALIZATION AND ACQUISITION OF FCEI
Effective December 18, 1996, FCEI acquired the stock of AAP in a reverse
acquisition in which AAP's stockholders acquired voting control of FCEI. The
acquisition was accomplished through an exchange of stock in which FCEI
exchanged 1,000,000 shares of Series A Preferred and options to purchase 879,834
shares of FCEI common stock for 100% of the outstanding stock of AAP. Upon
completing the transaction, the stockholders of AAP controlled 60% of the voting
rights of the combined Company.
For financial reporting purposes, AAP is deemed to be the acquiring entity.
The merger has been reflected in the accompanying consolidated financial
statements as (a) recapitalization of AAP (whereby the issued and outstanding
stock of AAP was converted into 1,000,000 shares of Series A Preferred and
options to purchase 879,834 shares of common stock -- see Note 9) and (b) the
issuance of the securities discussed in the following paragraph by AAP in
exchange for all of the outstanding equity securities of FCEI.
In the merger, AAP is deemed to have issued 5,032,422 shares of common
stock and to have issued 586,556 stock options to FCEI stockholders (see Note
9). The estimated fair value assigned to the securities issued was $3,003,000,
which was determined based on the estimated fair value of the securities of AAP
which were obtained by the FCEI stockholders in the reverse acquisition, an
assessment of the trading prices of FCEI stock preceding the reverse
acquisition, and the appraised value of the FCEI assets acquired.
The acquisition was recorded using the purchase method of accounting.
Accordingly, the consideration of $3,100,000, including transaction costs, was
allocated to the FCEI net assets acquired based on estimated fair values
including current assets of $1,871,000, property and equipment of $7,516,000,
long-term debt of $4,030,000 and current liabilities of $2,257,000. The results
of FCEI's operations are included in the accompanying consolidated financial
statements from the date of acquisition.
F-12
<PAGE> 122
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. RECAPITALIZATION AND ACQUISITIONS (CONTINUED)
ACQUISITION OF EAGLE AND TAYLOR
On August 29, 1996, AAP acquired the stock and certain assets and
liabilities of Eagle and Taylor. The acquisition was accounted for as a
purchase. The purchase price approximated $22,202,000 and was allocated to the
net assets acquired based on estimated fair market values including current
assets of $17,123,000, property and equipment of $6,805,000, accrued warranty
obligations of $4,600,000, and current and other liabilities of $4,362,000. Cost
in excess of net assets acquired of $7,236,000 was recorded and will be
amortized over 25 years. Subordinated notes payable to the seller totalling
$8,000,000 were used to finance a portion of the acquisitions (see Note 5). The
results of Eagle and Taylor operations are included in the accompanying
consolidated financial statements from the date of acquisition.
ACQUISITION OF MALLYCLAD AND VYN-L
The June 25, 1996 acquisition of Mallyclad and Vyn-L was accounted for as a
purchase. The purchase price approximated $1,009,000 and was allocated to net
assets acquired based on estimated fair values including current assets of
$900,000, property and equipment of $205,000, other assets of $170,000, and
current liabilities of $266,000. The accounts of Mallyclad and Vyn-L are
included in the accompanying consolidated financial statements from the June 25,
1996 acquisition date.
ACQUISITION OF WESTERN
On March 14, 1997, the Company acquired all of the stock of Western.
Western is based in Phoenix, Arizona and manufactures custom residential
aluminum windows and doors. The acquisition was accounted for as a purchase. The
purchase price approximated $2,400,000 and was allocated to net assets acquired
based on estimated fair market values including current assets of $1,976,000,
property and equipment of $961,000, and current liabilities of $537,000. Notes
to sellers approximating $779,000 were used to finance a portion of the
acquisition. Additionally, Western was financed with a revolving line-of-credit
and term notes with a bank totalling approximately $1,400,000. The accounts of
Western are included in the accompanying financial statements from the March 14,
1997 acquisition date.
ACQUISITION OF THERMETIC
On July 18, 1997, the Company acquired all of the stock of Thermetic, a
Toluca, Illinois manufacturer of residential vinyl windows. The acquisition was
accounted for as a purchase. The purchase price approximated $4,500,000 and was
allocated to net assets acquired based on estimated fair market values including
current assets of $1,700,000, net property and equipment of $2,300,000, current
liabilities of $1,400,000 and long-term liabilities of $2,100,000. The Company
recorded costs in excess of net assets acquired in the amount of $4,000,000.
The Thermetic acquisition was financed through the issuance of $2,500,000
in convertible secured debentures to the seller, the issuance of 384,000 shares
of the Company's common stock and a commitment to issue an aggregate number of
additional shares of the Company's common stock eighteen months after closing
having a market value of $1,000,000 when issued. The accounts of Thermetic are
included in the accompanying financial statements from the July 18, 1997
acquisition date.
ACQUISITION OF BINNINGS, DANVID, AMERICAN GLASSMITH AND MODERN (SUBSEQUENT
EVENT)
On December 10, 1997, the Company acquired all of the outstanding stock of
Binnings Building Products, Inc. (Binnings), and substantially all of the assets
of Danvid Company, Inc. and Danvid Window Company, (collectively Danvid),
American Glassmith, Inc. (American Glassmith), and Modern Window Corporation
(Modern), collectively the "Acquisitions". Binnings, located in Lexington, North
Carolina,
F-13
<PAGE> 123
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
manufactures residential vinyl windows and aluminum windows and storm doors.
Danvid, located in Carrollton, Texas, manufactures and installs residential
aluminum windows and doors and vinyl windows. American Glassmith, located in
Columbus, Ohio, manufactures decorative glass lites and laminated glass. Modern,
located in Oak Park, Michigan, manufactures residential vinyl windows and doors.
Each of theses acquisitions will be accounted for as a purchase. The aggregate
purchase price for the Acquisitions approximated $52,135,000, and will be
allocated to the net assets acquired based on estimated fair market values,
including current assets of $21,940,000, net property, plant and equipment of
$21,652,000, other assets of $433,000, current liabilities of $9,286,000, and
long term liabilities of $52,000. Cost in excess of net assets acquired of
$17,448,000 will be recorded and amortized over 25 years. The accounts of the
Acquisitions will be included in the Company's financial statements from the
December 10, 1997 acquisition date. The Acquisitions were financed primarily
with a portion of the proceeds from the issuance of $125,000,000 of 11 3/4%
senior notes maturing on December 1, 2007 (See Note 14).
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following pro forma information for the year ended December 31, 1996
has been prepared assuming that the offering of $125,000,000 of 11 3/4% senior
notes due December 1, 2007 (the Offering) and the acquisitions of FCEI, Eagle &
Taylor, Mallyclad and Vyn-L, Western, Thermetic, Binnings, Danvid, American
Glassmith and Modern had occurred on January 1, 1996. The following pro forma
information for the nine months ended September 30, 1997 has been prepared
assuming that the Offering and the acquisitions of Western, Thermetic, Binnings,
Danvid, American Glassmith and Modern had occurred on January 1, 1997. The pro
forma information includes adjustments for interest expense for the senior notes
issued in the Offering, adjustments to selling, general and administrative
expenses for decreases in compensation expense for certain officers and members
of Boards of Directors of the Acquisitions, adjustments to depreciation expense
based on the estimated fair market value of the property and equipment acquired,
amortization of cost in excess of net assets acquired arising from the
acquisitions, and adjustments for income taxes.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -----------------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net sales..................................................... $176,393 $ 144,340
Net loss...................................................... (7,234) (3,642)
Net loss per common share..................................... (0.53) (0.27)
</TABLE>
3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Raw materials..................................... $ 7,664,151 $ 10,565,055
Work-in-process................................... 1,266,383 1,318,522
Finished goods.................................... 2,040,610 1,642,050
----------- -----------
$ 10,971,144 $ 13,525,627
=========== ===========
</TABLE>
F-14
<PAGE> 124
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. REVOLVING LINES-OF-CREDIT
At December 31, 1996, the Company had $5,477,000 outstanding under a
subsidiary's revolving line-of-credit facility whereby the subsidiary may borrow
or issue letters-of-credit of up to $13,000,000 based on available collateral.
Amounts outstanding under the revolving line-of-credit facility are payable on
August 29, 1999. Borrowings bear interest at 1.5% above the prime rate (9.75% at
December 31, 1996) and interest is payable monthly. No letters-of-credit were
outstanding at December 31, 1996.
Since the revolving line-of-credit facility includes a subjective
acceleration clause and a requirement to maintain a lock-box arrangement whereby
remittances from the subsidiary's customers reduce the debt outstanding, the
borrowings outstanding are classified as current obligations.
The revolving line-of-credit is a component of a credit facility that also
includes a term loan under which the subsidiary is subject to certain
restrictive covenants (see Note 5).
In connection with the acquisitions of Western and Thermetic (see Note 2),
the Company entered into line-of-credit facilities whereby the subsidiaries may
borrow up to $2,550,000 based upon available collateral. Amounts outstanding
under these lines are secured by substantially all of the assets of the
respective subsidiaries and bear interest based upon the prime rate.
On December 10, 1997, the Company repaid its existing lines of credit with
a portion of the proceeds from the issuance of $125,000,000 of 11 3/4% senior
notes maturing on December 1, 2007 (See Note 14).
5. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Term notes payable to bank, due August 2001, payable in monthly
installments of $55,407 plus interest at the prime rate plus
1.5% (9.75% at December 31, 1996)............................. $ 3,113,000
Subordinated notes payable, due August 1999, with interest
payable monthly at the rate of 10%............................ 8,000,000
Term note payable to bank, due January 2001, payable in monthly
installments of $30,000 including interest at the prime rate
plus 2.0% (10.25% at December 31, 1996), secured by
substantially all of the assets of a subsidiary............... 2,625,000
Other........................................................... 2,238,000
-----------
15,976,000
Less current portion............................................ 1,498,000
-----------
$ 14,478,000
===========
</TABLE>
The term notes due August 2001 are components of a credit facility that
also includes a revolving line-of-credit (see Note 4). The credit facility is
secured by substantially all of the assets of a subsidiary and contains various
restrictive covenants which, among other matters, require the subsidiary to
maintain certain defined minimum working capital and adjusted net worth
requirements. As of December 31, 1996, the Company was not in compliance with
certain covenants of the credit facility. Subsequent to December 31, 1996, the
lender modified these covenants and the Company is in compliance with the
revised covenants and believes it is probable that it will comply with the
revised covenants for the next twelve months.
F-15
<PAGE> 125
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT (CONTINUED)
The subordinated notes due in August 1999 were incurred in connection with
the acquisition of Eagle and Taylor (see Note 2). The subordinated notes are
secured by 20% of the AAPC shares owned by AAP Holdings, Inc. which have been
pledged to the seller under terms of a ten year Option and Pledge Agreement that
underlies the subordinated notes. Terms of the Option and Pledge Agreement
provide the seller with the right to purchase the Option Shares for $1 if the
principal balance of the subordinated notes is not repaid by December 31, 1997.
The amount of Option Shares is subject to reduction in accordance with a formula
based on repayment of principal of the subordinated notes defined in the Option
and Pledge Agreement. If the principal balance of the subordinated notes is
reduced by less than $1.5 million by December 31, 1997, the seller will have the
right to purchase all of the Option Shares for $1. If the subordinated notes are
paid in full by December 31, 1997, the number of Option Shares is reduced to
zero. The Company has agreed to issue to AAP Holdings, Inc. a number of common
shares of the Company equal to the number of common shares delivered by AAP
Holdings, Inc. to the seller if the options are exercised under terms of the
Option and Pledge Agreement described above. The subordinated notes also include
certain non-financial restrictive covenants.
The transfer of funds from the operating subsidiaries to the Company is
restricted by terms of the credit agreements described above without the prior
consent of the respective lenders. Substantially all operating assets are at the
subsidiary level as the parent company currently acts as a holding company and
does not have any operations.
Various debt obligations are guaranteed by certain stockholders. In
connection with the Agreement and Plan of Reorganization (see Note 1), the
Company must obtain written consent from the guarantors before disposing of
assets securing the debt obligations.
The approximate maturities of long-term debt (assuming the subordinated
notes will be repaid in 1999) are as follows: 1997 -- $1,500,000;
1998 -- $1,000,000; 1999 -- $9,000,000; 2000 -- $1,030,000; and 2001 --
$2,860,000.
In 1997, term notes were entered into in connection with the acquisitions
of Western and Thermetic (see Note 2). These notes aggregate approximately
$6,400,000, are secured by substantially all of the assets of the respective
subsidiaries and bear interest at both fixed and variable rates.
On December 10, 1997, the Company repaid its existing debt with a portion
of the proceeds from the issuance of $125,000,000 of 11 3/4% senior notes
maturing on December 1, 2007 (See Note 14).
6. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
Certain leased assets are capitalized and consist of computer equipment and
delivery equipment with a cost of $1,578,000 at December 31, 1996. Other leases
for buildings and equipment are classified as operating.
F-16
<PAGE> 126
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
At December 31, 1996, the future minimum lease payments under operating and
capital leases are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- ----------
<S> <C> <C>
1997................................................. $ 497,600 $ 583,500
1998................................................. 332,600 585,400
1999................................................. 84,300 561,000
2000................................................. 3,100 --
-------- ----------
TOTAL................................................ $ 917,600 1,729,900
========
Less amount representing interest.................... 173,300
----------
Net present value.................................... 1,556,600
Less current portion................................. 488,984
----------
LONG-TERM CAPITAL LEASE OBLIGATIONS.................. $1,067,616
==========
</TABLE>
Rental expense incurred for operating leases was $217,000 from the period
from inception to December 31, 1996.
LITIGATION
At December 31, 1996, the Company is a defendant in several lawsuits. The
Company may be liable in these matters to the extent that the lawsuits are found
in favor of the plaintiffs and to the extent that these matters are not covered
by the Company's insurance. In the opinion of management, such liabilities, if
any, would not have a material effect on the consolidated financial statements
of the Company.
7. BENEFIT PLANS
Eagle & Taylor Company participates in a 401(k) plan for all eligible
nonunion employees which includes provisions for Company matching contributions.
Additionally, union employees at the Taylor operating division participate in a
multiemployer pension plan into which Taylor contributes $0.22 per hour worked.
Expenses incurred relating to these plans was $89,000 from inception to December
31, 1996.
Union employees at Taylor are also entitled to postretirement healthcare
benefits pursuant to a collective bargaining agreement. Under the contract
provisions, Taylor will pay a retired employee with a minimum of 10 years of
service a benefit of up to $100 per month after retirement at age 62. The
accompanying consolidated balance sheets include a liability of $450,000 which
is the accumulated postretirement benefit obligation at December 31, 1996 and
September 30, 1997. Expenses from the period from inception to December 31, 1996
relating to these postretirement benefits were not significant.
8. STOCKHOLDERS' EQUITY
SERIES A PREFERRED STOCK
The Series A Preferred is voting preferred stock and has the same number of
votes as the number of shares of common stock into which the Series A Preferred
would be convertible if converted in full on the record date.
No dividends may be paid with respect to the common stock unless a dividend
is paid to the holders of the Series A Preferred. Any dividends paid are
required to be allocated pro rata among the holders of the
F-17
<PAGE> 127
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. STOCKHOLDERS' EQUITY (CONTINUED)
common stock and Series A Preferred as though the Series A Preferred had been
converted in full to common stock on the dividend payment date.
The Series A Preferred has a liquidation preference over the common stock
in the amount of $.10 per share. Any amounts remaining will be allocated to the
common stock and Series A Preferred holders as if the Series A Preferred had
been converted in full upon such liquidation.
SERIES B PREFERRED STOCK
In 1997, the Company received proceeds of $425,000 from the private
placement of 4,250 shares of Series B Cumulative Redeemable Convertible
Preferred Stock (the Series B Preferred). The Series B Preferred accrues
cumulative dividends at the annual rate of $8.00 per share commencing July 1,
1998, payable either in cash or common stock at the election of the Company.
Each share of Series B Preferred is convertible, at the option of the holder,
into shares of common stock. The redemption price of $100 per share of Series B
Preferred plus any cumulative unpaid dividends can be used to purchase shares of
common stock at market value. However, a discount from the quoted market price
of common stock was applicable for holders exercising conversion rights prior to
August 31, 1997 and the discounts are accounted for as dividends to the holders.
Through September 30, 1997, all of the Series B Preferred shares issued have
been converted to common stock.
The Series B Preferred is voting preferred stock and each share of Series B
Preferred Stock entitles the holder to one vote. The Series B Preferred will be
entitled to vote as a separate class with respect to all matters that would
adversely affect the powers, preferences or rights of Series B Preferred Stock.
STOCK WARRANTS
In April and June 1997, the Company issued promissory notes with detachable
stock warrants to accredited investors for proceeds totalling $450,000. The
warrants, which expire in one year, grant the note holders the right to purchase
128,572 shares of the Company's common stock at $3.50 per share. The fair market
value attributable to these warrants has been recognized as additional paid in
capital and the resulting discount is being amortized over the life of the notes
which expire in December 1997.
9. STOCK OPTIONS
As part of the consideration paid in the acquisition of FCEI in December
1996, the Company is deemed to have issued to certain FCEI stockholders options
to purchase an aggregate of 586,556 shares of the Company's common stock at
prices ranging from $2.50 to $5.00 per share ("FCEI Options"). The FCEI Options
were deemed to have been issued in exchange for previously outstanding options
granted under the FCEI Employee Incentive Stock Option Plan.
As part of the recapitalization of AAP that occurred in connection with the
acquisition of FCEI (see Note 2), AAP Holdings, Inc. received options to
purchase 879,834 shares of common stock of the Company ("AAPH Options"). The
AAPH Options are equivalent to 1.5 times the number of shares of the Company's
common stock subject to the 586,556 FCEI Options. The AAPH Options are identical
in price and exercise terms to the FCEI Options and are exercisable only to the
extent that the FCEI Options are exercised.
F-18
<PAGE> 128
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCK OPTIONS (CONTINUED)
The following is a summary of the stock options issued in connection with
the reverse acquisition that are outstanding as of September 30, 1997.
<TABLE>
<CAPTION>
OPTION FCEI AAPH
PRICE OPTIONS OPTIONS TOTAL
--------------------------------------------- ------- ------- ---------
<S> <C> <C> <C>
$2.50........................................ 100,000 150,000 250,000
3.75........................................ 471,770 707,654 1,179,424
5.00........................................ 14,786 22,180 36,966
------- ------- ---------
586,556 879,834 1,466,390
======= ======= =========
</TABLE>
All of the FCEI Options are exercisable. The options with exercise prices
of $2.50 and $3.75 expire in 1998 and the remaining options expire in 1999.
In 1996, the Company adopted the American Architectural Products
Corporation Stock Option Plan (the "Plan") whereby 10,000,000 shares of the
Company's common stock has been authorized for issuance under the Plan. Shares
of common stock have been made available for grant to directors, officers, key
employees and non-employees at the discretion of the Board of Directors. The
exercise price of stock options granted to employees and non-employee directors
equals the market price of the Company's common stock at the date of grant. The
stock options issued to employees have a ten year term and vest in 20%
increments over five years. Stock options issued to non-employee directors have
a ten year term and vest within one year. As of December 31, 1996 no shares have
been granted under this Plan.
10. INCOME TAXES
The provision for income taxes for the period ended December 31, 1996
consists of the following:
<TABLE>
<CAPTION>
FROM DATE OF
INCEPTION TO
DECEMBER 31,
1996
------------
<S> <C>
CURRENT
Federal................................................ $269,000
State.................................................. 60,000
----------
329,000
DEFERRED
Tax benefit allocated to reduce cost in excess of net
assets acquired..................................... 311,000
----------
$640,000
==========
</TABLE>
F-19
<PAGE> 129
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES (CONTINUED)
Significant components of deferred tax assets and liabilities as of
December 31, 1996 are as follows:
<TABLE>
<S> <C>
DEFERRED TAX ASSETS
Net operating loss carryforwards....................... $ 850,000
Allowance for doubtful accounts........................ 150,000
Accrued warranty obligations........................... 1,520,000
Accrued postretirement benefits........................ 150,000
Other accruals......................................... 250,000
Other.................................................. 60,000
----------
2,980,000
----------
DEFERRED TAX LIABILITIES
Depreciation........................................... 2,090,000
Other.................................................. 180,000
----------
2,270,000
----------
NET DEFERRED TAX ASSETS.................................. 710,000
VALUATION ALLOWANCE FOR DEFERRED TAX ASSETS.............. (710,000)
----------
NET DEFERRED TAXES....................................... $ --
==========
</TABLE>
In recording the acquisition of Eagle and Taylor, the Company established a
valuation allowance against the entire net deferred tax assets acquired, based
on uncertainties surrounding the expected realization of these assets. The
Company will reverse the valuation allowance if and when the assessment of the
need for such an allowance changes. In the event that the valuation allowance
established at the acquisition date is reduced, such reductions would be
recognized as reductions of cost in excess of net assets acquired.
The actual income tax expense attributable to earnings for the period from
inception to December 31, 1996 differed from the amounts computed by applying
the U.S. federal tax rate of 34 percent to pretax earnings as a result of the
following:
<TABLE>
<S> <C>
Tax at U.S. federal statutory rate....................... $470,000
Valuation allowance adjustment........................... 100,000
State income taxes, net of federal income tax benefit.... 40,000
Expenses not deductible for tax purposes................. 40,000
Other.................................................... (10,000)
----------
PROVISION FOR INCOME TAXES............................... $640,000
==========
</TABLE>
At December 31, 1996, the Company had net operating loss carryforwards
available to offset future years' taxable income. Due to changes in ownership,
utilization of net operating loss carryforwards is limited. Management estimates
that carryforwards aggregating approximately $2,500,000 will be available
through 2011. The utilization of these carryforwards will be limited to
approximately $170,000 per year.
11. RELATED PARTY TRANSACTIONS
The Company paid management fees to its majority stockholder of
approximately $120,000 for the period from inception to December 31, 1996.
F-20
<PAGE> 130
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. LABOR FORCE
Two of the Company's units maintain collective bargaining agreements with
all or part of their hourly employees. Employees covered under these agreements,
expiring in 2000 and 2002, represent 1% and 8%, respectively, of the Company's
total work force.
13. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
FROM DATE OF
INCEPTION
(JUNE 19, 1996)
TO
DECEMBER 31, 1996
-----------------
<S> <C>
CASH PAID DURING THE PERIOD FOR
Interest............................................... $ 620,000
Income taxes........................................... 70,000
NONCASH INVESTING AND FINANCING ACTIVITIES
Common stock and debt issued and liabilities assumed in
acquisitions........................................... $27,981,000
Capital lease obligations................................ 1,578,000
Distribution to stockholder.............................. 170,000
</TABLE>
14. SUBSEQUENT EVENTS
On December 10, 1997, the Company consummated an offering of $125 million
of 11 3/4% senior notes which will mature on December 1, 2007. Interest is
payable semiannually on June 1 and December 1 of each year. Concurrent with the
consummation of the offering of the senior notes, the Company acquired all of
the outstanding stock of Binnings Building Products, Inc., and substantially all
of the assets of Danvid Company, Inc. and Danvid Window Company, American
Glassmith, Inc., and Modern Window Corporation, collectively the "Acquisitions"
(See Note 2).
Of the approximately $118.5 million in net proceeds received by the Company
from the issuance of the senior notes, approximately $47.8 million was used to
fund the cash portion of the purchase price of the Acquisitions (including the
repayment of assumed debt) and approximately $33.8 million was used to repay
existing indebtedness of the Company (See Notes 4 and 5). Approximately $36.9
million is intended to be used by the Company for additional acquisitions,
working capital and general corporate purposes.
F-21
<PAGE> 131
INDEPENDENT AUDITORS REPORT
To the Board of Directors and Stockholders of
Eagle Window & Door, Inc. and Subsidiaries and
Taylor Building Products Company (Wholly-Owned Subsidiaries)
We have audited the accompanying combined balance sheets of Eagle Window &
Door, Inc. and Subsidiaries and Taylor Building Products Company (Wholly-Owned
Subsidiaries), as of December 31, 1994 and 1995 and August 29, 1996, and the
related combined statements of operations and accumulated deficit, and cash
flows for the years ended December 31, 1994 and 1995 and the eight months ended
August 29, 1996. These combined financial statements are the responsibility of
the Companies' management. Our responsibility is to express an opinion on these
combined 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 audits to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Eagle
Window & Door, Inc. and Subsidiaries and Taylor Building Products Company
(Wholly-Owned Subsidiaries) as of December 31, 1994 and 1995 and August 29,
1996, and the results of their combined operations and cash flows for the years
ended December 31, 1994 and 1995 and the eight months ended August 29, 1996 in
conformity with generally accepted accounting principles.
SEMPLE & COOPER, P.L.C.
Phoenix, Arizona
January 31, 1997
F-22
<PAGE> 132
EAGLE WINDOW & DOOR, INC. AND SUBSIDIARIES AND
TAYLOR BUILDING PRODUCTS COMPANY (WHOLLY-OWNED SUBSIDIARIES)
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------- AUGUST 29,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash (Note 2)................................. $ 212,332 $ 750,361 $ 395,859
Accounts receivable, net (Note 1)............. 7,901,250 6,954,830 7,736,517
Inventory (Notes 1 and 3)..................... 18,234,183 8,330,593 8,483,224
Prepaids and other............................ 569,385 448,426 314,240
------------ ------------ ------------
Total Current Assets....................... 26,917,150 16,484,210 16,929,840
------------ ------------ ------------
Property, Plant and Equipment, Net (Notes 1 and
4)............................................ 10,844,153 8,760,799 6,966,340
------------ ------------ ------------
Deposits and Other Assets....................... 132,269 55,370 93,376
------------ ------------ ------------
Total Assets............................... $ 37,893,572 $ 25,300,379 $ 23,989,556
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current Liabilities:
Accounts payable.............................. $ 3,342,794 $ 2,859,256 $ 2,429,053
Accrued wages and payroll taxes............... 567,118 371,510 453,459
Payable to affiliates (Note 10)............... 25,427,638 20,482,654 19,441,656
Other accrued expenses........................ 1,783,282 1,527,296 2,346,756
Accrued warranty reserve--short-term portion
(Note 9)................................... 1,740,000 1,566,000 1,479,000
------------ ------------ ------------
Total Current Liabilities.................. 32,860,832 26,806,716 26,149,924
------------ ------------ ------------
Long-Term Liabilities:
Accrued warranty reserve--long-term portion
(Note 9)................................... 3,409,800 3,258,800 3,148,412
------------ ------------ ------------
Commitments and Contingencies: (Note 5)......... -- -- --
Stockholder's Equity (Deficit): (Note 6)
Common stock.................................. 211,851 211,851 211,851
Additional paid-in capital.................... 26,081,937 26,081,937 27,224,456
Accumulated deficit........................... (24,670,848) (31,058,925) (32,745,087)
------------ ------------ ------------
Total Stockholder's Equity (Deficit)....... 1,622,940 (4,765,137) (5,308,780)
------------ ------------ ------------
Total Liabilities and Stockholder's Equity
(Deficit)................................ $ 37,893,572 $ 25,300,379 $ 23,989,556
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-23
<PAGE> 133
EAGLE WINDOW & DOOR, INC. AND SUBSIDIARIES AND
TAYLOR BUILDING PRODUCTS COMPANY (WHOLLY-OWNED SUBSIDIARIES)
COMBINED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
FOR THE
FOR THE YEARS ENDED DECEMBER EIGHT MONTHS
31, ENDED
----------------------------- AUGUST 29,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Sales........................................... $ 92,644,635 $ 72,962,690 $ 39,971,058
Cost of Sales................................... 83,387,571 67,642,530 33,832,799
------------ ------------ ------------
Gross Profit.................................... 9,257,064 5,320,160 6,138,259
Selling Expense................................. 9,166,868 6,619,136 3,948,778
General and Administrative Expenses............. 5,084,716 5,714,966 3,141,852
Restructuring Charge (Note 7)................... -- 840,042 --
------------ ------------ ------------
Loss from Operations............................ (4,994,520) (7,853,984) (952,371)
------------ ------------ ------------
Other Income (Expense):
Interest expense (Note 10).................... (2,040,067) (1,755,177) (1,142,519)
Gain (Loss) on sale of assets................. (23,293) (375,325) (773,866)
Other......................................... 69,440 38,984 274,661
------------ ------------ ------------
(1,993,920) (2,091,518) (1,641,724)
------------ ------------ ------------
Loss before Income Tax Benefit.................. (6,988,440) (9,945,502) (2,594,095)
Income Tax Benefit (Note 1)..................... 2,550,020 3,557,425 907,933
------------ ------------ ------------
Net Loss........................................ (4,438,420) (6,388,077) (1,686,162)
Accumulated Deficit, Beginning of Year.......... (20,232,428) (24,670,848) (31,058,925)
------------ ------------ ------------
Accumulated Deficit, End of Year................ $(24,670,848) $(31,058,925) $(32,745,087)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-24
<PAGE> 134
EAGLE WINDOW & DOOR, INC. AND SUBSIDIARIES AND
TAYLOR BUILDING PRODUCTS COMPANY (WHOLLY-OWNED SUBSIDIARIES)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
FOR THE YEARS ENDED DECEMBER EIGHT MONTHS
31 ENDED
----------------------------- AUGUST 29,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Cash received from customers.................. $ 97,443,508 $ 73,112,175 $ 39,462,693
Cash paid to suppliers and employees.......... (95,570,911) (70,132,913) (38,177,166)
Interest paid................................. (8,711) (3,686) --
Interest received............................. 20,548 4,504 1,340
Restructuring costs........................... -- (423,909) --
------------ ------------ ------------
Net cash provided by operating
activities............................... 1,884,434 2,556,171 1,286,867
------------ ------------ ------------
Cash Flows from Investing Activities:
Cash received from sale of equipment.......... 278,139 558,265 37,289
Purchase of equipment......................... (1,885,382) (2,576,407) (1,678,658)
------------ ------------ ------------
Net cash used by investing activities...... (1,607,243) (2,018,142) (1,641,369)
------------ ------------ ------------
Cash Flows from Financing Activities:
Repayment of debt.......................... (64,859) -- --
------------ ------------ ------------
Net cash used by financing activities...... (64,859) -- --
------------ ------------ ------------
Net increase (decrease) in cash................. 212,332 538,029 (354,502)
Cash at beginning of year....................... -- 212,332 750,361
------------ ------------ ------------
Cash at end of year............................. $ 212,332 $ 750,361 $ 395,859
=========== =========== ===========
Reconciliation of Net Loss to Net Cash Provided
by Operating Activities:
Net Loss........................................ $ (4,438,420) $ (6,388,077) $ (1,686,162)
------------ ------------ ------------
Adjustments to Reconcile Net Loss to Net Cash
Provided by Operating Activities:
Depreciation.................................. 3,926,218 3,310,040 2,661,961
(Gain) Loss on sale of assets................. 23,293 375,325 773,866
Abandonment of fixed assets in
restructuring.............................. -- 416,131 --
Interest expense contributed to capital by
Parent Company............................. -- -- 1,142,519
Changes in Assets and Liabilities:
Accounts receivable........................... 5,319,036 946,420 (781,687)
Inventory..................................... 2,577,426 9,903,590 (152,631)
Prepaids and other............................ 88,377 120,959 134,186
Deposits and other............................ 674 76,899 (38,005)
Accounts payable.............................. (806,796) (483,538) (430,203)
Accrued wages and payroll taxes............... (31,983) (195,608) 72,539
Other accrued expenses........................ (1,457,456) (255,986) 828,870
Payable to affiliates......................... (3,364,082) (4,944,984) (1,040,998)
Accrued warranty reserve...................... 48,147 (325,000) (197,388)
------------ ------------ ------------
6,322,854 8,944,248 2,973,029
------------ ------------ ------------
Net cash provided by operating
activities............................... $ 1,884,434 $ 2,556,171 $ 1,286,867
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-25
<PAGE> 135
EAGLE WINDOW & DOOR, INC. AND SUBSIDIARIES AND
TAYLOR BUILDING PRODUCTS COMPANY (WHOLLY-OWNED SUBSIDIARIES)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES:
BASIS OF PRESENTATION:
The combined financial statements include the financial position, results
of operations and cash flows of Eagle Window & Door, Inc. and Subsidiaries and
Taylor Building Products Company (the Companies). All material intercompany
transactions, accounts and balances have been eliminated.
Each Company is a wholly-owned subsidiary of MascoTech, Inc. Because of
these relationships, the financial statements of the Companies have been
prepared on a combined format as if they were a single entity. In addition,
MascoTech, Inc. performed the Companies' treasury function, and allocated
expenses for various services it provided (See Note 10).
Eagle Window & Door, Inc. and Subsidiaries (Eagle) are engaged in the
manufacture of aluminum clad and all wood windows and doors. Eagle's primary
market is the construction industry. Products are marketed through various
distributors located throughout the United States and Pacific Rim. Eagle's
wholly-owned subsidiaries, Eagle Window & Door of Bellevue, Inc. and Eagle
Service Company are engaged in the sale and distribution of windows and doors
throughout the United States.
The accompanying combined financial statements include the consolidated
accounts of Eagle Window & Door, Inc. and its wholly-owned subsidiaries, Eagle
Window & Door of Bellevue, Inc. and Eagle Service Company. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Taylor Building Products Company (Taylor) is engaged in the manufacture of
entry and garage doors. The Company markets entry doors under the brand names of
Perma Door and Taylor Door. The Perma Door brand is primarily marketed through
millwork distributors and the Taylor Door brand is primarily marketed through
installing dealers. The Company markets garage doors under the Taylor Door brand
name throughout the United States.
PERVASIVENESS OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
EARNINGS PER SHARE:
Historical earnings per share data has not been presented in the
accompanying financial statements due to the subsequent acquisition of the two
Companies by American Architectural Products, Inc. and its reverse merger with a
public reporting company (See Note 13).
ACCOUNTS RECEIVABLE:
As of December 31, 1994 and 1995 and as of August 29, 1996, allowances have
been established for potentially uncollectible accounts receivable in the
amounts of $648,385, $445,418 and $791,521, respectively.
INVENTORY:
Inventory is stated at the lower of cost (first-in, first-out method) or
market. Inventories are reviewed periodically for obsolescence, and an allowance
established to record potentially obsolete inventory at net realizable value
(See Note 3).
F-26
<PAGE> 136
EAGLE WINDOW & DOOR, INC. AND SUBSIDIARIES AND
TAYLOR BUILDING PRODUCTS COMPANY (WHOLLY-OWNED SUBSIDIARIES)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES: (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. Depreciation is provided
for using the straight-line method over the estimated useful lives of the
assets. Maintenance and repairs that neither materially add to the value of the
property nor appreciably prolong its life are charged to expense as incurred.
Betterments or renewals are capitalized when incurred. Depreciation expense for
the years ended December 31, 1994 and 1995 and the eight months ended August 29,
1996, was $3,926,218, $3,310,040 and $2,661,961, respectively. Assets are being
depreciated over their estimated useful lives, as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements........................................... 40
Machinery and equipment.............................................. 6-15
Computer and office equipment........................................ 10
Tools, dies and fixtures............................................. 3
</TABLE>
INCOME TAXES:
The Companies file their income tax returns on a consolidated basis with
their parent company. All provisions for federal and state income taxes,
including provisions for deferred income taxes, are provided for through the
intercompany accounts.
ADVERTISING:
The cost of advertising is expensed as incurred. Advertising expense was
$1,426,021, $1,192,915 and $479,300, respectively, for the years ended December
31, 1994 and 1995 and the eight months ended August 29, 1996.
2. CONCENTRATION OF CREDIT RISK:
The combined Companies maintain cash balances at various financial
institutions. At December 31, 1994 and 1995 and at August 29, 1996, the combined
Companies have uninsured cash in the approximate amounts of $734,000, $670,000
and $230,000, respectively.
3. INVENTORY:
As of December 31, 1994 and 1995 and as of August 29, 1996, inventory
consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- AUGUST 29,
1994 1995 1996
----------- ----------- ----------
<S> <C> <C> <C>
Raw materials....................... $ 8,213,917 $ 7,106,775 $6,118,026
Work in process..................... 3,873,183 1,215,724 1,366,212
Finished goods...................... 7,702,083 1,631,594 1,473,501
----------- ----------- ----------
19,789,183 9,954,093 8,957,739
Less: provision for obsolete
inventory......................... (1,555,000) (1,623,500) (474,515)
----------- ----------- ----------
$18,234,183 $ 8,330,593 $8,483,224
========== ========== =========
</TABLE>
Included in the allowance for obsolete inventory as of December 31, 1995 is
approximately $1,260,000 for future losses from Taylor Building Products
Company's restructuring plan (See Note 7).
F-27
<PAGE> 137
EAGLE WINDOW & DOOR, INC. AND SUBSIDIARIES AND
TAYLOR BUILDING PRODUCTS COMPANY (WHOLLY-OWNED SUBSIDIARIES)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT:
As of December 31, 1994 and 1995, and as of August 29, 1996, property,
plant and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------- AUGUST 29,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Land and improvements................... $ 388,690 $ 407,523 $ 408,934
Buildings and improvements.............. 7,693,066 7,996,419 7,698,252
Machinery and equipment................. 12,322,099 10,807,526 11,276,992
Computer and office equipment........... 2,875,659 3,238,291 2,223,089
Tools, dies and fixtures................ 2,535,934 1,962,048 3,698,385
------------ ------------ ------------
25,815,448 24,411,807 25,305,652
Less: accumulated depreciation.......... (14,971,295) (15,651,008) (18,339,312)
------------ ------------ ------------
$ 10,844,153 $ 8,760,799 $ 6,966,340
=========== =========== ===========
</TABLE>
5. COMMITMENTS AND CONTINGENCIES:
COMMITMENTS:
The Companies are currently leasing certain office and manufacturing space
in Dubuque, Iowa and West Branch, Michigan under non-cancellable operating lease
agreements which expire through July, 1997. The terms of the leases provide for
combined monthly payments totalling approximately $12,000. The lease terms also
require the Companies to pay common area maintenance, taxes, insurance and other
costs. The Companies are also leasing equipment under various non-cancellable
operating lease agreements which expire through July, 2000. Rent expense under
the operating lease agreements was $927,916, $817,418 and $477,761,
respectively, for the years ended December 31, 1994, 1995 and the eight months
ended August 29, 1996.
A schedule of future minimum lease payments due under the non-cancellable
operating lease agreements, is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, AMOUNT
- ------------ ----------
<S> <C> <C>
1996............................................................. $ 595,370
1997............................................................. 330,465
1998............................................................. 221,577
1999............................................................. 88,472
2000............................................................. 4,729
----------
$1,240,613
=========
</TABLE>
CONTINGENCIES:
Environmental Issue:
Based on an evaluation of Eagle's operating facility, asbestos-containing
materials were located in various sections of the facility. No provision or
accrual has been made to provide for any potential future costs for abatement
because, in management's opinion, they should not have a material adverse effect
upon the combined financial position of the Companies. In connection with the
sale of the Companies to American Architectural Products, Inc. (See Note 13),
the former parent of the Companies agreed to bear certain abatement costs
relating to this matter.
F-28
<PAGE> 138
EAGLE WINDOW & DOOR, INC. AND SUBSIDIARIES AND
TAYLOR BUILDING PRODUCTS COMPANY (WHOLLY-OWNED SUBSIDIARIES)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
Litigation:
At December 31, 1995 and August 29, 1996, the Companies are a party to
several lawsuits. The Companies believe that the lawsuits are without merit and
intend to vigorously defend their position. Provision for a lawsuit that was
settled subsequent to December 31, 1995 for approximately $165,000 has been
charged to operations in the accompanying financial statements for the year
ended December 31, 1995. A provision has been charged to operations in the
accompanying financial statements for the eight months ended August 29, 1996 for
approximately $100,000 for a lawsuit involving product performance issues.
6. STOCKHOLDERS' EQUITY:
The stock of Taylor Building Products Company consists of 1,000 shares of
$1 par value common stock authorized, issued and outstanding. The stock of Eagle
Window & Door, Inc. consists of 500,000 shares of $1 par value common stock
authorized, 210,851 shares issued and outstanding.
7. RESTRUCTURING CHARGE:
In September, 1995, Taylor's management adopted a restructuring plan to
address recurring operating losses. The goal of the plan was to reduce overhead
through a plan of business consolidation and simplification. The major
components to the plan were: (1) closure of its satellite locations in Florida
and Texas; (2) elimination of its "non-core" product lines; and (3) improve the
proficiency of its entry and garage door lines. As a result of the restructuring
plan, the Company incurred costs for liquidation of inventory, loss on the sale
and abandonment of fixed assets, severance pay, and other related costs. The
restructuring plan was completed during the first quarter of 1996.
The restructuring charge for the year ended December 31, 1995, consisted of
the following:
<TABLE>
<S> <C>
Loss on sale and abandonment of fixed assets...................... $416,131
Severance pay..................................................... 281,012
Other............................................................. 142,899
--------
$840,042
========
</TABLE>
8. STATEMENTS OF CASH FLOWS:
NON-CASH INVESTING AND FINANCING ACTIVITIES:
During the year ended December 31, 1994, the Companies recognized an
investing activity that affected assets and liabilities, but did not result in
cash receipts or payments. This non-cash activity was a devaluation of fixed
assets assigned to the Companies by the parent company, offset against amounts
due to the parent company.
During the year ended December 31, 1995, the Companies recognized an
investing activity that affected equity, but did not result in cash receipts or
payments. This non-cash activity consisted of the write off notes receivable
deemed uncollectible in the amount of $344,473.
9. WARRANTY RESERVE:
The Companies sell the majority of their products with limited warranties
of two to 25 years. At December 31, 1994 and 1995, and at August 29, 1996, the
accompanying financial statements include a reserve of $5,149,800, $4,824,800
and $4,627,412, respectively, for estimated warranty claims based on the
Companies' historical claims experience.
F-29
<PAGE> 139
EAGLE WINDOW & DOOR, INC. AND SUBSIDIARIES AND
TAYLOR BUILDING PRODUCTS COMPANY (WHOLLY-OWNED SUBSIDIARIES)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
10. RELATED PARTY TRANSACTIONS:
As of December 31, 1994 and 1995, and as of August 29, 1996, the Companies
had amounts payable to affiliates of $25,427,638, $20,482,654 and, $19,441,656,
respectively. These affiliates represent primarily the parent company and
subsidiaries of the parent company. Various shared expenses were charged to the
Companies through the payable to affiliate account. These expenses included
items such as general insurance, health insurance, and workers compensation
insurance, which were charged based on specific identification of the expense.
For the years ended December 31, 1994 and 1995 and the eight months ended August
29, 1996, total expenses charged to the Companies through specific
identification were $4,357,726, $3,588,020 and $1,613,407, respectively.
In addition, MascoTech, Inc., the parent company, charged the Companies a
management fee based on budgeted sales for the various operating subsidiaries.
For the years ended December 31, 1994 and 1995 and the eight months ended August
29, 1996, total management fees charged to the Companies were $1,481,200,
$1,314,700 and $951,000, respectively.
MascoTech, Inc. also provided cash management services for the Companies.
For the years ended December 31, 1994 and 1995 and the eight months ended August
29, 1996, the Companies had recorded interest expense relating to the amounts
payable to affiliates of $2,040,067, $1,755,177 and $1,142,519, respectively.
Interest expense for the eight month period ended August 29, 1996 was treated as
contributed to capital by the Parent Company.
11. BENEFIT PLANS:
401K PROFIT SHARING PLAN AND PENSION PLAN:
The Companies' former parent sponsored the MascoTech, Inc. Salaried Savings
Plan. All salaried employees of the Company with three months of service, were
eligible to participate in the Plan. The Plan operated as a 401K Savings Plan.
The Plan did not provide for a discretionary matching or profit sharing
contribution. As such, no expense has been recorded for contributions in the
accompanying financial statements.
The Companies' former parent sponsored the MascoTech, Inc. Master Hourly
Employees' Pension Plan. All hourly employees of the Companies were eligible to
participate in the Plan with participation commencing on the date of hire.
Benefits in the Plan were vested and based on the number of years of credited
service.
Pursuant to the pending sale of the Companies to American Architectural
Products, Inc., in August, 1996, and in accordance with the Stock Purchase
Agreement, coverage under these plans ceased. The seller agreed to fully vest
all participants and pay benefits in the normal course of the plans. As such, no
liability has been reported in the accompanying combined financial statements
for any potential unfunded liabilities.
POST-RETIREMENT BENEFITS:
Taylor Building Products Company sponsors a post-retirement health benefit
program pursuant to its collective bargaining contract. Under the principal
terms of the contract, the Company will pay a retired employee with a minimum of
ten years service, a benefit of $100 per month after retirement at age 62. As of
the date of the financial statements, no material post-retirement benefit
obligation has been incurred.
LABOR FORCE:
Most of the hourly employees of Taylor Building Products Company,
comprising approximately 85 percent of the Taylor labor force, are covered under
a collective bargaining agreement. The contract expired in February, 1997, and
was renegotiated for an additional five years.
F-30
<PAGE> 140
EAGLE WINDOW & DOOR, INC. AND SUBSIDIARIES AND
TAYLOR BUILDING PRODUCTS COMPANY (WHOLLY-OWNED SUBSIDIARIES)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
12. ECONOMIC DEPENDENCY:
For the years ended December 31, 1994 and 1995, Eagle Window & Door, Inc.
purchased approximately 24 percent and 38 percent, respectively, of their
materials from two suppliers. For the eight month period ended August 29, 1996,
Eagle purchased approximately 15 percent of their materials from one supplier.
At December 31, 1994 and 1995, and at August 29, 1996, amounts due to the
suppliers were $628,768, $254,584 and $332,179, respectively.
For the years ended December 31, 1994 and 1995, and for the eight month
period ended August 29, 1996, Taylor Building Products Company purchased
approximately 14 percent, 16 percent, and 20 percent, respectively, of their
materials from one supplier. At December 31, 1994 and 1995, and at August 29,
1996, amounts due to the supplier were approximately $434,000, $452,000 and
$362,000, respectively.
13. SUBSEQUENT EVENT:
ACQUISITION:
Effective August 29, 1996, the Companies were acquired by American
Architectural Products, Inc. (AAP). On December 18, 1996, American Architectural
Products Holdings, Inc. (AAPH, parent of AAP) consummated transactions
contemplated under an Agreement and Plan of Reorganization dated October 25,
1996. Under terms of this Agreement, all of the capital stock of AAP was
exchanged by AAPH for a 60 percent interest in Forte Computer Easy, Inc. The
financial statements do not give effect to these transactions.
F-31
<PAGE> 141
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
Mallyclad Corporation and Vyn-L Corporation
We have audited the accompanying combined balance sheets of Mallyclad
Corporation and Vyn-L Corporation as of November 30, 1994 and 1995 and June 30,
1996, and the related combined statements of operations and retained earnings,
and cash flows for the years ended November 30, 1994 and 1995 and the seven
months ended June 30, 1996. These combined financial statements are the
responsibility of the Companies' management. Our responsibility is to express an
opinion on these combined 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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Mallyclad
Corporation and Vyn-L Corporation as of November 30, 1994 and 1995 and June 30,
1996, and the results of their combined operations and their combined cash flows
for the years ended November 30, 1994 and 1995 and the seven months ended June
30, 1996 in conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
Troy, Michigan
April 28, 1997
F-32
<PAGE> 142
MALLYCLAD CORPORATION
AND VYN-L CORPORATION
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------------------
1994 1995 JUNE 30, 1996
----------- ----------- -------------
<S> <C> <C> <C>
ASSETS (Note 3)
CURRENT ASSETS
Cash and equivalents............................. $ 75,660 $ 110,599 $ 229,615
Accounts receivable, less allowance for doubtful
accounts of $7,000 in 1996.................... 673,627 530,410 358,731
Refundable income taxes.......................... -- 26,160 26,160
Inventories (Note 2)............................. 527,475 430,902 285,635
Prepaid expenses................................. 20,848 22,853 18,736
----------- ----------- -----------
TOTAL CURRENT ASSETS............................... 1,297,610 1,120,924 918,877
----------- ----------- -----------
PROPERTY AND EQUIPMENT
Leasehold improvements........................... 123,865 128,391 128,391
Machinery and equipment.......................... 2,166,739 2,203,868 2,205,604
Computers and office equipment................... 81,514 85,184 87,420
----------- ----------- -----------
2,372,118 2,417,443 2,421,415
Less accumulated depreciation.................... (2,186,494) (2,268,378) (2,304,178)
----------- ----------- -----------
NET PROPERTY AND EQUIPMENT......................... 185,624 149,065 117,237
----------- ----------- -----------
OTHER ASSETS....................................... 64,042 59,481 32,896
----------- ----------- -----------
$ 1,547,276 $ 1,329,470 $ 1,069,010
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving line of credit (Note 3)................ $ -- $ 100,000 $ --
Accounts payable................................. 460,372 280,737 158,039
Accruals
Product claims................................ 11,807 59,556 46,101
Commissions................................... 38,974 28,181 20,150
Compensation.................................. 42,522 12,185 8,647
Other......................................... 76,700 53,170 52,103
----------- ----------- -----------
TOTAL CURRENT LIABILITIES.......................... 630,375 533,829 285,040
----------- ----------- -----------
COMMITMENTS (Note 5)
STOCKHOLDERS' EQUITY
Common stock, $1 par, authorized 50,000 shares;
outstanding 50,000 shares--Mallyclad
Corporation................................... 50,000 50,000 50,000
Common stock, $1 par, authorized 50,000 shares;
outstanding 38,000 shares--Vyn-L
Corporation................................... 38,000 38,000 38,000
Retained earnings................................ 828,901 707,641 695,970
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY......................... 916,901 795,641 783,970
----------- ----------- -----------
$ 1,547,276 $ 1,329,470 $ 1,069,010
=========== =========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-33
<PAGE> 143
MALLYCLAD CORPORATION
AND VYN-L CORPORATION
COMBINED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED SEVEN
NOVEMBER 30, MONTHS
------------------------- ENDED
1994 1995 JUNE 30, 1996
---------- ---------- -------------
<S> <C> <C> <C>
Net Sales............................................. $4,564,079 $3,991,882 $ 1,915,620
Cost of Goods Sold.................................... 3,792,841 3,520,971 1,596,753
---------- ---------- -------------
Gross Profit.......................................... 771,238 470,911 318,867
Selling, General and Administrative Expenses.......... 677,656 648,990 349,671
---------- ---------- -------------
Income (Loss) from Operations......................... 93,582 (178,079) (30,804)
Other Income--Net..................................... 46,913 37,133 19,133
---------- ---------- -------------
Income (Loss) Before Taxes on Income.................. 140,495 (140,946) (11,671)
Tax Benefits (Taxes on Income) (Note 6)............... (41,600) 20,686 --
---------- ---------- -------------
Net Income (Loss)..................................... 98,895 (120,260) (11,671)
Retained Earnings, beginning of period................ 731,006 828,901 707,641
Dividends............................................. (1,000) (1,000) --
---------- ---------- -------------
Retained Earnings, end of period...................... $ 828,901 $ 707,641 $ 695,970
========= ========= ==========
</TABLE>
See accompanying notes to combined financial statements.
F-34
<PAGE> 144
MALLYCLAD CORPORATION
AND VYN-L CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEVEN
NOVEMBER 30, MONTHS
----------------------- ENDED
1994 1995 JUNE 30, 1996
--------- --------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................................... $ 98,895 $(120,260) $ (11,671)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization...................... 49,882 81,884 35,800
Changes in operating assets and liabilities:
Receivables...................................... (188,926) 117,057 171,679
Inventories...................................... (198,249) 96,573 145,267
Prepaid expenses................................. 3,500 (2,005) 4,117
Other assets..................................... 3,099 4,561 26,585
Accounts payable................................. 171,948 (179,635) (122,698)
Accruals......................................... 40,525 (16,911) (26,091)
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES..... (19,326) (18,736) 222,988
--------- --------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES
Additions to property and equipment................... (107,313) (45,325) (3,972)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under line of credit
arrangements....................................... (46,719) 100,000 (100,000)
Dividends paid........................................ (1,000) (1,000) --
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES..... (47,719) 99,000 (100,000)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS......... (174,358) 34,939 119,016
CASH AND EQUIVALENTS, at beginning of period............ 250,018 75,660 110,599
--------- --------- ---------
CASH AND EQUIVALENTS, at end of period.................. $ 75,660 $ 110,599 $ 229,615
========= ========= =========
</TABLE>
See accompanying notes to combined financial statements.
F-35
<PAGE> 145
MALLYCLAD CORPORATION
AND VYN-L CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND BASIS OF PRESENTATION
Mallyclad Corporation (Mallyclad) manufactures vinyl clad steel and
aluminum cut to length sheets, primarily for the construction, appliance and
automotive industries. Vyn-L Corporation (Vyn-L) is a steel and aluminum
processor, performing shearing and forming functions for its customers.
Mallyclad and Vyn-L ("the Companies") were under common control and because
of these relationships, the financial statements of the Companies have been
prepared on a combined basis as if they were a single entity. All material
intercompany transactions, accounts and balances have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of receivables, payables and accrued expenses
approximate fair value because of the short maturity of these items.
CASH EQUIVALENTS
Cash equivalents are short-term, highly liquid investments consisting of
money market funds.
INVENTORIES
Inventories are stated at the lower of cost or market value determined on
the first-in, first-out (FIFO) basis.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided for
using accelerated methods over the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Leasehold improvements............................................... 7-31
Machinery and equipment.............................................. 7-15
Computers and office equipment....................................... 5-7
</TABLE>
Depreciation expense for the years ended November 30, 1994 and 1995 and for
the seven months ended June 30, 1996, was $49,882, $81,884 and $35,800,
respectively.
Expenditures for renewals and betterments are capitalized. Expenditures for
maintenance and repairs are charged against income as incurred.
REVENUE RECOGNITION
Revenues from sales and the corresponding receivables are recorded upon the
shipment of product to the customer.
F-36
<PAGE> 146
MALLYCLAD CORPORATION
AND VYN-L CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The income tax provision is computed using the liability method. Deferred
taxes are recorded for the expected future tax consequences of temporary
differences between the financial reporting and the tax bases of the Companies'
assets and liabilities.
2. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------------
1994 1995 JUNE 30, 1996
-------- -------- --------------
<S> <C> <C> <C>
Raw materials........................... $422,175 $355,670 $198,605
Finished goods.......................... 105,300 75,232 87,030
-------- -------- --------
$527,475 $430,902 $285,635
======== ======== ========
</TABLE>
3. REVOLVING LINE OF CREDIT
Mallyclad had a $400,000 revolving line of credit secured by substantially
all of the assets of Mallyclad. The outstanding borrowings on the line were
$-0-, $100,000 and $-0-, respectively, as of November 30, 1994 and 1995, and
June 30, 1996. The interest rate on the line was prime plus 1/2 percent.
Interest expense was $467, $5,086 and $2,110, respectively, for the periods
ended November 30, 1994 and 1995, and June 30, 1996. The revolving line of
credit was terminated in connection with the acquisition of the Company's common
stock (see Note 9).
4. RETIREMENT PLAN
Mallyclad sponsors a defined contribution retirement plan for salaried
employees. Employees are eligible to participate in the Plan one year after
employment. Company contributions are required in the amount of 4.3 percent of
the participant's total compensation plus 4.3 percent of the participant's
compensation in excess of $30,000. Contributions were $31,641, $30,974 and
$17,500, respectively, for the periods ended November 30, 1994 and 1995, and
June 30, 1996.
5. COMMITMENTS
The Companies leased their facilities from a related party under
non-cancellable operating lease agreements which commenced January 1, 1994. The
operating lease agreements are for a term of five years and provide for total
monthly payments of $16,168. Rent expense under the operating lease agreements
for the periods ended November 30, 1994 and 1995, and June 30, 1996 was
$163,000, $163,000 and $95,000, respectively.
F-37
<PAGE> 147
MALLYCLAD CORPORATION
AND VYN-L CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
6. TAXES ON INCOME
The benefits (expenses) for income taxes consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED SEVEN
NOVEMBER 30, MONTHS
-------------------- ENDED
1994 1995 JUNE 30, 1996
-------- ------- --------------
<S> <C> <C> <C>
Current federal.......................... $(41,600) $20,686 $ --
Deferred................................. -- -- --
-------- ------- -------
Total.................................... $(41,600) $20,686 $ --
======== ======= =======
</TABLE>
Significant components of deferred taxes consist of deferred tax assets
arising from accrued expenses, allowance for doubtful accounts and depreciation.
Management has recorded a full valuation allowance against these deferred tax
assets at November 30, 1994 and 1995 and at June 30, 1996.
7. MAJOR CUSTOMERS
One customer accounted for 16% of net sales in 1994, and two customers,
each individually accounting for at least 10% of combined net sales, accounted
for 23% of net sales in 1995.
8. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest approximated interest expense.
Cash paid for taxes on income for the periods ended November 30, 1994 and
1995, and June 30, 1996 totaled $39,449, $33,014 and $-0-, respectively.
9. SUBSEQUENT EVENT
On June 25, 1996, all of the outstanding stock of the Companies was
purchased by an individual. On December 18, 1996 Mallyclad and Vyn-L were merged
into American Architectural Products, Inc. (AAP), a Company controlled by this
same individual. These financial statements do not give effect to these
transactions.
F-38
<PAGE> 148
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Forte Computer Easy, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Forte
Computer Easy, Inc. and Subsidiaries as of December 31, 1995, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
presents fairly, in all material respects, the consolidated financial position
of Forte Computer Easy, Inc. and Subsidiaries as of December 31, 1995, and the
consolidated results of its operations, changes in stockholders' equity, and
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
SEMPLE & COOPER, P.L.C.
Phoenix, Arizona
May 28, 1996
F-39
<PAGE> 149
(This page intentionally left blank)
F-40
<PAGE> 150
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash........................................................... $ 143,254 $ 255,549
Accounts receivable, less allowance for doubtful accounts and
returns of $299,939 and $0, respectively.................... 437,160 198,394
Inventory...................................................... 1,666,832 1,782,078
Prepaid expenses............................................... 31,474 15,002
Costs and estimated earnings in excess of billings on
uncompleted contracts....................................... 246,472 43,574
----------- -----------
Total Current Assets........................................ 2,525,192 2,294,597
----------- -----------
Property, Plant and Equipment:
Land........................................................... 74,969 74,969
Buildings and improvements..................................... 2,957,795 2,968,203
Equipment, machinery and tooling............................... 2,099,581 1,839,282
Office furniture and equipment................................. 122,709 85,423
Vehicles....................................................... 140,787 171,725
Airplane....................................................... 207,600 --
----------- -----------
5,603,441 5,139,602
Less: accumulated depreciation................................. (1,196,182) (1,118,303)
----------- -----------
4,407,259 4,021,299
----------- -----------
Other Assets:
Net assets of discontinued operations.......................... 74,000 --
Goodwill, net.................................................. 360,533 318,926
Other intangible costs, net.................................... 27,170 29,598
Deposits and other............................................. 3,467 2,913
----------- -----------
465,170 351,437
----------- -----------
$ 7,397,621 $ 6,667,333
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-41
<PAGE> 151
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(UNAUDITED)
<S> <C> <C>
Current Liabilities:
Current portion of long-term debt.............................. $ 243,438 $ 242,000
Revolving line of credit....................................... 107,906 107,906
Amount due officer............................................. 18,013 18,013
Accounts payable............................................... 596,369 353,673
Accrued liabilities............................................ 457,170 53,455
Net liabilities of discontinued operations..................... -- 209,945
Accrued costs of discontinued operations....................... 277,619 --
Billings in excess of costs and estimated earnings on
uncompleted contracts....................................... 371,778 17,408
----------- -----------
Total Current Liabilities................................... 2,072,293 1,002,400
----------- -----------
Long-Term Debt, Net of Current Portion........................... 4,021,664 4,429,684
Lease Deposit.................................................... 9,575 9,575
Deferred Tax Liability........................................... 160,573 92,273
----------- -----------
4,191,812 4,531,532
----------- -----------
Commitments...................................................... -- --
Stockholders' Equity:
Preferred stock -- $.01 par value; 20,000,000 shares
authorized; no shares issued or outstanding................. -- --
Common stock -- $.01 par value; 50,000,000 shares authorized;
48,460,111 shares issued and outstanding; 1,718,422 shares
subscribed.................................................. 484,601 484,601
Paid-in capital................................................ 2,669,485 2,413,902
Common stock subscribed........................................ 79,143 79,143
Accumulated deficit............................................ (1,727,609) (1,840,724)
----------- -----------
1,505,620 1,136,922
Less: Treasury stock, 456,317 shares at cost................... (372,104) (3,521)
----------- -----------
1,133,516 1,133,401
----------- -----------
$ 7,397,621 $ 6,667,333
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-42
<PAGE> 152
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
------------ -------------------------------
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1996
------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Net Revenues........................................ $ 5,426,260 $ 4,361,288 $ 2,635,113
Cost of Revenues.................................... 4,540,722 3,541,366 2,087,032
----------- ----------- -----------
Gross Profit........................................ 885,538 819,922 548,081
Selling, General and Administrative................. 747,659 532,900 497,196
----------- ----------- -----------
Income Loss......................................... 137,879 287,022 50,885
Other Income (Expense):
Gain on sale of assets............................ -- -- 123,439
Other income (expense)............................ 22,086 37,018 12,841
Rental income..................................... 86,929 67,596 71,905
Interest expense.................................. (352,403) (254,879) (285,646)
Amortization of intangibles....................... -- (44,699) (49,932)
----------- ----------- -----------
Income (Loss) from Continuing Operations before
Provision for Income Taxes........................ (105,509) 92,058 (76,508)
Provision for Income Tax Benefit (Expense).......... 54,971 (34,900) 29,000
----------- ----------- -----------
Loss from Continuing Operations..................... (50,538) (57,158) (47,508)
Discontinued Operations:
Loss from operations of software division and disk
fulfillment division........................... (1,149,518) (560,990) (35,454)
Loss on disposal of disk fulfillment division....... (245,419) -- (30,153)
----------- ----------- -----------
Net Loss............................................ $ (1,445,475) $ (503,832) $ (113,115)
=========== =========== ===========
Earnings per Share Income (loss) from continuing
operations........................................ -- -- --
Loss of discontinued operations and operations to
be disposed of................................. (.03) (.01) --
Income (loss) from disposal of disk and
fulfillment division........................... -- -- --
----------- ----------- -----------
Net Income (Loss)................................... $ (.01) $ (.01) $ --
=========== =========== ===========
Weighted Average Shares Outstanding................. 50,000,000 49,630,799 49,813,420
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-43
<PAGE> 153
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM DECEMBER 31, 1994 THROUGH SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
COMMON
SHARES PAID-IN STOCK TREASURY ACCUMULATED TOTAL
PREFERRED OF COMMON COMMON CAPITAL SUBSCRIBED STOCK DEFICIT EQUITY
--------- ---------- -------- ---------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994............... -- 48,460,111 $484,601 $2,669,485 $ 79,143 -- $ (282,134) $ 2,951,095
Acquisition of
456,317 shares of
treasury stock, at
cost............... -- -- -- -- -- $(372,104) -- (372,104)
Net loss............. -- -- -- -- -- -- (1,445,475) (1,445,475)
--------- ---------- -------- ---------- -------- --------- ----------- -----------
Balance, December 31,
1995............... -- 48,460,111 484,601 2,669,485 79,143 (372,104) (1,727,609) 1,133,516
Sale of Treasury
Shares
(unaudited)........ -- -- -- (255,583) -- 368,583 -- 113,000
Net loss
(unaudited)........ -- -- -- -- -- -- (113,115) (113,115)
--------- ---------- -------- ---------- -------- --------- ----------- -----------
Balance, September
30, 1996
(unaudited)........ $ -- 48,460,111 $484,601 $2,413,902 $ 79,143 $ (3,521) $(1,840,724) $ 1,133,401
========= ========== ======== ========== ======== ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-44
<PAGE> 154
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
------------ -------------------------------
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1996
------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Loss.......................................... $ (1,445,475) $ (503,832) $ (113,115)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization.................. 378,886 281,977 227,451
Amortization of software development costs..... 109,899 141,247 --
Amortization of intangibles.................... 76,078 65,201 49,932
Decrease in provision for returns and doubtful
accounts..................................... (180,468) (71,947) --
Gain on sale of assets......................... -- (77,601) (123,439)
Decrease in provision for inventory
obsolescence................................. (284,540) -- --
Impairment of intangible assets of discontinued
operations................................... 246,083 -- --
Cash received from purchase of subsidiary...... -- -- --
Changes in Assets and Liabilities:
(Increase) Decrease in Assets:
Accounts receivable............................ 1,272,684 591,626 174,660
Inventory...................................... 908,156 416,386 (115,246)
Prepaid expenses............................... 80,204 68,031 16,472
Costs and estimated earnings in excess of
billings on uncompleted contracts............ 72,848 (44,541) 202,898
Deposits and intangibles....................... 5,433 5,641 (10,199)
Increase (Decrease) in Liabilities:
Accounts payable............................... (1,692,059) (385,410) (242,696)
Accrued liabilities............................ (12,103) 25,055 (371,904)
Amount due officer............................. 713 -- --
Accrued costs of discontinued operations....... 277,619 -- (207,827)
Net liabilities of discontinued operations..... -- -- 303,945
Billings in excess of costs and estimated
earnings on uncompleted contracts............ 231,618 124,025 (354,370)
Net deferred tax liability..................... (154,828) (308,700) (68,300)
---------- ---------- ------------
Net cash provided by (used by) operating
activities.............................. $ (109,252) $ 327,158 $ (631,738)
========== ========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-45
<PAGE> 155
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED -----------------------------
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1996
------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Cash Flows from Investing Activities:
Capital expenditures............................... $ (153,285) $(121,943) $ (97,376)
Computer software development costs................ (30,102) (30,102) --
Proceeds from the sale of assets................... 686,250 50,000 250,000
----------- --------- ---------
Net cash provided by (used by) investing
activities............................... 502,863 (102,045) 152,624
----------- --------- ---------
Cash Flows from Financing Activities:
Proceeds from sale of treasury stock............... 75,000 -- 113,000
Proceeds from debt................................. 337,971 337,971 2,942,000
Principal payments on debt......................... (785,959) (661,085) (2,463,591)
Payments on amount due officers, net............... -- (20,164) --
----------- --------- ---------
Net cash provided by (used by) financing
activities............................... (372,988) (343,278) 591,409
----------- --------- ---------
Net Increase (Decrease) in Cash...................... 20,623 (118,165) 112,295
Cash, Beginning of Year.............................. 122,631 122,631 143,254
----------- --------- ---------
Cash, End of Year.................................... $ 143,254 $ 4,466 $ 255,549
=========== ========= =========
</TABLE>
F-46
<PAGE> 156
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1996
------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Payment of accrued liability with equity in a
building........................................... $ -- $ -- $ 31,811
======= ======= =======
Negotiated accounts payable settlement reductions of
discontinued operations............................ $124,744 $ -- $ --
======= ======= =======
Purchase of treasury stock through the reduction of
accounts receivable and accrual of expenses........ $372,104 $ -- $ --
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-47
<PAGE> 157
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS:
Forte Computer Easy, Inc. is a Corporation which was duly formed and
organized under the laws of the State of Utah. Through June 8, 1994, the
acquisition date of Forte, Inc. and Arizona Disk Fulfillment, Inc., the Company
was principally engaged in the business of software publishing. Based upon the
aforementioned acquisitions, the Company expanded its operations through the
acquired subsidiaries into manufacturing of commercial and architectural
fenestration products, and into computer disk duplication and fulfillment
services for software publishers and technology based industries throughout the
United States.
In late 1995, the Company decided to discontinue its operations in the
software publishing and computer disk duplication and fulfillment divisions, as
disclosed in Note 10, Discontinued Operations.
ACQUISITION OF SUBSIDIARIES:
Effective June 8, 1994, the Company finalized the acquisition of all of the
outstanding stock of Forte, Inc. and Subsidiary, an Ohio corporation and Arizona
Disk Fulfillment, Inc., an Arizona corporation.
The acquisition of Forte, Inc. was effected through the exchange of
32,479,290 (unaudited) shares, of which 1,718,422 (unaudited) shares are
subscribed of the Company's common stock for all of the outstanding shares of
Forte, Inc. under a tax-free reorganization within the meaning of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. The acquisition
was accounted for financial statement purposes as a reverse acquisition, with
Forte, Inc. as the acquiring company.
The acquisition of Arizona Disk Fulfillment, Inc. was completed through the
payment of $150,000 (unaudited) and the issuance of 1,900,000 (unaudited) shares
of the Company's common stock for all of the outstanding shares of Arizona Disk
Fulfillment, Inc. This transaction was also completed as a tax-free
reorganization.
For financial accounting purposes, the acquisitions are accounted for as
purchases in accordance with Accounting Principles Board Opinion No. 16. For tax
reporting purposes, these acquisitions were structured as tax-free
reorganizations.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Forte
Computer Easy, Inc. and its wholly-owned subsidiaries, Forte, Inc. and Arizona
Disk Fulfillment, Inc. All significant inter-company balances and transactions
have been eliminated in consolidation.
PERVASIVENESS OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
UNAUDITED FINANCIAL STATEMENTS:
The unaudited interim consolidated financial statements include all
adjustments for normal recurring accruals considered necessary to present fairly
the Company's consolidated statements for the periods presented. Operating
results for the nine months ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996.
F-48
<PAGE> 158
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION:
Computer Software:
The Company recognizes its computer software sales revenue in accordance
with the American Institute of Certified Public Accountants Statement of
Position 91-1 regarding software revenue recognition. Product revenue is
recognized, net of an allowance for estimated returns, upon product shipment.
The Company has established a program which enables distributors to return
products for credit against future purchases.
CONTRACTING REVENUES:
The Company recognizes contract manufacturing income from fixed-price and
modified-fixed price contracts on the percentage-of-completion method of
accounting. Direct labor is allocated on a standard cost basis, based on the
estimated time to manufacture each type of production unit, and manufacturing
overhead is allocated by manufacturing labor hours. Installation labor is
allocated by contract as incurred. Contract material costs are accumulated on a
standard cost basis based upon the type of production unit manufactured under
contract. The amount recorded as the percentage complete for each individual
contract is based upon the units of production method. The cost of materials
purchased but not utilized in completion of the manufacturing process are not
considered in determining the progress toward completion.
Incurred contract costs include all direct material utilized, labor costs,
installation costs and those indirect costs related to contract performance,
such as indirect labor, supplies, tools, repairs, factory costs, and
depreciation. Selling, general and administrative costs are charged to expense
as incurred. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined. Changes in job performance,
job conditions and estimated profitability, including those arising from final
contract settlements, may result in revisions to cost and revenue and are
recognized in the period in which the revisions are determined.
The asset, "Costs and Estimated Earnings in Excess of Billings on
Uncompleted Contracts" represents revenues recognized in excess of amounts
billed, and the liability "Billings in Excess of Costs and Estimated Earnings on
Uncompleted Contracts" represents revenues recorded in excess of recognized
costs and estimated earnings.
CONCENTRATIONS OF RISK:
The Company sells its software inventory on credit primarily to software
distributors and national retailers who market the Company's products and other
software products principally in the United States. The majority of the
Company's consolidated accounts receivable balance as of December 31, 1995 is
due from six major customers.
In addition, the Company currently has two major contracts in process from
its fenestration operations, which together represent approximately 54 percent
of the total contracts in process at December 31, 1995. These two contracts were
substantially completed at December 31, 1995.
ACCOUNTS RECEIVABLE:
The Company follows the allowance method of recognizing uncollectible
accounts receivable. The allowance method recognizes bad debt expense as a
percentage of accounts receivable, based on a review of the individual accounts
outstanding and the Company's prior history of uncollectible accounts
receivable.
F-49
<PAGE> 159
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES:
Inventories are stated at the lower of cost or market. Cost is determined
on the weighted average basis for software product inventory, and the first-in,
first-out basis for all other inventory.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. Depreciation is computed
by the straight-line method over the estimated useful lives of the related
assets for financial reporting purposes and on an accelerated method for tax
purposes. The estimated useful lives are as follows:
<TABLE>
<S> <C>
Buildings............................................ 31.5-40 years
Leasehold improvements............................... 5-7 years
Office furniture and fixtures........................ 7-10 years
Equipment............................................ 5-15 years
</TABLE>
Maintenance and repairs that neither materially add to the value of the
property nor appreciably prolong its life are charged to operations as incurred.
Betterments or renewals are capitalized when incurred. For the year ended
December 31, 1995, depreciation expense was $378,886. For the nine months ended
September 30, 1995 and 1996, depreciation expense was $281,977 and $277,451
(unaudited), respectively.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS:
The Company capitalizes software development costs in accordance with
Financial Accounting Standards Board Statement No. 86. Software development
costs not qualifying for capitalization are expensed as research and development
costs, as incurred. These costs totaled approximately $175,708 for the year
ended December 31, 1995.
Capitalized costs are amortized on a product-by-product basis using
straight-line amortization with useful lives of three to five years. The Company
evaluates the estimated net realizable value of each software product at each
balance sheet date and records write-downs to net realizable value for any
products for which net book value is in excess of net realizable value. During
the year ended December 31, 1995, amortization of capitalized software
development costs charged to cost of revenues totaled $109,899. Based upon
management's decision to phase-out the software division in 1995, all
capitalized software development costs were written off.
GOODWILL:
Goodwill represents the excess of the cost of companies acquired over the
fair value of their net assets at the date of acquisition and is being amortized
on the straight-line method over eight to 25 years. Amortization expense charged
to operations for the years ended December 31, 1995 amounted to $47,567.
Amortization expense charged to operations for the nine months ended September
30, 1995 and 1996 was $39,447 and $41,602 (unaudited), respectively. The Company
evaluates the estimated net realizable value of its goodwill at each balance
sheet date, and records writedowns if the carrying value exceeds the expected
future net operating cash flows from the related operations. If the expected
future net operating cash flows are less than the carrying value, the Company
recognizes an impairment loss equal to the amount by which the carrying value
exceeds the discounted expected future net operating cash flows from the related
operations. During the current year the Company recognized an impairment of
intangible assets of discontinued operations in the approximate amount of
$246,083.
F-50
<PAGE> 160
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER INTANGIBLE COSTS:
Other intangible costs are comprised primarily of deferred loan costs,
which are amortized over the term of the related loan on a straight-line basis.
Amortization for the year ended December 31, 1995 amounted to $28,511. For the
nine months ended September 30, 1995 and 1996, amortization of other intangible
costs was $5,252 and $8,325, respectively.
INCOME TAXES:
Effective January 1, 1993, the Company implemented Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires an
asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future,
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income, and tax net operating loss
and credit carryforwards. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable or refundable for the period plus or minus the change
in deferred tax assets and liabilities during the period.
2. SEGMENT REPORTING:
The following table presents the total assets of Forte Computer Easy, Inc.
and Subsidiaries at December 31, 1995, and the net revenues and net loss of
Forte Computer Easy, Inc. and Subsidiaries for the year ended December 31, 1995,
are as follows:
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Total Assets:
Forte Computer Easy, Inc............................................ $ 150,198
Forte, Inc.......................................................... 7,260,315
Arizona Disk Fulfillment, Inc....................................... (12,892)
-----------
Total............................................................... $ 7,397,621
===========
Net Revenues:
Forte Computer Easy, Inc............................................ $ 1,010,242
Forte, Inc.......................................................... 5,426,260
Arizona Disk Fulfillment, Inc....................................... 1,541,650
Less: amount included in discontinued operations.................... (2,551,892)
-----------
Total............................................................... $ 5,426,260
===========
Net Loss:
Forte Computer Easy, Inc............................................ $(1,026,029)
Forte, Inc.......................................................... (50,538)
Arizona Disk Fulfillment, Inc....................................... (368,908)
-----------
Total............................................................... $(1,445,475)
===========
</TABLE>
F-51
<PAGE> 161
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. CONTRACTS IN PROGRESS:
Costs and estimated earnings in excess of billings and billings in excess
of costs and estimated earnings on uncompleted contracts consist of the
following:
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Costs incurred on uncompleted contracts.......... $4,466,544 $ 882,983
Profit earned to date............................ 1,623,862 415,165
---------- ----------
6,090,406 1,298,148
Less: billings to date........................... 6,215,712 1,271,982
---------- ----------
$ (125,306) $ 26,166
========== ==========
</TABLE>
Presentation in the accompanying balance sheets, is as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................... $ 246,472 $ 43,574
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................... (371,778) (17,408)
-------- ---------
$ (125,306) $ 26,166
======== =========
</TABLE>
4. INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Raw materials.............................................. $1,761,561 $ 1,669,078
Finished goods............................................. 110,188 185,000
Work in process............................................ 44,185 38,000
Packaging materials and components......................... 10,898 --
Less: amounts included in net assets of discontinued
operations............................................... (260,000) (110,000)
---------- ----------
$1,666,832 $ 1,782,078
========== ==========
</TABLE>
5. REVOLVING CREDIT LINE:
The Company had an operating agreement for a line of credit under which it
could borrow $300,000 or 80% of the eligible accounts receivable of Computer
Easy International, Inc. at a monthly rate of 3%. The credit line was terminated
on August 31, 1995, as the Company is in default.
6. RELATED PARTY TRANSACTIONS:
The Company sells fenestration products to a contractor, whose owner is
related to an officer of the Company. Sales for the year ended December 31, 1995
totaled $43,459 and revenue for the nine months ended September 30, 1996 was $0.
No amount is owed the Company at December 31, 1995 and September 30, 1996.
F-52
<PAGE> 162
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company performs management services for various rental properties
owned by an officer of the Company. Management services billed during the year
ended December 31, 1995 and during the nine months ended September 30, 1996
amounted to $49,804 and $37,724, respectively. Amounts included in accounts
receivable at December 31, 1995 and September 30, 1996 totaled $14,109 and
$44,802, respectively, and in the opinion of management, are expected to be
collected.
7. INCOME TAXES:
For financial accounting and tax reporting purposes, the Company reports
income and expenses on the accrual basis of accounting. For the year ended
December 31, 1995, the Company made provisions for net federal and state income
tax benefits in the approximate amounts of $69,100 and $155,000, respectively.
This tax benefit was due to the net increase of the deferred tax asset arising
from the net operating loss carryforwards.
At December 31, 1995, there are federal and state net operating loss
carryforwards available to offset future federal and state taxable income,
expiring as follows:
<TABLE>
<CAPTION>
FEDERAL NET STATE NET
EXPIRATION OPERATING LOSS EXPIRATION OPERATING LOSS
DECEMBER 31, CARRYFORWARD DECEMBER 31, CARRYFORWARD
- --------------------- -------------- --------------------- --------------
<S> <C> <C> <C>
2002............... $ 86,238 1997................. $ 74,152
2005............... 74,252 1998................. 608,297
2008............... 608,297 1999................. 564,044
2009............... 564,044 2000................. 1,014,207
----------
2010............... 1,014,207
----------
$2,347,038 $2,260,700
========== ==========
</TABLE>
Federal net operating losses are further limited due to ownership changes
to approximately $300,000 per year.
Deferred income taxes arise from timing differences resulting from revenues
and costs reported for financial accounting and tax reporting purposes in
different periods. Deferred income taxes represent the tax liability or asset
based on different depreciation methods used for financial accounting and tax
reporting purposes, research and development costs which are expended as period
costs for tax reporting purposes, contract accounting under the percentage of
completion method for financial reporting and completed contract basis for tax
purposes, and differences in asset basis for financial reporting and tax
purposes due to the purchase method of accounting used in the business
acquisitions.
Components of the net deferred tax liability are as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Deferred Tax Asset:
Estimated benefit from federal and state net operating
loss carryforwards.................................... $ 704,111 $ 758,800
Deferred Income Taxes Payable:
Depreciation differences................................. (510,450) (521,000)
Contract accounting differences.......................... (354,234) (330,073)
--------- ---------
Net deferred tax liability................................. $ (160,573) $ (92,273)
========= =========
</TABLE>
F-53
<PAGE> 163
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Borrowings under loan agreements with a bank............... $2,796,125 $ 3,254,707
Lines of credit with a bank................................ 495,000 250,000
Borrowings under other loan agreements..................... 1,050,977 1,166,977
---------- ----------
4,342,102 4,671,684
Less: amount included in net assets of discontinued
operations .......................................... (77,000) --
---------- ----------
Total long-term debt....................................... 4,265,102 4,671,684
Less: current portion of long-term debt.................... (243,438) (242,000)
---------- ----------
Long-term debt............................................. $4,021,664 $ 4,429,684
========== ==========
</TABLE>
Borrowings under loan agreements and lines of credit with a bank are
collateralized by equipment, inventory, accounts receivable, assignment of a
$400,000 life insurance policy on an officer of the Company, and an assignment
of rents on an operating lease. The loan agreements have interest rates varying
from 8.25 percent per annum to variable rates of prime plus 2.25 percent per
annum. The prime rate at December 31, 1995 and September 30, 1996 was 8.5
percent and 8.25 percent, respectively.
Borrowings under other loan agreements are collateralized by equipment and
real estate and have interest rates varying from 3 percent to 10 percent per
annum.
On January 30, 1996, Forte, Inc. restructured its long-term debt with a
bank. The debt restructure consolidated nine existing loans, and provides for a
15 year amortization, with a five year call. The gross proceeds of the debt
restructure amounted to $2,675,000, with an interest rate of two points over the
bank's prime rate. The initial rate of interest is 10.5 percent. The loan
agreement calls for monthly payments, including principal and interest, of
$25,000 for the period February, 1996 through July, 1996, and thereafter monthly
payments, including principal and interest, of $30,000. The note is secured by a
first mortgage assignment of rents on property leased by the Company; a blanket
assignment of life insurance on an officer, in the amount of $1,650,000, and all
inventory, accounts, contract rights, equipment, fixtures and general
intangibles.
At December 31, 1995, the approximate aggregate maturities of debt for the
succeeding five years, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, AMOUNT
------------- ----------
<S> <C>
1996............................. $ 243,438
1997............................. 266,386
1998............................. 259,495
1999............................. 279,841
2000............................. 293,443
Subsequent......................... 2,922,499
----------
$4,265,102
==========
</TABLE>
9. INCENTIVE STOCK OPTION PLANS AND STOCK OPTIONS:
In May, 1992, the Board of Directors adopted an Employee Incentive Stock
Option Plan which was approved by the shareholders in May, 1992. The plan calls
for reservation of 5,000,000 shares of the
F-54
<PAGE> 164
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCENTIVE STOCK OPTION PLANS AND STOCK OPTIONS (CONTINUED)
Company's common stock. The plan also provides for the issuance of options to
purchase the Company's common stock at 100% of the fair market value at the date
of grant. Options have a maximum duration of ten years after the date of grant.
As part of the Plan and Agreement of Reorganization with Forte, Inc., stock
options were granted to the former stockholders of Forte, Inc. for 4,717,698
shares at $.375 per share and are exercisable through June 8, 1998. The Plan
also provides for the Company to enter into separate Stock Option Agreements
dated June 7, 1994, whereby the Company has the right, for a period of one year
from June 8, 1994, to purchase 30 percent of the shares owned by certain major
stockholders at the rate of $.50 per share. The number of shares which can be
redeemed by the Company under this agreement is 1,940,202. The Company did not
exercise any of its options to repurchase any of the returned shares.
Outstanding options would be adjusted in the event of any forward or
reverse stock split or similar activity.
Stock option activity is as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996 OPTION PRICE
------------ ------------- ------------
<S> <C> <C> <C>
Outstanding, beginning of period............. $6,815,548 $ 5,815,548 $ .25 - $.50
Granted during the period.................... -- -- .375
Exercised during the period.................. -- -- .00
Cancelled during the period.................. 1,000,000 -- .00
---------- ---------- ----------
$5,815,548 $ 5,815,548 $ .25 - $.50
========== ========== ==========
</TABLE>
In addition, during the year ended December 31, 1995, the Company sold
150,000 shares of common stock, at $.50 per share, subject to put options. The
put options provide the purchasers the right to put the shares to the Company
one year after the date of issuance of the common stock at $.625 per share or
two years after the date of issuance at $.75 per share. As of the balance sheet
date at December 31, 1995 and September 30, 1996, an accrual for the put option,
in the amount of $75,000, has been made.
10. DISCONTINUED OPERATIONS:
SOFTWARE DIVISION
On September 6, 1995, Forte Computer Easy, Inc. sold its rights to the
Floor Plan Plus(TM) and 3D Design(TM) lines for $691,889, together with a
$200,000 contingent payment based upon future performance goals of the acquiring
company, International Microcomputer Software, Inc. (NASDAQ:IMSI). These product
lines represent a significant portion of the historical sales of the software
operating division. The Company determined that it was in the best long-range
interest of the Company to phase-out the software division. Proceeds from the
sale were utilized for debt reduction of this division.
The software division's operating loss for the year ended December 31, 1995
of $1,026,029 (net of income tax benefit of $16,500), is shown separately in the
accompanying statements of operations for the year ended December 31, 1995 and
for the nine months ended September 30, 1996 and 1995.
A provision of $50,000 for expected operating losses during the final
phase-out period in 1996 has been made at December 31, 1995.
F-55
<PAGE> 165
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. DISCONTINUED OPERATIONS (CONTINUED)
Net revenue for the software division for 1995 was $1,010,242. This revenue
is not included in net revenue in the accompanying statement of operations.
ARIZONA DISK FULFILLMENT, INC.
The disk and fulfillment division operating loss for the year ended
December 31, 1995 of $368,908 (net of income tax benefit of $18,500), is shown
separately in the accompanying statement of operations.
Estimated losses on the disposal of the disk and fulfillment division of
$227,619, which includes $80,000 for expected operating losses for the period
January 1, 1996 to August 31, 1996, have been provided for at December 31, 1995.
Net revenue for the disk fulfillment division for 1995 was $1,541,650. This
revenue is not included in net revenue in the accompanying statement of
operations.
On August 5, 1996, the Company entered into a Stock Purchase Agreement
pursuant to which it agreed to sell 100 percent of the issued and outstanding
common stock of Arizona Disk Fulfillment, Inc. to Beverly and James W. Schmidt.
Mr. Schmidt has served as president of Arizona Disk Fulfillment, Inc. since
1993. The sale of Arizona Disk Fulfillment, Inc. by the Company was fully
consummated in August, 1996.
11. ASSETS AND LIABILITIES TO BE DISPOSED OF:
Assets and liabilities of the following operating divisions to be disposed
of consisted of the following at December 31, 1995 and September 30, 1996:
(unaudited)
<TABLE>
<CAPTION>
DISK AND
SOFTWARE FULFILLMENT
DECEMBER 31, 1995: DIVISION DIVISION TOTAL
------------------------------------------- -------- ----------- --------
<S> <C> <C> <C>
Accounts receivable........................ $ -- $ 60,000 $ 60,000
Inventory.................................. -- 260,000 260,000
Equipment and property..................... 110,000 262,000 372,000
Deposits................................... -- 16,000 16,000
-------- -------- --------
Total assets..................... 110,000 598,000 708,000
-------- -------- --------
Current portion of long-term debt.......... 70,000 -- 70,000
Accounts payable and current accrued
liabilities.............................. -- 557,000 557,000
Long-term debt............................. -- 7,000 7,000
-------- -------- --------
70,000 564,000 634,000
-------- -------- --------
Net Assets to be Disposed of............... $ 40,000 $ 34,000 $ 74,000
======== ======== ========
</TABLE>
F-56
<PAGE> 166
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. ASSETS AND LIABILITIES TO BE DISPOSED OF (CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996: (UNAUDITED)
------------------------------------------------------------------
<S> <C>
Software Division:
Inventory......................................................... $110,000
Miscellaneous assets.............................................. 9,080
--------
Total assets............................................ 119,080
--------
Accounts payable.................................................. 85,989
Accrued liabilities............................................... 243,036
--------
329,025
--------
Net liabilities of discontinued operations........................ $209,945
========
</TABLE>
Assets and liabilities are shown at their expected net realizable value,
and have been separately classified in the accompanying balance sheets.
12. LITIGATION:
The Company is a defendant in a lawsuit filed by an individual for
non-compliance and other claims related to an employment agreement. The lawsuit
seeks actual and punitive damages in excess of $129,000. The Company's legal
counsel believes that the lawsuit is without merit. Therefore, as of December
31, 1995, and September 30, 1996 no accrual has been made for a loss contingency
related to the subject litigation claim. Management intends to vigorously defend
its position.
The Company is a defendant in a lawsuit filed by a corporation for claims
relating to a contractual agreement. The plaintiff has proposed a settlement in
the amount of $11,000. Counsel anticipates this matter to be resolved in the
near future.
13. SUBSEQUENT EVENT:
Subsequent to the balance sheet date of December 31, 1995, the Company
entered into an agreement with a former shareholder to purchase all of the
outstanding common stock owned by the shareholder. The common stock was acquired
in exchange for the relief of debt owing the Company and discounted future
services to be provided by the Company, in the aggregate amount of $372,000. The
financial statements at December 31, 1995 give retroactive effect to this
transaction. In addition, the Company believes that it has a claim for
additional shares of common stock controlled by the shareholder, in the amount
of approximately 260,000 shares.
F-57
<PAGE> 167
INDEPENDENT AUDITORS' REPORT
To the Stockholder and Board of Directors of
Western Insulated Glass, Co.
We have audited the accompanying balance sheet of Western Insulated Glass,
Co. as of October 31, 1996, and the related statements of operations and
retained earnings, 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 statement presentation.
We believe our audit of the financial statements 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 Western Insulated Glass, Co.
as of October 31, 1996, in conformity with generally accepted accounting
principles.
SEMPLE & COOPER, L.L.P.
Phoenix, Arizona
June 3, 1997
F-58
<PAGE> 168
WESTERN INSULATED GLASS, CO.
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
OCTOBER 31, JANUARY 31,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................... $ 296,387 $ 265,150
Accounts receivable............................................ 664,163 579,818
Inventory...................................................... 865,392 824,402
Prepaid expenses and other current assets...................... 18,112 13,585
----------- -----------
Total Current Assets........................................ 1,844,054 1,682,955
NONCURRENT ASSETS:
Deposits and other noncurrent assets........................... 12,171 16,920
Cash surrender value of life insurance, net.................... 23,819 24,711
Property, plant & equipment, net............................... 204,483 211,207
----------- -----------
Total Noncurrent Assets..................................... 240,473 252,838
----------- -----------
Total Assets..................................................... $ 2,084,527 $ 1,935,793
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable-related parties.................................. $ 1,245,707 $ 1,245,707
Accounts payable............................................... 259,194 221,594
Accrued expenses............................................... 25,797 1,800
Accrued payroll................................................ 230,207 55,804
Interest payable............................................... 339,857 340,857
Income taxes payable........................................... 20,584 47,166
----------- -----------
Total Current Liabilities................................... 2,121,346 1,912,928
STOCKHOLDER'S EQUITY (DEFICIT):
Preferred stock, no par value; 2,000,000 shares authorized,
1,620,000 shares issued, none outstanding................... 426,099 426,099
Common stock, no par value; 1,000,000 shares authorized,
180,000 shares issued and 90,000 shares outstanding......... 47,344 47,344
Retained earnings.............................................. 1,199,738 1,259,422
----------- -----------
1,673,181 1,732,865
Less: Treasury stock at cost................................... (1,710,000) (1,710,000)
----------- -----------
Total Stockholder's Equity (Deficit)........................ (36,819) 22,865
----------- -----------
Total Liabilities & Stockholder's Equity (Deficit)............... $ 2,084,527 $ 1,935,793
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-59
<PAGE> 169
WESTERN INSULATED GLASS, CO.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
YEAR ENDED JANUARY 31,
OCTOBER 31, -------------------------
1996 1996 1997
----------- ---------- ----------
<S> <C> <C> <C>
Sales................................................ $5,820,726 $1,259,184 $1,331,549
Cost of Sales........................................ 3,867,411 899,839 950,287
----------- ---------- ----------
Gross Profit....................................... 1,953,315 359,345 381,262
Selling, General and Administrative Expenses......... 1,304,102 290,099 283,281
----------- ---------- ----------
Income from Operations............................. 649,213 69,246 97,981
Other Income (Expense):
Interest Income (Expense), net..................... -- (4,088) 1,119
Other Expense...................................... (8,114) (6,827) (5,843)
----------- ---------- ----------
(8,114) (10,915) (4,724)
----------- ---------- ----------
Income Before Income Taxes......................... 641,099 58,331 93,257
Provision for Income Taxes........................... 228,584 20,999 33,573
----------- ---------- ----------
Net Income......................................... 412,515 37,332 59,684
Retained earnings, beginning......................... 787,223 787,223 1,199,738
----------- ---------- ----------
Retained earnings, ending............................ $1,199,738 $ 824,555 $1,259,422
========== ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-60
<PAGE> 170
WESTERN INSULATED GLASS, CO.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
YEAR ENDED JANUARY 31,
OCTOBER 31, -----------------------
1996 1996 1997
----------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................... $ 412,515 $ 37,332 $ 59,684
Adjustment to reconcile net income to cash from
operating activities--Depreciation............... 68,933 11,892 17,674
Changes in operating assets and liabilities:
Accounts receivable, net......................... (110,325) 50,999 84,345
Inventories...................................... (40,237) (31,693) 40,990
Prepaid expenses and other current assets........ (3,526) 0 4,527
Accounts payable................................. (34,055) (49,508) (36,600)
Accrued expenses................................. 176,748 (16,869) (198,400)
Income taxes payable............................. 20,584 20,995 26,582
Other............................................ 0 14,614 (5,641)
----------- --------- ---------
Net cash provided by (used in) operating
activities..................................... 490,637 37,762 (6,839)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.................. (106,821) (16,095) (24,398)
----------- --------- ---------
Net cash used in investing activities............ (106,821) (16,095) (24,398)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable-related parties.......... (222,338) 0 0
----------- --------- ---------
Net cash used in financing activities............ (222,338) 0 0
Net Increase (Decrease) in Cash....................... 161,478 21,667 (31,237)
Cash, Beginning Balance............................... 134,909 154,680 296,387
----------- --------- ---------
Cash, Ending Balance.................................. $ 296,387 $ 176,347 $ 265,150
========== ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-61
<PAGE> 171
WESTERN INSULATED GLASS, CO.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES:
OPERATIONS:
Western Insulated Glass, Co. (the Company) is a Corporation duly formed and
organized under the laws of Arizona. The Company is engaged in the manufacturing
and retail sales of luxury residential and light commercial windows.
PERVASIVENESS OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORY:
Inventory is stated at the lower of cost or market. Inventory costs are
stated at last invoice cost, which approximates cost using the first-in,
first-out method and consisted of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
OCTOBER 31 JANUARY 31,
1996 1997
----------- -----------
<S> <C> <C>
Raw materials........................................ $ 744,073 $ 708,821
Work in process...................................... 61,411 58,533
Finished goods....................................... 59,908 57,048
--------- ---------
$ 865,392 $ 824,402
========= =========
</TABLE>
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are recorded at cost. Depreciation is
provided for using the accelerated and straight-line methods over the estimated
useful lives of the assets. Maintenance and repairs that neither materially add
to the value of the property nor appreciably prolong its life are charged to
expense as incurred. Betterments or renewals are capitalized when incurred.
INCOME TAXES:
For financial accounting and tax reporting purposes, the Company reports
revenues and costs on the accrual basis of accounting. The financial reporting
basis of the Company's assets and liabilities approximates the tax basis.
Accordingly, no deferred taxes are recorded for the future tax consequences of
differences in bases, and income tax expense is computed by applying statutory
rates to pretax earnings.
INTERIM FINANCIAL INFORMATION
The accompanying unaudited interim financial statements include the
accounts of Western Insulated Glass, Co. In the opinion of management, all
adjustments (consisting only of recurring adjustments) necessary for a fair
presentation of financial position and results of operations have been made.
Operating results for the period ended January 31, 1997 are not necessarily
indicative of the results for a full fiscal year. These unaudited interim
financial statements should be read in conjunction with the financial statements
and notes thereto of the Company for the fiscal year ended October 31, 1996.
F-62
<PAGE> 172
WESTERN INSULATED GLASS, CO.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. CONCENTRATION OF CREDIT RISK:
The Company maintains cash at three financial institutions. Deposits not to
exceed $100,000 at each financial institution are insured by the Federal Deposit
Insurance Corporation. At October 31, 1996, the Company had uninsured cash in
the amount of $254,171.
3. RELATED PARTY TRANSACTIONS:
NOTES PAYABLE--RELATED PARTIES:
At October 31, 1996, notes payable-related parties consist of the
following:
<TABLE>
<S> <C>
10% note payable to the stockholder, due on demand; secured by treasury
stock................................................................. $1,215,707
Two 6% notes payable to an officer of the Company, with interest only
payments due quarterly, principal due October, 1997................... 30,000
----------
$1,245,707
=========
</TABLE>
At October 31, 1996, accrued interest payable of $339,857 relates to the
aforementioned notes payable-related parties.
LEASE COMMITMENT:
The Company is currently leasing its manufacturing facility in Phoenix,
Arizona from an officer of the Company under a non-cancellable operating lease.
Rent expense under the lease agreement for the year ended October 31, 1996, was
$192,000.
A schedule of future minimum lease payments due under the non-cancellable
operating lease agreement at October 31, 1996, is as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---------------------------------------------------------------- ----------
<S> <C>
1997............................................................ $ 192,000
1998............................................................ 192,000
1999............................................................ 192,000
2000............................................................ 192,000
2001............................................................ 192,000
Subsequent...................................................... 80,000
----------
$1,040,000
=========
</TABLE>
4. TREASURY STOCK:
Treasury stock is shown at cost and consists of 1,620,000 shares of
preferred stock, and 90,000 shares of common stock.
5. CASH SURRENDER VALUE OF LIFE INSURANCE:
The Company is a beneficiary of insurance policies on the life of a
corporate officer. The cash surrender value at October 31, 1996 is net of 8%
notes payable in the amount of $50,000, which were collateralized by the cash
value of the policies.
6. ECONOMIC DEPENDENCY:
The Company purchases a substantial portion of its product from three
suppliers. During the year ended October 31, 1996, purchases from these
suppliers approximated 70 percent of total purchases. At October 31, 1996,
amounts due to the suppliers included in accounts payable were $161,554.
F-63
<PAGE> 173
WESTERN INSULATED GLASS, CO.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During the year ended October 31, 1996, sales to a single customer were
approximately 10 percent of total sales. At October 31, 1996, the amount due
from the customer, included in accounts receivable was $94,234.
7. COMMITMENTS AND CONTINGENCIES:
LEASES:
The Company leases various pieces of equipment under non-cancellable
operating lease agreements expiring through June, 2000. Rent expense under the
operating lease agreements for the year ended October 31, 1996 was $18,270.
As of October 31, 1996, a schedule of future minimum lease payments due
under the non-cancellable operating lease agreements, is as follows:
<TABLE>
<CAPTION>
YEAR ENDING
OCTOBER 31, AMOUNT
- ----------- -------
<S> <C> <C>
1997................................................................ $16,608
1998................................................................ 15,696
1999................................................................ 12,960
2000................................................................ 7,940
-------
$53,204
=======
</TABLE>
EMPLOYMENT CONTRACT:
The Company has entered into an employment contract with its president
through March, 2000 that provides for a minimum annual salary and incentives
based on the Company's attainment of specified levels of earnings. In connection
with the acquisition of the Company by American Architectural Products
Corporation (See Note 9), this agreement was revised so that as of October 31,
1996, the total future commitment, excluding incentives, was $285,000.
8. EMPLOYEE BENEFIT PLAN:
The Company maintains a 401(K) plan for all eligible employees, which
includes provisions for Company matching contributions. Expense relating to the
Company matching contributions was $10,538 for the year ended October 31, 1996.
9. SUBSEQUENT EVENTS:
On March 14, 1997, 100 percent of the Company's outstanding stock was
acquired by American Architectural Products Corporation, in exchange for cash
and the assumption of certain liabilities, in the approximate amount of
$2,400,000. The financial statements do not give effect to this transaction.
F-64
<PAGE> 174
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Thermetic Glass Inc.
We have audited the accompanying balance sheet of Thermetic Glass Inc. as
of December 31, 1996, and the related statement of operations and accumulated
deficit 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 statement 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 Thermetic Glass Inc. as of
December 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Clifton Gunderson L.L.C.
Peoria, Illinois
October 3, 1997
F-65
<PAGE> 175
THERMETIC GLASS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................... $ 4,948 $ 0
Accounts receivable............................................ 594,025 697,358
Inventory...................................................... 846,008 1,013,359
Prepaid expenses and other current assets...................... 67,143 54,817
----------- -----------
Total Current Assets........................................ 1,512,124 1,765,534
NONCURRENT ASSETS:
Deposits and other noncurrent assets........................... 107,585 110,445
Property, plant & equipment, net............................... 1,670,287 1,557,892
----------- -----------
Total Noncurrent Assets..................................... 1,777,872 1,668,337
----------- -----------
Total Assets..................................................... $ 3,289,996 $ 3,433,871
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable--current, including capital lease obligations.... $ 1,046,573 $ 1,442,761
Accounts payable and accrued expenses.......................... 305,554 380,368
----------- -----------
Total Current Liabilities................................... 1,352,127 1,823,129
LONG-TERM LIABILITIES:
Notes payable--long-term, including capital lease
obligations................................................. 1,866,747 1,636,482
Other liabilities.............................................. 0 6,074
----------- -----------
Total Long-Term Liabilities................................. 1,866,747 1,642,556
----------- -----------
Total Liabilities................................................ 3,218,874 3,465,685
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock of no par value; authorized 500,000 shares; issued
and outstanding 1,000 shares................................ 1,000 1,000
Additional paid in capital..................................... 2,300,000 2,300,000
Accumulated deficit............................................ (2,229,878) (2,332,814)
----------- -----------
Total Stockholders' Equity (Deficit)........................ 71,122 (31,814)
----------- -----------
Total Liabilities & Stockholders' Equity......................... $ 3,289,996 $ 3,433,871
=========== ===========
</TABLE>
The accompanying summary of significant accounting policies and notes are
an integral part of the financial statements.
F-66
<PAGE> 176
THERMETIC GLASS, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED SIX MONTHS ENDED JUNE 30,
DECEMBER 31, ---------------------------
1996 1996 1997
------------ ----------- -----------
<S> <C> <C> <C>
Sales............................................ $ 4,966,666 $ 1,888,909 $ 2,305,029
Cost of Sales.................................... 4,190,384 1,664,490 1,936,713
------------ ----------- -----------
Gross Profit................................... 776,282 224,419 368,316
Selling, General and Administrative Expenses..... 822,785 376,189 340,583
------------ ----------- -----------
Income (loss) from Operations.................. (46,503) (151,770) 27,733
Other Income (Expense):
Interest Expense, net.......................... (235,062) (116,484) (126,315)
Other Expense.................................. 16,350 22,448 (4,354)
------------ ----------- -----------
(218,712) (94,036) (130,669)
------------ ----------- -----------
Loss Before Income Taxes....................... (265,215) (245,806) (102,936)
Provision for Income Taxes....................... 677,124 0 0
------------ ----------- -----------
Net loss....................................... (942,339) (245,806) (102,936)
Accumulated Deficit, beginning................... (1,287,539) (1,287,539) (2,229,878)
------------ ----------- -----------
Accumulated Deficit, ending...................... $(2,229,878) $(1,533,345) $(2,332,814)
============ ========== ==========
</TABLE>
The accompanying summary of significant accounting policies and notes
are an integral part of the financial statements.
F-67
<PAGE> 177
THERMETIC GLASS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED JUNE
YEAR ENDED 30,
DECEMBER 31, -----------------------
1996 1997 1996
------------ --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss.......................................... $ (942,339) $(102,936) $(245,806)
Adjustment to reconcile net loss to cash from
operating activities--
Depreciation and amortization.................. 204,517 115,860 109,364
Changes in operating assets and liabilities:
Accounts receivable, net....................... (22,379) (103,333) (38,903)
Inventories.................................... (119,684) (167,351) 12,832
Prepaid expenses and other current assets...... (3,299) 12,326 22,904
Accounts payable and accrued expenses.......... 104,731 74,814 23,117
Deferred tax asset............................. 677,124 0 0
Other.......................................... 0 3,214 4,785
---------- --------- ---------
Net cash used in operating activities.......... (101,329) (167,406) (111,707)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment................ (97,933) (3,465) (111,755)
---------- --------- ---------
Net cash used in investing activities.......... (97,933) (3,465) (111,755)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable....................... 750,000 -- --
Principal payments on notes payable............... (390,000) -- --
Proceeds from issuance of long-term debt.......... 30,000 165,923 213,850
Principal payments on long-term debt.............. (191,464) -- --
Principal payments on obligations under capital
leases......................................... (3,938) -- --
---------- --------- ---------
Net cash from financing activities............. 194,598 165,923 213,850
Net Decrease in Cash................................ (4,664) (4,948) (9,612)
Cash, Beginning Balance............................. 9,612 4,948 9,612
---------- --------- ---------
Cash, Ending Balance................................ $ 4,948 $ 0 $ 0
========== ========= =========
ADDITIONAL CASH FLOW INFORMATION
Cash paid during the year for interest............ $ 227,259 -- --
========== ========= =========
NONCASH INVESTING AND FINANCING ACTIVITIES
Capital lease obligations incurred when the
Company entered into leases for new trucks..... $ 109,894 -- --
========== ========= =========
</TABLE>
The accompanying summary of significant accounting policies and notes
are an integral part of the financial statements.
F-68
<PAGE> 178
THERMETIC GLASS INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Thermetic Glass Inc. is a manufacturer of vinyl windows and doors with
sales concentrated mainly in the Midwest and is dependent upon the Midwest
economy. The Company's products are readily available, and the Company is not
dependent on a single supplier or only a few suppliers.
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation on plant
and equipment is calculated using straight-line or accelerated methods over the
estimated useful lives of the assets. Equipment held under capital leases is
amortized straight line over the shorter of the lease term or estimated useful
life of the asset. Accumulated depreciation was $1,087,000 and $1,213,000 at
December 31, 1996 and June 30, 1997, respectively.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Deferred tax assets are reduced by a
valuation allowance if it is deemed more likely than not that some or all of the
deferred tax assets will not be realized.
PATENT AND TRADEMARK
These assets are amortized over the estimated useful lives of the
respective assets using the straight-line method.
INTERIM FINANCIAL INFORMATION
BASIS OF PRESENTATION
The accompanying unaudited interim financial statements include the
accounts of Thermetic Glass, Inc. In the opinion of management, all adjustments
(consisting only of recurring adjustments) necessary for a fair presentation of
financial position and results of operations have been made. Operating results
for the period ended June 30, 1997 are not necessarily indicative of the results
for a full year. These unaudited interim financial statements should be read in
conjunction with the financial statements and notes thereto of the Company for
the year ended December 31, 1996.
INVENTORIES
At June 30, 1997, inventory consisted of the following:
<TABLE>
<S> <C>
Raw materials................................................... $ 904,929
Work in process................................................. 0
Finished goods.................................................. 108,430
----------
$1,013,359
=========
</TABLE>
This information is an integral part of the accompanying financial statements.
F-69
<PAGE> 179
THERMETIC GLASS INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1--PROPERTY, PLANT, AND EQUIPMENT
A summary of property, plant, and equipment at December 31, 1996 follows:
<TABLE>
<S> <C>
Land........................................................... $ 10,800
Buildings...................................................... 1,030,516
Machinery and equipment........................................ 1,407,256
Vehicles....................................................... 243,533
Furniture and fixtures......................................... 65,108
----------
$2,757,213
=========
</TABLE>
Depreciation expense for the year ended December 31, 1996 was $202,297.
Certain property and equipment is pledged as collateral on notes payable
and long-term debt as described in Notes 2 and 5 to the financial statements.
NOTE 2--NOTES PAYABLE TO BANK--CURRENT
Notes payable to bank at December 31, 1996:
<TABLE>
<S> <C>
9 percent, $200,000 limit, due September 20, 1997; secured by
$90,000 certificate of deposit of major shareholder and
$110,000 personal guarantee of major shareholder.............. $200,000
Prime plus 1 percent, $100,000 limit, due April 3, 1997; secured
by accounts receivable, machinery and equipment, and
inventories................................................... 100,000
Prime plus 1 percent, $250,000 limit, due August 9, 1997;
secured by accounts receivable, machinery and equipment, and
inventories................................................... 160,000
--------
460,000
--------
</TABLE>
Unsecured notes payable to shareholders at December 31, 1996:
<TABLE>
<S> <C>
10 percent, due on demand....................................... 100,000
8.5 percent, due on demand...................................... 100,000
8.5 percent, due on demand...................................... 50,000
8.5 percent, due on demand...................................... 50,000
8.5 percent, due on demand...................................... 50,000
--------
350,000
--------
</TABLE>
Other unsecured notes payable to employees and others at December 31, 1996:
<TABLE>
<S> <C>
8 percent, due on demand........................................ 6,000
8 percent, due on demand........................................ 20,000
8 percent, due on demand........................................ 20,000
7 percent, due on demand........................................ 20,000
--------
66,000
--------
$876,000
========
</TABLE>
F-70
<PAGE> 180
THERMETIC GLASS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1996:
<TABLE>
<S> <C>
Note payable to major shareholder, secured by substantially all
assets of the Company, is due as follows:
June 1, 2024 at 8.5 percent, payable in monthly installments
of $12,920, including interest............................ $1,644,154
8.0 percent note payable to bank, due in monthly installments
of $3,393, including interest, through January, 1997; secured
by accounts receivable, machinery and equipment, and
inventories.................................................. 3,353
7.5 percent note payable to bank, due in monthly installments
of $2,302, including interest, through March, 1997; secured
by accounts receivable, machinery and equipment, and
inventories.................................................. 6,841
6.5 percent note payable to bank, due in monthly installments
of $651, including interest, through November, 1997; secured
by a van..................................................... 6,936
7.5 percent note payable to bank, due in monthly installments
of $1,377, including interest, through January, 1998; secured
by accounts receivable, machinery and equipment, and
inventories.................................................. 17,125
8.25 percent note payable to bank, due in monthly installments
of $1,229, including interest, through June, 1998; secured by
accounts receivable, machinery and equipment, and
inventories.................................................. 20,774
7.5 percent note payable to bank, due in monthly installments
of $1,607, including interest, through September, 1998;
secured by accounts receivable, machinery and equipment, and
inventories.................................................. 31,520
8.25 percent note payable to bank, due in monthly installments
of $945, including interest, through September 1999; secured
by accounts receivable, machinery and equipment, and
inventories.................................................. 27,775
Prime plus 1 percent note payable to bank, due in monthly
installments of $6,614, including interest, through July,
1999; secured by accounts receivable, machinery and
equipment, and inventories................................... 172,886
----------
Total long-term debt........................................... 1,931,364
Less current installments...................................... 157,026
----------
Long-Term Debt, excluding current installments................. $1,774,338
=========
</TABLE>
The aggregate maturities of long-term debt for each of the years subsequent
to December 31, 1996 are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1997....................................................... $ 157,026
1998....................................................... 122,045
1999....................................................... 59,449
2000....................................................... 20,212
2001....................................................... 21,999
2002-2024.................................................. 1,550,633
----------
$1,931,364
=========
</TABLE>
F-71
<PAGE> 181
THERMETIC GLASS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--INCOME TAXES
Income tax expense amounted to $677,124 for 1996. The actual expense for
1996 differs from the "expected" tax expense (computed by applying the
applicable U.S. federal corporate income tax rate of 34 percent to loss before
income taxes) as follows:
<TABLE>
<S> <C>
Computed "expected" tax benefit................................... $(90,173)
Surtax............................................................ 3,489
State income taxes, net of federal benefit........................ 67,851
Nondeductible expenses............................................ 5,091
Prior year underaccrual........................................... 59,894
Change in beginning of the year balance of the valuation allowance
for deferred tax assets allocated to income tax expense......... 634,058
Other, net........................................................ (3,086)
--------
$677,124
========
</TABLE>
The components of income tax expense for 1996 are as follows:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- -------- --------
<S> <C> <C> <C>
Federal.................................... $ -- $574,320 $574,320
State...................................... -- 102,804 102,804
-------- -------- --------
$ -- $677,124 $677,124
======== ======== ========
</TABLE>
The tax effects of temporary differences that give rise to the deferred tax
assets and deferred tax liabilities at December 31, 1996 are presented below:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards.............................. $ 841,153
Vacation accrual.............................................. 7,243
Accounts receivable, due to allowance for doubtful accounts... 46,400
Interest not currently deductible............................. 11,678
Inventories, due to additional costs inventoried for tax
purposes................................................... 15,493
Depreciation.................................................. 14,855
----------
Total gross deferred tax assets............................ 936,822
Less valuation allowance...................................... (935,087)
----------
Net deferred tax assets.................................... 1,735
Deferred tax liabilities:
Capital leases................................................ (1,735)
----------
Net Deferred Tax Assets......................................... $ --
=========
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1996 was
$97,320. The net change in the valuation allowance for the year ended December
31, 1996 was an increase of $837,767.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. In order to fully realize
the deferred tax asset, the Company will need to generate future taxable income
of approximately $2,400,000. The Company has recorded a valuation allowance to
reflect the estimated amount of deferred tax
F-72
<PAGE> 182
THERMETIC GLASS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--INCOME TAXES (CONTINUED)
assets which may not be realized due to the expiration of net operating loss
carryforwards and other deferred assets that may not be realized.
At December 31, 1996, the Company has the following net operating loss and
investment tax credit carryforwards for income tax purposes:
<TABLE>
<CAPTION>
NET OPERATING INVESTMENT
YEAR OF EXPIRATION LOSSES TAX CREDITS
--------------------------------------------------- ------------- ------------
<S> <C> <C>
1998.......................................... $ -- $1,430
1999.......................................... -- 195
2000.......................................... 175,160 --
2001.......................................... 52,793 --
2002.......................................... 811,470 --
2003.......................................... 450,222 --
2004.......................................... 204,743 --
2006.......................................... 1,513 --
2010.......................................... 174,295 --
2011.......................................... 232,687 --
</TABLE>
NOTE 5--RELATED PARTY TRANSACTIONS
The Company is obligated to repurchase outstanding common stock from its
minority shareholders in the event of death or other termination of employment
with the Company. The terms of the agreement indicate the repurchase price per
share to be the greater of $1.00 per share or the book value per share ($71 at
December 31, 1996). (The minority shareholders own 180 shares of the outstanding
common stock.) In the event the Company cannot finance the repurchase, the
Company's major shareholder is obligated to purchase the minority shareholder's
common stock.
NOTE 6--CAPITAL LEASES
In May and November of 1996, the Company entered into two capital leases
for vehicles that expire in May 2002 and November 2001, respectively. At
December 31, 1996, the gross amounts recorded under the capital leases were as
follows:
<TABLE>
<S> <C>
Vehicles.......................................................... $151,113
Less accumulated amortization..................................... 49,495
--------
$101,618
========
</TABLE>
Amortization for the year ended December 31, 1996 was $8,276 and is
included in depreciation expense.
F-73
<PAGE> 183
THERMETIC GLASS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--CAPITAL LEASES (CONTINUED)
The present value of future minimum capital lease payments, exclusive of
certain assessments which are also payable by the Company, as of December 31,
1996 is:
<TABLE>
<S> <C>
1997.............................................................. $ 31,920
1998.............................................................. 31,920
1999.............................................................. 31,920
2000.............................................................. 31,920
2001.............................................................. 30,572
2002.............................................................. 6,560
--------
Total minimum lease payments.................................... 164,812
Less amount representing interest................................. 58,856
--------
Present value of net minimum capital lease payments............. 105,956
Less current installments of obligations under capital leases..... 13,547
--------
Obligations under Capital Leases, Excluding Current
Installments.................................................... $ 92,409
========
</TABLE>
NOTE 7--BUSINESS AND CREDIT CONCENTRATIONS
Most of the Company's customers are located in the Midwest. The Company had
no customers that accounted for more than 10 percent of the Company's sales in
1996. The Company had thirty-four customers in 1996, each of whom had an
accounts receivable balance which exceeded 5 percent of the Company's total
stockholders' equity at December 31, 1996. Accounts receivable from these
customers totaled approximately $564,000 at December 31, 1996.
NOTE 8--401(k) PLAN
In 1996, the Company adopted a 401(k) plan covering all employees who have
completed one year of service by January 1 and attained age 21. The Company
matches 25 percent of the employees' contributions up to 6 percent of their
income. The expense for 1996 was $10,317.
NOTE 9--SUBSEQUENT EVENT
On July 18, 1997, all of the stock of Thermetic Glass Inc. was acquired by
American Architectural Products Corporation (AAPC) in exchange for cash, AAPC
common stock, convertible secured debentures payable to the seller, and the
assumption of certain liabilities. The accompanying financial statements do not
give effect to this transaction.
F-74
<PAGE> 184
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Binnings Building Products, Inc.:
We have audited the accompanying balance sheets of Binnings Building
Products, Inc. (a Delaware corporation) as of December 31, 1996 and 1995, and
the related statements of operations, stockholders' deficit, and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Binnings Building Products,
Inc. as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Greensboro, North Carolina,
March 21, 1997 (except with respect to
the matters discussed in Note 10 as to
which the date is December 10, 1997).
F-75
<PAGE> 185
BINNINGS BUILDING PRODUCTS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
ASSETS -------------------------- --------------------------
(SUBSTANTIALLY ALL PLEDGED -- NOTE 4) 1995 1996 1996 1997
- ------------------------------------------------------------ ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 200,000 $ 844,000 $ 533,000 $ 1,074,000
Receivables
Trade................................................... 4,062,000 4,948,000 5,157,000 5,003,000
Other................................................... 98,000 87,000 145,000 98,000
Inventories............................................... 5,915,000 6,549,000 6,014,000 5,351,000
Prepaid expenses.......................................... 352,000 619,000 704,000 585,000
----------- ----------- ----------- -----------
Total current assets................................ 10,627,000 13,047,000 12,553,000 12,111,000
----------- ----------- ----------- -----------
Property, plant and equipment held for sale, net of
accumulated depreciation of $1,319,000 (Note 2)........... 0 0 0 5,127,000
Property, plant and equipment, at cost:
Land...................................................... 2,189,000 2,189,000 2,189,000 288,000
Buildings................................................. 8,825,000 8,829,000 8,825,000 4,320,000
Machinery and equipment................................... 6,828,000 7,249,000 7,159,000 7,648,000
----------- ----------- ----------- -----------
17,842,000 18,267,000 18,173,000 12,256,000
Less -- Accumulated depreciation.......................... (7,779,000) (8,461,000) (8,318,000) (7,453,000)
----------- ----------- ----------- -----------
10,063,000 9,806,000 9,855,000 4,803,000
----------- ----------- ----------- -----------
Deferred income taxes (Note 9).............................. 448,000 262,000 393,000 161,000
----------- ----------- ----------- -----------
Other assets, net........................................... 222,000 251,000 265,000 287,000
----------- ----------- ----------- -----------
$21,360,000 $23,366,000 $23,066,000 $22,489,000
=========== =========== =========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C> <C> <C> <C>
Current liabilities:
Current maturities of long-term debt (Note 4)............. $ 350,000 $ 7,044,000 $ 7,128,000 $14,339,000
Accounts payable and accrued liabilities (Note 3)......... 3,728,000 4,377,000 4,137,000 3,500,000
Deferred income taxes (Note 9)............................ 448,000 262,000 393,000 161,000
----------- ----------- ----------- -----------
Total current liabilities........................... 4,526,000 11,683,000 11,658,000 18,000,000
Long-term debt to certain common stockholders, net of
current maturities (Note 4)............................... 20,628,000 13,860,000 13,994,000 6,550,000
Other long-term debt, net of current maturities (Note 4).... 163,000 76,000 97,000 14,000
Other long-term obligations (Note 4)........................ 0 218,000 0 218,000
Puttable common stock, voting, 59,524 shares issued and
outstanding at December 31, 1996, and September 30, 1997
(unaudited) (Note 4)...................................... 0 139,000 0 139,000
----------- ----------- ----------- -----------
Total liabilities................................... 25,317,000 25,976,000 25,749,000 24,921,000
----------- ----------- ----------- -----------
Commitments and contingencies (Notes 4, 5 and 6)
Stockholders' deficit:
Preferred stock, Series A, $1 par value, 8% cumulative,
500,000 shares authorized; 168,775 and 149,158 shares
issued and outstanding at December 31, 1995 and 1996,
respectively, 168,775 (unaudited) and 149,158
(unaudited) shares issued and outstanding at September
30, 1996 and 1997, respectively, stated at $10 per share
liquidating preference price, redeemable at $10 per
share at the Company's option (Note 6).................. 1,688,000 1,492,000 1,688,000 1,492,000
Preferred stock, Series B, $1 par value, 9% cumulative,
500,000 shares authorized; 35,000 and 30,000 shares
issued and outstanding at December 31, 1995 and 1996,
respectively, 35,000 (unaudited) and 30,000 (unaudited)
shares issued and outstanding at September 30, 1996 and
1997, respectively, stated at $10 per share liquidating
preference price, redeemable at $10 per share at the
Company's option (Note 6)............................... 350,000 300,000 350,000 300,000
Common stock, $.01 par value, 1,000,000 shares authorized,
voting, 187,291 and 158,176 shares issued and
outstanding at December 31, 1995 and 1996, respectively,
158,176 (unaudited) shares issued and outstanding at
September 30, 1996 and 1997............................. 2,000 2,000 2,000 2,000
Common stock purchase options (Note 6).................... 103,000 103,000 103,000 0
Capital in excess of par value............................ 236,000 330,000 236,000 330,000
Accumulated deficit....................................... (6,336,000) (4,837,000) (5,062,000) (4,556,000)
----------- ----------- ----------- -----------
Total stockholders' deficit......................... (3,957,000) (2,610,000) (2,683,000) (2,432,000)
----------- ----------- ----------- -----------
$21,360,000 $23,366,000 $23,066,000 $22,489,000
=========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-76
<PAGE> 186
BINNINGS BUILDING PRODUCTS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 -----------------------------
--------------------------------------- SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1996 1997
----------- ----------- ----------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales....................... $35,465,000 $34,503,000 $43,060,000 $ 31,645,000 $ 33,932,000
Cost of sales................... 26,245,000 25,353,000 30,191,000 22,370,000 24,653,000
----------- ----------- ----------- ----------- -----------
Gross profit.................... 9,220,000 9,150,000 12,869,000 9,275,000 9,279,000
Selling, general and
administrative expenses....... 8,271,000 7,764,000 8,778,000 6,356,000 7,342,000
----------- ----------- ----------- ----------- -----------
Income from operations.......... 949,000 1,386,000 4,091,000 2,919,000 1,937,000
----------- ----------- ----------- ----------- -----------
Other expense (income):
Interest...................... 2,540,000 2,527,000 2,370,000 1,591,000 1,574,000
Amortization of other
assets..................... 86,000 88,000 16,000 12,000 15,000
Other, net.................... (91,000) 16,000 38,000 20,000 12,000
----------- ----------- ----------- ----------- -----------
2,535,000 2,631,000 2,424,000 1,623,000 1,601,000
----------- ----------- ----------- ----------- -----------
Income (loss) before provision
for income taxes.............. (1,586,000) (1,245,000) 1,667,000 1,296,000 336,000
Provision for income taxes (Note
9)............................ 0 0 29,000 22,000 8,000
----------- ----------- ----------- ----------- -----------
Net income (loss)............... $(1,586,000) $(1,245,000) $ 1,638,000 $ 1,274,000 $ 328,000
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-77
<PAGE> 187
BINNINGS BUILDING PRODUCTS, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON CAPITAL
PREFERRED PREFERRED STOCK IN
STOCK, STOCK, COMMON PURCHASE EXCESS OF ACCUMULATED
SERIES A SERIES B STOCK OPTION PAR VALUE DEFICIT TOTAL
---------- --------- ------ --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993......... $1,696,000 $ 0 $2,000 $ 325,000 $236,000 $(3,327,000) $(1,068,000)
Net loss......................... 0 0 0 0 0 (1,586,000) (1,586,000)
Issuance of 35,000 shares of
Preferred Stock, Series B (Note
6)............................. 0 350,000 0 0 0 0 350,000
Redemption of common stock
purchase options, net (Note
6)............................. 0 0 0 (222,000) 0 (178,000) (400,000)
Repurchase of 819 shares of
Preferred Stock, Series A...... (8,000) 0 0 0 0 0 (8,000)
---------- -------- ------ --------- -------- ----------- -----------
Balance, December 31, 1994......... 1,688,000 350,000 2,000 103,000 236,000 (5,091,000) (2,712,000)
Net loss......................... 0 0 0 0 0 (1,245,000) (1,245,000)
---------- -------- ------ --------- -------- ----------- -----------
Balance, December 31, 1995......... 1,688,000 350,000 2,000 103,000 236,000 (6,336,000) (3,957,000)
Net income (unaudited)........... 0 0 0 0 0 1,274,000 1,274,000
---------- -------- ------ --------- -------- ----------- -----------
Balance, September 30, 1996
(unaudited)...................... 1,688,000 350,000 2,000 103,000 236,000 (5,062,000) (2,683,000)
Net income....................... 0 0 0 0 0 364,000 364,000
Repurchase of 29,115 shares of
common stock................... 0 0 0 0 (15,000) 0 (15,000)
Repurchase of 19,617 shares of
Preferred Stock, Series A...... (196,000) 0 0 0 109,000 0 (87,000)
Retirement of 5,000 shares of
Preferred Stock, Series B (Note
6)............................. 0 (50,000) 0 0 0 0 (50,000)
Puttable common stock redemption
accretion (Note 4)............. 0 0 0 0 0 (139,000) (139,000)
---------- -------- ------ --------- -------- ----------- -----------
Balance, December 31, 1996......... 1,492,000 300,000 2,000 103,000 330,000 (4,837,000) (2,610,000)
Net income (unaudited)........... 0 0 0 0 0 328,000 328,000
Redemption of common stock
purchase option (unaudited)
(Note 6)....................... 0 0 0 (103,000) 0 (47,000) (150,000)
---------- -------- ------ --------- -------- ----------- -----------
Balance, September 30, 1997
(unaudited)...................... $1,492,000 $ 300,000 $2,000 $ 0 $330,000 $(4,556,000) $(2,432,000)
========== ======== ====== ========= ======== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-78
<PAGE> 188
BINNINGS BUILDING PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, -----------------------------
-------------------------------------- SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1996 1997
----------- ----------- ---------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................. $(1,586,000) $(1,245,000) $1,638,000 $ 1,274,000 $ 328,000
Adjustments to reconcile net income (loss) to net
cash provided by operating activities-
Depreciation..................................... 870,000 858,000 691,000 545,000 477,000
Amortization..................................... 86,000 88,000 16,000 12,000 15,000
Gain on sale of property, plant and equipment.... (62,000) (6,000) (1,000) (1,000) 0
Conversion of accrued interest to long-term debt
(Note 4)....................................... 0 980,000 0 0 0
Minority interest in loss of joint venture....... 0 0 14,000 0 0
Accretion of capital appreciation rights (Note
4)............................................. 0 0 218,000 0 0
Change in current assets and liabilities:
(Increase) decrease in receivables............. 372,000 121,000 (837,000) (1,142,000) (66,000)
(Increase) decrease in inventories............. 391,000 939,000 (634,000) (99,000) 1,198,000
(Increase) decrease in prepaid expenses........ 1,000 (162,000) (267,000) (352,000) 34,000
Increase in other assets....................... 0 (67,000) (49,000) (15,000) (51,000)
Increase (decrease) in accounts payable and
accrued liabilities......................... 408,000 (613,000) 599,000 409,000 (877,000)
----------- ---------- ---------- ---------- ----------
Net cash provided by operating activities... 480,000 893,000 1,388,000 631,000 1,058,000
----------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Capital expenditures............................... (280,000) (405,000) (435,000) (338,000) (462,000)
Proceeds from sale of property, plant and
equipment........................................ 106,000 6,000 2,000 2,000 0
Investment in joint venture........................ 0 0 (2,000) (2,000) 0
Advances to joint venture.......................... 0 0 (38,000) (38,000) 0
----------- ---------- ---------- ---------- ----------
Net cash used in investing activities....... (174,000) (399,000) (473,000) (376,000) (462,000)
----------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Principal payments on capital lease and other
obligations...................................... (275,000) (178,000) (219,000) (164,000) (111,000)
Borrowings (repayments) on revolving credit
facility, net.................................... (111,000) (119,000) 174,000 329,000 (11,000)
Proceeds from issuance of preferred stock (Note
6)............................................... 350,000 0 0 0 0
Principal payments on notes payable................ 0 (28,000) (116,000) (87,000) (94,000)
Repurchase of Preferred Stock, Series A............ (8,000) 0 (87,000) 0 0
Repurchase of common stock......................... 0 0 (15,000) 0 0
Redemption of common stock purchase option (Note
6)............................................... (400,000) 0 0 0 (150,000)
Increase in deferred financing costs............... (29,000) (136,000) (8,000) 0 0
----------- ---------- ---------- ---------- ----------
Net cash used in (provided by) financing
activities................................ (473,000) (461,000) (271,000) 78,000 (366,000)
----------- ---------- ---------- ---------- ----------
Net (decrease) increase in cash...................... (167,000) 33,000 644,000 333,000 230,000
Cash, beginning of period............................ 334,000 167,000 200,000 200,000 844,000
----------- ---------- ---------- ---------- ----------
Cash, end of period.................................. $ 167,000 $ 200,000 $ 844,000 $ 533,000 $ 1,074,000
=========== ========== ========== ========== ==========
Supplemental disclosure -- Cash paid for interest.... $ 2,527,000 $ 1,436,000 $2,074,000 $ 1,530,000 $ 1,677,000
=========== ========== ========== ========== ==========
Supplemental disclosure -- Cash paid for income
taxes.............................................. $ 0 $ 0 $ 0 $ 0 $ 70,000
=========== ========== ========== ========== ==========
Supplemental schedule of noncash financing activities -- In 1997, the Company acquired equipment through the issuance of a
capital lease obligation of $139,000. In 1996, the Company retired 5,000 shares of $10 par value Preferred Stock, Series B,
without compensation to the preferred stockholder (Note 6). In 1995, the Company's accrued interest obligation of $245,000
at December 31, 1994, was converted to long-term debt in 1995 (Note 4).
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-79
<PAGE> 189
BINNINGS BUILDING PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS:
Binnings Building Products, Inc. (the Company) was incorporated in February
1986 under the laws of the state of Delaware. On April 29, 1986, the Company
(which was previously inactive) acquired substantially all of the assets and
assumed certain liabilities of the Binnings Building Products Division of
National Gypsum Company in a leveraged buyout transaction. The purchase price
was allocated to the assets purchased and liabilities assumed based on their
estimated fair values.
The Company is engaged in the manufacturing, marketing and distribution of
aluminum storm windows and doors, screens, primary windows, patio doors,
insulating glass and vinyl windows from its facilities in North Carolina and
Florida.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
Prior to 1996, the Company incurred losses before extraordinary items in
each year since 1988. As reflected in the accompanying financial statements, the
Company had net income of $1,638,000 in the year ended December 31, 1996,
$1,274,000 (unaudited) and $328,000 (unaudited) in the nine months ended
September 30, 1996 and 1997, respectively, and net losses of $1,245,000 and
$1,586,000 in the years ended December 31, 1995 and 1994, respectively, and had
an accumulated deficit of $4,837,000 at December 31, 1996 and $4,556,000
(unaudited) at September 30, 1997. The Company is in the highly competitive
building products market and its products are subject to substantial pricing
competition. The Company's primary raw material is subject to commodity-based
price fluctuations. The Company closed several distribution centers in Florida
in prior years and modified significant debt terms in 1995 (Note 4).
Management's plans for 1997 provide for increases in sales due to price
increases and increases in market penetration for its products. Management's
plans also include efforts to control selling, general and administrative
expenses as it increases its service area and product offerings.
Historically, the Company has not been in compliance with certain financial
covenants of its notes payable from certain common stockholders and has obtained
waivers from the holders of these notes. During 1997, the Company obtained
waivers from its lenders for its events of default through January 1, 1998. Upon
the expiration of these waivers, the Company will likely be in default of these
covenants (Note 4). Subsequent to the year ended December 31, 1996, the
revolving credit facility and notes payable to certain common stockholders were
repaid in conjunction with the purchase of all of the Company's outstanding
preferred and common shares by American Architectural Products Corporation (Note
10).
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities and commitments in the normal course of business, rather than
through a process of forced liquidation. Management is of the opinion that
results of future operations will be sufficient to fund the Company's liquidity
requirements; however, there can be no assurance that the Company's operations
will continue to be profitable or produce positive cash flow. Accordingly, the
accompanying financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
Unaudited Interim Financial Information
The unaudited interim financial statements for the nine months ended
September 30, 1996 and 1997, include all adjustments, consisting of normal
recurring accruals, which the Company considers necessary for a fair
presentation of the results of its operations for the periods presented. The
interim periods' results are not necessarily indicative of the results of
operations for a full fiscal year.
F-80
<PAGE> 190
BINNINGS BUILDING PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Cash and Cash Equivalents
Cash and cash equivalents include all cash balances and highly liquid
investments with an original maturity of three months or less.
Concentration of Credit Risk and Accounts Receivable
The Company's customers are concentrated in the Southeastern United States
construction and home improvement retail markets. No single customer accounted
for a significant amount of the Company's sales, and there were no significant
trade receivables outstanding from any single customer at December 31, 1994,
1995, 1996, September 30, 1996 and 1997. The Company performs on-going credit
evaluations of its customers' financial condition and generally does not require
collateral. Allowances for doubtful accounts are $138,000, $223,000, $203,000
(unaudited) and $378,000 (unaudited) at December 31, 1995 and 1996, and
September 30, 1996 and 1997, respectively.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is provided
using the straight-line method over the estimated useful lives for financial
reporting purposes, presently ranging from 3 to 40 years, and accelerated
methods for income tax purposes.
During 1997, the Company decided to relocate its manufacturing facility in
Florida and sell and lease back the land and buildings of several of its
distribution centers in Florida and began to market these facilities for sale.
Accordingly, the net book value of these facilities at September 30, 1997 of
$5,127,000 (unaudited) has been reflected as property held for sale in the
accompanying balance sheet. In management's opinion, the fair market value less
estimated costs to sell the property, plant and equipment designated as held for
sale is greater than the net book value of this property.
The Company reviews the carrying values of property, plant and equipment
for impairment whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Measurement of any impairment would
include a comparison of estimated future operating cash flows anticipated to be
generated during the remaining useful life to the carrying value of the asset.
Inventories
Inventories are carried at the lower of cost or market. Cost is determined
using the last-in, first-out (LIFO) method. Inventories consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------- ------------------------
1995 1996 1996 1997
----------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Raw materials............... $ 3,144,000 $2,358,000 $2,216,000 $2,659,000
Work in process............. 1,652,000 1,832,000 1,442,000 839,000
Finished goods.............. 2,515,000 3,038,000 3,214,000 2,532,000
----------- ---------- ---------- ----------
7,311,000 7,228,000 6,872,000 6,030,000
Less -- Allowance to reduce
inventories to LIFO
cost...................... (1,396,000) (679,000) (858,000) (679,000)
----------- ---------- ---------- ----------
$ 5,915,000 $6,549,000 $6,014,000 $5,351,000
=========== ========== ========== ==========
</TABLE>
During 1994, 1995 and 1996, the Company liquidated certain LIFO inventory
that was carried at lower costs which prevailed in prior years. The effect of
these liquidations was to decrease cost of goods sold by $104,000, $211,000 and
$8,000 in 1994, 1995 and 1996, respectively.
F-81
<PAGE> 191
BINNINGS BUILDING PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company prepares detail calculations of its LIFO inventory reserve as
of its fiscal year end. For the unaudited nine months ended September 30, 1996
and 1997, the Company estimated its allowance to reduce inventories to LIFO cost
based on the level and mix of inventory on hand and changes in prices of
significant components of inventory. In management's opinion, the allowances at
September 30, 1996 and 1997 are reasonable.
Other Assets
Other assets include deferred financing and other costs incurred primarily
in connection with the Company's financing arrangements. These costs are stated
at the remaining unamortized original cost and are being amortized on a
straight-line basis over the terms of the related loans. Accumulated
amortization of deferred financing and other costs was $49,000, $65,000, $61,000
(unaudited), and $111,000 (unaudited) at December 31, 1995 and 1996, and
September 30, 1996 and 1997, respectively.
Joint Venture
In 1996, the Company formed a joint venture with seven other equal
investors, consisting primarily of other manufacturers of window and door
products. The Company's ownership interest in the joint venture is 12.5%. The
joint venture was formed for the purpose of distributing vinyl windows
throughout the Southeastern United States to certain major retail customers.
The Company's share of losses incurred by the joint venture is recorded on
the equity method and is included in other expenses. The Company's share of
losses of the joint venture for the year ended December 31, 1996, and for the
nine months ended September 30, 1996 and 1997 were $14,000, $2,000 (unaudited)
and $0 (unaudited), respectively.
Income Taxes
Deferred income tax liabilities and assets are determined based on the
difference between the financial statement and income tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
using enacted income tax rates in effect for the year in which the differences
are expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred income tax assets to the amount expected to be
realized.
Revenue Recognition
The Company recognizes a sale when goods are shipped or when ownership is
assumed by the customer.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying amounts of accounts receivable, payable and accrued expenses
approximate fair value because of the short maturity of these items. Based on
the borrowing rates currently available to the Company, the carrying amounts of
long-term debt approximate fair value.
F-82
<PAGE> 192
BINNINGS BUILDING PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------ ------------------------
1995 1996 1996 1997
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Accounts payable -- Trade.... $2,049,000 $2,070,000 $2,168,000 $1,557,000
Payroll and related
benefits................... 728,000 1,097,000 824,000 1,266,000
Other........................ 951,000 1,210,000 1,145,000 677,000
----------- ---------- ---------- ----------
$3,728,000 $4,377,000 $4,137,000 $3,500,000
=========== ========== ========== ==========
</TABLE>
4. LONG-TERM DEBT:
The Company's long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------------- ---------------------------
1995 1996 1996 1997
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Borrowings from certain common
stockholders, secured by
substantially all assets....
Notes payable due September
1, 2000, with monthly
sinking fund requirements
of $10,475 beginning
October 1, 1995, interest
of 9.0% per annum payable
monthly.................. $ 659,000 $ 543,000 $ 572,000 $ 447,000
Notes payable due September
1, 2005, with monthly
sinking fund requirements
of $116,400 beginning
October 1, 1997, interest
of 9.25% per annum
payable monthly.......... 13,738,000 13,738,000 13,738,000 13,738,000
Revolving credit facility
due on August 31, 1999,
interest payable monthly
in arrears at the prime
rate (8.25% at December
31, 1996, and 8.50% at
September 30, 1997) plus
3%....................... 6,256,000 6,430,000 6,585,000 6,421,000
----------- ---------- ---------- ----------
Total borrowings......... 20,653,000 20,711,000 20,895,000 20,606,000
Capital lease obligations..... 151,000 22,000 54,000 122,000
Other......................... 337,000 247,000 270,000 175,000
----------- ---------- ---------- ----------
21,141,000 20,980,000 21,219,000 20,903,000
Less -- Current maturities.... 350,000 7,044,000 7,128,000 14,339,000
----------- ---------- ---------- ----------
$20,791,000 $13,936,000 $14,091,000 $ 6,564,000
=========== ========== ========== ==========
</TABLE>
On September 1, 1995, the Company completed the renegotiation of
significant terms of its debt obligations. The notes payable to certain common
stockholders ($13,200,000 outstanding at December 31, 1994) were modified such
that the interest rates were reduced to 9% and 9.25% and the terms extended. In
addition, unpaid accrued interest of $1,225,000 on September 1, 1995, ($245,000
at December 31, 1994) was converted to principal and will be repaid under
similar terms as the corresponding debt obligations. The 9.25%
F-83
<PAGE> 193
BINNINGS BUILDING PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
notes contain a mandatory redemption clause which stipulates that in the event
there are insurance or condemnation proceeds, an Asset Disposition (as defined),
or when there is excess cash availability (as defined) exceeding $750,000,
redemption payments equal to the excess cash availability over $500,000 must be
made (at no premium). There were no events which occurred during 1996 or 1997
that required a redemption payment to be made. The Company may also redeem, at
its option, the notes payable at a redemption price equal to 100% of the
principal amount, subject to notification requirements to the holders as
specified in the Loan and Security agreements.
In lieu of a restructuring fee paid to holders of the 9.25% notes, the
Company issued capital appreciation rights exercisable for cash payments based
on the value of these rights, as defined. The holders of the capital
appreciation rights may receive payment on the appreciation of the rights, as
defined, following the earlier of (a) September 1, 2000, or (b) the sale or
transfer of all or substantially all of the assets of the Company, the sale or
transfer of a majority of its common stock or a majority of its voting common
stock, the public offering of its common stock or other capital stock, the
bankruptcy or insolvency of the Company, or any other extraordinary corporate
event or (c) the payment in full of the securities. The right to receive payment
on the appreciation of the rights expires on September 1, 2005. In addition to
the capital appreciation rights, the Company granted each holder an option to
put to the Company, in connection with the holder's demand for payment on the
capital appreciation rights, the common shares of the Company it holds, for
which the Company would be required to purchase these shares based on the value,
as defined, on such date. As defined in the agreements, the formula value of
these rights is recalculated at each fiscal year end. The Company accrues the
estimated purchase price of these rights ratably over the period to the earliest
stated payment date of September 1, 2000. Changes in the purchase price due to
the most recent fiscal year calculation are recognized prospectively over the
remaining period. At December 31, 1996, the purchase price for the capital
appreciation rights was approximately $1,019,000 and approximately $645,000
related to the common stock put options. In 1996, the Company recorded interest
expense of $218,000 and a corresponding long-term liability related to the
capital appreciation rights and a charge to accumulated deficit of $139,000 and
a corresponding common stock put option as a component of stockholders' deficit
in the accompanying balance sheets.
As of September 30, 1997, the Company has estimated the change in the
purchase price of these rights based on its unaudited results to date during
1997 and its budgeted results for the remainder of 1997 and determined no
additional accrual of interest expense for the capital appreciation rights or
accretion of the common stock put options is necessary for the nine months ended
September 30, 1997. Subsequent to the year ended December 31, 1996, all of the
Company's capital appreciation rights and the common stock put option were
extinguished in conjunction with the purchase of all of the outstanding
preferred and common shares of the Company by American Architectural Products
Corporation (Note 10).
In connection with modification of the Company's debt terms, the Company
increased its available borrowings under the revolving credit facility from
$6,570,000 to the lesser of $7,000,000 or the borrowing base of 85% of eligible
trade receivables, plus 45% of eligible inventory at the lower of cost or market
value on a first-in, first-out basis. Total credit availability resulting from
the borrowing base was $7,000,000, $7,000,000 (unaudited), and $6,979,000
(unaudited) at December 31, 1996 , September 30, 1996 and 1997, respectively, of
which $6,430,000, $6,585,000 (unaudited), and $6,421,000 (unaudited) was
outstanding at December 31, 1996, September 30, 1996 and 1997, respectively.
The debt agreements contain various covenants which, among other
requirements, limit dispositions of property, plant and equipment, require
maintenance of insurance satisfactory to the lenders, restrict payment of cash
dividends and dispositions of stock, prohibit additional debt, mergers and
acquisitions, and require maintenance of certain financial covenants. At
December 31, 1996, there were no events of noncompliance with the debt
agreements that were not waived by the lenders. As of September 30, 1997, in the
opinion of management, the Company will not be in compliance with certain
financial covenants upon expiration of the waivers from the lenders in January
1998. Accordingly, the Company classified the notes payable to certain
F-84
<PAGE> 194
BINNINGS BUILDING PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
common stockholders as current liabilities as of September 30, 1997. Subsequent
to the year ended December 31, 1996, the revolving credit facility and notes
payable to certain common stockholders were repaid in conjunction with the
purchase of all of the outstanding preferred and common shares of the Company by
American Architectural Products Corporation (Note 10).
During 1991, the Company entered into a capital lease for certain of its
data processing equipment. The lease contains a bargain purchase option. The net
book value of this equipment of approximately $126,000, $116,000, $119,000
(unaudited) and $109,000 (unaudited) at December 31, 1995 and 1996, September
30, 1996 and 1997, respectively, is included in property, plant and equipment in
the accompanying balance sheets.
Maturities of long-term debt are as follows as of December 31, 1996, and
September 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
PERIOD ENDING DECEMBER 31, 1996 1997
---------------------------------- ------------ -------------
(UNAUDITED)
<S> <C> <C>
1997.............................. $ 7,044,000 $ 471,000
1998.............................. 1,460,000 13,941,000
1999.............................. 1,518,000 6,463,000
2000.............................. 1,620,000 28,000
2001.............................. 1,641,000 0
Thereafter........................ 7,697,000 0
----------- -----------
$ 20,980,000 $ 20,903,000
=========== ===========
</TABLE>
5. COMMITMENTS AND CONTINGENCIES:
The Company leases facilities and transportation equipment under
noncancellable operating leases expiring through 2001. Rental expense under
operating leases was approximately $377,000, $384,000, $471,000, $353,000
(unaudited) and $212,000 (unaudited) for the years ended December 31, 1994, 1995
and 1996 and the nine months ended September 30, 1996 and 1997, respectively.
The future minimum rental payments under these lease agreements having initial
or remaining terms in excess of one year are as follows as of December 31, 1996,
and September 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
PERIOD ENDING DECEMBER 31, 1996 1997
----------------------------------- ------------ -------------
(UNAUDITED)
<S> <C> <C>
1997............................... $ 476,000 $ 134,000
1998............................... 401,000 432,000
1999............................... 327,000 358,000
2000............................... 112,000 139,000
2001............................... 8,000 18,000
---------- ----------
$1,324,000 $ 1,081,000
========== ==========
</TABLE>
In prior years, the Company identified potential groundwater contamination
as part of continuous monitoring procedures in place at its Florida
manufacturing facility. The Company is in the process of implementing an
approved Remedial Action Plan (RAP) from the Dade County Department of
Environmental Resources (DERM), to address the groundwater conditions. Based on
the approved RAP, the cost of remediation will be approximately $150,000 to
install, operate and maintain the remediation system. The required period of
monitoring is dependent upon the results of the monitoring. Potential
modification to the RAP could occur if levels of contamination are found above
or below specified DERM limits. During 1993, a charge of $218,000 was provided
to cover the estimated future costs of this monitoring and other environmental
investigation and remediation costs. At December 31, 1996, and September 30,
1997,
F-85
<PAGE> 195
BINNINGS BUILDING PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
respectively, remaining environmental accruals amounted to $166,000 and $159,000
(unaudited), respectively, and are included in accrued liabilities in the
accompanying balance sheets. In management's opinion, based upon the facts
currently known, adequate provision has been made for this contingency, and the
final resolution of all environmental matters will not have a material adverse
effect on the Company's financial position.
The Company is a party to certain legal actions and claims in the normal
course of business, none of which individually or in the aggregate, in the
opinion of management, based upon the facts currently known, are expected to
have a material adverse effect on the Company's financial position.
6. STOCKHOLDERS' DEFICIT:
In 1991, the Company issued common stock purchase options which, after full
exercise thereof, would give the holder a maximum of 49% of the common stock of
the Company. In 1994, the Company terminated those common stock purchase options
through payment of $400,000 in cash and issuance of common stock purchase
options which, after full exercise thereof, would give the holder a maximum of
10% of the voting common stock of the Company. The options were exercisable at a
price of $.01 per share on or before February 28, 1997. The Company retained the
right to terminate these options at a price as defined in the option agreement.
The price to terminate all of the options outstanding at December 31, 1996,
based on the terms of the agreement was $1,348,000. The options outstanding at
December 31, 1995 and 1996, were stated at fair market value based on the
purchase price of the terminated options in 1995 and were included in
stockholders' deficit in the 1995 and 1996 accompanying balance sheets. In
February 1997, the Company terminated the remaining outstanding common stock
purchase options through a payment of $150,000.
During 1994, the Company issued 9% Series B Preferred Stock (the previously
issued preferred stock now being designated as Series A Preferred Stock) to a
stockholder in exchange for cash of $350,000. An additional $50,000 was obtained
through the same stockholder in exchange for an exclusive supply agreement,
whereby the Company agreed to purchase from an unrelated supplier all of the
Company's requirements for specialty windows from October 1, 1994, to September
30, 1997, or longer, if required, to meet a total of $3,000,000 of purchases.
The unrelated supplier, in consideration to the stockholder for facilitating the
supply agreement, agreed to give the $50,000 to the stockholder and, in
addition, promised to pay the stockholder $50,000 in 1996 and 1997 so long as
the supply agreement is still in full force and effect. Additionally, the
stockholder, in consideration to the Company for entering into the agreement
with the unrelated supplier, agreed to transfer to the Company, at no cost,
5,000 shares of Series B Preferred Stock in 1996 and 1997 concurrently with its
receipt of the $50,000 payments so long as the supply agreement is still in full
force and effect. In 1996, the Company received the 5,000 shares of Series B
preferred stock from the stockholder. At September 30, 1997, the Company had not
met its minimum purchase commitments and thus, received no additional shares of
Series B Preferred Stock from the stockholder under this agreement. At September
30, 1997, the agreement was in full force and effect.
The Company and its stockholders have entered into an agreement which
restricts the right of the stockholders to sell or transfer their shares unless
specified conditions are met. The Company has a right of first refusal, as
defined in the agreement, to purchase any shares offered for sale. The
stockholders have certain registration rights and the right of first refusal to
purchase additional capital stock offered by the Company.
The Company has the right to redeem the cumulative preferred stock, Series
A and Series B, in whole or in part, at any time by giving notice of redemption
to all holders. The redemption price for such optional redemption is $10 per
share. In the event of liquidation, dissolution or winding up of the Company,
the Series B stockholders are given preference over the Series A and common
stockholders. Otherwise, all equity stockholders are given the same preference.
F-86
<PAGE> 196
BINNINGS BUILDING PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The holders of both series of the preferred stock are entitled to receive,
if and when declared by the Board of Directors, dividends of additional fully
paid and nonassessable shares of cumulative preferred stock at the rate of 8%
for Series A Preferred Stock and 9% for Series B Preferred Stock per annum
payable semiannually, commencing October 30, 1986, for the Series A Preferred
Stock and commencing April 30, 1995, for the Series B Preferred Stock. The
Company has not declared any dividends subsequent to April 30, 1988, and,
accordingly, as of December 31, 1996 and September 30, 1997, respectively,
approximately $1,428,000 and $1,485,000 (unaudited) Series A Preferred Stock
dividends are in arrears, and approximately $70,000 and $77,000 (unaudited) of
Series B Preferred Stock dividends are in arrears. Subsequent to the year ended
December 31, 1996, a stock dividend was declared on all stock dividends in
arrears for Series A Preferred Stock and Series B Preferred Stock in conjunction
with the purchase of all of the outstanding preferred and common shares of the
Company by American Architectural Products Corporation (Note 10).
Under an employment contract, an employee of the Company is eligible to
receive additional compensation and a bonus if the Company achieves certain
defined earnings levels. The additional compensation and bonus are payable all
or in part by one or more of the following methods: cash, common stock options
with an exercise price of $2.16 per share and stock appreciation rights
exercisable at a price of $2.16 per share. Under this agreement, $55,000 and
$57,000 (unaudited) were earned and paid to the employee for the year ended
December 31, 1996 and September 30, 1997, respectively. The employment contract
also granted the employee 37,500 options to purchase common stock of the Company
at an exercise price of $2.16 per share.
In September 1997, the Company entered into employment agreements with two
officers. Under these agreements, 16,750 options to purchase common stock of the
Company were granted. The exercise dates are December 31, 1998 through December
31, 2000 at exercise prices of $2.00 to $4.00 per share. Upon sale of the
Company on or before June 30, 1998, the exercise price is adjusted to $.50 per
share, as defined in the agreement (Note 10). At September 30, 1997, no stock
options are exercisable. In addition, 16,750 stock appreciation rights were
granted. The exercise price is $0.01 per right and are exercisable through
December 31, 2000. At September 30, 1997, no obligation had been earned under
the stock appreciation rights agreement (Note 10).
In December 1996, the Company entered into an agreement with a consultant
and issued warrants for the purchase of 70,889 shares of common stock. The
exercise price is based on a formula and vesting is based on triggering events,
as defined in the agreement. At September 30, 1997, these warrants are not
exercisable. Subsequent to the year ended December 31, 1996, the common stock
purchase warrants were extinguished in conjunction with the purchase of all of
the outstanding preferred and common shares of the Company by American
Architectural Products Corporation (Note 10).
7. BENEFIT PLANS:
Effective January 1, 1989, the Company established an enhanced 401(k)
defined contribution plan for substantially all employees. Under this plan,
employees may contribute between 2% and 15% of their salaries and wages with the
Company matching up to 100% of the first 3% of employee contributions. The
expense under this plan was $58,000, $53,000, $66,000, $51,000 (unaudited) and
$145,000 (unaudited) for the years ended December 31, 1994, 1995 and 1996, and
the nine months ended September 30, 1996 and 1997, respectively.
8. RELATED PARTIES:
During 1996 and the unaudited nine months ended September 30, 1996 and
1997, the Company sold certain finished products to the joint venture referred
to in Note 2. Sales to the joint venture totaled $1,542,000, $872,000
(unaudited) and $2,409,000 (unaudited) for the year ended December 31, 1996, and
the nine months ended September 30, 1996 and 1997, respectively. Accounts
receivable from the joint venture
F-87
<PAGE> 197
BINNINGS BUILDING PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
were $234,000, $240,000 (unaudited) and $430,000 (unaudited) at December 31,
1996, and September 30, 1996 and 1997, respectively.
9. INCOME TAXES:
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires recognition
of future tax benefits, to the extent that realization of such benefits is more
likely than not, attributable to deductible temporary differences between the
financial statement and income tax basis of assets and liabilities and net
operating loss carryforwards.
The net deferred income tax liability at December 31, 1995 and 1996, and
September 30, 1996 and 1997, is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------------- ---------------------------
1995 1996 1996 1997
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Assets................ $ 5,063,000 $ 4,341,000 $ 4,630,000 $ 4,216,000
Liabilities........... (5,063,000) (4,341,000) (4,630,000) (4,216,000)
----------- ----------- ----------- -----------
$ 0 $ 0 $ 0 $ 0
=========== =========== =========== ===========
</TABLE>
Temporary differences and carryforwards which give rise to significant
deferred income tax assets (liabilities) as of December 31, 1995 and 1996, are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------------- --------------------------
1995 1996 1996 1997
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current deferred income taxes --
Allowance for doubtful
accounts.................... $ 54,000 $ 87,000 $ 79,000 $ 147,000
Inventory valuation
differences................. (847,000) (947,000) (973,000) (836,000)
Accrued expenses not currently
deductible for income tax
purposes.................... 271,000 318,000 242,000 274,000
Accrued environmental
expenses.................... 62,000 131,000 120,000 128,000
Other.......................... 12,000 149,000 139,000 126,000
----------- ----------- ----------- -----------
Total current deferred income
taxes.......................... $ (448,000) $ (262,000) $ (393,000) $ (161,000)
=========== =========== =========== ===========
Long-term deferred income
taxes --
Property, plant and equipment.... $(2,152,000) $(2,013,000) $(2,046,000) $(2,101,000)
Federal net operating loss
carryforwards............... 3,971,000 3,128,000 3,361,000 3,011,000
State net operating loss
carryforwards............... 501,000 295,000 467,000 289,000
Alternative minimum tax
carryforwards............... 0 29,000 22,000 37,000
Valuation allowance............ (1,872,000) (1,177,000) (1,411,000) (1,075,000)
----------- ----------- ----------- -----------
Total long-term deferred income
taxes.......................... $ 448,000 $ 262,000 $ 393,000 $ 161,000
=========== =========== =========== ===========
</TABLE>
F-88
<PAGE> 198
BINNINGS BUILDING PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The income tax provision for the years ended December 31, 1994, 1995 and
1996, and for the nine-month periods ended September 30, 1996 and 1997, consists
of the following elements:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------- ---------------------------
1994 1995 1996 1996 1997
---- ---- ------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Currently payable................... $0 $0 $29,000 $22,000 $ 8,000
Deferred payable.................... 0 0 0 0 0
-- --
------- ------- ------
$0 $0 $29,000 $22,000 $ 8,000
== == ======= ======= ======
</TABLE>
A reconciliation between income taxes computed at the statutory federal
rate of 35% and the provisions for income taxes for the years ended December 31,
1994, 1995 and 1996, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------------- -----------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Amount at statutory
federal rate......... $(555,000) $(436,000) $ 583,000 $ 454,000 $ 118,000
Change in valuation
allowance............ 468,000 311,000 (695,000) (461,000) (102,000)
Alternative minimum
taxes (AMT).......... 0 0 29,000 22,000 8,000
Nondeductible
expenses............. 2,000 2,000 47,000 43,000 12,000
Other.................. 85,000 123,000 65,000 (36,000) (28,000)
--------- --------- -------- -------- --------
$ 0 $ 0 $ 29,000 $ 22,000 $ 8,000
========= ========= ======== ======== ========
</TABLE>
In fiscal years 1994 and 1995 and prior years, the Company incurred
significant financial reporting and taxable losses principally as a result of a
capital structure that contained a substantial amount of high interest rate
debt. Although substantial net deferred income tax assets were generated during
these periods, a valuation allowance was established because in management's
assessment the historical operating trends made it uncertain whether the net
deferred income tax assets would be realized. Accordingly, no provision or
benefit for income taxes was recognized in 1994 and 1995.
During late 1995, the Company renegotiated the significant terms of its
debt obligations which lowered interest expense and provided liquidity for
operations. For the nine months ended September 30, 1996 and the year ended
December 31, 1996, the Company reported taxable income and net income for
financial reporting purposes. The provision for income taxes for the nine months
ended September 30, 1996 and the year ended December 31, 1996 of $22,000
(unaudited) and $29,000, respectively, is comprised solely of AMT as the Company
was able to utilize a portion of its net operating loss carryforwards. At
December 31, 1996 and at September 30, 1997, management determined, largely
because of the Company's prior losses, that it remains uncertain whether the net
deferred tax assets would be realized. As a result a valuation allowance of
$1,177,000 and $1,075,000 (unaudited) was recorded at December 31, 1996 and at
September 30, 1997, respectively.
For federal income tax reporting purposes, the Company had net operating
loss carryforwards of approximately $9,776,000 as of December 31, 1996. These
losses may be used to reduce future taxable income, if any, and expire from 2001
through 2010. These carryforwards may be subject to annual limitation in the
future in accordance with the Tax Reform Act of 1986 (Note 10). For state income
tax reporting purposes, the Company had net operating loss carryforwards of
approximately $5,291,000 as of December 31, 1996, which expire from 1997 through
2010.
F-89
<PAGE> 199
BINNINGS BUILDING PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
10. SUBSEQUENT EVENTS:
Effective December 10, 1997, the stockholders of the Company sold all of
their outstanding preferred and common shares to American Architectural Products
Corporation (American) for approximately $26,500,000. In accordance with the
terms of the sale agreement, the revolving credit facility and notes payable to
certain common stockholders (Note 4) were repaid in full. The agreement provides
for a payment of approximately $1,100,000 to the holders of the 9.25% notes
payable extinguishing the holders' common stock put option and capital
appreciation rights as well as repurchasing 62,500 shares of common stock held
by the holders of the 9.25% notes payable. On December 10, 1997, the Board of
Directors of the Company declared stock dividends payable to cover all Series A
Preferred and Series B Preferred stock dividends that were in arrears through
the date of the sale of the Company. The Company called all of the Series A
Preferred and Series B Preferred shares for redemption as of December 10, 1997.
The Company expects to redeem all of the Series A Preferred and Series B
Preferred shares at the stated redemption value of $10 per share. Payments to
the holders of the Series A Preferred and Series B Preferred shares totaling
approximately $3,169,000 and $394,000, respectively, will be made as the stock
certificates are tendered by the holders. The common stock purchase warrants
held by a consultant expired unexercised on December 10, 1997. Additionally, on
December 10, 1997, the holders of the 54,250 outstanding common stock options
exercised their options and purchased 54,250 shares of common stock of the
Company. The amount to be distributed to the common stockholders will represent
the remaining proceeds from the $26,500,000 payment by American after repayment
of the notes payable, revolving credit facility, Series A Preferred shares,
Series B Preferred shares and closing fees and expenses.
As a result of the purchase of the Company's common stock, the estimated
value associated with the 16,750 stock appreciation rights held by two officers
was approximately $117,000 at December 10, 1997. As of December 10, 1997, the
officers had not exercised their redemption rights.
On November 11, 1997, the Company signed a letter of intent to sell its
Miami production facility and real estate for approximately $4,500,000. The net
book value of the property was approximately $3,629,000 (unaudited) at September
30, 1997. Management anticipates the sale to close by the end of June 1998.
F-90
<PAGE> 200
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
Danvid Company, Inc. and Danvid Window Company
We have audited the accompanying combined balance sheets of Danvid Company,
Inc. and Danvid Window Company as of July 28, 1996 and July 27, 1997, and the
related combined statements of income and retained earnings and cash flows for
the years then ended. These financial statements are the responsibility of the
Companies' 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 combined 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.
As discussed in Note 6 to the accompanying combined financial statements,
the Companies may be subject to additional federal income tax liabilities as a
result of an investigation by the Internal Revenue Service.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Danvid
Company, Inc. and Danvid Window Company at July 28, 1996 and July 27, 1997, and
the results of their combined operations and their combined cash flows for the
years then ended in conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
Dallas, Texas
October 20, 1997
F-91
<PAGE> 201
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 28, JULY 27,
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
Current
Cash.............................................................. $ 678,459 $1,059,761
Short-term investments (Note 4)................................... 1,004,967 1,052,250
Accounts receivable:
Trade, less allowance for doubtful accounts of $353,400 and
$125,600...................................................... 3,846,336 4,667,013
Employees...................................................... 60,004 92,735
Other.......................................................... 13,597 8,861
Inventories (Note 1).............................................. 1,099,859 1,151,992
Prepaid expenses.................................................. 31,275 39,998
Notes receivable -- current portion (Note 2)...................... 11,748 12,342
Deferred tax benefit (Note 8)..................................... 236,424 149,565
---------- ----------
Total current assets...................................... 6,982,669 8,234,517
---------- ----------
Machinery and equipment net (Note 3)................................ 398,643 443,071
---------- ----------
Other
Deposits.......................................................... 26,903 23,300
Investments (Note 4).............................................. 38,485 55,300
Notes receivable, less current portion (Note 2)................... 58,606 39,010
Deferred tax benefit (Note 8)..................................... 56,213 45,932
---------- ----------
Total other assets........................................ 180,207 163,542
---------- ----------
$7,561,519 $8,841,130
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable -- trade......................................... $2,833,765 $2,606,979
Notes payable -- current portion (Note 5)......................... 17,033 36,781
Accrued expenses:
Payroll and payroll taxes...................................... 368,196 429,379
Profit-sharing plan contribution............................... 150,000 --
Other taxes.................................................... 173,378 233,407
Warranty expenses -- current portion........................... 324,294 354,139
Federal income taxes........................................... 454,737 201,858
---------- ----------
Total current liabilities................................. 4,321,403 3,862,543
Notes payable, less current maturities (Note 5)..................... 117,371 82,000
Accrued warranty expenses, less current portion..................... 191,583 159,343
---------- ----------
Total liabilities......................................... 4,630,357 4,103,886
---------- ----------
Commitments and contingencies (Notes 6, 7 and 10)
Shareholders' equity (Note 9)
Common stock -- par............................................... 1,000 1,000
Common stock -- no par............................................ 1,000 1,000
Retained earnings................................................. 3,059,162 4,848,429
---------- ----------
3,061,162 4,850,429
Less: Treasury stock, at cost (Note 9).............................. (130,000) (130,000)
Plus: Unrealized securities gain.................................... -- 16,815
---------- ----------
Total shareholders' equity................................ 2,931,162 4,737,244
---------- ----------
$7,561,519 $8,841,130
========== ==========
</TABLE>
See accompanying summary of accounting policies and notes to combined financial
statements.
F-92
<PAGE> 202
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------
JULY 28, JULY 27,
1996 1997
----------- -----------
<S> <C> <C>
Sales............................................................. $40,731,403 $42,003,176
Cost of Goods Sold................................................ 33,777,787 33,807,196
----------- -----------
Gross Margin...................................................... 6,953,616 8,195,980
----------- -----------
Operating Expenses:
Selling expenses................................................ 1,412,078 2,039,554
General and administrative expenses............................. 4,115,884 3,637,973
----------- -----------
Total Operating Expenses................................ 5,527,962 5,677,527
----------- -----------
Operating Profit.................................................. 1,425,654 2,518,453
----------- -----------
Other Income (Expense):
Interest and dividend income.................................... 22,766 61,349
Other income.................................................... 53,055 51,826
Interest expense................................................ (14,946) (2,656)
----------- -----------
Total Other Income (Expense)............................ 60,875 110,519
----------- -----------
Income Before Income Taxes........................................ 1,486,529 2,628,972
----------- -----------
Income Taxes (Benefit):
Current......................................................... 744,607 737,565
Deferred........................................................ (138,079) 97,140
----------- -----------
Total Income Taxes...................................... 606,528 834,705
----------- -----------
Net Income........................................................ 880,001 1,794,267
Retained Earnings, beginning of year.............................. 2,184,161 3,059,162
Dividends......................................................... (5,000) (5,000)
----------- -----------
Retained Earnings, end of year.................................... $ 3,059,162 $ 4,848,429
=========== ===========
</TABLE>
See accompanying summary of accounting policies and notes to combined financial
statements.
F-93
<PAGE> 203
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------
JULY 28, JULY 27,
1996 1997
----------- ----------
<S> <C> <C>
Operating Activities:
Net income....................................................... $ 880,001 $1,794,267
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................. 201,139 204,000
Deferred taxes................................................ (138,079) 97,140
Gain on investments........................................... -- (47,283)
Changes in operating assets and liabilities
Accounts receivable -- trade................................ 184,293 (820,677)
Accounts receivable -- other................................ 11,587 (27,995)
Inventories................................................. 119,962 (52,133)
Prepaid expenses............................................ 164,871 (8,723)
Other assets................................................ 3,604 3,600
Accounts payable............................................ (94,868) (225,786)
Accrued expenses............................................ 808,750 (284,062)
----------- ----------
Net cash provided by operating activities.......................... 2,141,260 632,348
----------- ----------
Investing Activities:
Increase in short-term investments............................... (1,004,967) --
Decrease in non-current investments.............................. 4,811 --
Payments received on notes receivable............................ 4,834 19,002
Purchase of property and equipment............................... (101,390) (248,428)
----------- ----------
Net cash used in investing activities.............................. (1,096,712) (229,426)
----------- ----------
Financing Activities:
Dividends paid................................................... (5,000) (5,000)
Note payments.................................................... (475,836) (16,620)
----------- ----------
Net cash used in financing activities.............................. (480,836) (21,620)
----------- ----------
Increase in cash and cash equivalents.............................. 563,712 381,302
Cash and Cash Equivalents:
Beginning of year................................................ 114,747 678,459
----------- ----------
End of year...................................................... $ 678,459 $1,059,761
=========== ==========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for interest........................... $ 14,946 $ 2,656
=========== ==========
</TABLE>
See accompanying summary of accounting policies and notes to combined financial
statements.
F-94
<PAGE> 204
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Danvid Company, Inc. (the Company) is a manufacturer of residential windows
and doors with its office and facilities located in Carrollton, Texas. The
Company is related to Danvid Window Company (Affiliate) through common
management and shareholders. The Company's products are principally sold to
Danvid Window Company which sells the products to wholesalers, retailers and
builders. Approximately 92 and 98 percent of the Company's 1996 and 1997 sales
are to Danvid Window Company, respectively. These financial statements are the
combined financial statements of Danvid Company, Inc. and Danvid Window Company.
All significant intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
CASH AND CASH EQUIVALENTS
The Company and its Affiliate maintain a portion of their cash in bank
deposit accounts which at times may have exceeded federally insured amounts. The
companies have not experienced any losses in such accounts and believe they are
not exposed to any significant credit risk on cash and cash equivalents.
INVESTMENTS
Short-term investments are stated at fair value and include investments in
equity and bond mutual funds. In accordance with company policy, these
investments, which the Company intends to hold for less than one year but longer
than three months, are not included as cash equivalents. These securities are
considered trading securities with the unrealized holding gains and losses
reported in earnings.
Non-current investments are stated at fair value and include investments in
equity securities which the Company intends to hold for periods longer than one
year. Unrealized holding gains and losses on securities are carried as a
separate component of shareholders' equity.
ACCOUNTS RECEIVABLE
The Company's customers, as well as the Affiliate's customers, are
primarily related to the home building and remodeling industries. Trade accounts
receivable are normally uncollateralized and payment terms are generally 30
days. Management performs periodic reviews of the creditworthiness of customers
and provides an allowance for losses on receivables based upon prior years'
experience.
INVENTORIES
Inventory is stated at the lower of cost (determined on a first-in,
first-out basis) or market. Inventory costs include materials, direct labor, and
manufacturing overhead. Costs of miscellaneous manufacturing supplies are
expensed as incurred.
F-95
<PAGE> 205
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MACHINERY AND EQUIPMENT
Machinery and equipment are stated at cost. Depreciation has been
calculated using an accelerated method over the estimated useful lives of the
assets as follows:
<TABLE>
<CAPTION>
ESTIMATED USEFUL LIFE
---------------------
<S> <C>
Transportation equipment.......................................... 5 years
Office furniture and equipment.................................... 7 - 10 years
Machinery and shop equipment...................................... 7 - 10 years
Computer equipment................................................ 5 years
</TABLE>
ACCRUED WARRANTY EXPENSES
The Company provides a 10-year warranty on its products and has established
a product warranty reserve. The warranty reserve is based on management's
estimates of future costs associated with fulfilling the warranty obligation.
Management's estimates were derived from the Company's historical experience.
REVENUES
The Company and Affiliate recognize revenue on its window products when
shipped to the customer. Repair, service, and freight revenue is recognized as
the services are performed. All sales between the Company and the Affiliate have
been eliminated.
INCOME TAXES
Statement of Financial Accounting Standards Board No. 109, "Accounting for
Income Taxes" (SFAS No. 109), provides for deferred income tax assets and
liabilities resulting from temporary differences (see Note 8). Temporary
differences are the differences between the tax basis of assets and liabilities
and their reported amounts in the financial statements that will result in
taxable or deductible amounts in future years. In accordance with SFAS No. 109,
the Company has considered the need for a valuation allowance to reduce its
deferred tax asset to an amount which will, more likely than not, be realized.
No valuation allowance was considered necessary.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130), which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS 130 is effective for financial statements for periods beginning
after December 15, 1997 and requires comparative information for earlier years
to be restated.
Additionally, in June 1997, the Financial Accounting Standards Board issued
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," (SFAS 131) which supersedes SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise." SFAS 131 establishes standards for the
reporting by public companies of information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements. It also establishes
standards for disclosures regarding products and services, geographic areas and
major customers.
F-96
<PAGE> 206
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
SFAS 131 is effective for financial statements for periods beginning after
December 15, 1997 and requires comparative information for earlier years to be
restated.
Because of the recent issuance of these standards, management has been
unable to fully evaluate the impact, if any, they may have on future financial
statement disclosures. Results of operations and financial position, however,
will be unaffected by implementation of these two standards.
F-97
<PAGE> 207
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
1. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
JULY 28, JULY 27,
1996 1997
---------- ----------
<S> <C> <C>
Raw materials....................................... $ 620,917 $ 663,676
Work-in-process..................................... 143,773 180,678
Finished goods...................................... 335,169 307,638
---------- ----------
Total $1,099,859 $1,151,992
========== ==========
</TABLE>
2. NOTES RECEIVABLE
Included in notes receivable is a loan due from a shareholder of the
Company totaling $8,320 and $13,520 at July 28, 1996 and July 27, 1997,
respectively. This loan is a demand note, bears no interest, and is payable
monthly. The loan is secured by an automobile owned by the officer.
The Company has an undivided interest in a note receivable with an
unrelated party that is secured by land and payable in quarterly installments of
principal and interest at 8 percent per annum. The note matures February 1,
2004.
The above referenced notes receivable have scheduled maturities as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
--------------------------------------------------- -------
<S> <C>
1998............................................... $12,342
1999............................................... 11,624
2000............................................... 8,777
2001............................................... 9,505
2002............................................... 9,104
-------
Total.............................................. $51,352
=======
</TABLE>
3. MACHINERY AND EQUIPMENT
Machinery and equipment consists of the following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Transportation equipment............................ $ 522,806 $ 643,231
Office furniture and equipment...................... 15,194 24,399
Machinery and shop equipment........................ 502,088 613,410
Computer equipment.................................. 184,413 191,889
---------- ----------
Total............................................... 1,224,501 1,472,929
Accumulated depreciation............................ 825,858 1,029,858
---------- ----------
Net machinery and equipment......................... $ 398,643 $ 443,071
========== ==========
</TABLE>
F-98
<PAGE> 208
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENTS
The cost and estimated fair value of the investment securities are as
follows:
<TABLE>
<CAPTION>
JULY 28, 1996
--------------------------------------------------
COST GAIN LOSS FAIR VALUE
---------- ------- ------- ----------
<S> <C> <C> <C> <C>
Trading securities (short-term)............... $1,004,967 $ -- $ -- $1,004,967
Available-for-sale securities (long-term)..... 38,485 -- -- 38,485
---------- --- --- ----------
Total investment securities................... $1,043,452 $ -- $ -- $1,043,452
========== === === ==========
</TABLE>
<TABLE>
<CAPTION>
JULY 27, 1997
--------------------------------------------------
COST GAIN LOSS FAIR VALUE
---------- ------- ------- ----------
<S> <C> <C> <C> <C>
Trading securities (short-term)............... $1,004,967 $47,283 $ - $1,052,250
Available-for-sale securities (long-term)..... 38,485 16,815 - 55,300
---------- ------- ------- ----------
Total investment securities................... $1,043,452 $64,098 $ - $1,107,550
========== ======= ======= ==========
</TABLE>
5. NOTES PAYABLE
The Company and its Affiliate have an $800,000 line-of-credit with Comerica
Bank -- Texas which bears interest at prime rate plus one percent and is payable
on demand. This line-of-credit has no outstanding balance as of July 28, 1996 or
July 27, 1997. Any borrowings under the line-of-credit are collateralized by
inventory and accounts receivable.
Long-term debt consist of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
13.65% installment note, payable monthly in the amount
of $717 including interest, due May 30, 1998 and
secured by an automobile............................. $ 28,404 $ 23,781
Non-interest bearing, promissory note to former
shareholder, payable monthly in the amount of $1,000,
secured by company stock............................. 106,000 94,000
-------- --------
Total.................................................. 134,404 117,781
Less: Current maturities............................... (17,033) (35,781)
-------- --------
Long-term debt......................................... $117,371 $ 82,000
======== ========
</TABLE>
Future maturities of long-term debt at July 27, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
-------------------------------------------------------- --------
<S> <C>
1998.................................................... $ 35,781
1999.................................................... 12,000
2000.................................................... 12,000
2001.................................................... 12,000
2002.................................................... 12,000
Thereafter.............................................. 34,000
--------
Total......................................... $117,781
========
</TABLE>
F-99
<PAGE> 209
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
6. COMMITMENTS AND CONTINGENCIES
The Internal Revenue Service is currently conducting an investigation of
the Companies and their shareholders. Although there have not been any
assessments against the Companies, the Companies may be subject to additional
federal income tax liabilities. The ultimate outcome of the investigations and
their effects on the Companies cannot presently be determined. Accordingly no
provision for any liability that may result upon the resolution of this matter
has been recognized in the combined financial statements.
At July 27, 1997, the Companies are defendants in several lawsuits. The
Companies may be liable in these matters to the extent that the lawsuits are
found in favor of the plaintiffs and to the extent that these matters are not
covered by the Companies' insurance. In the opinion of management, such
liabilities, if any, would not have a material effect on the combined financial
statements.
At July 27, 1997, the Company was committed to various operating leases of
its office, production facility, production and office equipment, and
transportation equipment. Operating lease expense was approximately $1,135,000
and $1,080,000 for the years ended 1996 and 1997, respectively.
Future estimated minimum lease payments under operating leases at July 27,
1997, are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
--------------------------------------------------------- ----------
<S> <C>
1998..................................................... $1,072,440
1999..................................................... 1,033,145
2000..................................................... 736,536
2001..................................................... 699,716
2002..................................................... 578,212
Thereafter............................................... 1,431,128
----------
Total.......................................... $5,551,177
==========
</TABLE>
7. EMPLOYEE BENEFIT PLANS
The Company and its Affiliate have adopted qualified defined contribution
profit-sharing plans during fiscal year 1996. The Plans cover all employees
meeting minimum age and length of service requirements. Contributions to the
Plans are made at the discretion of each company's Board of Directors. Expense
related to these Plans were $150,000 and $200,000 for the years ended July 28,
1996 and July 27, 1997, respectively.
8. INCOME TAXES
The Company's effective tax rate in 1996 is 41 percent. This differs from
the statutory tax rate of 34 percent due to non-deductible expenses (e.g. meals
and entertainment) and an additional provision for potential income tax
liabilities.
F-100
<PAGE> 210
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Cumulative temporary differences consist of the following:
<TABLE>
<CAPTION>
JULY 28, JULY 27,
1996 1997
-------- --------
<S> <C> <C>
Deferred tax assets:
Accrued warranty expense............................. $175,398 $174,584
Capitalized inventory costs.......................... 8,840 8,840
Allowance for bad debts.............................. 117,324 20,318
-------- --------
Gross deferred tax assets.............................. 301,562 203,742
-------- --------
Deferred tax liabilities:
Machinery and equipment.............................. (8,925) (8,245)
-------- --------
Net deferred tax assets................................ $292,637 $195,497
======== ========
</TABLE>
9. SHAREHOLDERS' EQUITY
Danvid Company, Inc. has 100,000 shares of no par common stock authorized,
4,500 shares issued, 4,275 shares outstanding and 225 shares in treasury valued
at cost at July 28, 1996 and July 27, 1997.
Danvid Window Company has 100,000 shares of $1 par common stock authorized,
1,000 shares issued and outstanding at July 28, 1996 and July 27, 1997. In
January 1996 and February 1997, common stock dividends of $5 par share were paid
totaling $5,000.
10. BUY -- SELL AGREEMENT
The Company and its Affiliate have an agreement regarding the disposition
of the Affiliate's sole shareholder's shares of common stock. In accordance with
the agreement, a shareholder of the Company can exercise an option to purchase a
controlling share of the Affiliate's common stock from the Affiliate's sole
shareholder. The purchase price as set forth in the agreement is $1.00 per
share.
11. MAJOR CUSTOMERS
The Company sells its products to homebuilders and distributors primarily
in its regional area. For the years ended July 28, 1996 and July 27, 1997, the
Company and its Affiliate had sales to one major distributor that approximated
12 percent in both years. The concentration in accounts receivable also
approximated 12 percent of the total balance in both years for the same
distributor.
12. SUBSEQUENT EVENT
Subsequent to their fiscal year end, the Company and the Affiliate and
their shareholders entered into a letter of intent with an unrelated company to
sell the net assets of the Company and the Affiliate.
F-101
<PAGE> 211
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Danvid Company, Inc. and Danvid Window Company
We were engaged to audit the accompanying combined balance sheet of Danvid
Company, Inc. and Danvid Window Company (a Texas corporation) as of July 31,
1995, and the related combined statement of operations and retained earnings,
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 statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Danvid Company, Inc.
and Danvid Window Company as of July 31, 1995, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
FOX, BYRD & GOLDEN
Dallas, Texas
October 13, 1995
F-102
<PAGE> 212
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
COMBINED BALANCE SHEET
JULY 31, 1995
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents.............................................................. $ 114,747
Short-term investments (Note 1G)....................................................... 43,296
Accounts receivable--trade (Notes 2 and 4)............................................. 4,030,629
Accounts receivable--other............................................................. 64,888
Notes receivable--current portion (Note 3)............................................. 19,613
Due from officer (Note 6).............................................................. 20,300
Inventory (Notes 1B and 4)............................................................. 1,219,821
Prepaid expenses....................................................................... 71,803
Income taxes receivable................................................................ 124,343
Deferred income taxes receivable (Notes 1D and 7)...................................... 49,132
----------
Total Current Assets............................................................ 5,758,572
----------
Property, Plant and Equipment (Notes 1C and 4)
Transportation equipment............................................................... 538,193
Office furniture and equipment......................................................... 15,194
Machinery and shop equipment........................................................... 458,878
Computer equipment..................................................................... 128,852
----------
1,141,117
Less: Accumulated depreciation......................................................... 642,861
----------
498,256
----------
Other Assets
Organization costs--net (Note 1H)...................................................... 327
Deposits............................................................................... 30,316
Notes receivable (Note 3).............................................................. 55,575
Deferred income taxes receivable (Notes 1D and 7)...................................... 105,426
----------
191,644
----------
$6,448,472
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable--trade................................................................ $2,928,634
Line-of-credit--bank (Note 4).......................................................... 350,000
Notes payable--current portion (Note 4)................................................ 124,836
Accrued payroll and commissions........................................................ 310,135
Accrued payroll taxes.................................................................. 80,335
Accrued warranty expense............................................................... 97,000
Accrued other expenses................................................................. 74,968
----------
Total Current Liabilities....................................................... 3,965,908
----------
Long-Term Debt
Notes payable (Notes 4 and 6).......................................................... 260,240
Less: Current portion.................................................................. 124,836
----------
135,404
----------
Other Liabilities
Accrued warranty expenses.............................................................. 291,000
----------
Total Liabilities............................................................... 4,392,312
----------
Stockholders' Equity
Common stock (Note 8).................................................................. 2,000
Retained earnings...................................................................... 2,184,160
----------
2,186,160
Less: Treasury stock, at cost (Note 8)................................................. 130,000
----------
2,056,160
----------
$6,448,472
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-103
<PAGE> 213
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
COMBINED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEAR ENDED JULY 31, 1995
<TABLE>
<S> <C>
Sales........................................................................... $37,909,147
Cost of Goods Sold.............................................................. 33,739,455
-----------
Gross Profit.................................................................... 4,169,692
-----------
Operating Expenses
Selling expenses.............................................................. 1,977,022
General and administrative expenses........................................... 2,405,330
-----------
4,382,352
-----------
Net Operating Loss.............................................................. (212,660)
-----------
Other Income (Expense)
Interest and dividend income.................................................. 13,056
Other income.................................................................. 69,994
Interest expense.............................................................. (30,782)
Loss on investment............................................................ (1,738)
-----------
50,530
-----------
Loss Before Federal Income Tax.................................................. (162,130)
-----------
Federal Income Tax Expense (Benefit) (Notes 1D and 7)
Current....................................................................... (45,251)
Deferred...................................................................... (19,578)
-----------
(64,829)
-----------
Net Loss........................................................................ (97,301)
Retained Earnings, Beginning of year............................................ 2,306,507
Dividends....................................................................... (25,046)
-----------
Retained Earnings, End of year.................................................. $ 2,184,160
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-104
<PAGE> 214
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JULY 31, 1995
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Net loss...................................................................... $ (97,301)
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization.............................................. 159,045
Loss on sale of investments................................................ 1,738
Decrease in accounts receivable............................................ 760,118
Decrease in income taxes receivable........................................ 6,211
Decrease in inventory...................................................... 83,179
Increase in prepaid expenses............................................... (10,397)
Decrease in other assets................................................... 26,030
Increase in deferred income taxes.......................................... (19,578)
Decrease in payables....................................................... (475,425)
Decrease in accrued expenses............................................... (419,111)
---------
Net Cash Provided by Operating Activities............................. 14,509
---------
Cash Flows from Investing Activities:
Decrease in investments in mutual funds....................................... (1,032)
Note proceeds................................................................. (15,000)
Payments received on notes receivable......................................... 13,651
Purchase of property and equipment............................................ (405,989)
---------
Net Cash Used in Investing Activities................................. (408,370)
---------
Cash Flows from Financing Activities:
Net proceeds from line-of-credit.............................................. 350,000
Dividends paid................................................................ (25,046)
Note payments................................................................. (156,232)
Purchase of treasury stock.................................................... (10,000)
---------
Net Cash Provided by Financing Activities............................. 158,722
---------
Decrease in Cash and Cash Equivalents........................................... (235,139)
Cash and Cash Equivalents
Beginning of year............................................................. 349,886
---------
End of year................................................................... $ 114,747
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-105
<PAGE> 215
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JULY 31, 1995
<TABLE>
<S> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Schedule of Noncash Investing and Financing Transactions:
Purchase of automobile......................................................... $ (33,475)
Note payable................................................................... 33,475
Purchase of treasury stock..................................................... (130,000)
Note payable................................................................... 120,000
---------
Cash Paid.............................................................. $ (10,000)
=========
Cash Payments (Refunds):
Interest....................................................................... $ 30,782
Income taxes................................................................... $ (51,462)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-106
<PAGE> 216
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
NOTES TO THE COMBINED FINANCIAL STATEMENTS
JULY 31, 1995
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Danvid Company, Inc. (the Company) is a manufacturer of aluminum windows
and doors with its office and facilities located in Carrollton, Texas. The
Company is related to Danvid Window Company (affiliate) and Advantage Discount
Glass through common management and shareholders. The Company's products are
principally sold to Danvid Window Company which sells the products to
wholesalers, retailers and builders. Approximately 94% of the Company's sales
are to Danvid Window Company. These financial statements are the combined
financial statements of Danvid Company, Inc. and Danvid Window Company. All
significant intercompany accounts and transactions have been eliminated. The
more significant accounting policies are as follows:
A. Sales are recognized when the product is shipped. Title actually
passes when the product is delivered, which is usually the same day that it
is shipped and no longer than three days after shipment. There were no
material shipments undelivered at July 31, 1995.
B. Inventory is carried at the lower of cost or market determined on a
first-in, first-out basis.
C. Property, plant and equipment, stated at cost, are depreciated
using an accelerated method over the estimated useful lives of the assets.
Depreciation expense was $158,527 for the year ended July 31, 1995.
<TABLE>
<CAPTION>
ASSETS ESTIMATED USEFUL LIFE
---------------------------------------------------------- ---------------------
<S> <C>
Transportation equipment.................................. 5 years
Office furniture and equipment............................ 7 - 10 years
Machinery and shop equipment.............................. 7 - 10 years
Computer equipment........................................ 5 years
</TABLE>
D. The Company has adopted Statement of Financial Accounting Standards
Board No. 109 for accounting for income taxes. For all significant items
where there is a timing difference between financial and income tax
reporting, deferred taxes are provided. Deferred taxes are classified as
current or noncurrent, depending on the classification of the assets and
liabilities to which they related.
E. Financial instruments which potentially subject the Company to a
concentration of credit risk principally consist of cash and trade
receivables. The Company sells its principal products to customers related
to the home building and remodeling industries. To reduce credit risk, the
Company performs on-going credit evaluations of its customers' financial
conditions and does not generally require collateral.
In the normal course of business, the Company may have bank account balances
in excess of federally insured limits.
F. For purposes of the statement of cash flows, cash equivalents
include time deposits, certificates of deposit, and all highly liquid debt
instruments with original maturities of three months or less.
G. Short-term investments are stated at the lower of cost or market
and include investments in equity and bond mutual funds.
H. Organization costs are being amortized over 5 years. Amortization
expense was $518 for 1995.
I. The Company provides a 10-year warranty on its products. The
Company has established an estimated accrual for these anticipated future
warranty costs.
F-107
<PAGE> 217
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 1995
NOTE 2--ACCOUNTS RECEIVABLE--TRADE
Accounts receivable--trade of the Company and its affiliate are pledged as
collateral on the Comerica Bank note and stated net of an allowance for doubtful
accounts of $232,358 at July 31, 1995. An aged analysis of accounts receivable
at July 31, 1995, is as follows:
<TABLE>
<CAPTION>
AMOUNT %
---------- ---
<S> <C> <C>
Current......................................... $3,138,427 74
30 days......................................... 937,150 22
60 days......................................... 187,410 4
---------- ---
$4,262,987 100
========== ===
</TABLE>
NOTE 3--NOTES RECEIVABLE
The Company has an undivided interest in a note receivable secured by land
payable in quarterly installments of principal and interest at 8% per annum
which matures February 1, 2004, and has an unsecured note being repaid in
monthly installments of $692, including interest at 10% per annum.
<TABLE>
<S> <C>
Total notes receivable..................................... $75,188
Less: Current portion...................................... 19,613
-------
Long-term notes receivable................................. $55,575
=======
</TABLE>
NOTE 4--NOTES PAYABLE
The Company has a line-of-credit with Comerica Bank in the amount of
$800,000 at prime plus 1% secured by eligible accounts receivable and inventory.
The line-of-credit is a demand note payable. At July 31, 1995, there was
$350,000 drawn against the line-of-credit.
A summary of long-term debt at July 31, 1995 is as follows:
<TABLE>
<S> <C>
General Motors Acceptance Corporation
Installment note payable monthly in the amount of $717 including
interest at 13.65% with balloon balance due May 30, 1998,
secured by an automobile........................................ $ 32,663
Individual (Ex-stockholder) (Note 6)
Promissory note payable monthly in the amount of $1,000 with no
interest, secured by company stock.............................. 119,000
Officer
Promissory note payable monthly in the amount of $8,484 plus
interest at 10%, matures February 28, 1997, unsecured
(subsequent payments through September 30, 1995 totaled
$82,865)........................................................ 108,577
--------
Total Indebtedness...................................... 260,240
Less: Current Portion................................... 124,836
--------
Long-Term Debt.......................................... $135,404
========
</TABLE>
F-108
<PAGE> 218
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 1995
NOTE 4--NOTES PAYABLE (CONTINUED)
The following are maturities of long-term debt at July 31, 1995:
<TABLE>
<CAPTION>
FISCAL
YEAR ENDED
JULY 31, AMOUNT
-------------------------------------------------- --------
<S> <C>
1996............................................ $124,836
1997............................................ 17,033
1998............................................ 35,371
1999............................................ 12,000
2000............................................ 12,000
Thereafter........................................ 59,000
--------
$260,240
========
</TABLE>
NOTE 5--COMMITMENTS AND CONTINGENT LIABILITIES
A. At July 31, 1995, the Company was committed to various operating leases
of its office and production facility and equipment. Rent expense for the year
ended July 31, 1995, was $481,649. Future estimated minimum lease payments under
noncancellable leases are:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, AMOUNT
---------------------------------------------------------------- --------
<S> <C>
1996............................................................ $514,200
1997............................................................ 225,400
1998............................................................ 23,800
1999............................................................ 21,800
--------
$785,200
========
</TABLE>
B. Employees of the Company are entitled to paid vacation, paid sick days
and personal days off, depending on job classification, length of service, and
other factors. It is impracticable to estimate the amount of compensation for
future absences, and, accordingly, no liability has been recorded in the
accompanying financial statements. The Company's policy is to recognize the
costs of compensated absences when actually paid to employees.
C. A workmen's compensation claim for approximately $40,000 has been filed
against Danvid Window Company. Management's opinion is that their insurance
company will cover the majority of any ultimate settlement and any payment by
the Company will not materially affect the Company's results of operations or
financial position.
NOTE 6--RELATED PARTY TRANSACTIONS
The following are related party transactions and balances for the year
ended July 31, 1995:
<TABLE>
<S> <C>
Note payable--officer........................................... $108,577
Accounts receivable--officer.................................... $ 20,300
Interest expense--officers...................................... $ 20,220
Note payable--Mary Crawford..................................... $119,000
</TABLE>
F-109
<PAGE> 219
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 1995
NOTE 7--INCOME TAXES
The Company's effective tax rate is higher than what would be expected if
the federal statutory rate was applied to net income because of expenses
deducted for financial reporting purposes that are not deductible for federal
income tax purposes. These permanent timing differences for calculation of
income tax include amounts related to meals and entertainment and officers life
insurance. Cumulative temporary timing differences consist of the following at
July 31, 1995:
<TABLE>
<S> <C>
Excess of depreciation for tax purposes over the amount taken for
book purposes.................................................. $ 6,427
Accrued warranty expense recognized for book purposes only....... (388,000)
Additional costs related to inventory, capitalized for tax
purposes only.................................................. (47,506)
---------
$(429,079)
=========
</TABLE>
The Company has the following capital loss carryforwards for regular
federal income tax purposes at July 31, 1995:
<TABLE>
<CAPTION>
YEAR OF EXPIRATION AMOUNT
----------------------------------------------------------------- -------
<S> <C>
1997............................................................. $23,687
1999............................................................. 76
2000............................................................. 1,739
-------
$25,502
=======
</TABLE>
NOTE 8--SHAREHOLDERS' EQUITY
Danvid Company, Inc. has 100,000 shares of no par common stock authorized,
4,500 shares issued, 4,275 shares outstanding and 225 shares in treasury at July
31, 1995. In June 1995, the Company purchased 225 shares of its stock in full
redemption of a stockholder's interest for $130,000. In July 1995, common stock
dividends of $2.35 per share were paid totaling $10,046.
Danvid Window Company has 100,000 shares of $1 par common stock authorized,
1,000 shares issued and outstanding at July 31, 1995. In January 1995, common
stock dividends of $15 per share were paid totaling $15,000.
F-110
<PAGE> 220
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................... 4
Forward-Looking Statements............... 4
Industry Data and Certain Defined
Terms.................................. 5
Trademarks............................... 5
Prospectus Summary....................... 6
Summary Financial Data................... 16
Risk Factors............................. 18
Use of Proceeds.......................... 24
Capitalization........................... 25
Unaudited Pro Forma Consolidated
Financial Statements................... 26
Selected Financial Data.................. 36
Management's Discussion and Analysis of
Financial Condition and Results of
Combined Operations.................... 40
Business................................. 47
Management............................... 59
Certain Relationships and Related
Transactions........................... 63
Principal Stockholders................... 65
Shares Eligible for Future Sale.......... 66
Description of Capital Stock............. 66
Description of Exchange Notes............ 68
Description of Outstanding Notes......... 93
The Exchange Offer....................... 94
Certain U.S. Federal Income Tax
Consequences........................... 103
Plan of Distribution..................... 107
Legal Matters............................ 108
Experts.................................. 108
Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure............................. 108
Index to Financial Statements............ F-1
</TABLE>
======================================================
======================================================
$125,000,000
EXCHANGE OFFER
[LOGO]
AMERICAN ARCHITECTURAL
PRODUCTS CORPORATION
11 3/4% SENIOR NOTES
DUE 2007
------------------------
PROSPECTUS
------------------------
, 1998
======================================================
<PAGE> 221
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
In accordance with Section 102(b)(7) of the Delaware General Corporation
Law ("DGCL"), the Company's Certificate of Incorporation includes a provision
that eliminates, to the fullest extent permitted by law, the personal liability
of members of its Board of Directors to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director. Such provision does
not eliminate or limit the liability of a director (1) for any breach of a
director's duty of loyalty to the Company or its stockholders, (2) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of a law, (3) for paying an unlawful dividend or approving an illegal
stock purchase or redemption (as provided in Section 174 of the DGCL) or (4) for
any transaction from which the director derived an improper personal benefit.
Section 145 of the DGCL permits a corporation to indemnify any director or
officer of the corporation against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with any action, suit or proceeding brought by reason of the fact
that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, if such person acted in good faith and in a
manner that he reasonably believed to be in or not opposed to the best interests
of the corporation and, with respect to any criminal action or proceeding, if he
had no reasonable cause to believe his conduct was unlawful. In a derivative
action (i.e., one brought by or in the right of the corporation),
indemnification may be made for expenses actually and reasonably incurred by any
officer or director in connection with the defense or settlement of such an
action or suit if such person acted in good faith and in a manner that he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the court in which such
action or suit was brought shall determine that such person is fairly and
reasonably entitled to indemnity for such expenses despite such adjudication of
liability.
The DGCL also permits a corporation to purchase and maintain insurance on
behalf of any person who is or was a director or officer against any liability
asserted against him and incurred by him in such capacity, or arising out of his
status as such, whether or not the corporation has the power to indemnify him
against that liability under Section 145 of the DGCL.
Certain provisions of the Company's Certificate of Incorporation and Bylaws
generally provide for the indemnification of and advancement of litigation
expenses to the Company's directors and officers and such other persons
designated by the Board of Directors of the Company as entitled to the benefits
of indemnification against all liabilities, losses and expenses incurred in
connection with any claim, action, suit or proceeding in which any of them
become involved by reason of their service rendered to the Company or, at its
request, to another entity; provided, however, that no such right to
indemnification shall exist with respect to an action brought by an indemnitee
against the Company unless certain conditions set forth in such provisions are
satisfied. The provisions of the Company's Certificate of Incorporation and
Bylaws are not exclusive of any other indemnification rights to which an
indemnitee may be entitled, whether by contract or otherwise. The Company may
also purchase liability insurance on behalf of its directors and officers,
whether or not it would have the obligation or power to indemnity any of them
under the terms of its Certificate of Incorporation.
In addition, each of the control persons, officers and directors of each of
the Subsidiary Guarantors is generally provided indemnification to the fullest
extent allowed by the law of such Subsidiary Guarantor's respective jurisdiction
of organization.
II-1
<PAGE> 222
ITEM 21(A). EXHIBITS
The information required by this Item 21(a) is set forth in the Index to
Exhibits accompanying this Registration Statement and is incorporated herein by
reference.
ITEM 21(B). FINANCIAL STATEMENT SCHEDULES
The financial statement schedules listed below follow:
1. Schedule II -- Valuation and Qualifying Accounts of American
Architectural Products Corporation
2. Schedule II -- Valuation and Qualifying Accounts of Eagle Window & Door,
Inc. and Subsidiaries and Taylor Building Products Company
3. Schedule II -- Valuation and Qualifying Accounts of Forte Computer Easy,
Inc. and Subsidiaries
4. Schedule II -- Valuation and Qualifying Accounts of Western Insulated
Glass, Co.
5. Schedule II -- Valuation and Qualifying Accounts of Thermetic Glass,
Inc.
6. Schedule II -- Valuation and Qualifying Accounts of Danvid Company, Inc.
and Danvid Window Company (Year ended July 31, 1995)
7. Schedule II -- Valuation and Qualifying Accounts of Danvid Company, Inc.
and Danvid Window Company (Year ended July 28, 1996 and year ended July 27,
1997)
8. Schedule II -- Valuation and Qualifying Accounts of Binnings Building
Products, Inc.
II-2
<PAGE> 223
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
American Architectural Products Corporation
The audit referred to in our report dated March 14, 1997, except for Note 5
which is as of March 31, 1997, relating to the consolidated financial statements
of American Architectural Products Corporation and subsidiaries, which is
contained in the Prospectus constituting part of this Registration Statement,
included the audit of the financial statement schedule listed under Item 21(b)
for the period from the date of inception (June 19, 1996) to December 31, 1996.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based upon our audit.
In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein.
BDO SEIDMAN, LLP
Troy, Michigan
March 14, 1997
II-3
<PAGE> 224
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
----------------------------
BALANCE CHARGED TO CHARGED TO BALANCE
AT BEGINNING COSTS AND OTHER AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(1) DEDUCTIONS PERIOD
- ------------------------------- ------------ ------------ ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts..................... $ -- $ 12,546 $ 914,552 $487,894(2) $ 439,204
Accrued warranty obligations... $ -- $369,324 $ 4,627,412 $615,657 $4,381,079
</TABLE>
- ---------------
(1) Purchased in business acquisitions
(2) Accounts deemed to be uncollectible
II-4
<PAGE> 225
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE II
To the Shareholders and Board of Directors of
Eagle Window & Door, Inc. and Subsidiaries and
Taylor Building Products Company (Wholly-Owned Subsidiaries)
We have audited in accordance with generally accepted auditing standards,
the August 29, 1996, December 31, 1995 and 1994 financial statements included in
this registration statement, and have issued our reports thereon dated January
31, 1997. Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. Schedule II is presented for purposes of complying
with the Securities and Exchange Commission's rules and is the responsibility of
the company's management. It is not part of the basic financial statements. The
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
SEMPLE & COOPER, L.L.P.
Phoenix, Arizona
June 23, 1997
II-5
<PAGE> 226
EAGLE WINDOW & DOOR, INC. AND SUBSIDIARIES
AND TAYLOR BUILDING PRODUCTS COMPANY
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END OF
PERIOD ENDED DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- --------------------- ------------------ ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
August 29, 1996...... Allowance for $ 445,418 $ 425,595 $-- $ 79,492 $ 791,521
doubtful accounts
December 31, 1995.... Allowance for $ 648,385 $ 570,709 $-- $ 773,676 $ 445,418
doubtful accounts
December 31, 1994.... Allowance for $ 690,184 $ 836,609 $-- $ 878,408 $ 648,385
doubtful accounts
August 29, 1996...... Provision for $ 1,623,500 $ 70,000 $-- $ 1,218,985 $ 474,515
obsolete inventory
December 31, 1995.... Provision for $ 1,555,000 $ 462,905 $-- $ 394,405 $ 1,623,500
obsolete inventory
December 31, 1994.... Provision for $ 250,000 $ 1,305,000 $-- $ -- $ 1,555,000
obsolete inventory
August 29, 1996...... Accrued warranty $ 4,824,800 $ 801,073 $-- $ 998,461 $ 4,627,412
obligations
December 31, 1995.... Accrued warranty $ 5,149,800 $ 1,710,750 $-- $ 2,035,750 $ 4,824,800
obligations
December 31, 1994.... Accrued warranty $ 5,101,663 $ 2,702,133 $-- $ 2,653,996 $ 5,149,800
obligations
</TABLE>
II-6
<PAGE> 227
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE II
To the Shareholders and Board of Directors of
Forte Computer Easy, Inc. and Subsidiaries
We have audited in accordance with generally accepted auditing standards,
the December 31, 1995 financial statements included in this registration
statement, and have issued our report thereon dated May 28, 1996. Our audit was
made for the purpose of forming an opinion on those statements taken as a whole.
Schedule II is presented for purposes of complying with the Securities and
Exchange Commission's rules and is the responsibility of the company's
management. It is not part of the basic financial statements. The schedule has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
Semple & Cooper, L.L.P.
Phoenix, Arizona
January 13, 1998
II-7
<PAGE> 228
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER DEDUCTIONS END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS WRITE-OFFS PERIOD
- -------------------------------------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
12/31/95
Allowance for doubtful accounts..... $277,275 $ 37,758 $ -- $ (15,094) $ 299,939
9/30/96
Allowance for doubtful accounts..... $299,939 $ -- $ -- $ (299,939) $ --
</TABLE>
II-8
<PAGE> 229
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE II
To the Shareholders and Board of Directors of
Western Insulated Glass Co.
We have audited in accordance with generally accepted auditing standards,
the October 31, 1996 financial statements included in this registration
statement, and have issued our report thereon dated June 3, 1997. Our audit was
made for the purpose of forming an opinion on those statements taken as a whole.
Schedule II is presented for purposes of complying with the Securities and
Exchange Commission's rules and is the responsibility of the company's
management. It is not part of the basic financial statements. The schedule has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
Semple & Cooper, L.L.P.
Phoenix, Arizona
January 13, 1998
II-9
<PAGE> 230
WESTERN INSULATED GLASS, CO.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
-------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER DEDUCTIONS END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS WRITE-OFFS PERIOD
- ----------------------------------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts.... $8,000 $1,179 $ -- $ (7,074) $2,105
</TABLE>
II-10
<PAGE> 231
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Thermetic Glass, Inc.
Under date of October 3, 1997, we reported on the balance sheet of
Thermetic Glass, Inc. as of December 31, 1996, and the related statements of
operations and cash flows for the year then ended, which are included in the
Form S-4. In connection with our audit of the aforementioned financial
statements, we also audited the related financial statement schedule in the
registration statement. This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audit.
In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
Clifton Gunderson L.L.C.
Peoria, Illinois
January 13, 1998
II-11
<PAGE> 232
THERMETIC GLASS, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN C
-------------------------
COLUMN E
COLUMN B ADDITIONS --------
---------- ------------------------- COLUMN D BALANCE
COLUMN A BALANCE AT CHARGED TO CHARGED TO ---------- AT END
- ------------------------------------------ BEGINNING COSTS AND OTHER DEDUCTIONS OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS (A) PERIOD
- ------------------------------------------ ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for doubtful accounts......... $ 84,841 $ 37,000 $-- $5,841 $116,000
======= ======= === ====== ========
</TABLE>
- ---------------
(a) Represents write-offs, net of recoveries of $616.
II-12
<PAGE> 233
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Danvid Company, Inc. and Danvid Window Company
Carrollton, Texas
We have audited, in accordance with generally accepted auditing standards,
the financial statements of Danvid Company, Inc. and Danvid Window Company
included in the American Architectural Products Corporation Form S-4
Registration Statement, and have issued our report thereon dated October 13,
1995. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The schedule is the responsibility of the Company's
management and is not part of the basic financial statements. This schedule has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
FOX, BYRD & GOLDEN
Dallas, Texas
October 13, 1995
II-13
<PAGE> 234
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
SCHEDULE II
ANALYSIS OF VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED JULY 31, 1995
<TABLE>
<CAPTION>
ADDITIONS
BALANCE CHARGED TO BALANCE
BEGINNING COSTS AND (1) END OF
OF PERIOD EXPENSES DEDUCTIONS OTHER PERIOD
--------- ---------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C>
Year Ended July 31, 1995:
Allowance for doubtful accounts....... 11,000 313,000 (92,000) -- 232,000
====== ======= ======= === =======
</TABLE>
- ---------------
(1) Deductions are for the purpose for which the reserve was created.
II-14
<PAGE> 235
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
Danvid Company, Inc. and Danvid Window Company
The audit referred to in our report dated October 20, 1997, relating to the
combined financial statements of Danvid Company, Inc. and Danvid Window Company,
which is contained in the Prospectus constituting part of this Registration
Statement, included the audits of the financial statement schedules listed under
Item 21(b) for the years ended July 28, 1996 and July 27, 1997. These financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement schedules
based upon our audits.
In our opinion, these financial statement schedules present fairly, in all
material respects, the information set forth therein.
BDO SEIDMAN, LLP
Dallas, Texas
October 20, 1997
II-15
<PAGE> 236
DANVID COMPANY, INC. AND DANVID WINDOW COMPANY
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE CHARGED TO BALANCE
AT BEGINNING COSTS AND AT END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS(1) PERIOD
- -------------------------------------------- ------------ ---------- ------------- ---------
<S> <C> <C> <C> <C>
Year Ended July 28, 1996
Allowance for doubtful accounts........... $232,400 $393,000 $(272,000) $ 353,400
Year Ended July 27, 1997
Allowance for doubtful accounts........... $353,400 $101,000 $(328,800) $ 125,600
</TABLE>
- ---------------
(1) Accounts deemed to be uncollectible.
II-16
<PAGE> 237
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Binnings Building Products, Inc.:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Binnings Building Products, Inc. included in the
American Architectural Products Corporation Form S-4 Registration Statement, and
have issued our report thereon dated March 21, 1997 (except with respect to the
matters discussed in Note 10 as to which the date is December 10, 1997). Our
audit was made for the purpose of forming an opinion on those statements taken
as a whole. The schedule is the responsibility of the Company's management and
is not part of the basic financial statements. This schedule has been subjected
to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Greensboro, North Carolina,
March 21, 1997.
II-17
<PAGE> 238
BINNINGS BUILDING PRODUCTS, INC.
SCHEDULE II
ANALYSIS OF VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996, AND
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
ADDITIONS
BALANCE CHARGED TO BALANCE
BEGINNING COST AND (1) END
OF PERIOD EXPENSES DEDUCTIONS OTHER OF PERIOD
--------- ---------- ---------- ----- ---------
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31, 1994:
Reserve deducted from assets to which
it applies-
Allowance for doubtful accounts............ $ 347,000 $205,000 $ (199,000) $ 0 $ 353,000
======== ======== ========= == ========
For the Year Ended December 31, 1995:
Reserve deducted from assets to which
it applies-
Allowance for doubtful accounts............ $ 353,000 $ 15,000 $ (230,000) $ 0 $ 138,000
======== ======== ========= == ========
For the Year Ended December 31, 1996:
Reserve deducted from assets to which
it applies-
Allowance for doubtful accounts............ $ 138,000 $161,000 $ (76,000) $ 0 $ 223,000
======== ======== ========= == ========
For the Nine Months Ended
September 30, 1996 (unaudited):
Reserve deducted from assets to which
it applies-
Allowance for doubtful accounts............ $ 138,000 $122,000 $ (57,000) $ 0 $ 203,000
======== ======== ========= == ========
For the Nine Months Ended
September 30, 1997 (unaudited):
Reserve deducted from assets to which
it applies-
Allowance for doubtful accounts............ $ 223,000 $172,000 $ (17,000) $ 0 $ 378,000
======== ======== ========= == ========
</TABLE>
- ---------------
(1) Deductions are for the purpose for which the reserve was created.
II-18
<PAGE> 239
ITEM 22. UNDERTAKINGS
The undersigned Co-Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act, each filing of an annual
report pursuant to section 13(a) or section 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement 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.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Co-Registrants pursuant to the provisions described under Item 20 above, or
otherwise, the Co-Registrants have 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. If a claim for indemnification against such
liabilities (other than the payment by the Co-Registrants of expenses incurred
or paid by a director, officer or controlling person of the Co-Registrants 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 Co-Registrants 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.
The undersigned Co-Registrants hereby undertake 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 the documents
filed subsequent to the effective date of the Registration Statement when it
became effective.
The undersigned Co-Registrants undertake 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 the Registration Statement when it became effective.
II-19
<PAGE> 240
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
registrants has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Boardman, Ohio, on the
12th day of January, 1998.
AMERICAN ARCHITECTURAL
PRODUCTS CORPORATION,
a Delaware corporation
By /s/ FRANK J. AMEDIA
------------------------------------
Frank J. Amedia
President and Chief Executive
Officer
EAGLE & TAYLOR COMPANY,
a Delaware corporation
By /s/ JOSEPH DOMINIJANNI
------------------------------------
Joseph Dominijanni
Vice President -- Finance
FORTE, INC.,
an Ohio corporation
By /s/ FRANK J. AMEDIA
------------------------------------
Frank J. Amedia
President
WESTERN INSULATED GLASS, CO.,
an Arizona corporation
By /s/ FRANK J. AMEDIA
------------------------------------
Frank J. Amedia
Chief Executive Officer
THERMETIC GLASS, INC.,
a Delaware corporation
By /s/ FRANK J. AMEDIA
------------------------------------
Frank J. Amedia
President
II-20
<PAGE> 241
BINNINGS BUILDING PRODUCTS, INC.,
a Delaware corporation
By /s/ FRANK J. AMEDIA
------------------------------------
Frank J. Amedia
President
DCI/DWC ACQUISITION CORPORATION,
a Delaware corporation
By /s/ FRANK J. AMEDIA
------------------------------------
Frank J. Amedia
President
MODERN WINDOW ACQUISITION CORPORATION,
a Delaware corporation
By /s/ FRANK J. AMEDIA
------------------------------------
Frank J. Amedia
President
AMERICAN GLASSMITH ACQUISITION
CORPORATION,
a Delaware corporation
By /s/ FRANK J. AMEDIA
------------------------------------
Frank J. Amedia
President
II-21
<PAGE> 242
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
Pursuant to the requirements of the Securities Act of 1933, 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>
* Chairman of the Board and January 12, 1998
- --------------------------------------------- Director
George S. Hofmeister
/s/ FRANK J. AMEDIA President, Chief Executive January 12, 1998
- --------------------------------------------- Officer and Director
Frank J. Amedia (Principal Executive
Officer)
/s/ RICHARD L. KOVACH Vice President and Chief January 12, 1998
- --------------------------------------------- Financial Officer
Richard L. Kovach (Principal Financial
Officer and Principal
Accounting Officer)
* Director January 12, 1998
- ---------------------------------------------
John J. Cafaro
* Treasurer and Director January 12, 1998
- ---------------------------------------------
Joseph Dominijanni
* Director January 12, 1998
- ---------------------------------------------
William R. Jackson, Jr.
* Director January 12, 1998
- ---------------------------------------------
John Masternick
* Director January 12, 1998
- ---------------------------------------------
James E. Phillips
* Director January 12, 1998
- ---------------------------------------------
Charles E. Trebilcock
* Director January 12, 1998
- ---------------------------------------------
James K. Warren
* By: /s/ FRANK J. AMEDIA
- ---------------------------------------------
Frank J. Amedia
attorney-in-fact
</TABLE>
II-22
<PAGE> 243
EAGLE & TAYLOR COMPANY
Pursuant to the requirements of the Securities Act of 1933, 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/ GEORGE S. HOFMEISTER Chairman of the Board, Chief January 12, 1998
- --------------------------------------------- Executive Officer and
George S. Hofmeister Director (Principal
Executive Officer)
/s/ JOSEPH DOMINIJANNI Vice President -- Finance January 12, 1998
- --------------------------------------------- (Principal Financial
Joseph Dominijanni Officer and Principal
Accounting Officer)
</TABLE>
II-23
<PAGE> 244
FORTE, INC.
Pursuant to the requirements of the Securities Act of 1933, 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/ GEORGE S. HOFMEISTER Chairman and Director January 12, 1998
- ---------------------------------------------
George S. Hofmeister
/s/ FRANK J. AMEDIA President (Principal January 12, 1998
- --------------------------------------------- Executive Officer)
Frank J. Amedia
/s/ RICHARD L. KOVACH Vice President and Chief January 12, 1998
- --------------------------------------------- Financial Officer
Richard L. Kovach (Principal Financial
Officer and Principal
Accounting Officer)
</TABLE>
II-24
<PAGE> 245
WESTERN INSULATED GLASS, CO.
Pursuant to the requirements of the Securities Act of 1933, 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/ GEORGE S. HOFMEISTER Director January 12, 1998
- ---------------------------------------------
George S. Hofmeister
/s/ FRANK J. AMEDIA Chief Executive Officer January 12, 1998
- --------------------------------------------- (Principal Executive
Frank J. Amedia Officer)
/s/ JOSEPH DOMINIJANNI Treasurer (Principal January 12, 1998
- --------------------------------------------- Financial Officer and
Joseph Dominijanni Principal Accounting
Officer)
</TABLE>
II-25
<PAGE> 246
THERMETIC GLASS, INC.
Pursuant to the requirements of the Securities Act of 1933, 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/ GEORGE S. HOFMEISTER Chairman of the Board, Chief January 12, 1998
- --------------------------------------------- Executive Officer and
George S. Hofmeister Director (Principal
Executive Officer)
/s/ JOSEPH DOMINIJANNI Treasurer (Principal January 12, 1998
- --------------------------------------------- Financial Officer and
Joseph Dominijanni Principal Accounting
Officer)
</TABLE>
II-26
<PAGE> 247
BINNINGS BUILDING PRODUCTS, INC.
Pursuant to the requirements of the Securities Act of 1933, 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/ FRANK J. AMEDIA Chairman of the Board, January 12, 1998
- --------------------------------------------- President and Director
Frank J. Amedia (Principal Executive
Officer)
/s/ JOSEPH DOMINIJANNI Treasurer (Principal January 12, 1998
- --------------------------------------------- Financial Officer and
Joseph Dominijanni Principal Accounting
Officer)
</TABLE>
II-27
<PAGE> 248
DCI/DWC ACQUISITION CORPORATION
Pursuant to the requirements of the Securities Act of 1933, 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/ FRANK J. AMEDIA Chairman of the Board, January 12, 1998
- --------------------------------------------- President and Director
Frank J. Amedia (Principal Executive
Officer)
/s/ JOSEPH DOMINIJANNI Treasurer (Principal January 12, 1998
- --------------------------------------------- Financial Officer and
Joseph Dominijanni Principal Accounting
Officer)
</TABLE>
II-28
<PAGE> 249
MODERN WINDOW ACQUISITION CORPORATION
Pursuant to the requirements of the Securities Act of 1933, 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/ GEORGE S. HOFMEISTER Chairman, Chief Executive January 12, 1998
- --------------------------------------------- Officer and Director
George S. Hofmeister (Principal Executive
Officer)
/s/ RICHARD L. KOVACH Chief Financial Officer January 12, 1998
- --------------------------------------------- (Principal Financial
Richard L. Kovach Officer)
/s/ JOSEPH DOMINIJANNI Treasurer (Principal January 12, 1998
- --------------------------------------------- Accounting Officer)
Joseph Dominijanni
</TABLE>
II-29
<PAGE> 250
AMERICAN GLASSMITH ACQUISITION CORPORATION
Pursuant to the requirements of the Securities Act of 1933, 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/ FRANK J. AMEDIA Chairman, President and January 12, 1998
- --------------------------------------------- Director (Principal
Frank J. Amedia Executive Officer)
/s/ RICHARD L. KOVACH Treasurer (Principal January 12, 1998
- --------------------------------------------- Financial Officer and
Richard L. Kovach Principal Accounting
Officer)
</TABLE>
II-30
<PAGE> 251
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
2.1 Agreement and Plan of Merger, dated as of November 10, 1997, by and among
American Architectural Products Corporation, BBPI Acquisition Corporation and
Binnings Building Products, Inc. ............................................. D
2.2 Asset Purchase Agreement, dated as of November 10, 1997, by and among DCI/DWC
Acquisition Corporation, Danvid Company, Inc. and Danvid Window Company. ..... D
2.3 Shareholders Agreement in Support of Asset Purchase Agreement, dated as of
November 10, 1997, by and among Daniel Crawford, Karen Crawford, David
Crawford, Paul Comer and DCI/DWC Acquisition Corporation. .................... D
2.4 Asset Purchase Agreement, dated as of December 10, 1997, by and among American
Architectural Products Corporation, American Glassmith Acquisition Corporation
and American Glassmith, Inc. ................................................. D
2.5 Agreement, dated as of December 10, 1997, by and among American Architectural
Products Corporation, Modern Window Acquisition Corporation and Modern Window
Corporation. ................................................................. D
2.6 Agreement and Plan of Reorganization, dated October 25, 1996, between Forte
Computer Easy, Inc. and AAP Holdings, Inc. ................................... B
3.1 Certificate of Incorporation of American Architectural Products
Corporation. ................................................................. C
3.2 Bylaws of American Architectural Products Corporation. ....................... C
3.3 Certificate of Incorporation of American Glassmith Acquisition
Corporation. ................................................................. *
3.4 Bylaws of American Glassmith Acquisition Corporation. ........................ *
3.5 Amended and Restated Certificate of Incorporation of Binnings Building
Products, Inc. ............................................................... *
3.6 Bylaws of Binnings Building Products, Inc. ................................... *
3.7 Certificate of Incorporation of DCI/DWC Acquisition Corporation. ............. *
3.8 Bylaws of DCI/DWC Acquisition Corporation. ................................... *
3.9 Certificate of Incorporation of Eagle & Taylor Company, as amended. .......... *
3.10 Bylaws of Eagle & Taylor Company. ............................................ *
3.11 Articles of Incorporation of Forte, Inc. ..................................... *
3.12 Code of Regulations of Forte, Inc. ........................................... *
3.13 Certificate of Incorporation of Modern Window Acquisition Corporation. ....... *
3.14 Bylaws of Modern Window Acquisition Corporation. ............................. *
3.15 Certificate of Incorporation of Thermetic Glass, Inc., as amended. ........... *
3.16 Bylaws of Thermetic Glass, Inc. .............................................. *
3.17 Articles of Incorporation of Western Insulated Glass, Co. .................... *
3.18 Bylaws of Western Insulated Glass, Co. ....................................... *
4.1 Form of American Architectural Products Corporation Common Stock
Certificate. ................................................................. E
4.2 Indenture dated as of December 10, 1997 with respect to 11 3/4% Senior Notes
due 2007 among American Architectural Products Corporation, as issuer,
American Glassmith Acquisition Corporation, BBPI Acquisition Corporation,
DCI/DWC Acquisition Corporation, Eagle & Taylor Company, Forte, Inc., Modern
Window Acquisition Corporation, Thermetic Glass, Inc., and Western Insulated
Glass, Co., as subsidiary guarantors, and United States Trust Company of New
York, as trustee. ............................................................ D
5 Opinion of Squire, Sanders & Dempsey L.L.P. .................................. +
10.1 1992 Incentive Stock Option Plan. ............................................ A
10.2 1996 Stock Option Plan. ...................................................... C
10.3 Employment Agreement, dated November 17, 1997, between Frank J. Amedia and
American Architectural Products Corporation. ................................. *
10.4a Lease Agreement, dated December 1989, between Centre Consolidated Properties,
Ltd. and Danvid Company, Inc. ................................................ *
10.4b Lease Extension Agreement to Industrial Lease Agreement between Beltline
Business Center Limited Partnership and Danvid Company, Inc. ................. *
</TABLE>
<PAGE> 252
<TABLE>
<S> <C> <C>
10.5 Business Property Lease, dated as of June 25, 1996, between C. Lane Mally and
Mallyclad Corporation. ....................................................... *
10.6a Lease Agreement, dated November 28, 1990, between J.M.J. Partnership and The
New Edgehill Co, Inc. ........................................................ *
10.6b Lease Modification No. 1, dated October 19, 1992, between J.M.J. Partnership
and The American Glassmith, Inc., f/k/a The New Edgehill Co., Inc. ........... *
10.6c Lease Modification No. 2, dated June 8, 1993, between J.M.J. Partnership and
The American Glassmith, Inc. ................................................. *
10.6d Lease Modification No. 3, dated January 31, 1995, between J.M.J. Partnership
and American Glassmith, Inc. ................................................. *
10.6e Lease Modification No. 4, dated as of March 31, 1995, between J.M.J.
Partnership and American Glassmith, Inc. ..................................... *
10.6f Lease Modification No. 5, dated as of August 31, 1995, between J.M.J.
Partnership and American Glassmith, Inc. ..................................... *
10.6g Lease Modification No. 6, dated June 19, 1996, between J.M.J. Partnership and
American Glassmith, Inc. ..................................................... *
10.7 Lease Agreement, dated March 14, 1997, by and among Benny J. Ellis and Linda
M. Ellis and Western Insulated Glass, Co. .................................... *
10.8 Purchase Agreement, dated as of December 4, 1997, by and among American
Architectural Products Corporation, NatWest Capital Markets Limited and
McDonald & Company Securities, Inc. .......................................... D
10.9 Exchange and Registration Rights Agreement, dated as of December 10, 1997, by
and among American Architectural Products Corporation, American Glassmith
Acquisition Corporation, BBPI Acquisition Corporation, DCI/DWC Acquisition
Corporation, Eagle & Taylor Company, Forte, Inc., Modern Window Acquisition
Corporation, Thermetic Glass, Inc., Western Insulated Glass, Co., NatWest
Capital Markets Limited and McDonald & Company Securities, Inc. .............. D
12 Statements re: Computation of Ratios.......................................... *
21 Subsidiaries of American Architectural Products Corporation................... *
23.1 Consent of Squire, Sanders & Dempsey L.L.P. .................................. See
Ex. 5
23.2 Consent of BDO Seidman, LLP................................................... *
23.3 Consent of Semple & Cooper, P.L.C. ........................................... *
23.4 Consent of Clifton Gunderson L.L.C. .......................................... *
23.5 Consent of Fox, Byrd & Golden, P.C. .......................................... *
23.6 Consent of Arthur Andersen LLP................................................ *
24 Power of Attorney............................................................. *
25 Statement of Eligibility of Trustee .......................................... *
27 Financial Data Schedule....................................................... *
</TABLE>
* Filed herewith.
+ To be filed by amendment.
A Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form 10-SB filed November 22, 1996.
B Incorporated by reference to the Company's Current Report on Form 8-K dated
October 25, 1996.
C Incorporated by reference to the Company's definitive Information Statement
relating to the special meeting of shareholders held on April 1, 1997.
D Incorporated by reference to the Company's Current Report on Form 8-K dated
December 10, 1997.
E Incorporated by reference to Amendment No. 2 to the Company's Registration
Statement on Form 10-SB filed April 17, 1997.
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF INCORPORATION
OF
AMERICAN GLASSMITH ACQUISITION CORPORATION
FIRST: The name of the Corporation is AMERICAN GLASSMITH ACQUISITION
CORPORATION.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington,
County of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in and to do any
lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is one hundred thousand (100,000) shares of common
stock, par value $.01 per share.
FIFTH: The name and mailing address of the Incorporator of the
Corporation is as follows:
NAME MAILING ADDRESS
AAP Holdings, Inc. 812 Huron Road, East, No. 880
Cleveland, Ohio 44115-1126
SIXTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the By-Laws of the Corporation.
(2) The number of directors of the Corporation shall be as from time to
time fixed by, or in the manner provided in, the By-Laws of the Corporation.
Election of directors need not be by written ballot unless the By-Laws so
provide.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or
<PAGE> 2
places as may be designated from time to time by the Board of Directors or in
the By-Laws of the Corporation.
EIGHTH: The liability of directors of the Corporation are hereby
eliminated to the full extent permitted by Section 102(b)(7) of the Delaware
General Corporation Law or any successor provisions.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this Certificate, hereby declaring and certifying
that this is its act and deed and the facts herein stated are true, and
accordingly has caused to be set hereunder its hand this 27th day of October,
1997.
AAP HOLDINGS, INC.
By:/s/ Tracey Stockton
-----------------------
Tracey Stockton
Assistant Secretary
2
<PAGE> 1
EXHIBIT 3.4
AMERICAN GLASSMITH ACQUISITION CORPORATION
BY-LAWS
ARTICLE I. Offices.
1.1 Registered Office. The registered office of the Corporation in the
State of Delaware shall be located in the City of Wilmington, County of New
Castle and the Agent in charge thereof shall be The Corporation Trust Company.
The Corporation may also have offices at such other places within or without the
State of Delaware as the Board of Directors may from time to time appoint or as
the business of the Corporation may require.
1.2 Principal Office. The principal office of the Corporation need not
be identical with the registered office, and may be changed from time to time as
the Board of Directors may determine.
ARTICLE II. Stockholders.
2.1 Annual Meetings. The annual meeting of the Stockholders shall be
held on the first day of April in each year, commencing in 1998, at 10:00
o'clock A.M. local time or on such other date and at such other times within any
particular calendar year as the Board of Directors may determine. If the day
fixed for the annual meeting shall be a legal holiday in the State of Delaware,
such meeting shall be held on the next succeeding business day. If the annual
meeting has not been held during a calendar year, any Stockholder may call such
meeting by following the procedure set forth in Section 2.2 hereof.
At the annual meeting, the Stockholders shall elect Directors for
the ensuing year and may transact such other business as may properly come
before the meeting.
2.2 Special Meetings. Special meetings of the Stockholders may be
called at any time by the Chief Executive Officer, or by the Board of Directors,
or by the Stockholders entitled to cast at least one-fifth (1/5) of the votes
which all Stockholders are entitled to cast at the particular meeting. Upon
written request of any person or persons who have duly called a special meeting,
the Secretary shall fix the date of the meeting to be held not more than sixty
(60) days after receipt of the request and give due notice thereof to the
Stockholders entitled to vote thereat. If the Secretary shall neglect or refuse
to fix such date or give such notice, the person or persons calling the meeting
may do so.
2.3 Place of Meeting. The Board of Directors may designate any place,
either within or without the State of Delaware, as the place of meeting for any
annual or special meeting of the Stockholders. If no designation is made by the
Board of Directors, the place of meeting shall be at the registered office of
the Corporation in the State of Delaware.
1
<PAGE> 2
2.4 Notice of Meeting. Written notice shall, unless otherwise provided
by statute, be given to Stockholders entitled to vote at the meeting who are
Stockholders as of the record date as provided in Section 2.6 hereof, not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by sending a copy thereof through the mail, or by telegram,
charges prepaid, to the address of the Stockholder appearing on the books of the
Corporation, or supplied by the Stockholder to the Corporation for the purpose
of notice. Such notice shall state the place, date and hour of the meeting. When
required by these By-Laws or by statute such notice shall also state the general
nature of the business to be transacted.
2.5 Sufficiency of Notice. Any notice required hereunder shall be
deemed to have been given to the person entitled thereto (a) if sent by mail,
when deposited in the United States mail, post prepaid, or (b) when lodged with
a telegraph office for transmission with charges prepaid, or (c) when delivered
personally.
Whenever notice is required to be given, a waiver thereof in
writing signed by the person or persons entitled to such notice, whether signed
before or after the time stated, shall be deemed equivalent to the giving of
such notice. Attendance of a person at any meeting, either in person or by
proxy, shall constitute a waiver of notice of such meeting, except where a
person attends a meeting for the express and stated purpose of objecting to the
transaction of any business because the meeting was not lawfully called or
convened.
2.6 Record Date. The Board of Directors may fix a record date for
purposes of determining the stockholders entitled to notice of or to vote at any
meeting of the stockholders or any adjournment thereof. That record date (i) may
not precede the date upon which the resolution fixing the record date is
adopted, and (ii) it can not be more than sixty days, nor less than ten days
preceding the meeting for which the record date is set.
In the event that the Board of Directors is fixing a record date
for determining the stockholders entitled to consent to corporate action in
writing without a meeting, the record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
shall not be more than ten days after the date upon which the resolution fixing
the record dated was so adopted.
In order to determine the stockholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date which shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors and shall not be more than sixty days prior to such action.
If no record date is fixed:
2
<PAGE> 3
(a) The record date for determining the stockholders entitled to
notice of or to vote at any meeting of the stockholders or any adjournment
thereof shall be at the close of business on the day next preceding the day on
which notice is given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held, provided however, that
the Board of Directors may fix a new record date for an adjourned meeting.
(b) The record date for determining the stockholders entitled to
consent to corporate action in writing without a meeting, WHEN NO PRIOR ACTION
BY THE BOARD OF DIRECTORS IS REQUIRED BY STATUTE, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation or its agent having custody of the
corporate record book.
(c) The record date for determining the stockholders entitled to
consent to corporate action in writing without a meeting, WHEN PRIOR ACTION BY
THE BOARD OF DIRECTORS IS REQUIRED BY STATUTE, shall be at the close of business
on the day on which the Board of Directors adopts the resolution taking such
prior action.
(d) The record date for determining the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any rights
or the stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
2.7 Voting List. The officer or agent having charge of the transfer
book for shares of the Corporation shall make and certify, at least ten (10)
days before each meeting of Stockholders, a complete list of the Stockholders
entitled to vote at the meeting or any adjournment therefore, arranged in
alphabetical order, with the address and the number of shares held by each. The
list shall be kept on file for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held and shall be subject to
inspection by any Stockholder for any purpose germane to the meeting at any time
during usual business hours, and shall also be produced and kept open at the
time and place of the meeting, and shall be subject to the inspection of any
Stockholder during the whole time of the meeting. The original stock ledger
transfer book shall be prima facie evidence as to who are the Stockholders
entitled to examine such list or stock ledger or transfer books, or to vote, in
person or by proxy, at any meeting of the Stockholders.
2.8 Quorum. Except as otherwise required by Law, the presence of
Stockholders, in person or by proxy, entitled to cast at least a majority of the
votes which all Common Stockholders (plus such other Stockholders who may from
time to time be entitled to vote with the holders of Common Shares) are entitled
to cast shall constitute a quorum.
3
<PAGE> 4
With respect to the consideration of any particular matter as to which the
Stockholders of any class or series shall be entitled to cast a vote separate
from the vote of the Common Stockholders, the presence of Stockholders, in
person or by proxy, entitled to cast at least a majority of the votes which all
such class or series of Stockholders are entitled to cast on such particular
matter shall constitute a quorum of such class or Series of Stockholders for the
purpose of considering such matters. The Stockholders present at a duly
organized meeting can continue to do business until adjournment, notwithstanding
the withdrawal of enough Stockholders to leave less than a quorum.
If a meeting cannot be organized because a quorum has not attended,
those present may adjourn the meeting to such time and place as they may
determine. When a meeting called for the election of Directors has been once
adjourned because a quorum had not attended, those Stockholders entitled to vote
in the election of Directors who attend the second of such adjourned meetings,
although less than a quorum as fixed in these By-Laws or in the Certificate of
Incorporation or by statute, shall nevertheless constitute a quorum for the
purpose of electing Directors.
2.9 Acts of Stockholder. Unless a greater or different vote shall be
required as to a particular matter by the Certificate of Incorporation or by
these By-Laws or by applicable statute, an act authorized by the vote of a
majority of those Common Shares (plus such other shares which may from time to
time be entitled to vote with the Common Shares) present in person or by proxy
at a duly organized meeting shall be the act of the Stockholders.
2.10 Adjournment. Adjournment or adjournments at any annual or special
meeting may be taken as may be directed by a majority of votes cast by the
Stockholders present in person or by proxy entitled to cast the votes which the
Common Stockholders (plus such other Stockholders who shall at the time be
entitled to vote with the holders of Common Shares on the matters to be
considered at the meeting), may cast. When a meeting is adjourned, it shall not
be necessary to give any notice of the adjourned meeting other than by
announcement at the meeting at which such adjournment is taken. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
2.11 Proxies. At all meetings of Stockholders, a Stockholder entitled
to vote on a particular matter may vote in person or may authorize another
person or persons to act for him by proxy. Every proxy shall be executed in
writing by the Stockholder, or by his duly authorized attorney in fact. Such
proxies shall be filed with the Secretary of the Corporation before or at the
time of the meeting. A proxy, unless coupled with an interest, shall be
revocable at will, notwithstanding any other agreement or any provision in the
proxy to the contrary, but the revocation of the proxy shall not be effective
until notice thereof has been given to the Secretary of the Corporation. The
Secretary may treat any proxy delivered to him as valid, unless before the vote
is counted or the authority is exercised, written notice of
4
<PAGE> 5
any invalidity, together with such supporting information as shall enable a
judgment to be rendered, is given to the Secretary.
2.12 Voting Rights. Unless otherwise provided in the Certificate of
Incorporation or in a duly filed statement establishing the rights of classes or
series, only the holders of Common Stock shall be entitled to vote at a meeting
of the Stockholders, and every Stockholder having the right to vote shall be
entitled to one vote for every share of Common Stock standing in his name on the
books of the Corporation.
2.13 Nomination of Directors. Nominations for election to the office of
Director at an annual or special meeting of Stockholders shall be made by the
Board of Directors, or by the Executive Committee, or by petition in writing
delivered to the Secretary of the Corporation not fewer than thirty-five (35)
days prior to such Stockholders' meeting, signed by the holders of at least one
percent (1%) of the Stockholders' shares entitled to be voted in the election of
Directors. Unless nominations shall have been made as aforesaid, they shall not
be considered at such Stockholders' meeting unless the number of persons
nominated as aforesaid shall be fewer than the number of persons to be elected
to the office of Director at such meeting, or unless persons duly nominated
shall have failed to be elected at such meeting and the persons elected as
Directors shall be fewer than the number of persons to be elected to the office
of Director at such meeting, in which events nominations may be made at the
Stockholders meeting by any person entitled to vote in the election of
directors.
2.14 Election by Ballot. The election of Directors shall be by written
ballot.
2.15 Judges of Election. In advance of any meeting of Stockholders, the
Board of Directors may appoint Judges of Election, who need not be Stockholders,
to act at such meeting or any adjournment thereof. The number of Judges shall be
one or three, the Judges of Election shall determine the number of shares
outstanding and the voting power of each; the shares represented at the meeting;
the existence of a quorum; the authenticity, validity and effect of proxies;
hear and determine all challenges and questions arising in connection with the
right to vote; receive, count and tabulate all votes or ballots, and determine
the result; and do such other acts as may be necessary and proper to conduct the
election or vote with fairness to all Stockholders. On request of the Chairman
of the Meeting, or of any Stockholder or his proxy, the Judges shall make a
report in writing of any challenge or question or matter determined by them, and
execute a certificate of any fact found by them. If there be three Judges of
Election, the decision, act or certificate of a majority shall be effective in
all respects as the decision and/or certificate of all. Any report or
certificate made by the Judges of Election shall be prima facie evidence of the
facts stated therein.
2.16 Consent of Stockholders in Lieu of Meeting. Any action required to
be taken at any annual or special meeting of Stockholders of the Corporation, or
any action which may be taken at any annual or special meeting of Stockholders,
may be taken without a meeting without prior notice and without a vote, if a
consent in writing setting forth the
5
<PAGE> 6
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 and separately dated at the time of signing by each such
Stockholder. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
Stockholders who have not consented in writing.
2.17 Cumulative Voting. At each election for Directors, every
Stockholder shall have one vote for each share of stock owned by such
Stockholder, or, if the certificate of incorporation so provides, to cumulate
the vote of said shares, and give one candidate as many votes as the number of
directors multiplied by the aggregate number of such Stockholder's votes shall
equal, or to distribute the votes on the same principle among as many candidates
as the Stockholder may see fit. The candidates receiving the highest number of
votes, up to the number of Directors to be elected, shall be elected.
ARTICLE III. Board of Directors
3.1 Number, Tenure and Qualifications. The business and affairs of the
Corporation shall be managed by its Board of Directors, one or more in number,
as may be determined by the Board of Directors from time to time, who shall be
natural persons of full age who need not be residents of the State of Delaware
and who need not be Stockholders in the Corporation. Each Director shall hold
office until the next succeeding annual meeting, or until his successor shall
have been elected and shall qualify.
3.2 Powers and Authorization. In addition to the powers and authority
by these By-Laws expressly conferred, the Board of Directors may exercise all of
the powers of the Corporation and do all lawful acts not by statute or by the
Certificate or by those By-Laws directed or required to be exercised or done
only by the Shareholders. The Board shall have the power to delegate any of the
powers exercised or exercisable by the Board to any standing or special
committee, or to any officer or agent, or to appoint any person to be the agent
of the Corporation, with such powers, including the power to subdelegate, and
upon such terms as the Board shall deem appropriate.
3.3 Meetings. Meetings of the Board of Directors shall be held at such
times and places, either within or without the State of Delaware, as may be
fixed by Resolution of the Board, or by the Chief Executive Officer, or upon
written demand of any two Directors.
3.4 Notice. Notice of a meeting of Directors or of any Committee of the
Board of Directors shall be delivered at least one day prior to such meeting by
oral, telegraphic or written notice. If mailed, such notice shall be deemed to
be delivered on the second day following the day deposited in the United States
mail, addressed to the Director at his business address, with postage thereon
prepaid. If notice be given by telegram, such notice shall be deemed to be
delivered on the day the telegram is delivered prepaid to the telegraph
6
<PAGE> 7
company, addressed to the Director at his business office. Notice of a meeting
need only state the place, day and hour of the said meeting.
A Director may waive notice of any meeting in a writing signed
either before or after the time stated. The attendance of a Director at a
meeting shall constitute a waiver of notice of such meeting, except where a
Director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting was not lawfully called or
convened.
3.5. Quorum. A majority of the Directors then in office shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, but if less than such quorum is present at a meeting, a majority
of the Directors present may adjourn the meeting from time to time without
further notice.
Directors shall be deemed present at a meeting of the Board of
Directors if by means of conference telephone or similar communications
equipment all persons participating in the meeting can hear each other.
The act of the majority of these Directors voting at a meeting at
which a quorum is present shall be the act of the Board of Directors.
3.6 Unanimous Consent. Any action which may be taken at the meeting of
the Directors, or by action of the members of the Executive Committee or by the
members of any other committee appointed by the Board, may be taken without a
meeting, if a consent or consents in writing setting forth the action so taken
shall be signed by all of the Directors or the members of the committee, as the
case may be, and filed with the Secretary of the Corporation.
3.7 Compensation. Directors as such need not receive any compensation
for their services. By Resolution of the Board, a stated salary may be fixed for
the Directors, or a fixed sum for and expenses of, attendance may be allowed for
attendance at each regular or special meeting of the Board. Nothing herein
contained shall be construed to preclude any Director from serving the
Corporation as a member of a committee or an officer or in any other capacity
and receiving compensation therefor.
3.8 Committees of the Board. The Board may, by Resolution adopted by a
majority of the whole Board, delegate two or more of its number to constitute an
Executive Committee, which, unless otherwise provided in such Resolution, shall
have and exercise the authority of the Board of Directors in the management of
the business and affairs of the Corporation. The Board may by Resolution adopted
by a majority of the whole Board delegate two or more of its members to act as a
committee to exercise all power and authority which the Board might exercise in
matters as to which the committee is authorized to act.
7
<PAGE> 8
The presence in person or as hereafter provided of one-half (1/2)
of the members of the Executive Committee or any other Committee shall
constitute a quorum for the transaction of business at any meeting of such
Committee, and the act of a majority of those members of such Committee voting
at a meeting at which a quorum is present shall be the act of the Committee.
Members of the Executive Committee or any other Committee shall be deemed as
being present at a meeting of such Committee if by means of conference telephone
or similar communications equipment all persons participating in the meeting can
hear each other. In the absence or disqualification of any member of such
Committee or Committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
3.9 Removal of Directors. Any individual Director may be removed from
office with cause by the vote of Stockholders entitled to cast at least a
majority of the votes which all Stockholders would be entitled to cast at any
annual election of Directors; provided, however, that if the certificate of
incorporation provides for the cumulation of votes in the election of Directors,
such removal shall not occur if the votes of a sufficient number of shares are
cast against the Resolution for his removal which if cumulatively voted at an
annual meeting of Directors would be sufficient to elect one or more Directors.
The entire Board of Directors may be removed from office without
assigning any cause by the vote of Stockholders entitled to cast at least a
majority of the votes Stockholders would be entitled to cast at any annual
election of Directors.
3.10 Vacancies. Vacancies in the Board of Directors, including
vacancies resulting from an increase in the number of Directors, shall be filled
by a majority vote of the remaining members of the Board though less than a
quorum. A Director elected to fill a vacancy shall be a Director until a
successor is elected by the Shareholders, who may make such election at the next
annual meeting of the Shareholders or any special meeting duly called for that
purpose and held prior thereto.
ARTICLE IV. Officers
4.1 Executive Officers. The Executive Officers of the Corporation shall
be chosen by the Directors and shall be a Chief Executive Officer, Secretary,
and Treasurer. The Board of Directors may also choose a Chairman of the Board, a
President, one or more Vice Presidents and such other officers and agents as it
shall deem necessary, who shall hold their offices for such terms and shall have
such authority and shall perform such duties as from time to time shall be
prescribed by the Board.
4.2 Qualifications. Any number of offices may be held by the same
person. The Chief Executive Officer, the President and the Vice President, if
any, and Secretary
8
<PAGE> 9
shall be natural persons of full age. The Treasurer, if a natural person, shall
be of MI age. It shall not be necessary for the officers to be Directors.
4.3 Salaries. The salaries of the Chief Executive Officer, any Chairman
of the Board, President and Vice Presidents, the Secretary and the Treasurer of
the Corporation shall be fixed by the Board of Directors.
4.4 Term of Office; Removal. The officers of the Corporation shall hold
office for one year and until their successors are chosen and qualify.
Notwithstanding the foregoing, every officer and agent may be
removed at any time by the Board of Directors, without assigning any cause
therefor.
4.5 Duties of the Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the Stockholders and Directors at which he is
present. He shall advise the Chief Executive Officer and other officers of the
Corporation on matters of general policy and shall perform such other duties as
may be assigned to him from time to time by the Board of Directors.
4.6 Duties of the Chief Executive Officer. The Chief Executive Officer
of the Corporation, in the absence of the Chairman of the Board, shall preside
at all meetings of the Stockholders and of the Board of Directors; he shall have
general and active management of the business of the Corporation, and shall see
that all orders and resolutions of the Board are carried into effect, subject,
however, to the right of the Directors to delegate any specific powers, except
such as may be by statute exclusively conferred on the Chief Executive Officer,
to any other officer or officers of the Corporation. He shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
Corporation. He shall be ex-officio a member of all committees, and shall have
the general powers and duties of supervision and management usually vested in
the office of President of a corporation. He shall have the power to appoint and
discharge, subject to the approval of the Directors, employees and agents of the
Corporation and fix their compensation, make and sign contracts and agreements
in the name and behalf of the Corporation and while the Directors and Executive
Committee are not in session, he shall have general management and control of
the business and affairs of the Corporation; he shall see that the books,
reports, statements and certificates required by the statute under which the
Corporation is organized or any other laws applicable thereto are properly kept,
made, and filed according to law; he shall generally do and perform all acts
incident to the office of President of a corporation, or which are authorized or
required by law.
4.7 Duties of the President. He shall advise the Chief Executive
Officer and other officers of the Corporation on matters of general policy and
shall perform such other duties as may be assigned to him from time to time by
the Chief Executive Officer and the Board of Directors.
9
<PAGE> 10
4.8 Duties of Vice Presidents. Any Vice Presidents chosen by the Board
shall be executive officers of the Corporation who shall assist the Chairman of
the Board and the Chief Executive Officer and have such powers and duties as may
be assigned from time to time by resolution of the Board of Directors, the Chief
Executive Officer or Chairman of the Board. The Board of Directors may elect a
senior Vice President to assist the Chairman of the Board and Chief Executive
Officer in carrying out their duties, in supervising the activities and
personnel of the Corporation, and generally to perform such functions as may be
designated by the Chief Executive Officer, and the Chairman of the Board.
4.9 Duties of Secretary. The Secretary shall attend all sessions of the
Board and all meetings of the Stockholders and act as clerk thereof, and record
all the votes of the Corporation and the minutes of all its transactions in a
book to be kept for that purpose; and shall perform like duties for all
committees of the Board of Directors when required. He shall give, or cause to
be given, notice of all meetings of the Stockholders and the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or Chief Executive Officer, and under whose supervision he shall be.
He shall keep in safe custody the corporate seal of the Corporation, and when
authorized by the Board or Chief Executive Officer affix the same to any
instrument requiring it.
4.10 Duties of Assistant Secretary. In the absence of the Secretary or
when the Board of Directors or Chief Executive Officer determines that it would
be inconvenient for the Secretary to carry out his duties, the Assistant
Secretary shall perform the duties of the Secretary, as directed by the Board of
Directors or Chief Executive Officer.
4.11 Duties of the Treasurer. The Treasurer shall have the custody of
all funds, securities, evidences of an indebtedness and other valuable documents
of the Corporation; he shall receive and give or cause to be given receipts and
acquittances for money paid in on account of the Corporation and shall pay out
of the funds on hand all just debts of the Corporation of whatever nature upon
maturity of the same; he shall enter or cause to be entered in the books of the
Corporation to be kept for that purpose full and accurate accounts of all monies
received and paid out on account of the Corporation and, whenever required by
the Chief Executive Officer or the Directors, he shall render to the Chief
Executive Officer and Board of Directors, at the regular meetings of the Board,
or whenever they may require it, a statement of his cash accounts and an account
of all his transactions as Treasurer and of the financial condition of the
Corporation; he shall keep or cause to be kept such other books as will show a
true record of the expenses, losses, gains, assets and liabilities of the
Corporation; he shall, unless otherwise determined by the Directors, have charge
of the original stock books, transfer books and stock ledgers and act as
transfer agent in respect to the stock securities of the Corporation; and he
shall perform all the other duties incident to the office of Treasurer of a
corporation. He shall give the Corporation a bond for the faithful discharge of
his duties in such amount and with such surety as the Board shall prescribe.
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4.12 Vacancies. If the office of any officer or agent one or more,
becomes vacant for any reason, the Board of Directors may choose a successor or
successors, who shall hold office at the pleasure of the Board.
ARTICLE V. Indemnification.
Each person who is, has been, or shall hereafter be, a director or
officer of the Corporation, or who is serving, may have served, or shall serve
at its request as a director or officer of another corporation, shall be
indemnified by the Corporation to the fullest extent to which indemnification is
permitted by subsections (a) through (i) of Section 145 of the Delaware General
Corporation Law.
The foregoing rights of indemnification shall inure to the benefit of
the personal representatives of such persons, and shall be in addition to any
other rights to which any such persons may be entitled to at law or agreement or
otherwise.
ARTICLE VI. Corporate Records and Statement.
6.1 Records. There shall be kept by the Corporation, either within or
without the State of Delaware, a record of the proceedings of the Stockholders
and of the Directors, and its By-Laws, including all amendments or alterations
thereto to date. An original or duplicate share register shall be kept at either
the registered office, or at the office of its transfer agent or registrar,
giving the names of the Stockholders, their respective addresses, and the number
and classes of shares held by each. The Corporation shall also keep appropriate,
complete and accurate books or records of account, which may be kept at its
registered office, or its principal place of business.
6.2 Annual Statement. The Chief Executive Officer and Board of
Directors shall present at each annual meeting of Stockholders such statement of
the business and affairs of the Corporation for the preceding year as they shall
deem appropriate. Upon written request of any Stockholder, the Corporation shall
mail to such Stockholder its balance sheet as at the end of the preceding fiscal
year, and its profit and loss statements for such fiscal year. Such statements
shall be prepared and presented in whatever manner the Board of Directors shall
deem advisable and need not be verified by a Certified Public Accountant.
ARTICLE VII. Share Certificates, Transfer of Stock, Etc.
7.1 Issuance. The Board of Directors shall have the power, by
Resolution duly adopted, to issue from time to time, in whole or in part, the
kinds or classes of shares authorized in the Certificate of Incorporation.
Share certificates shall bear the signature of the Chairman, the
Vice Chairman, the President or any Vice President, and the Secretary, any
Assistant Secretary, the
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Treasurer or any Assistant Treasurer, and the corporate seal, which may be a
facsimile, engraved or printed. Where such certificate is signed by a transfer
agent or a registrar, the signature of such officers upon such certificate may
be a facsimile, engraved or printed.
7.2 Transfers of Shares. Transfer of shares shall be made on the books
of the Corporation upon surrender of the certificates therefor, endorsed by the
person named in the certificate or by attorney, lawfully constituted in writing.
No transfer need be made inconsistent with the provisions of the Uniform
Commercial Code or other applicable Federal, State or Local Law.
No transfer or assignment shall affect the right of the
Corporation to pay any dividend due upon the stock, or to treat the registered
holder as the holder in fact, until such transfer or assignment is registered on
the books of this Corporation.
7.3 Absolute Owner. The Corporation shall be entitled to treat the
registered holder of any shares of the Corporation as the absolute owner
thereof, and accordingly shall not be bound to recognize any equitable or other
claim to, or interest in, such share, on the part of any other person, whether
or not the Corporation shall have express or other notice thereof.
7.4 Lost, Destroyed or Mutilated Certificates. In the event that a
share certificate shall be lost, destroyed or mutilated, a new certificate may
be issued therefor upon such terms and indemnity to the Corporation as the Board
of Directors may prescribe.
ARTICLE VIII. Miscellaneous Provisions.
8.1 Signatures on Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
8.2 Securities of Other Corporations. The Chief Executive Officer, or
the Secretary, shall have full power to vote, appoint proxies, or otherwise
perform any act as a Stockholder with respect to any shares or other securities
of any Corporation owned by this Corporation, including the power to sell,
convert, exchange, pledge or encumber such securities.
8.3 Fiscal Year. The fiscal year shall be such date as shall be
determined by the Board of Directors.
ARTICLE IX. Amendments.
9.1 These By-Laws may be altered, amended or repealed by a majority of
the members of the Board of Directors, or by a majority of those Common Shares
(plus such
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other shares as may then be entitled to vote with the Common Shares) present in
person or by proxy at any regular or special meeting duly organized.
* * * * * *
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EXHIBIT 3.5
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BINNINGS BUILDING PRODUCTS, INC.
BINNINGS BUILDING PRODUCTS, INC., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
A. The name of the corporation is Binnings Building Products, Inc. The
date of filing of its original Certificate of Incorporation was February 5,
1986.
B. This Amended and Restated Certificate of Incorporation was duly
adopted by written consent of the stockholders without a meeting in accordance
with the applicable provisions of Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware, and written notice of the adoption of
this Amended and Restated Certificate of Incorporation has been given as
provided by Section 228 of the General Corporation Law of the State of Delaware
to every stockholder entitled to such notice, and the following resolution
restating, integrating and further amending the Certificate of Incorporation of
this corporation was approved by written consent of the stockholders of the
corporation without a meeting as of December 10, 1997:
NOW, THEREFORE, BE IT RESOLVED, that the Certificate of
Incorporation of this Corporation be, and it hereby is,
restated and further amended to read in its entirety as
follows:
1. The name of the corporation is Binnings Building Products, Inc.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle, Delaware 19801. The name of its registered agent at such address
is The Corporation Trust Company.
3. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
4. The total number of shares which the Corporation shall have
authority to issue is 1,000 shares of capital stock, and the par value of each
such share is $0.001 per share.
<PAGE> 2
Cumulative voting as provided for by Section 214 of Title 8 of the
Delaware Code shall not apply to this Corporation.
Preemptive rights as provided for by Section 102(b)(3) of Title 8 of
the Delaware Code shall not be granted and are hereby expressly denied.
5. The Board of Directors shall have sole authority to determine the
number of Directors serving on the Board, and may increase or decrease the exact
number of Directors from time to time by resolution duly adopted by such Board.
No decrease in the number of Directors shall have the effect of shortening the
term of any incumbent Director.
6. The Corporation shall have perpetual existence.
7. The Corporation shall be managed by the Board of Directors, which
shall exercise all powers conferred under the laws of the State of Delaware. The
Board of Directors shall have authority to make, alter or repeal the Bylaws of
the Corporation.
8. Elections of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.
9. Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
10. No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that nothing contained herein shall
eliminate or limit the liability of a director of the Corporation to the extent
provided by applicable laws (i) for any breach of the director's duty
<PAGE> 3
of loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or knowing violation
of law, (iii) for authorizing the payment of a dividend or repurchase of stock,
or (iv) for any transaction from which the director derived an improper personal
benefit. The limitation of liability provided herein shall continue after a
director has ceased to occupy such position as to acts or omissions occurring
during such director's term or terms of office.
11. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, Binnings Building Products, Inc. has caused this
certificate to be signed by Frank J. Amedia, its President, this 10th day of
December, 1997.
BINNINGS BUILDING PRODUCTS, INC.,
a Delaware corporation
By /s/ Frank J. Amedia
-------------------------------
Name: Frank J. Amedia
Title: President
<PAGE> 1
EXHIBIT 3.6
BYLAWS
OF
BBPI ACQUISITION CORPORATION
ARTICLE I
OFFICES
1. Registered Office.
The registered office of the Corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware.
2. Other Offices.
The Corporation may also have offices at such other places both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
1. Annual Meeting.
The annual meeting of the stockholders shall be held on the first
Monday of April of each year, or if that day is a legal holiday in Delaware,
then on the next day thereafter which is not a legal holiday, or at such other
date as the Board of Directors shall determine, for the purpose of electing
Directors and for the transaction of such other business as may properly come
before the meeting. If the election of Directors is not held on the day
designated herein for any annual meeting of the stockholders, or any adjournment
thereof, the Directors shall cause the election to be held at a special meeting
of the stockholders as soon thereafter as convenient.
2. Special Meetings.
Special meetings of the stockholders may be called for any purpose or
purposes at any time by the Board of Directors, Chairman of the Board or the
President, and shall be called by the Chairman of the Board or the President at
the request of the holders of not less than one-tenth (1/10) of all outstanding
stock of the Corporation entitled to vote at such meeting, or otherwise as
provided by the Delaware General Corporation Law and Section 12 of Article III
of these Bylaws. Such request shall state the purpose or purposes of the
proposed meeting.
<PAGE> 2
3. Place of Meetings.
Annual and special meetings of the stockholders shall be held at the
principal office of the Corporation, unless otherwise specified in the notice
calling any such meeting, or in the event of a waiver of notice of such meeting,
in such waiver of notice.
4. Notice of Meeting.
Written notice stating the place, date 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 to each stockholder of record entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting. Notice may be delivered either personally or by first
class, certified or registered mail, by an officer of the Corporation at the
direction of the person or persons calling the meeting. If mailed, notice shall
be deemed to be delivered when mailed to the stockholders at his or her address
as it appears on the stock transfer books of the Corporation. Notice need not be
given of an adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken, provided that such adjournment is for
less than thirty (30) days and further provided that a new record date is not
fixed for the adjourned meeting, in either of which events, written notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at such meeting. At any adjourned meeting, any business may be transacted
which might have been transacted at the meeting as originally noticed. A written
waiver of notice, whether given before or after the meeting to which it relates,
shall be equivalent to the giving of notice of such meeting to the stockholder
or stockholders signing such waiver. Attendance of a stockholder at a meeting
shall constitute a waiver of notice of such meeting, except when the stockholder
attends for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
5. Fixing Date for Determination of Stockholders Record.
In order that the Corporation may determine the stockholders entitled
to notice of and to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a meeting,
or to receive payment of any dividend or other distribution or allotment of any
rights, or to exercise any rights in respect of any other change, conversion or
exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix in advance a record date, which shall not be more than sixty
(60) nor less than ten (10) days prior to the date of such meeting or such
action, as the case may be. If the Board has not fixed a record date for
determining the stockholders entitled to notice of and to vote at a meeting of
stockholders, the record date shall be at close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held. If
the Board has not fixed a record date for determining the stockholders entitled
to express consent to corporate action in writing without a meeting, when no
prior action by the Board is necessary, the record date shall be the day on
which the first written consent is expressed by any stockholder. If the Board
has not fixed a
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record date for determining stockholders for any other purpose, the record date
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
6. Record of Stockholders.
The Secretary or other officer having charge of the stock transfer
books of the Corporation shall make, or cause to be made, at least ten (10) days
before every meeting of stockholders, a complete record of the stockholders
entitled to vote at a meeting of stockholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present.
7. Quorum and Manner of Acting.
At any meeting of the stockholders, the presence, in person or by
proxy, of the holders of a majority of the outstanding stock entitled to vote
shall constitute a quorum. All shares represented and entitled to vote on any
single subject matter which may be brought before the meeting shall be counted
for quorum purposes. Only those shares entitled to vote on a particular subject
matter shall be counted for the purpose of voting on that subject matter.
Business may be conducted once a quorum is present and may continue to be
conducted until adjournment sine die, notwithstanding the withdrawal or
temporary absence of stockholders leaving less than a quorum. Except as
otherwise provided in the Delaware General Corporation Law, the affirmative vote
of the holders of a majority of the shares of stock then represented at the
meeting and entitled to vote thereat shall be the act of the stockholders;
provided, however, that if the shares of stock so represented are less than the
number required to constitute a quorum, the affirmative vote must be such as
would constitute a majority if a quorum were present, except that the
affirmative vote of the holders of a majority of the shares of stock then
present is sufficient in all cases to adjourn a meeting.
8. Voting of Shares of Stock.
Each stockholder shall be entitled to one vote or corresponding
fraction thereof for each share of stock or fraction thereof standing in his,
her or its name on the books of the Corporation on the record date. A
stockholder may vote either in person or by proxy executed in writing by the
stockholder or by his, her or its duly authorized attorney in fact, but no such
proxy shall be voted or acted upon after three (3) years from the date of its
execution unless the
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proxy provides for a longer period. Shares of its own stock belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor counted
for quorum purposes; provided, however, that the foregoing shall not limit the
right of any corporation to vote stock, including but not limited to its own
stock, when held by it in a fiduciary capacity. Shares of stock standing in the
name of another corporation may be voted by such officer, agent or proxy as the
bylaws of such other corporation may prescribe or, in the absence of such
provision, as the board of directors of such other corporation may determine.
Unless demanded by a stockholder present in person or by proxy at any meeting of
the stockholders and entitled to vote thereat, or unless so directed by the
chairman of the meeting, the vote thereat on any question need not be by ballot.
If such demand or direction is made, a vote by ballot shall be taken, and each
ballot shall be signed by the stockholder voting, or by his or her proxy, and
shall state the number of shares voted.
9. Organization.
At each meeting of the stockholders, the Chairman of the Board, or, if
he or she is absent therefrom, the President, or, if he or she is absent
therefrom, another officer of the Corporation chosen as chairman of such meeting
by stockholders holding a majority of the shares present in person or by proxy
and entitled to vote thereat, or, if all the officers of the Corporation are
absent therefrom, a stockholder of record so chosen, shall act as chairman of
the meeting and preside thereat. The Secretary, or, if he or she is absent from
the meeting or is required pursuant to the provisions of this Section 9 to act
as chairman of such meeting, the person (who shall be an Assistant Secretary, if
any and if present) whom the chairman of the meeting shall appoint shall act as
secretary of the meeting and keep the minutes thereof.
10. Order of Business.
The order of business at each meeting of the stockholders shall be
determined by the chairman of such meeting, but the order of business may be
changed by the vote of stockholders holding a majority of the shares present in
person or by proxy at such meeting and entitled to vote thereat.
11. Voting.
At all meetings of stockholders, each stockholder entitled to vote
thereat shall have the right to vote, in person or by proxy, and shall have, for
each share of stock registered in his, her or its name, the number of votes
provided by the Certificate of Incorporation in respect of stock of such class.
Stockholders shall not have cumulative voting rights with respect to the
election of Directors.
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12. Action By Stockholders Without a Meeting.
Any action required or permitted to be taken at a meeting of the
stockholders may be taken without a meeting, without notice and without a vote,
if a consent in writing, setting forth the action so taken, is signed by the
holders of outstanding stock having not less than the number of votes that would
have been necessary to authorize such action at a meeting at which all shares
entitled to vote were present and voted. Prompt notice of the taking of any such
action shall be given to any such stockholders entitled to vote who have not so
consented in writing.
ARTICLE III
BOARD OF DIRECTORS
1. General Powers.
The business and affairs of the Corporation shall be managed by the
Board of Directors.
2. Number, Term of Office and Qualifications.
Subject to the requirements of the Delaware General Corporation Law,
the Board of Directors may from time to time determine the number of Directors.
Until the Board shall otherwise determine, the number of Directors shall be that
number comprising the initial Board as set forth in the Certificate of
Incorporation. Each Director shall hold office until his or her successor is
duly elected or until his or her earlier death or resignation or removal in the
manner hereinafter provided. Directors need not be stockholders.
3. Place of Meeting.
The Board of Directors may hold its meetings at such place or places as
it may from time to time by resolution determine or as shall be designated in
any notices or waivers of notice thereof. Any such meeting, whether regular or
special, may be held by conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting in such manner shall constitute presence in
person at such meeting.
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4. Annual Meetings.
As soon as practicable after each annual election of Directors and on
the same day, the Board of Directors shall meet for the purpose of organization
and the transaction of other business at the place where regular meetings of the
Board of Directors are held, and no notice of such meeting shall be necessary in
order to legally hold the meeting, provided that a quorum is present. If such
meeting is not held as provided above, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for a
special meeting of the Board of Directors, or in the event of waiver of notice
as specified in the written waiver of notice.
5. Regular Meetings.
Regular meetings of the Board of Directors may be held without notice
at such times as the Board of Directors shall from time to time by resolution
determine.
6. Special Meetings; Notice.
Special meetings of the Board of Directors shall be held whenever
called by the Chairman of the Board or a majority of the Directors at the time
in office. Notice shall be given, in the manner hereinafter provided, of each
such special meeting, which notice shall state the time and place of such
meeting, but need not state the purposes thereof. Except as otherwise provided
in Section 7 of this Article III, notice of each such meeting shall be mailed to
each Director, addressed to him or her at his or her residence or usual place of
business, at least two (2) days before the day on which such meeting is to be
held, or shall be sent addressed to him or her at such place by telegraph,
cable, wireless or other form of recorded communication or delivered personally
or by telephone not later than the day before the day on which such meeting is
to be held. A written waiver of notice, whether given before or after the
meeting to which it relates, shall be equivalent to the giving of notice of such
meeting to the Director or Directors signing such waiver. Attendance of a
Director at a special meeting of the Board of Directors shall constitute a
waiver of notice of such meeting, except when he or she attends the meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
7. Quorum and Manner of Acting.
A majority of the whole Board of Directors shall be present in person
at any meeting of the Board of Directors in order to constitute a quorum for the
transaction of business at such meeting, and except as otherwise specified in
these Bylaws, and except also as otherwise expressly provided by the Delaware
General Corporation Law, the vote of a majority of the Directors present at any
such meeting at which a quorum is present shall be the act of the Board of
Directors. In the absence of a quorum from any such meeting, a majority of the
Directors present thereat may adjourn such meeting from time to time to another
time or place, without
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notice other than announcement at the meeting, until a quorum shall be present
thereat. The Directors shall act only as a Board and the individual Directors
shall have no power as such.
8. Organization.
At each meeting of the Board of Directors, the Chairman of the Board of
Directors, or, if he or she is absent therefrom, the President, or if he or she
is absent therefrom, a Director chosen by a majority of the Directors present
thereat, shall act as chairman of such meeting and preside thereat. The
Secretary, or if he or she is absent, the person (who shall be an Assistant
Secretary, if any and if present) whom the chairman of such meeting shall
appoint, shall act as Secretary of such meeting and keep the minutes thereof.
9. Action by Directors Without a Meeting.
Any action required or permitted to be taken at a meeting of the Board
of Directors may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, is signed by
all Directors and such consent is filed with the minutes of the proceedings of
the Board of Directors.
10. Resignations.
Any Director may resign at any time by giving written notice of his or
her resignation to the Corporation. Any such resignation shall take effect at
the time specified therein, or, if the time when it shall become effective is
not specified therein, it shall take effect immediately upon its receipt by the
Chairman of the Board, the President or the Secretary; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
11. Removal of Directors.
Directors may be removed, with or without cause, as provided from time
to time by the Delaware General Corporation Law as then in effect.
12. Vacancies.
Vacancies and newly created directorships resulting from any increase
in the authorized number of Directors elected by all of the stockholders having
the right to vote as a single class may be filled by a majority of the Directors
then in office, although less than a quorum, or by a sole remaining Director. If
at any time, by reason of death or resignation or other cause, the Corporation
has no Directors in office, then any officer or any stockholder or an executor,
administrator, trustee or guardian of a stockholder, may call a special meeting
of stockholders for the purpose of filling vacancies in the Board of Directors.
If one or more Directors shall resign from the Board of Directors, effective at
a future date, a majority of the Directors then in office, including those who
have so resigned, shall have the power to fill such vacancy or
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vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective, and each Director so chosen shall hold office as
provided in this section in the filling of other vacancies.
13. Compensation.
Unless otherwise expressly provided by resolution adopted by the Board
of Directors, no Director shall receive any compensation for his or her services
as a Director. The Board of Directors may at any time and from time to time by
resolution provide that the Directors shall be paid a fixed sum for attendance
at each meeting of the Board of Directors or a stated salary as Director. In
addition, the Board of Directors may at any time and from time to time by
resolution provide that Directors shall be paid their actual expenses, if any,
of attendance at each meeting of the Board of Directors. Nothing in this section
shall be construed as precluding any Director from serving the Corporation in
any other capacity and receiving compensation therefor, but the Board of
Directors may by resolution provide that any Director receiving compensation for
his or her services to the Corporation in any other capacity shall not receive
additional compensation for his or her services as a Director.
ARTICLE IV
OFFICERS
1. Number.
The Corporation shall have the following officers: a Chairman of the
Board (who shall be a Director), a President, a Vice President, a Secretary and
a Treasurer. At the discretion of the Board of Directors, the Corporation may
also have additional Vice Presidents, one or more Assistant Vice Presidents, one
or more Assistant Secretaries and one or more Assistant Treasurers. Any two or
more offices may be held by the same person.
2. Election and Term of Office.
The officers of the Corporation shall be elected annually by the Board
of Directors. Each such officer shall hold office until his or her successor is
duly elected or until his or her earlier death or resignation or removal in the
manner hereinafter provided.
3. Agents.
In addition to the officers mentioned in Section 1 of this Article IV,
the Board of Directors may appoint such agents as the Board of Directors may
deem necessary or advisable, each of which agents shall have such authority and
perform such duties as are provided in these Bylaws or as the Board of Directors
may from time to time determine. The Board of Directors may delegate to any
officer or to any committee the power to appoint or remove any such agents.
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4. Removal.
Any officer may be removed, with or without cause, at any time by
resolution adopted by a majority of the whole Board of Directors.
5. Resignations.
Any officer may resign at any time by giving written notice of his or
her resignation to the Board of Directors, the Chairman of the Board, the
President or the Secretary. Any such resignation shall take effect at the times
specified therein, or, if the time when it shall become effective is not
specified therein, it shall take effect immediately upon its receipt by the
Board of Directors, the Chairman of the Board, the President or the Secretary;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
6. Vacancies.
A vacancy in any office due to death, resignation, removal,
disqualification or any other cause may be filled for the unexpired portion of
the term thereof by the Board of Directors.
7. Chairman of the Board.
The Chairman of the Board shall be the chief executive officer of the
Corporation and shall have, subject to the control of the Board, general and
active supervision and direction over the business and affairs of the
Corporation and over its several officers. The Chairman of the Board shall: (a)
preside at all meetings of the stockholders and at all meetings of the Board;
(b) make a report of the state of the business of the Corporation at each annual
meeting of the stockholders; (c) see that all orders and resolutions of the
Board are carried into effect; (d) sign, with the Secretary or an Assistant
Secretary, certificates for stock of the Corporation; (e) have the right to
sign, execute and deliver in the name of the Corporation all deeds, mortgages,
bonds, contracts or other instruments authorized by the Board, except in cases
where the signing, execution or delivery thereof is expressly delegated by the
Board or by these Bylaws to some other officer or agent of the Corporation or
where any of them are required by law otherwise to be signed, executed or
delivered; and (f) have the right to cause the corporate seal, if any, to be
affixed to any instrument which requires it. In general, the Chairman of the
Board shall perform all duties incident to the office of the Chairman of the
Board and such other duties as from time to time may be assigned to him or her
by the Board.
8. President.
The President shall have, subject to the control of the Board and the
Chairman of the Board, general and active supervision and direction over the
business and affairs of the Corporation and over its several officers. At the
request of the Chairman of the Board, or in case of his or her absence or
inability to act, the President shall perform the duties of the Chairman of the
Board and, when so acting, shall have all the powers of, and be subject to all
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the restrictions upon, the Chairman of the Board. He may sign, with the
Secretary or an Assistant Secretary, certificates for stock of the Corporation.
He may sign, execute and deliver in the name of the Corporation all deeds,
mortgages, bonds, contracts or other instruments authorized by the Board, except
in cases where the signing, execution or delivery thereof is expressly delegated
by the Board or by these Bylaws to some other officer or agent of the
Corporation or where any of them are required by law otherwise to be signed,
executed or delivered, and he may cause the corporate seal, if any, to be
affixed to any instrument which requires it. In general, the President shall
perform all duties incident to the office of the President and such other duties
as from time to time may be assigned to him or her by the Board or the Chairman
of the Board.
9. Vice President.
The Vice President and any additional Vice Presidents shall have such
powers and perform such duties as the Chairman of the Board, the President or
the Board of Directors may from time to time prescribe and shall perform such
other duties as may be prescribed by these Bylaws. At the request of the
President, or in case of his or her absence or inability to act, the Vice
President shall perform the duties of the President and, when so acting, shall
have all the powers of, and be subject to all the restrictions upon, the
President.
10. Secretary.
The Secretary shall: (a) record all the proceedings of the meetings of
the stockholders, the Board of Directors and the Executive Committee, if any, in
one or more books kept for that purpose; (b) see that all notices are duly given
in accordance with the provisions of these Bylaws or as required by law; (c) be
the custodian of all contracts, deeds, documents, all other indicia of title to
properties owned by the Corporation and of its other corporate records (except
accounting records) and of the corporate seal, if any, and affix such seal to
all documents the execution of which on behalf of the Corporation under its seal
is duly authorized; (d) sign, with the Chairman of the Board, the President, the
Executive Vice President or a Vice President, certificates for stock of the
Corporation; (e) have charge, directly or through the transfer clerk or transfer
clerks, transfer agent or transfer agents and registrar or registrars appointed
as provided in Section 3 of Article VII of these Bylaws, of the issue, transfer
and registration of certificates for stock of the Corporation and of the records
thereof, such records to be kept in such manner as to show at any time the
amount of the stock of the Corporation issued and outstanding, the manner in
which and the time when such stock was paid for, the names, alphabetically
arranged, and the addresses of the holders of record thereof, the number of
shares held by each, and the time when each became a holder of record; (f) upon
request, exhibit or cause to be exhibited at all reasonable times to any
Director such records of the issue, transfer and registration of the
certificates for stock of the Corporation; (g) see that the books, reports,
statements, certificates and all other documents and records required by law are
properly kept and filed; and (h) see that the duties prescribed by Section 6 of
Article II of these Bylaws are performed. In general, the Secretary shall
perform all duties incident to the office of Secretary
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and such other duties as from time to time may be assigned to him or her by the
Chairman of the Board, the President or the Board of Directors.
11. Treasurer.
If required by the Board of Directors, the Treasurer shall give a bond
for the faithful discharge of his or her duties in such sum and with such surety
or sureties as the Board of Directors shall determine. The Treasurer shall: (a)
have charge and custody of, and be responsible for, all funds, securities, notes
and valuable effects of the Corporation; (b) receive and give receipt for moneys
due and payable to the Corporation from any sources whatsoever; (c) deposit all
such moneys to the credit of the Corporation or otherwise as the Board of
Directors, the Chairman of the Board or the President shall direct in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article VI of these Bylaws; (d) cause such funds to be
disbursed by checks or drafts on the authorized depositories of the Corporation
signed as provided in Article VI of these Bylaws; (e) be responsible for the
accuracy of the amounts of, and cause to be preserved proper vouchers for, all
moneys so disbursed; (f) have the right to require from time to time reports or
statements giving such information as he or she may desire with respect to any
and all financial transactions of the Corporation from the officers or agents
transacting the same; (g) render to the Chairman of the Board, the President or
the Board, whenever they, respectively, shall request him or her so to do, an
account of the financial condition of the Corporation and of all his or her
transactions as Treasurer; and (h) upon request, exhibit or cause to be
exhibited at all reasonable times the cash books and other records to the
Chairman of the Board, the President or any of the Directors of the Corporation.
In general, the Treasurer shall perform all duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him or
her by the Chairman of the Board, the President or the Board of Directors.
12. Assistant Officers.
Any persons elected as assistant officers shall assist in the
performance of the duties of the designated office and such other duties as
shall be assigned to them by any Vice President, the Secretary or the Treasurer,
as the case may be, or by the Board of Directors, the Chairman of the Board, or
the President.
ARTICLE V
COMMITTEES
1. Executive Committee; How Constituted and Powers.
The Board of Directors, by resolution adopted by a majority of the
whole Board of Directors, may designate one or more of the Directors then in
office, who shall include the Chairman of the Board, to constitute an Executive
Committee, which shall have and may exercise between meetings of the Board of
Directors all the delegable powers of the Board of
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Directors to the extent not expressly prohibited by the Delaware General
Corporation Law or by resolution of the Board of Directors. The Board may
designate one or more Directors as alternate members of the Committee who may
replace any absent or disqualified member at any meeting of the Committee. Each
member of the Executive Committee shall continue to be a member thereof only
during the pleasure of a majority of the whole Board of Directors.
2. Executive Committee; Organization.
The Chairman of the Board shall act as chairman at all meetings of the
Executive Committee and the Secretary shall act as secretary thereof. In case of
the absence from any meeting of the Chairman of the Board or the Secretary, the
Committee may appoint a chairman or secretary, as the case may be, of the
meeting.
3. Executive Committee; Meetings.
Regular meetings of the Executive Committee may be held without notice
on such days and at such places as shall be fixed by resolution adopted by a
majority of the Committee and communicated to all its members. Special meetings
of the Committee shall be held whenever called by the Chairman of the Board or a
majority of the members thereof then in office. Notice of each special meeting
of the Committee shall be given in the manner provided in Section 6 of Article
III of these Bylaws for special meetings of the Board of Directors. Notice of
any such meeting of the Executive Committee, however, need not be given to any
member of the Committee if waived by him or her in writing or by telegraph,
cable, wireless or other form of recorded communication either before or after
the meeting, or if he or she is present at such meetings, except when he or she
attends for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Subject to the
provisions of this Article V, the Committee, by resolution adopted by a majority
of the whole Committee, shall fix its own rules of procedure and it shall keep a
record of its proceedings and report them to the board at the next regular
meeting thereof after such proceedings have been taken. All such proceedings
shall be subject to revision or alteration by the Board of Directors; provided,
however, that third parties shall not be prejudiced by any such revision or
alteration.
4. Executive Committee; Quorum and Manner of Acting.
A majority of the Executive Committee shall constitute a quorum for the
transaction of business, and, except as specified in Section 3 of this Article
V, the act of a majority of those present at a meeting thereof at which a quorum
is present shall be the act of the Committee. The members of the Committee shall
act only as a committee, and the individual members shall have no power as such.
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5. Other Committees.
The Board of Directors, by resolution adopted by a majority of the
whole Board, may constitute other committees, which shall in each case consist
of one or more of the Directors and, at the discretion of the Board of
Directors, such officers who are not Directors. The Board of Directors may
designate one or more Directors or officers who are not Directors as alternate
members of any committee who may replace any absent or disqualified member at
any meeting of the committee. Each such committee shall have and may exercise
such powers as the Board of Directors may determine and specify in the
respective resolutions appointing them; provided, however, that (a) unless all
of the members of any committee shall be Directors, such committee shall not
have authority to exercise any of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and (b) if any
committee shall have the power to determine the amounts of the respective fixed
salaries of the officers of the Corporation or any of them, such committee shall
consist of not less than three (3) members and none of its members shall have
any vote in the determination of the amount that shall be paid to him or her as
a fixed salary. A majority of all the members of any such committee may fix its
rules of procedure, determine its action and fix the time and place of its
meetings and specify what notice thereof, if any, shall be given, unless the
Board of Directors shall otherwise by resolution provide.
6. Resignations.
Any member of the Executive Committee or any other committee may resign
therefrom at any time by giving written notice of his or her resignation to the
Chairman of the Board, the President or the Secretary. Any such resignation
shall take effect at the time specified therein, or if the time when it shall
become effective is not specified therein, it shall take effect immediately upon
its receipt by the Chairman of the Board, the President or the Secretary; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
7. Vacancies.
Any vacancy in the Executive Committee or any other committee shall be
filled by the vote of a majority of the whole Board of Directors.
8. Compensation.
Unless otherwise expressly provided by resolution adopted by the Board
of Directors, no member of the Executive Committee or any other committee shall
receive any compensation for his or her services as a committee member. The
Board of Directors may at any time and from time to time by resolution provide
that committee members shall be paid a fixed sum for attendance at each
committee meeting or a stated salary as a committee member. In addition, the
Board of Directors may at any time and from time to time by resolution provide
that such committee members shall be paid their actual expenses, if any, of
attendance at each committee
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meeting. Nothing in this section shall be construed as precluding any committee
member from serving the Corporation in any other capacity and receiving
compensation therefor, but the Board of Directors may by resolution provide that
any committee member receiving compensation for his or her services to the
Corporation in any other capacity shall not receive additional compensation for
his or her services as a committee member.
9. Dissolution of Committees; Removal of Committee Members.
The Board of Directors, by resolution adopted by a majority of the
whole Board, may, with or without cause, dissolve the Executive Committee or any
other committee, and, with or without cause, remove any member thereof.
ARTICLE VI
MISCELLANEOUS
1. Execution of Contracts.
Except as otherwise required by law or by these Bylaws, any contract or
other instrument may be executed and delivered in the name of the Corporation
and on its behalf by the Chairman of the Board, the President, or any Vice
President. In addition, the Board of Directors may authorize any other officer
of officers or agent or agents to execute and deliver any contract or other
instrument in the name of the Corporation and on its behalf, and such authority
may be general or confined to specific instances as the Board of Directors may
by resolution determine.
2. Attestation.
Any Vice President, the Secretary, or any Assistant Secretary may
attest the execution of any instrument or document by the Chairman of the Board,
the President, or any other duly authorized officer or agent of the Corporation
and may affix the corporate seal, if any, in witness thereof, but neither such
attestation nor the affixing of a corporate seal shall be requisite to the
validity of any such document or instrument.
3. Checks, Drafts.
All checks, drafts, orders for the payment of money, bills of lading,
warehouse receipts, obligations, bills of exchange and insurance certificates
shall be signed or endorsed (except endorsements for collection for the account
of the Corporation or for deposit to its credit, which shall be governed by the
provisions of Section 5 of this Article VI) by such officer or officers or agent
or agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
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4. Deposits.
All funds of the Corporation not otherwise employed shall be deposited
from time to time to the credit of the Corporation or otherwise as the Board of
Directors, the Chairman of the Board of Directors, or the President shall direct
in general or special accounts at such banks, trust companies, savings and loan
associations, or other depositories as the Board of Directors may select or as
may be selected by any officer or officers or agent or agents of the Corporation
to whom power in that respect has been delegated by the Board of Directors. For
the purpose of deposit and for the purpose of collection for the account of the
Corporation, checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation may be endorsed, assigned and delivered
by any officer or agent of the Corporation. The Board of Directors may make such
special rules and regulations with respect to such accounts, not inconsistent
with the provisions of these Bylaws, as it may deem expedient.
5. Proxies in Respect of Stock or Other Securities of Other Corporations.
Unless otherwise provided by resolution adopted by the Board of
Directors, the Chairman of the Board of Directors, the President, or any Vice
President may exercise in the name and on behalf of the Corporation the powers
and rights which the Corporation may have as the holder of stock or other
securities in any other corporation, including without limitation the right to
vote or consent with respect to such stock or other securities.
6. Fiscal Year.
The fiscal year of the Corporation shall correspond with the calendar
year.
ARTICLE VII
STOCK
1. Certificates.
Every holder of stock in the Corporation shall be entitled to have a
certificate signed by or in the name of the Corporation by the Chairman of the
Board of Directors, the President, or a Vice President and by the Secretary or
an Assistant Secretary. The signatures of such officers upon such certificate
may be facsimiles if the certificate is signed, manually or by facsimile
signature, by a transfer agent or registered by a registrar, other than the
Corporation itself or one of its employees. If any officer who has signed or
whose facsimile signature has been placed upon a certificate has ceased for any
reason to be such officer prior to issuance of the certificate, the certificate
may be issued with the same effect as if that person were such officer at the
date of issue. All certificates for stock of the Corporation shall be
consecutively numbered, shall state the number of shares represented thereby and
shall otherwise be in such form as shall be determined by the Board of
Directors, subject to such requirements as are imposed by the Delaware General
Corporation Law. The names and addresses of the persons
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to whom the shares represented by certificates are issued shall be entered on
the stock transfer books of the Corporation, together with the number of shares
and the date of issue, and in the case of cancellation, the date of
cancellation. Certificates surrendered to the Corporation for transfer shall be
canceled, and no new certificate shall be issued in exchange for such shares
until the original certificate has been canceled; except that in the case of a
lost, stolen, destroyed or mutilated certificate, a new certificate may be
issued therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.
2. Transfer of Stock.
Transfers of shares of stock of the Corporation shall be made only on
the stock transfer books of the Corporation by the holder of record thereof or
by his or her legal representative or attorney in fact, who shall furnish proper
evidence of authority to transfer to the Secretary, or a transfer clerk or a
transfer agent, and upon surrender of the certificate or certificates for such
shares properly endorsed and payment of all taxes thereon. The person in whose
name shares of stock stand on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation.
3. Regulations.
The Board of Directors may make such rules and regulations as it may
deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for stock of the Corporation. The
Board of Directors may appoint, or authorize any officer or officers or any
committee to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
ARTICLE VIII
DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding shares of stock in the manner
and upon the terms and conditions provided in the Delaware General Corporation
Law.
ARTICLE IX
SEAL
A corporate seal shall not be requisite to the validity of any
instrument executed by or on behalf of the Corporation. Nevertheless, if in any
instance a corporate seal is used, the same shall be in the form of a circle and
shall bear the full name of the Corporation and the year and state of
incorporation, or words and figures of similar import.
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ARTICLE X
INDEMNIFICATION OF DIRECTORS AND OFFICERS
1. General.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he 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 his conduct was unlawful. 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 person did not act in good faith and in a
manner which he 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 reasonable cause to believe that his conduct was unlawful.
2. Derivative Actions.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
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3. Indemnification in Certain Cases.
To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1 and 2 of this Article X, 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 therewith.
4. Procedure.
Any indemnification under Sections 1 and 2 of this Article X (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in such Sections 1 and 2. Such
determination shall be made (a) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (c) by the stockholders.
5. Advances for Expenses.
Expenses incurred by a director, officer, employee, or agent of the
Corporation in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall be ultimately
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article X.
6. Rights Not-Exclusive.
The indemnification and advancement of expenses provided by or granted
pursuant to, the other Sections of this Article X shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled under
any law, by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
7. Insurance.
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
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whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article X.
8. Definition of Corporation.
For the purposes of this Article X, references to "the Corporation"
include, in addition to the resulting corporation, all constituent corporations
(including any constituent of a constituent) absorbed in consolidation or merger
which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees and agents so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article X with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
9. Other Definitions.
For purposes of this Article X, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
X.
10. Continuation of Rights.
The indemnification and advancement of expenses provided by, or granted
pursuant to this Article X shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person. No amendment to or repeal of
this Article X shall apply to or have any effect on, the rights of any director,
officer, employee or agent under this Article X which rights come into existence
by virtue of acts or omissions of such director, officer, employee or agent
occurring prior to such amendment or repeal.
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ARTICLE XI
AMENDMENTS
These Bylaws may be repealed, altered or amended by the affirmative
vote of the holders of a majority of the stock issued and outstanding and
entitled to vote at any meeting of Stockholders or by resolution duly adopted by
the affirmative vote of not less than a majority of the Directors in office at
any annual or regular meeting of the Board of Directors or at any special
meeting of the Board of Directors if notice of the proposed repeal, alteration
or amendment be contained in the notice of such special meeting, and new Bylaws
may be adopted, at any time only by the Board of Directors.
ADOPTED by the Board of Directors of the Corporation this 10th day of
November, 1997.
/s/ Frank J. Amedia
----------------------------------
DIRECTOR
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Exhibit 3.7
CERTIFICATE OF INCORPORATION
OF
DCI/DWC ACQUISITION CORPORATION
1. The name of the corporation is: DCI/DWC Acquisition Corporation.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
4. The total number of shares which the Corporation shall have
authority to issue is 1,000 shares of capital stock, and the par value of each
such share is $0.001 per share.
Cumulative voting as provided for by Section 214 of Title 8 of the
Delaware Code shall not apply to this Corporation.
Preemptive rights as provided for by Section 102(b)(3) of Title 8 of
the Delaware Code shall not be granted and are hereby expressly denied.
5. The name and mailing address of each incorporator is:
NAME MAILING ADDRESS
A.S. Gardner Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
S.A. Clegg Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
<PAGE> 2
C.L. Hughes Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
6. The name and mailing address of each person who is to serve as a
director until the first annual meeting of the stockholders or until a successor
is elected and qualified is:
NAME MAILING ADDRESS
Frank J. Amedia c/o American Architectural Products Corp.
755 Boardman-Canfield Road
South Bridge Executive Center
Building G West
Boardman, Ohio 44512
The Board of Directors shall have sole authority to determine
the number of Directors serving on the Board, and may increase or decrease the
exact number of Directors from time to time by resolution duly adopted by such
Board. No decrease in the number of Directors shall have the effect of
shortening the term of any incumbent Director.
7. The Corporation shall have perpetual existence.
8. The Corporation shall be managed by the Board of Directors, which
shall exercise all powers conferred under the laws of the State of Delaware. The
Board of Directors shall have authority to make, alter or repeal the Bylaws of
the Corporation.
9. Elections of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.
10. Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
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11. No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that nothing contained herein shall
eliminate or limit the liability of a director of the Corporation to the extent
provided by applicable laws (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or knowing violation of law, (iii)
for authorizing the payment of a dividend or repurchase of stock, or (iv) for
any transaction from which the director derived an improper personal benefit.
The limitation of liability provided herein shall continue after a director has
ceased to occupy such position as to acts or omissions occurring during such
director's term or terms of office.
12. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
The undersigned, being each of the incorporators hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, do hereby declare and certify that this is our act and
deed and the facts herein stated are true, and accordingly have hereunto set our
hands this 10th day of November, 1997.
/s/ A.S. Gardner
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/s/ S.A. Clegg
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/s/ C.L. Hughes
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INCORPORATORS
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Exhibit 3.8
BYLAWS
OF
DCI/DWC ACQUISITION CORPORATION
ARTICLE I
OFFICES
1. Registered Office.
The registered office of the Corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware.
2. Other Offices.
The Corporation may also have offices at such other places both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
1. Annual Meeting.
The annual meeting of the stockholders shall be held on the first
Monday of April of each year, or if that day is a legal holiday in Delaware,
then on the next day thereafter which is not a legal holiday, or at such other
date as the Board of Directors shall determine, for the purpose of electing
Directors and for the transaction of such other business as may properly come
before the meeting. If the election of Directors is not held on the day
designated herein for any annual meeting of the stockholders, or any adjournment
thereof, the Directors shall cause the election to be held at a special meeting
of the stockholders as soon thereafter as convenient.
2. Special Meetings.
Special meetings of the stockholders may be called for any purpose or
purposes at any time by the Board of Directors, Chairman of the Board or the
President, and shall be called by the Chairman of the Board or the President at
the request of the holders of not less than one-tenth (1/10) of all outstanding
stock of the Corporation entitled to vote at such meeting, or otherwise as
provided by the Delaware General Corporation Law and Section 12 of Article III
of these Bylaws. Such request shall state the purpose or purposes of the
proposed meeting.
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3. Place of Meetings.
Annual and special meetings of the stockholders shall be held at the
principal office of the Corporation, unless otherwise specified in the notice
calling any such meeting, or in the event of a waiver of notice of such meeting,
in such waiver of notice.
4. Notice of Meeting.
Written notice stating the place, date 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 to each stockholder of record entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting. Notice may be delivered either personally or by first
class, certified or registered mail, by an officer of the Corporation at the
direction of the person or persons calling the meeting. If mailed, notice shall
be deemed to be delivered when mailed to the stockholders at his or her address
as it appears on the stock transfer books of the Corporation. Notice need not be
given of an adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken, provided that such adjournment is for
less than thirty (30) days and further provided that a new record date is not
fixed for the adjourned meeting, in either of which events, written notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at such meeting. At any adjourned meeting, any business may be transacted
which might have been transacted at the meeting as originally noticed. A written
waiver of notice, whether given before or after the meeting to which it relates,
shall be equivalent to the giving of notice of such meeting to the stockholder
or stockholders signing such waiver. Attendance of a stockholder at a meeting
shall constitute a waiver of notice of such meeting, except when the stockholder
attends for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
5. Fixing Date for Determination of Stockholders Record.
In order that the Corporation may determine the stockholders entitled
to notice of and to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a meeting,
or to receive payment of any dividend or other distribution or allotment of any
rights, or to exercise any rights in respect of any other change, conversion or
exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix in advance a record date, which shall not be more than sixty
(60) nor less than ten (10) days prior to the date of such meeting or such
action, as the case may be. If the Board has not fixed a record date for
determining the stockholders entitled to notice of and to vote at a meeting of
stockholders, the record date shall be at close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held. If
the Board has not fixed a record date for determining the stockholders entitled
to express consent to corporate action in writing without a meeting, when no
prior action by the Board is necessary, the record date shall be the day on
which the first written consent is expressed by any stockholder. If the Board
has not fixed a
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record date for determining stockholders for any other purpose, the record date
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
6. Record of Stockholders.
The Secretary or other officer having charge of the stock transfer
books of the Corporation shall make, or cause to be made, at least ten (10) days
before every meeting of stockholders, a complete record of the stockholders
entitled to vote at a meeting of stockholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present.
7. Quorum and Manner of Acting.
At any meeting of the stockholders, the presence, in person or by
proxy, of the holders of a majority of the outstanding stock entitled to vote
shall constitute a quorum. All shares represented and entitled to vote on any
single subject matter which may be brought before the meeting shall be counted
for quorum purposes. Only those shares entitled to vote on a particular subject
matter shall be counted for the purpose of voting on that subject matter.
Business may be conducted once a quorum is present and may continue to be
conducted until adjournment sine die, notwithstanding the withdrawal or
temporary absence of stockholders leaving less than a quorum. Except as
otherwise provided in the Delaware General Corporation Law, the affirmative vote
of the holders of a majority of the shares of stock then represented at the
meeting and entitled to vote thereat shall be the act of the stockholders;
provided, however, that if the shares of stock so represented are less than the
number required to constitute a quorum, the affirmative vote must be such as
would constitute a majority if a quorum were present, except that the
affirmative vote of the holders of a majority of the shares of stock then
present is sufficient in all cases to adjourn a meeting.
8. Voting of Shares of Stock.
Each stockholder shall be entitled to one vote or corresponding
fraction thereof for each share of stock or fraction thereof standing in his,
her or its name on the books of the Corporation on the record date. A
stockholder may vote either in person or by proxy executed in writing by the
stockholder or by his, her or its duly authorized attorney in fact, but no such
proxy shall be voted or acted upon after three (3) years from the date of its
execution unless the
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proxy provides for a longer period. Shares of its own stock belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor counted
for quorum purposes; provided, however, that the foregoing shall not limit the
right of any corporation to vote stock, including but not limited to its own
stock, when held by it in a fiduciary capacity. Shares of stock standing in the
name of another corporation may be voted by such officer, agent or proxy as the
bylaws of such other corporation may prescribe or, in the absence of such
provision, as the board of directors of such other corporation may determine.
Unless demanded by a stockholder present in person or by proxy at any meeting of
the stockholders and entitled to vote thereat, or unless so directed by the
chairman of the meeting, the vote thereat on any question need not be by ballot.
If such demand or direction is made, a vote by ballot shall be taken, and each
ballot shall be signed by the stockholder voting, or by his or her proxy, and
shall state the number of shares voted.
9. Organization.
At each meeting of the stockholders, the Chairman of the Board, or, if
he or she is absent therefrom, the President, or, if he or she is absent
therefrom, another officer of the Corporation chosen as chairman of such meeting
by stockholders holding a majority of the shares present in person or by proxy
and entitled to vote thereat, or, if all the officers of the Corporation are
absent therefrom, a stockholder of record so chosen, shall act as chairman of
the meeting and preside thereat. The Secretary, or, if he or she is absent from
the meeting or is required pursuant to the provisions of this Section 9 to act
as chairman of such meeting, the person (who shall be an Assistant Secretary, if
any and if present) whom the chairman of the meeting shall appoint shall act as
secretary of the meeting and keep the minutes thereof.
10. Order of Business.
The order of business at each meeting of the stockholders shall be
determined by the chairman of such meeting, but the order of business may be
changed by the vote of stockholders holding a majority of the shares present in
person or by proxy at such meeting and entitled to vote thereat.
11. Voting.
At all meetings of stockholders, each stockholder entitled to vote
thereat shall have the right to vote, in person or by proxy, and shall have, for
each share of stock registered in his, her or its name, the number of votes
provided by the Certificate of Incorporation in respect of stock of such class.
Stockholders shall not have cumulative voting rights with respect to the
election of Directors.
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12. Action By Stockholders Without a Meeting.
Any action required or permitted to be taken at a meeting of the
stockholders may be taken without a meeting, without notice and without a vote,
if a consent in writing, setting forth the action so taken, is signed by the
holders of outstanding stock having not less than the number of votes that would
have been necessary to authorize such action at a meeting at which all shares
entitled to vote were present and voted. Prompt notice of the taking of any such
action shall be given to any such stockholders entitled to vote who have not so
consented in writing.
ARTICLE III
BOARD OF DIRECTORS
1. General Powers.
The business and affairs of the Corporation shall be managed by the
Board of Directors.
2. Number, Term of Office and Qualifications.
Subject to the requirements of the Delaware General Corporation Law,
the Board of Directors may from time to time determine the number of Directors.
Until the Board shall otherwise determine, the number of Directors shall be that
number comprising the initial Board as set forth in the Certificate of
Incorporation. Each Director shall hold office until his or her successor is
duly elected or until his or her earlier death or resignation or removal in the
manner hereinafter provided. Directors need not be stockholders.
3. Place of Meeting.
The Board of Directors may hold its meetings at such place or places as
it may from time to time by resolution determine or as shall be designated in
any notices or waivers of notice thereof. Any such meeting, whether regular or
special, may be held by conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting in such manner shall constitute presence in
person at such meeting.
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4. Annual Meetings.
As soon as practicable after each annual election of Directors and on
the same day, the Board of Directors shall meet for the purpose of organization
and the transaction of other business at the place where regular meetings of the
Board of Directors are held, and no notice of such meeting shall be necessary in
order to legally hold the meeting, provided that a quorum is present. If such
meeting is not held as provided above, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for a
special meeting of the Board of Directors, or in the event of waiver of notice
as specified in the written waiver of notice.
5. Regular Meetings.
Regular meetings of the Board of Directors may be held without notice
at such times as the Board of Directors shall from time to time by resolution
determine.
6. Special Meetings; Notice.
Special meetings of the Board of Directors shall be held whenever
called by the Chairman of the Board or a majority of the Directors at the time
in office. Notice shall be given, in the manner hereinafter provided, of each
such special meeting, which notice shall state the time and place of such
meeting, but need not state the purposes thereof. Except as otherwise provided
in Section 7 of this Article III, notice of each such meeting shall be mailed to
each Director, addressed to him or her at his or her residence or usual place of
business, at least two (2) days before the day on which such meeting is to be
held, or shall be sent addressed to him or her at such place by telegraph,
cable, wireless or other form of recorded communication or delivered personally
or by telephone not later than the day before the day on which such meeting is
to be held. A written waiver of notice, whether given before or after the
meeting to which it relates, shall be equivalent to the giving of notice of such
meeting to the Director or Directors signing such waiver. Attendance of a
Director at a special meeting of the Board of Directors shall constitute a
waiver of notice of such meeting, except when he or she attends the meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
7. Quorum and Manner of Acting.
A majority of the whole Board of Directors shall be present in person
at any meeting of the Board of Directors in order to constitute a quorum for the
transaction of business at such meeting, and except as otherwise specified in
these Bylaws, and except also as otherwise expressly provided by the Delaware
General Corporation Law, the vote of a majority of the Directors present at any
such meeting at which a quorum is present shall be the act of the Board of
Directors. In the absence of a quorum from any such meeting, a majority of the
Directors present thereat may adjourn such meeting from time to time to another
time or place, without
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notice other than announcement at the meeting, until a quorum shall be present
thereat. The Directors shall act only as a Board and the individual Directors
shall have no power as such.
8. Organization.
At each meeting of the Board of Directors, the Chairman of the Board of
Directors, or, if he or she is absent therefrom, the President, or if he or she
is absent therefrom, a Director chosen by a majority of the Directors present
thereat, shall act as chairman of such meeting and preside thereat. The
Secretary, or if he or she is absent, the person (who shall be an Assistant
Secretary, if any and if present) whom the chairman of such meeting shall
appoint, shall act as Secretary of such meeting and keep the minutes thereof.
9. Action by Directors Without a Meeting.
Any action required or permitted to be taken at a meeting of the Board
of Directors may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, is signed by
all Directors and such consent is filed with the minutes of the proceedings of
the Board of Directors.
10. Resignations.
Any Director may resign at any time by giving written notice of his or
her resignation to the Corporation. Any such resignation shall take effect at
the time specified therein, or, if the time when it shall become effective is
not specified therein, it shall take effect immediately upon its receipt by the
Chairman of the Board, the President or the Secretary; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
11. Removal of Directors.
Directors may be removed, with or without cause, as provided from time
to time by the Delaware General Corporation Law as then in effect.
12. Vacancies.
Vacancies and newly created directorships resulting from any increase
in the authorized number of Directors elected by all of the stockholders having
the right to vote as a single class may be filled by a majority of the Directors
then in office, although less than a quorum, or by a sole remaining Director. If
at any time, by reason of death or resignation or other cause, the Corporation
has no Directors in office, then any officer or any stockholder or an executor,
administrator, trustee or guardian of a stockholder, may call a special meeting
of stockholders for the purpose of filling vacancies in the Board of Directors.
If one or more Directors shall resign from the Board of Directors, effective at
a future date, a majority of the Directors then in office, including those who
have so resigned, shall have the power to fill such vacancy or
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vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective, and each Director so chosen shall hold office as
provided in this section in the filling of other vacancies.
13. Compensation.
Unless otherwise expressly provided by resolution adopted by the Board
of Directors, no Director shall receive any compensation for his or her services
as a Director. The Board of Directors may at any time and from time to time by
resolution provide that the Directors shall be paid a fixed sum for attendance
at each meeting of the Board of Directors or a stated salary as Director. In
addition, the Board of Directors may at any time and from time to time by
resolution provide that Directors shall be paid their actual expenses, if any,
of attendance at each meeting of the Board of Directors. Nothing in this section
shall be construed as precluding any Director from serving the Corporation in
any other capacity and receiving compensation therefor, but the Board of
Directors may by resolution provide that any Director receiving compensation for
his or her services to the Corporation in any other capacity shall not receive
additional compensation for his or her services as a Director.
ARTICLE IV
OFFICERS
1. Number.
The Corporation shall have the following officers: a Chairman of the
Board (who shall be a Director), a President, a Vice President, a Secretary and
a Treasurer. At the discretion of the Board of Directors, the Corporation may
also have additional Vice Presidents, one or more Assistant Vice Presidents, one
or more Assistant Secretaries and one or more Assistant Treasurers. Any two or
more offices may be held by the same person.
2. Election and Term of Office.
The officers of the Corporation shall be elected annually by the Board
of Directors. Each such officer shall hold office until his or her successor is
duly elected or until his or her earlier death or resignation or removal in the
manner hereinafter provided.
3. Agents.
In addition to the officers mentioned in Section 1 of this Article IV,
the Board of Directors may appoint such agents as the Board of Directors may
deem necessary or advisable, each of which agents shall have such authority and
perform such duties as are provided in these Bylaws or as the Board of Directors
may from time to time determine. The Board of Directors may delegate to any
officer or to any committee the power to appoint or remove any such agents.
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4. Removal.
Any officer may be removed, with or without cause, at any time by
resolution adopted by a majority of the whole Board of Directors.
5. Resignations.
Any officer may resign at any time by giving written notice of his or
her resignation to the Board of Directors, the Chairman of the Board, the
President or the Secretary. Any such resignation shall take effect at the times
specified therein, or, if the time when it shall become effective is not
specified therein, it shall take effect immediately upon its receipt by the
Board of Directors, the Chairman of the Board, the President or the Secretary;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
6. Vacancies.
A vacancy in any office due to death, resignation, removal,
disqualification or any other cause may be filled for the unexpired portion of
the term thereof by the Board of Directors.
7. Chairman of the Board.
The Chairman of the Board shall be the chief executive officer of the
Corporation and shall have, subject to the control of the Board, general and
active supervision and direction over the business and affairs of the
Corporation and over its several officers. The Chairman of the Board shall: (a)
preside at all meetings of the stockholders and at all meetings of the Board;
(b) make a report of the state of the business of the Corporation at each annual
meeting of the stockholders; (c) see that all orders and resolutions of the
Board are carried into effect; (d) sign, with the Secretary or an Assistant
Secretary, certificates for stock of the Corporation; (e) have the right to
sign, execute and deliver in the name of the Corporation all deeds, mortgages,
bonds, contracts or other instruments authorized by the Board, except in cases
where the signing, execution or delivery thereof is expressly delegated by the
Board or by these Bylaws to some other officer or agent of the Corporation or
where any of them are required by law otherwise to be signed, executed or
delivered; and (f) have the right to cause the corporate seal, if any, to be
affixed to any instrument which requires it. In general, the Chairman of the
Board shall perform all duties incident to the office of the Chairman of the
Board and such other duties as from time to time may be assigned to him or her
by the Board.
8. President.
The President shall have, subject to the control of the Board and the
Chairman of the Board, general and active supervision and direction over the
business and affairs of the Corporation and over its several officers. At the
request of the Chairman of the Board, or in case of his or her absence or
inability to act, the President shall perform the duties of the Chairman of the
Board and, when so acting, shall have all the powers of, and be subject to all
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the restrictions upon, the Chairman of the Board. He may sign, with the
Secretary or an Assistant Secretary, certificates for stock of the Corporation.
He may sign, execute and deliver in the name of the Corporation all deeds,
mortgages, bonds, contracts or other instruments authorized by the Board, except
in cases where the signing, execution or delivery thereof is expressly delegated
by the Board or by these Bylaws to some other officer or agent of the
Corporation or where any of them are required by law otherwise to be signed,
executed or delivered, and he may cause the corporate seal, if any, to be
affixed to any instrument which requires it. In general, the President shall
perform all duties incident to the office of the President and such other duties
as from time to time may be assigned to him or her by the Board or the Chairman
of the Board.
9. Vice President.
The Vice President and any additional Vice Presidents shall have such
powers and perform such duties as the Chairman of the Board, the President or
the Board of Directors may from time to time prescribe and shall perform such
other duties as may be prescribed by these Bylaws. At the request of the
President, or in case of his or her absence or inability to act, the Vice
President shall perform the duties of the President and, when so acting, shall
have all the powers of, and be subject to all the restrictions upon, the
President.
10. Secretary.
The Secretary shall: (a) record all the proceedings of the meetings of
the stockholders, the Board of Directors and the Executive Committee, if any, in
one or more books kept for that purpose; (b) see that all notices are duly given
in accordance with the provisions of these Bylaws or as required by law; (c) be
the custodian of all contracts, deeds, documents, all other indicia of title to
properties owned by the Corporation and of its other corporate records (except
accounting records) and of the corporate seal, if any, and affix such seal to
all documents the execution of which on behalf of the Corporation under its seal
is duly authorized; (d) sign, with the Chairman of the Board, the President, the
Executive Vice President or a Vice President, certificates for stock of the
Corporation; (e) have charge, directly or through the transfer clerk or transfer
clerks, transfer agent or transfer agents and registrar or registrars appointed
as provided in Section 3 of Article VII of these Bylaws, of the issue, transfer
and registration of certificates for stock of the Corporation and of the records
thereof, such records to be kept in such manner as to show at any time the
amount of the stock of the Corporation issued and outstanding, the manner in
which and the time when such stock was paid for, the names, alphabetically
arranged, and the addresses of the holders of record thereof, the number of
shares held by each, and the time when each became a holder of record; (f) upon
request, exhibit or cause to be exhibited at all reasonable times to any
Director such records of the issue, transfer and registration of the
certificates for stock of the Corporation; (g) see that the books, reports,
statements, certificates and all other documents and records required by law are
properly kept and filed; and (h) see that the duties prescribed by Section 6 of
Article II of these Bylaws are performed. In general, the Secretary shall
perform all duties incident to the office of Secretary
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and such other duties as from time to time may be assigned to him or her by the
Chairman of the Board, the President or the Board of Directors.
11. Treasurer.
If required by the Board of Directors, the Treasurer shall give a bond
for the faithful discharge of his or her duties in such sum and with such surety
or sureties as the Board of Directors shall determine. The Treasurer shall: (a)
have charge and custody of, and be responsible for, all funds, securities, notes
and valuable effects of the Corporation; (b) receive and give receipt for moneys
due and payable to the Corporation from any sources whatsoever; (c) deposit all
such moneys to the credit of the Corporation or otherwise as the Board of
Directors, the Chairman of the Board or the President shall direct in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article VI of these Bylaws; (d) cause such funds to be
disbursed by checks or drafts on the authorized depositories of the Corporation
signed as provided in Article VI of these Bylaws; (e) be responsible for the
accuracy of the amounts of, and cause to be preserved proper vouchers for, all
moneys so disbursed; (f) have the right to require from time to time reports or
statements giving such information as he or she may desire with respect to any
and all financial transactions of the Corporation from the officers or agents
transacting the same; (g) render to the Chairman of the Board, the President or
the Board, whenever they, respectively, shall request him or her so to do, an
account of the financial condition of the Corporation and of all his or her
transactions as Treasurer; and (h) upon request, exhibit or cause to be
exhibited at all reasonable times the cash books and other records to the
Chairman of the Board, the President or any of the Directors of the Corporation.
In general, the Treasurer shall perform all duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him or
her by the Chairman of the Board, the President or the Board of Directors.
12. Assistant Officers.
Any persons elected as assistant officers shall assist in the
performance of the duties of the designated office and such other duties as
shall be assigned to them by any Vice President, the Secretary or the Treasurer,
as the case may be, or by the Board of Directors, the Chairman of the Board, or
the President.
ARTICLE V
COMMITTEES
1. Executive Committee; How Constituted and Powers.
The Board of Directors, by resolution adopted by a majority of the
whole Board of Directors, may designate one or more of the Directors then in
office, who shall include the Chairman of the Board, to constitute an Executive
Committee, which shall have and may exercise between meetings of the Board of
Directors all the delegable powers of the Board of
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Directors to the extent not expressly prohibited by the Delaware General
Corporation Law or by resolution of the Board of Directors. The Board may
designate one or more Directors as alternate members of the Committee who may
replace any absent or disqualified member at any meeting of the Committee. Each
member of the Executive Committee shall continue to be a member thereof only
during the pleasure of a majority of the whole Board of Directors.
2. Executive Committee; Organization.
The Chairman of the Board shall act as chairman at all meetings of the
Executive Committee and the Secretary shall act as secretary thereof. In case of
the absence from any meeting of the Chairman of the Board or the Secretary, the
Committee may appoint a chairman or secretary, as the case may be, of the
meeting.
3. Executive Committee; Meetings.
Regular meetings of the Executive Committee may be held without notice
on such days and at such places as shall be fixed by resolution adopted by a
majority of the Committee and communicated to all its members. Special meetings
of the Committee shall be held whenever called by the Chairman of the Board or a
majority of the members thereof then in office. Notice of each special meeting
of the Committee shall be given in the manner provided in Section 6 of Article
III of these Bylaws for special meetings of the Board of Directors. Notice of
any such meeting of the Executive Committee, however, need not be given to any
member of the Committee if waived by him or her in writing or by telegraph,
cable, wireless or other form of recorded communication either before or after
the meeting, or if he or she is present at such meetings, except when he or she
attends for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Subject to the
provisions of this Article V, the Committee, by resolution adopted by a majority
of the whole Committee, shall fix its own rules of procedure and it shall keep a
record of its proceedings and report them to the board at the next regular
meeting thereof after such proceedings have been taken. All such proceedings
shall be subject to revision or alteration by the Board of Directors; provided,
however, that third parties shall not be prejudiced by any such revision or
alteration.
4. Executive Committee; Quorum and Manner of Acting.
A majority of the Executive Committee shall constitute a quorum for the
transaction of business, and, except as specified in Section 3 of this Article
V, the act of a majority of those present at a meeting thereof at which a quorum
is present shall be the act of the Committee. The members of the Committee shall
act only as a committee, and the individual members shall have no power as such.
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5. Other Committees.
The Board of Directors, by resolution adopted by a majority of the
whole Board, may constitute other committees, which shall in each case consist
of one or more of the Directors and, at the discretion of the Board of
Directors, such officers who are not Directors. The Board of Directors may
designate one or more Directors or officers who are not Directors as alternate
members of any committee who may replace any absent or disqualified member at
any meeting of the committee. Each such committee shall have and may exercise
such powers as the Board of Directors may determine and specify in the
respective resolutions appointing them; provided, however, that (a) unless all
of the members of any committee shall be Directors, such committee shall not
have authority to exercise any of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and (b) if any
committee shall have the power to determine the amounts of the respective fixed
salaries of the officers of the Corporation or any of them, such committee shall
consist of not less than three (3) members and none of its members shall have
any vote in the determination of the amount that shall be paid to him or her as
a fixed salary. A majority of all the members of any such committee may fix its
rules of procedure, determine its action and fix the time and place of its
meetings and specify what notice thereof, if any, shall be given, unless the
Board of Directors shall otherwise by resolution provide.
6. Resignations.
Any member of the Executive Committee or any other committee may resign
therefrom at any time by giving written notice of his or her resignation to the
Chairman of the Board, the President or the Secretary. Any such resignation
shall take effect at the time specified therein, or if the time when it shall
become effective is not specified therein, it shall take effect immediately upon
its receipt by the Chairman of the Board, the President or the Secretary; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
7. Vacancies.
Any vacancy in the Executive Committee or any other committee shall be
filled by the vote of a majority of the whole Board of Directors.
8. Compensation.
Unless otherwise expressly provided by resolution adopted by the Board
of Directors, no member of the Executive Committee or any other committee shall
receive any compensation for his or her services as a committee member. The
Board of Directors may at any time and from time to time by resolution provide
that committee members shall be paid a fixed sum for attendance at each
committee meeting or a stated salary as a committee member. In addition, the
Board of Directors may at any time and from time to time by resolution provide
that such committee members shall be paid their actual expenses, if any, of
attendance at each committee
13
<PAGE> 14
meeting. Nothing in this section shall be construed as precluding any committee
member from serving the Corporation in any other capacity and receiving
compensation therefor, but the Board of Directors may by resolution provide that
any committee member receiving compensation for his or her services to the
Corporation in any other capacity shall not receive additional compensation for
his or her services as a committee member.
9. Dissolution of Committees; Removal of Committee Members.
The Board of Directors, by resolution adopted by a majority of the
whole Board, may, with or without cause, dissolve the Executive Committee or any
other committee, and, with or without cause, remove any member thereof.
ARTICLE VI
MISCELLANEOUS
1. Execution of Contracts.
Except as otherwise required by law or by these Bylaws, any contract or
other instrument may be executed and delivered in the name of the Corporation
and on its behalf by the Chairman of the Board, the President, or any Vice
President. In addition, the Board of Directors may authorize any other officer
of officers or agent or agents to execute and deliver any contract or other
instrument in the name of the Corporation and on its behalf, and such authority
may be general or confined to specific instances as the Board of Directors may
by resolution determine.
2. Attestation.
Any Vice President, the Secretary, or any Assistant Secretary may
attest the execution of any instrument or document by the Chairman of the Board,
the President, or any other duly authorized officer or agent of the Corporation
and may affix the corporate seal, if any, in witness thereof, but neither such
attestation nor the affixing of a corporate seal shall be requisite to the
validity of any such document or instrument.
3. Checks, Drafts.
All checks, drafts, orders for the payment of money, bills of lading,
warehouse receipts, obligations, bills of exchange and insurance certificates
shall be signed or endorsed (except endorsements for collection for the account
of the Corporation or for deposit to its credit, which shall be governed by the
provisions of Section 5 of this Article VI) by such officer or officers or agent
or agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
14
<PAGE> 15
4. Deposits.
All funds of the Corporation not otherwise employed shall be deposited
from time to time to the credit of the Corporation or otherwise as the Board of
Directors, the Chairman of the Board of Directors, or the President shall direct
in general or special accounts at such banks, trust companies, savings and loan
associations, or other depositories as the Board of Directors may select or as
may be selected by any officer or officers or agent or agents of the Corporation
to whom power in that respect has been delegated by the Board of Directors. For
the purpose of deposit and for the purpose of collection for the account of the
Corporation, checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation may be endorsed, assigned and delivered
by any officer or agent of the Corporation. The Board of Directors may make such
special rules and regulations with respect to such accounts, not inconsistent
with the provisions of these Bylaws, as it may deem expedient.
5. Proxies in Respect of Stock or Other Securities of Other Corporations.
Unless otherwise provided by resolution adopted by the Board of
Directors, the Chairman of the Board of Directors, the President, or any Vice
President may exercise in the name and on behalf of the Corporation the powers
and rights which the Corporation may have as the holder of stock or other
securities in any other corporation, including without limitation the right to
vote or consent with respect to such stock or other securities.
6. Fiscal Year.
The fiscal year of the Corporation shall correspond with the calendar
year.
ARTICLE VII
STOCK
1. Certificates.
Every holder of stock in the Corporation shall be entitled to have a
certificate signed by or in the name of the Corporation by the Chairman of the
Board of Directors, the President, or a Vice President and by the Secretary or
an Assistant Secretary. The signatures of such officers upon such certificate
may be facsimiles if the certificate is signed, manually or by facsimile
signature, by a transfer agent or registered by a registrar, other than the
Corporation itself or one of its employees. If any officer who has signed or
whose facsimile signature has been placed upon a certificate has ceased for any
reason to be such officer prior to issuance of the certificate, the certificate
may be issued with the same effect as if that person were such officer at the
date of issue. All certificates for stock of the Corporation shall be
consecutively numbered, shall state the number of shares represented thereby and
shall otherwise be in such form as shall be determined by the Board of
Directors, subject to such requirements as are imposed by the Delaware General
Corporation Law. The names and addresses of the persons
15
<PAGE> 16
to whom the shares represented by certificates are issued shall be entered on
the stock transfer books of the Corporation, together with the number of shares
and the date of issue, and in the case of cancellation, the date of
cancellation. Certificates surrendered to the Corporation for transfer shall be
canceled, and no new certificate shall be issued in exchange for such shares
until the original certificate has been canceled; except that in the case of a
lost, stolen, destroyed or mutilated certificate, a new certificate may be
issued therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.
2. Transfer of Stock.
Transfers of shares of stock of the Corporation shall be made only on
the stock transfer books of the Corporation by the holder of record thereof or
by his or her legal representative or attorney in fact, who shall furnish proper
evidence of authority to transfer to the Secretary, or a transfer clerk or a
transfer agent, and upon surrender of the certificate or certificates for such
shares properly endorsed and payment of all taxes thereon. The person in whose
name shares of stock stand on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation.
3. Regulations.
The Board of Directors may make such rules and regulations as it may
deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for stock of the Corporation. The
Board of Directors may appoint, or authorize any officer or officers or any
committee to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
ARTICLE VIII
DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding shares of stock in the manner
and upon the terms and conditions provided in the Delaware General Corporation
Law.
ARTICLE IX
SEAL
A corporate seal shall not be requisite to the validity of any
instrument executed by or on behalf of the Corporation. Nevertheless, if in any
instance a corporate seal is used, the same shall be in the form of a circle and
shall bear the full name of the Corporation and the year and state of
incorporation, or words and figures of similar import.
16
<PAGE> 17
ARTICLE X
INDEMNIFICATION OF DIRECTORS AND OFFICERS
1. General.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he 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 his conduct was unlawful. 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 person did not act in good faith and in a
manner which he 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 reasonable cause to believe that his conduct was unlawful.
2. Derivative Actions.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
17
<PAGE> 18
3. Indemnification in Certain Cases.
To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1 and 2 of this Article X, 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 therewith.
4. Procedure.
Any indemnification under Sections 1 and 2 of this Article X (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in such Sections 1 and 2. Such
determination shall be made (a) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (c) by the stockholders.
5. Advances for Expenses.
Expenses incurred by a director, officer, employee, or agent of the
Corporation in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall be ultimately
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article X.
6. Rights Not-Exclusive.
The indemnification and advancement of expenses provided by or granted
pursuant to, the other Sections of this Article X shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled under
any law, by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
7. Insurance.
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
18
<PAGE> 19
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article X.
8. Definition of Corporation.
For the purposes of this Article X, references to "the Corporation"
include, in addition to the resulting corporation, all constituent corporations
(including any constituent of a constituent) absorbed in consolidation or merger
which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees and agents so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article X with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
9. Other Definitions.
For purposes of this Article X, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
X.
10. Continuation of Rights.
The indemnification and advancement of expenses provided by, or granted
pursuant to this Article X shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person. No amendment to or repeal of
this Article X shall apply to or have any effect on, the rights of any director,
officer, employee or agent under this Article X which rights come into existence
by virtue of acts or omissions of such director, officer, employee or agent
occurring prior to such amendment or repeal.
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<PAGE> 20
ARTICLE XI
AMENDMENTS
These Bylaws may be repealed, altered or amended by the affirmative
vote of the holders of a majority of the stock issued and outstanding and
entitled to vote at any meeting of Stockholders or by resolution duly adopted by
the affirmative vote of not less than a majority of the Directors in office at
any annual or regular meeting of the Board of Directors or at any special
meeting of the Board of Directors if notice of the proposed repeal, alteration
or amendment be contained in the notice of such special meeting, and new Bylaws
may be adopted, at any time only by the Board of Directors.
ADOPTED by the Board of Directors of the Corporation this 10th day of
November, 1997.
/s/ Frank J. Amedia
----------------------------------
DIRECTOR
20
<PAGE> 1
EXHIBIT 3.9
CERTIFICATE OF INCORPORATION
OF
AMERICAN ARCHITECTURAL PRODUCTS, INC.
FIRST: The name of the Corporation is AMERICAN ARCHITECTURAL PRODUCTS,
INC.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington,
County of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in and to do any
lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is one hundred thousand (100,000) shares of common
stock, par value $.01 per share.
FIFTH: The name and mailing address of the Incorporator of the
Corporation is as follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
- ---- ---------------
<S> <C>
American Commercial Holdings, Inc. 925 Euclid Avenue, NO. 1100
Cleveland, Ohio 44115
</TABLE>
SIXTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders.
(1) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the By-Laws of the Corporation.
(2) The number of directors of the Corporation shall be as from time to
time fixed by, or in the manner provided in, the By-Laws of the Corporation.
Election of directors need not be by written ballot unless the By-Laws so
provide.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or
<PAGE> 2
places as may be designated from time to time by the Board of Directors or in
the By-Laws of the Corporation.
EIGHTH: The liability of directors of the Corporation is hereby
eliminated to the full extent permitted by Section 102(b)(7) of the Delaware
General Corporation Law or any successor provisions.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this Certificate, hereby declaring and certifying
that this is its act and deed and the facts herein stated are true, and
accordingly has caused to be set hereunder its hand this 19th day of June, 1996.
AMERICAN COMMERCIAL HOLDINGS, INC.
By: /s/ James K. Warren
---------------------------------------
James K. Warren
Vice President - Corporate Planning and
Secretary
2
<PAGE> 3
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
AMERICAN ARCHITECTURAL PRODUCTS, INC.
AMERICAN ARCHITECTURAL PRODUCTS, INC., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation") does hereby certify:
1. The Board of Directors of American Architectural Products, Inc., by
the unanimous written consent of its members filed with the minutes of the
board, duly adopted resolutions setting forth a proposed amendment to the
Certificate of Incorporation of the Corporation declaring this amendment to be
advisable and submitting the amendment to the stockholders of the Corporation
for consideration. The resolution setting forth the proposed amendment is as
follows:
RESOLVED: That Article 1 of the Certificate of Incorporation
of AMERICAN ARCHITECTURAL PRODUCTS, INC. be
amended to read in its entirety as follows:
1. The name of the Corporation is: EAGLE
& TAYLOR COMPANY.
2. Thereafter, the amendment was duly adopted by written consent of the
sole stockholder of the Corporation in accordance with Section 228 of the
General Corporation Law of the State of Delaware.
3. This amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its Chairman and Chief Executive Officer this 18th day of March, 1997.
AMERICAN ARCHITECTURAL PRODUCTS, INC.
Attest:
/s/ Tracey Stockton By: /s/ George S. Hofmeister
- ------------------------- ----------------------------------
Tracey Stockton George S. Hofmeister
Assistant Secretary Chairman and Chief Executive Officer
<PAGE> 1
Exhibit 3.10
EAGLE & TAYLOR COMPANY
BY-LAWS
ARTICLE I. Offices.
1.1 Registered Office. The registered office of the Corporation in the
State of Delaware shall be located in the City of Wilmington, County of New
Castle and the Agent in charge thereof shall be The Corporation Trust Company.
The Corporation may also have offices at such other places within or without the
State of Delaware as the Board of Directors may from time to time appoint or as
the business of the Corporation may require.
1.2 Principal Office. The principal office of the Corporation need not be
identical with the registered office, and may be changed f rom time to time as
the Board of Directors may determine.
ARTICLE II. Stockholders.
2.1 Annual Meeting. The annual meeting of the Stockholders shall be held on
the first day of April in each year, commencing in 1997, at 10:00 o'clock A.M.
local time or on such other date and at such other times within any particular
calendar year as the Board of Directors may determine. If the day fixed for the
annual meeting shall be a legal holiday in the State of Delaware, such meeting
shall be held on the next succeeding business day. If the annual meeting has not
been held during a calendar year, any Stockholder may call such meeting by
following the procedure set forth in Section 2.2 hereof.
At the annual meeting, the Stockholders shall elect Directors for the
ensuing year and may transact such other business as may properly come before
the meeting.
2.2 Special Meetings. Special meetings of the Stockholders may be called at
any time by the Chief Executive Officer, or by the Board of Directors, or by the
Stockholders entitled to cast at least one-fifth (1/5) of the votes which all
Stockholders are entitled to cast at the particular meeting. Upon written
request of any person or persons who have duly called a special meeting, the
Secretary shall fix the date of the meeting to be held not more than sixty (60)
days after receipt of the request and give due notice thereof to the
Stockholders entitled to vote thereat. If the Secretary shall neglect or refuse
to fix such date or give such notice, the person or persons calling the meeting
may do so.
2.3 Place of Meeting. The Board of Directors may designate any place,
either within or without the State of Delaware, as the place of meeting for any
annual or special meeting of the Stockholders. If no designation is made by the
Board of Directors, the place of meeting shall be at the registered office of
the Corporation in the State of Delaware.
2.4 Notice of Meeting. Written notice shall, unless otherwise provided by
statute, be given to Stockholders entitled to vote at the meeting who are
Stockholders as of the record date as provided in Section 2.6 hereof, not less
than ten (10) nor more than sixty (60) days
<PAGE> 2
before the date of the meeting, either personally or by sending a copy thereof
through the mail, or by telegram, charges prepaid, to the address of the
Stockholder appearing on the books of the Corporation, or supplied by the
Stockholder to the Corporation for the purpose of notice. Such notice shall
state the place, date and hour of the meeting. When required by these By-Laws or
by statute such notice shall also state the general nature of the business to be
transacted.
2.5 Sufficiency of Notice. Any notice required hereunder shall be deemed to
have been given to the person entitled thereto (a) if sent by mail, when
deposited in the United States mail, post prepaid, or (b) when lodged with a
telegraph office for transmission with charges prepaid, or (c) when delivered
personally.
Whenever notice is required to be given, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether signed before
or after the time stated, shall be deemed equivalent to the giving of such
notice. Attendance of a person at any meeting, either in person or by proxy,
shall constitute a waiver of notice of such meeting, except where a person
attends a meeting for the express and stated purpose of objecting to the
transaction of any business because the meeting was not lawfully called or
convened.
2.6 Record Date. The Board of Directors may fix a record date for purposes
of determining the stockholders entitled to notice of or to vote at any meeting
of the stockholders or any adjournment thereof. That record date (i) may not
precede the date upon which the resolution fixing the record date is adopted,
and (ii) it can not be more than sixty days, nor less than ten days preceding
the meeting for which the record date is set.
In the event that the Board of Directors is fixing a record date for
determining the stockholders entitled to consent to By-Laws corporate action in
writing without a meeting, the record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
shall not be more than ten days after the date upon which the resolution fixing
the record dated was so adopted.
In order to determine the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date which shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors and shall not be more than sixty days prior to such action.
If no record date is fixed:
(a) The record date for determining the stockholders entitled
to notice of or to vote at any meeting of the stockholders or any adjournment
thereof shall be at the close of business on the day next preceding the day on
which notice is given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held; provided however, that
the Board of Directors may fix a new record date for an adjourned meeting.
2 By-Laws
<PAGE> 3
(b) The record date for determining the stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by Statute, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation or its agent having custody of the
corporate record book.
(c) The record date for determining the stockholders entitled to
consent to corporate action in writing without a meeting, when prior action
by the Board of Directors is required by Statute, shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action.
(d) The record date for determining the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
2.7 Voting List. The officer or agent having charge of the transfer book
for shares of the Corporation shall make and certify, at least ten (10) days
before each meeting of Stockholders, a complete list of the Stockholders
entitled to vote at the meeting or any adjournment thereof, arranged in
alphabetical order, with the address and the number of shares held by each. The
list shall be kept on file for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held and shall be subject to
inspection by any Stockholder for any purpose germane to the meeting at any time
during usual business hours, and shall also be produced and kept open at the
time and place of the meeting, and shall be subject to the inspection of any
Stockholder during the whole time of the meeting. The original stock ledger
transfer book shall be prima facie evidence as to who are the Stockholders
entitled to examine such list or stock ledger or transfer books, or to vote, in
person or by proxy, at any meeting of the Stockholders.
2.8 Quorum. Except as otherwise required by Law, the presence of
Stockholders, in person or by proxy, entitled to cast at least a majority of the
votes which all Common Stockholders (plus such other Stockholders who may from
time to time be entitled to vote with the holders of Common Shares) are entitled
to cast shall constitute a quorum. With respect to the consideration of an]_&
particular matter as to which the Stockholders of any class or series shall be
entitled to cast a vote separate from the vote of the Common Stockholders, the
presence of Stockholders, in person or by proxy, entitled to cast at least a
majority of the votes which all such class or series of Stockholders are
entitled to cast on such particular matter shall constitute a quorum of such
class or series of Stockholders for the purpose of considering such matters. The
Stockholders present at a duly organized meeting can continue to do business
until adjournment, notwithstanding the withdrawal of enough Stockholders to
leave less than a quorum.
If a meeting cannot be organized because a quorum has not attended,
those
3 By-Laws
<PAGE> 4
present may adjourn the meeting to such time and place as they may determine.
When a meeting called for the election of Directors has been once adjourned
because a quorum had not attended, those Stockholders entitled to vote in the
election of Directors who attend the second of such adjourned meetings, although
less than a quorum as fixed in these By-Laws or in the Certificate on
Incorporation or by statute, shall nevertheless constitute a quorum for the
purpose of electing Directors.
2.9 Acts of Stockholders. Unless a greater or different vote shall be
required as to a particular matter by the Certificate of Incorporation or by
these By-Laws or by applicable statute, an act authorized by the vote of a
majority of those Common Shares (plus, such other shares which may from time to
time be entitled to vote with the Common Shares) present in person or by proxy
at a duly organized meeting shall be the act of the Stockholders,
2.10 Adjournment. Adjournment or adjournments at any annual or special
meeting may be taken as may be directed by a majority of votes cast by the
Stockholders present in person or by proxy entitled to cast the votes which the
Common Stockholders (plus such other Stockholders who shall at the time be
entitled to vote with the holders of Common Shares on the matters to be
considered at the meeting), may cast. When a meeting is adjourned, it shall not
be necessary to give any notice of the adjourned meeting other than by
announcement at the meeting at which such adjournment is taken. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
2.11 Proxies. At all meetings of Stockholders, a Stockholder entitled to
vote on a particular matter may vote in person or may authorize another person
or persons to act for him by proxy. Every proxy shall be executed in writing by
the Stockholder, or by his duly authorized attorney in fact. Such proxies shall
be filed with the Secretary of the Corporation before or at the time of the
meeting. A proxy, unless coupled with an interest, shall be revocable at will,
notwithstanding any other agreement or any provision in the proxy to the
contrary, but the revocation of the proxy shall not be effective until notice
thereof has been given to the Secretary of the Corporation. The Secretary may
treat any proxy delivered to him as valid, unless before the vote is counted or
the authority is exercised, written notice of any invalidity, together with such
supporting information as shall enable a judgment to be rendered, is given to
the Secretary.
2.12 Voting Rights. Unless otherwise provided in the Certificate of
Incorporation or in a duly filed statement establishing the rights of classes or
series, only the holders of Common Stock shall be entitled to vote at a meeting
of the Stockholders, and every Stockholder having the right to vote shall be
entitled to one vote for every share of Common Stock standing in this name on
the books of the Corporation.
2.13 Nomination of Directors. Nominations for election to the office of
Director at an annual or special meeting of Stockholders shall be made by the
Board of Directors, or by the Executive Committee, or by petition in writing
delivered to the Secretary of the
4 By-Laws
<PAGE> 5
Corporation not fewer than thirty-five (35) days prior to such Stockholders'
meeting, signed by the holders of at least one percent (1%) of the Stockholders'
shares entitled to be voted in the election of Directors. Unless nominations
shall have been made as aforesaid, they shall not be considered at such
Stockholders' meeting unless the number of persons nominated as aforesaid shall
be fewer than the number of persons to be elected to the office of Director at
such meeting, or unless persons duly nominated shall have failed to be elected
at such meeting and the persons elected as Directors shall be fewer than the
number of persons to be elected to the office of Director at such meeting, in
which events nominations may be made at the Stockholders' meeting by any person
entitled to vote in the election of directors.
2.14 Election by Ballot. The election of Directors shall be by written
ballot.
2.15 Judges of Election. In advance of any meeting of Stockholders, the
Board of Directors may appoint Judges of Election, who need not be Stockholders,
to act at such meeting or any adjournment thereof. The number of Judges shall be
one or three. The Judges of Election shall determine the number of shares
outstanding and the voting power of each; the shares represented at the meeting;
the existence of a quorum; the authenticity, validity and effect of proxies;
hear and determine all challenges and questions arising in connection with the
right to vote; receive, count and tabulate all votes or ballots, and determine
the results, and do such other acts as may be necessary and proper to conduct
the election or vote with fairness to all Stockholders. On request of the
Chairman of the Meeting, or of any Stockholder or his proxy, the Judges shall
make a report in writing of any challenge or question or matter determined by
them, and execute a certificate of any fact found by them. If there be three
Judges of Election, the decision, act or certificate of a majority shall be
effective in all respects as the decision and/or certificate of all. Any report
or certificate made by the Judges of Election shall be prima facie evidence of
the facts stated therein.
2.16 Consent of Stockholders in Lieu of Meeting. Any action required to be
taken at any annual or special meeting of Stockholders of the Corporation, or
any action which may be taken at any annual or special meeting of Stockholders,
may be taken without a meeting without prior notice and without a vote, 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 and separately dated
at the time of signing by each such Stockholder. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those Stockholders who have not consented in writing.
2.17 Cumulative Voting. At each election for Directors, every Stockholder
shall have one vote for each share of stock owned by such Stockholder, or, if
the certificate of incorporation so provides, to cumulate the vote of said
shares, and give one candidate as many votes as the number of directors
multiplied by the aggregate number of such Stockholder's votes shall equal, or
to distribute the votes on the same principle among as many candidates as the
Stockholder may see fit. The candidates receiving the highest number of votes,
up to the number of Directors to be elected, shall be elected.
5 By-Laws
<PAGE> 6
ARTICLE III. Board of Directors
3.1 Number, Tenure and Qualifications. The business and affairs of the
Corporation shall be managed by its Board of Directors, one or more in number,
as may be determined by the Board of Directors from time to time, who shall be
natural persons of full age who need not be residents of the State of Delaware
and who need not be Stockholders in the Corporation. Each Director shall hold
office until the next succeeding annual meeting, or until his successor shall
have been elected and shall qualify.
3.2 Powers and Authorization. In addition to the powers and authority by
these By-Laws expressly conferred, the Board of Directors may exercise all of
the powers of the Corporation and do all lawful acts not by statute or by the
Certificate or by those By-Laws directed or required to be exercised or done
only by the Shareholders. The Board shall have the power to delegate any of the
powers exercised or exercisable by the Board to any standing or special
committee, or to any officer or agent, or to appoint any person to be the agent
of the Corporation, with such powers, including the power to subdelegate, and
upon such terms as the Board shall deem appropriate.
3.3 Meetings. Meetings of the Board of Directors shall be held at such
times and places, either within or without the State of Delaware, as may be
fixed by Resolution of the Board, or by the Chief Executive officer, or upon
written demand of any two Directors.
3.4 Notice. Notice of a meeting of Directors or of any Committee of the
Board of Directors shall be delivered at least one day prior to such meeting by
oral, telegraphic or written notice. If mailed, such notice shall be deemed to
be delivered on the second day following the day deposited in the United States
mail, addressed to the Director at his business address, with postage thereon
prepaid. If notice be given by telegram, such notice shall be deemed to be
delivered on the day the telegram is delivered prepaid to the telegraph company,
addressed to the Director at his business office. Notice of a meeting need only
state the place, day and hour of the said meeting.
A Director may waive notice of any meeting in a writing signed either
before or after the time stated. The attendance of a Director at a meeting shall
constitute a waiver of notice of such meeting, except where a Director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting was not lawfully called or convened.
3.5 Quorum. A majority of the Directors then in office shall constitute a
quorum for the transaction of business at any meeting of the Board of Directors,
but if less than such quorum is present at a meeting, a majority of the
Directors present may adjourn the meeting from time to time without further
notice.
Directors shall be deemed present at a meeting of the Board of
Directors if by means of conference telephone or similar communications
equipment all persons participating in the meeting can hear each other.
6 By-Laws
<PAGE> 7
The act of the majority of these Directors voting at a meeting at
which a quorum is present shall be the act of the Board of Directors.
3.6 Unanimous Consent. Any action which may be taken at the meeting of the
Directors, or by action of the members of the Executive Committee or by the
members of any other committee appointed by the Board, may be taken without a
meeting, if a consent or consents in writing setting forth the action so taken
shall be signed by all of the Directors or the members of the committee, as the
case may be, and filed with the Secretary of the Corporation.
3.7 Compensation. Directors as such need not receive any compensation for
their services. By Resolution of the Board, a stated salary may be fixed for the
Directors, or a fixed sum for and expenses of, attendance may be allowed for
attendance at each regular or special meeting of the Board. Nothing herein
contained shall be construed to preclude any Director from serving the
corporation as a member of a committee or an officer or in any other capacity
and receiving compensation therefor.
3.8 Committees of the Board. The Board may, by Resolution adopted by a
majority of the whole Board, delegate two or more of its number to constitute an
Executive Committee, which, unless otherwise provided in such Resolution, shall
have and exercise the authority of the Board of Directors in the management of
the business and affairs of the Corporation. The Board may by Resolution adopted
by a majority of the whole Board delegate two or more of its members to act as a
committee to exercise all power and authority which the Board might exercise in
matters as to which the committee is authorized to act.
The presence in person or as hereafter provided of one-half (1/2) of
the members of the Executive Committee or any other Committee shall constitute a
quorum for the transaction of business at any meeting of such Committee, and the
act of a majority of those members of such Committee voting at a meeting at
which a quorum is present shall be the act of the Committee. Members of the
Executive Committee or any other Committee shall be deemed as being present at a
meeting of such Committee if by means of conference telephone or similar
communications equipment all persons participating in the meeting can hear each
other. In the absence or disqualification of any member of such Committee or
Committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
3.9 Removal of Directors. Any individual Director may be removed from
office with cause by the vote of Stockholders entitled to cast at least a
majority of the votes which all Stockholders would be entitled to cast at any
annual election of Directors; provided, however, that if the certificate of
incorporation provides for the cumulation of votes in the election of Directors,
such removal shall not occur if the votes of a sufficient number of shares are
cast against the Resolution for his removal which if cumulatively voted at an
annual meeting of Directors would be sufficient to elect one or more Directors.
7 By-Laws
<PAGE> 8
The entire Board of Directors may be removed from office without
assigning any cause by the vote of stockholders entitled to cast at least a
majority of the votes Stockholders would be entitled to cast at any annual
election of Directors.
3.10 Vacancies. Vacancies in the Board of Directors, including vacancies
resulting from an increase in the number of Directors, shall be filled by a
majority vote of the remaining members of the Board though less than a quorum. A
Director elected to fill a vacancy shall be a Director until a successor is
elected by the Shareholders, who may make such election at the next annual
meeting Shareholders or any special meeting duly called for that purpose and
held prior thereto.
ARTICLE IV. Officers.
4.1 Executive Officers. The Executive officers of the Corporation shall be
chosen by the Directors and shall be a Chief Executive officer, Secretary, and
Treasurer The Board of Directors may also choose a chairman of the Board, a
President, one or more Vice Presidents and such other officers and agents as it
shall deem necessary, who shall hold their offices for such terms and shall have
such authority and shall perform such duties as from time to time shall be
prescribed by the Board.
4.2 Qualifications. Any number of offices may be held by the same person.
The Chief Executive officer, the President and the Vice President, if any, and
Secretary shall be natural persons of full age. The Treasurer, if a natural
person, shall be of full age. It shall not be necessary for the officers to be
Directors.
4.3 Salaries. The salaries of the Chief Executive Officer, any Chairman of
the Board, President and Vice Presidents, the Secretary and the Treasurer of the
Corporation shall be fixed by the Board of Directors.
4.4 Term of Office; Removal. The officers of the Corporation shall hold
office for one year and until their successors are chosen and qualify.
Notwithstanding the foregoing, every officer and agent may be
removed at any time by the Board of Directors, without assigning any cause
therefor.
4.5 Duties of the Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the Stockholders and Directors at which he is
present. He shall advise the Chief Executive Officer and other officers of the
Corporation on matters of general policy and shall perform such other duties as
may be assigned to him from time to time by the Board of Directors.
4.6 Duties of the Chief Executive Officer. The Chief Executive Officer of
the Corporation, in the absence of the Chairman of the Board, shall preside at
all meetings of the Stockholders and of the Board of Directors; he shall have
general and active management of the business of the Corporation, and shall see
that all orders and resolutions of the Board are carried into effect, subject,
however, to the right of the Directors to delegate any specific
8 By-Laws
<PAGE> 9
powers, except such as may be by statute exclusively conferred on the Chief
Executive Officer, to any other officer or officers of the Corporation. He shall
execute bonds, mortgages and other contracts requiring a seal, under the seal of
the Corporation. He shall be ex-officio a member of all committees, and shall
have the general powers and duties of supervision and management usually vested
in the office of President of a corporation. He shall have the power to appoint
and discharge, subject to the approval of the Directors, employees and agents of
the Corporation and fix their compensation, make and sign contracts and
agreements in the name and behalf of the Corporation and while the Directors and
Executive Committee are not in session, he shall have general management and
control of the business and affairs of the Corporation; he shall see that the
books, reports, statements and certificates required by the statute under which
the Corporation is organized or any other laws applicable thereto are properly
kept, made, and filed according to law; he shall generally do and perform all
acts incident to the office of President of a corporation, or which are
authorized or required by law.
4.7 Duties of the President. He shall advise the Chief Executive Officer
and other officers of the Corporation on matters of general policy and shall
perform such other duties as may be assigned to him from time to time by the
Chief Executive officer and the Board of Directors.
4.8 Duties of Vice Presidents. Any Vice Presidents chosen by the Board
shall be executive officers of the Corporation who shall assist the Chairman of
the Board and the Chief Executive Officer and have such powers and duties as may
be assigned from time to time by resolution of the Board of Directors, the Chief
Executive officer or Chairman of the Board. The Board of Directors may elect a
senior Vice President to assist the Chairman of the Board and Chief Executive
officer in carrying out their duties, in supervising the activities and
personnel of the Corporation, and generally to perform such functions as may be
designated by the Chief Executive Officer, and the Chairman of the Board.
4.9 Duties of Secretary. The Secretary shall attend all sessions of the
Board and all meetings of the Stockholders and act as clerk thereof, and record
all the votes of the Corporation and the minutes of all its transactions in a
book to be kept for that purpose; and shall perform like duties for all
committees of the Board of Directors when required. He shall give, or cause to
be given, notice of all meetings of the Stockholders and the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or Chief Executive Officer, and under whose supervision he shall be.
He shall keep in safe custody the corporate seal of the Corporation, and when
authorized by the Board or Chief Executive officer affix the same to any
instrument requiring it.
4.10 Duties of Assistant Secretary. In the absence of the Secretary or when
the Board of Directors or Chief Executive officer determines that it would be
inconvenient for the Secretary to carry out his duties, the Assistant Secretary
shall perform the duties of the Secretary, as directed by the Board of Directors
or Chief Executive officer.
4.11 Duties of the Treasurer. The Treasurer shall have the custody of all
funds, securities, evidences of an indebtedness and other valuable documents of
the Corporation; he
9 By-Laws
<PAGE> 10
shall receive and give or cause to be given receipts and acquittances for money
paid in on account of the Corporation and shall pay out of the funds on hand all
just debts of the Corporation of whatever nature upon maturity of the same; he
shall enter or cause to be entered in the books of the Corporation to be kept
for that purpose full and accurate accounts of all monies received and paid out
on account of the Corporation and, whenever required by the Chief Executive
officer or the Directors, he shall render to the Chief Executive Officer and
Board of Directors, at the regular meetings of the Board, or whenever they may
require it, a statement of his cash accounts and an account of all his
transactions as Treasurer and of the financial condition of the Corporation; he
shall keep or cause to be kept such other books as will show a true record of
the expenses, losses, gains, assets and liabilities of the corporation; he
shall, unless otherwise determined by the Directors, have charge of the original
stock books, transfer books and stock ledgers and act as transfer agent in
respect to the stock securities of the Corporation; and he shall perform all the
other duties incident to the office of Treasurer of a corporation. He shall give
the Corporation a bond for the faithful discharge of his duties in such amount
and with such surety as the Board shall prescribe.
4.12 Vacancies. If the office of any officer or agent, one or more, becomes
vacant for any reason, the Board of Directors may choose a successor or
successors, who shall hold office at the pleasure of the Board.
ARTICLE V. Indemnification.
Each person who is, has been, or shall hereafter be, a director or
officer of the Corporation, or who is serving, may have served, or shall serve
at its request as a director or officer of another corporation, shall be
indemnified by the Corporation to the fullest extent to which indemnification is
permitted by subsections (a) through (i) of Section 145 of the Delaware General
Corporation Law.
The foregoing rights of indemnification shall inure to the personal
representatives of such persons, and shall benefit of the be in addition to any
other rights to which any such persons may be entitled to at law or agreement or
otherwise.
ARTICLE VI. Corporate Records and Statement.
6.1 Records There shall be kept by the Corporation, either within or
without the State of Delaware, a record of the proceedings of the Stockholders
and of the Directors, and its By-Laws, including all amendments or alterations
thereto to date. An original or duplicate share register shall be kept at either
the registered office, or at the office of its transfer agent or registrar,
giving the names of the Stockholders, their respective addresses, and the number
and classes of shares held by each. The Corporation shall also keep appropriate,
complete and accurate books or records of account, which may be kept at its
registered office, or its principal place of business.
6.2 Annual Statement. The Chief Executive Officer and Board of Directors
shall present at each annual meeting of Stockholders such statement of the
business and affairs of
10 By-Laws
<PAGE> 11
the Corporation for the preceding year as they shall deem appropriate. Upon
written request of any Stockholder, the Corporation shall mail to such
Stockholder its balance sheet as at the end of the preceding fiscal year, and
its profit and loss statements for such fiscal year. Such statements shall be
prepared and presented in whatever manner the Board of Directors shall deem
advisable and need not be verified by a Certified Public Accountant.
ARTICLE VII. Share Certificates, Transfer of Stock, Etc.
7.1 Issuance. The Board of Directors shall have the power, by Resolution
duly adopted, to issue from time to time, in whole or in part, the kinds or
classes of shares authorized in the Certificate of Incorporation.
Share certificates shall bear the signature of the Chairman,
the Vice Chairman, the President or any Vice President, and the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer, and the corporate
seal, which may be a facsimile, engraved or printed. Where such certificate is
signed by a transfer agent or a registrar, the signature of such officers upon
such certificate may be a facsimile, engraved or printed.
7.2 Transfers of Shares. Transfer of shares shall be made on the books of
the Corporation upon surrender of the certificates therefor, endorsed by the
person named in the certificate or by attorney, lawfully constituted in writing.
No transfer need be made inconsistent with the provisions of the Uniform
Commercial Code or other applicable Federal, State or Local Law.
No transfer or assignment shall affect the right of the Corporation to
pay any dividend due upon the stock, or to treat the registered holder as the
holder in fact, until such transfer or assignment is registered on the books of
this Corporation.
7.3 Absolute Owner. The Corporation shall be entitled to treat the
registered holder of any shares of the Corporation as the absolute owner
thereof, and accordingly shall not be bound to recognize any equitable or other
claim to, or interest in, such share, on the part of any other person, whether
or not the Corporation shall have express or other notice thereof.
7.4 Lost, Destroyed or Mutilated Certificates. In the event that a share
certificate shall be lost, destroyed or mutilated, a new certificate may be
issued therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.
ARTICLE VIII. Miscellaneous Provisions.
8.1 Signatures on Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
8.2 Securities of Other Corporations. The Chief Executive Officer, or the
Secretary, shall have full power to vote, appoint proxies, or otherwise perform
any act as a
11 By-Laws
<PAGE> 12
Stockholder with respect to any shares or other securities of any Corporation
owned by this corporation, including the power to sell, convert, exchange,
pledge or encumber such securities.
8.3 Fiscal Year. The fiscal year shall be such date as shall be determined
by the Board of Directors.
ARTICLE IX. Amendments.
9.1 These By-Laws may be altered, amended or repealed by a majority of the
members of the Board of Directors, or by a majority of those Common Shares (plus
such other shares as may then be entitled to vote with the Common Shares)
present in person or by proxy at any regular or special meeting duly organized.
* * * * *
12 By-Laws
<PAGE> 1
Exhibit 3.11
ARTICLES OF INCORPORATION
OF
FORTE, INC.
The undersigned, who desires to form a corporation for profit under the
Ohio Revised Code, does hereby certify:
FIRST: The name of said corporation shall be FORTE, INC.
SECOND: The place in the State of Ohio where its principal office is to be
located is the City of Youngstown, in Mahoning County, Ohio.
THIRD: The purpose for which it is formed is to engage in any lawful act or
activity for which corporations may be formed under Section 1701.01 and 1701.98,
inclusive, of the Ohio Revised Code.
FOURTH: The maximum number of shares which the corporation is authorized to
have outstanding is Seven Hundred Fifty (750), all of which shall be common
shares without par value.
FIFTH: The amount of capital which the corporation will begin business with
is Five Hundred Dollars ($500.00).
SIXTH: A director of this corporation shall not be disqualified by his
office from dealing or contracting with the corporation as a vendor, purchaser,
employee,a gent or otherwise.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 16th day of
February, 1990.
/s/Frank J. Amedia
--------------------------
FRANK AMEDIA, INCORPORATOR
<PAGE> 2
ORIGINAL APPOINTMENT OF AGENT
KNOW ALL MEN BY THESE PRESENTS, that FRANK AMEDIA, in care of Harold D.
Davis, CPAs, Inc. of 930 Trailwood Drive, Youngstown, Mahoning County, Ohio
44512, a natural person and resident of said county, being the county in which
the principal office of FORTE, INC. is located, is hereby appointed as the
person on whom process, tax notices and demands against FORTE, INC. may be
served.
/s/ Frank Amedia
--------------------------
FRANK AMEDIA, INCORPORATOR
Youngstown, Ohio
FORTE, INC.
Youngstown, Ohio
Gentlemen:
I hereby accept the appointment as the representative of your
corporation upon whom process, tax notices or demands may be served.
/s/ Frank Amedia
--------------------------
FRANK AMEDIA
STATE OF OHIO )
) SS:
COUNTY OF MAHONING )
Personally appeared before me, the undersigned, a Notary Public, in and
for said County, this 16th day of February, 1990, the above named FRANK AMEDIA,
who acknowledged the signing of the foregoing to be his free act and deed for
the uses and purposes therein mentioned.
WITNESS my hand and official seal on the day and year last aforesaid.
/s/ Mark Belinky
--------------------------
NOTARY PUBLIC
<PAGE> 1
EXHIBIT 3.12
CODE OF REGULATIONS
OF
FORTE, INC.
ARTICLE I
SHAREHOLDERS
SECTION 1. MEETINGS OF SHAREHOLDERS
(a) Annual Meeting. The annual meeting of the shareholders of this
Corporation, for the election of directors, the consideration of financial
statements and other reports, and the transaction of such other business as may
properly be brought before such meeting, shall be held during the month of
March, or on such date and at such time as the board of directors shall
determine. Upon due notice, there may also be considered and acted upon at an
annual meeting any matter which could properly be considered and acted upon at a
special meeting, in which and for which purpose the annual meeting shall also be
considered as, and shall be, a special meeting. If the election of directors is
not held at any annual meeting, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as may be convenient. At such meeting the
shareholders may elect the directors and transact other business with the same
force and effect as at an annual meeting.
(b) Special Meeting. Special meetings of the shareholders may be held
on any business day when called by any person or persons who may be authorized
by law, or by persons holding 33 and 1/3% of all shares outstanding and entitled
to vote thereat. Calls for
<PAGE> 2
special meetings shall specify the purpose or purposes thereof and no business
shall be considered at any such meeting other than that specified in the call
therefor.
(c) Place of Meetings. Any meeting of shareholders may be held at such
place within or without the State of Ohio as may be designated in the Notice of
said meeting.
(d) Notice, Purpose, and Waiver of Notice of Meeting.
(1) Notice and Purpose of Meeting. Written notice of the
purpose or purposes and of the time and place within or without the
State of Ohio of every meeting of shareholders shall be given, by or at
the direction of the President or the Secretary, either personally or
by mail, not less than seven (7) days nor more than sixty (60) days
before the date of the meeting to each shareholder of record entitled
to notice of such meeting. Such notice shall be directed to each
shareholder at his address as it appears on the records of the
Corporation unless he shall have filed with the Secretary of the
Corporation a written request that notices intended for him be sent to
some other address, in which case it shall be mailed or delivered to
the address designated in such request. Notice shall be deemed to have
been given to the person entitled thereto when deposited in the United
States mail or personally delivered. Such further notice shall be given
as may be required by law. Except as otherwise expressly provided by
statute, no publication of any notice of a meeting of shareholders
shall be required. Except where otherwise required by law, notice of
adjournment of a meeting of the shareholders of the Corporation need
not be given until the time and place to which it is adjourned are
fixed and announced at such meeting. No business shall be transacted at
any such adjourned meeting except as might have been lawfully
transacted at the meeting at which such adjournment was taken.
<PAGE> 3
(2) Notice to Joint Owners. All notices with respect to any
shares to which persons are entitled by joint or common ownership may
be given to that one of such persons who is named first upon the books
of this Corporation, and notice so given shall be sufficient notice to
all the holders of such shares.
(3) Waiver. Notice of any meeting of shareholders may be
waived in writing, either before or after the holding of the meeting,
by any shareholder, which writing shall be filed with the records of
the meeting. The attendance of a shareholder at a meeting without
protesting the lack of proper notice prior to or at the commencement of
the meeting shall be deemed a waiver by him of notice of the meeting.
(e) Shareholders Entitled to Notice and to Vote. If a record date shall
not be fixed or the books of the Corporation shall not be closed against
transfers of shares pursuant to statutory authority, the record date for the
determination of shareholders entitled to notice of or to vote at any meeting of
shareholders shall be the close of business on the twentieth day prior to the
date of the meeting, and only shareholders of record at such record date shall
be entitled to notice of and to vote at such meeting. Such record date shall
continue to be the record date for all adjournments of such meeting unless a new
record date shall be fixed and notice thereof and of the date of the adjourned
meeting be given to all shareholders entitled to notice in accordance with the
new record date so fixed.
(f) Quorum. Except as otherwise required by the statutes of Ohio,
shareholders holding a majority of shares entitled to notice of the meeting
shall constitute a quorum at any and all meetings of shareholders; provided,
however, that no action required by law, the Articles, or these Regulations to
be authorized or taken by the holders of a designated
<PAGE> 4
proportion of the shares of the Corporation may be authorized or taken by the
lesser proportion. The shareholders present in person or by proxy, whether or
not a quorum be present, may adjourn the meeting from time to time without
notice other than by announcement at the meeting.
(g) Organization of Meetings:
(1) Presiding Officer. Meetings of the shareholders shall be
presided over by the Chairman of the Board, if any, or if he is not
present or there is no one filling that office, by the President, or if
they are not present, by a Vice President, or, if he is not present, by
such person who may have been chosen by the Board of Directors, or if
none of such persons is present, by a chairman to be chosen by a
majority of the shareholders entitled to vote who are present in person
or by proxy at the meeting.
(2) Secretary. The Secretary of the Corporation, or, in his
absence, an Assistant Secretary, or, if they are not present, such
person as may be chosen by the Board of Directors, shall act as
Secretary of every meeting and shall keep and make a record of the
proceedings thereat, or if none of the foregoing is present, a majority
of the shareholders entitled to vote who are present in person or by
proxy at the meeting shall choose any person present to act as
Secretary of the meeting.
(h) Order of Business. The order of business at all meetings of the
shareholders, unless waived or otherwise determined by vote of the holder or
holders of the majority of the number of shares entitled to vote present in
person or represented by proxy, shall be observed as far as practicable and
consistent with the purposes of the meeting:
1. Call of the meeting to order.
<PAGE> 5
2. Selection of Chairman and/or Secretary, if necessary.
3. Presentation of proof of notice of the meeting and
presentment of affidavit thereof.
4. Roll call, including filing of proxies with
Secretary.
5. Announcement that a quorum is present.
6. Upon appropriate demand, appointment of inspectors of
election.
7. Reading, correction and approval of previously
unapproved minutes.
8. Reports, if any, of officers and committees.
9. Election of directors, if the meeting is an annual
meeting, or a meeting called for that purpose.
10. Unfinished business, if adjourned meeting.
11. Consideration in sequence of all other matters set
forth in the call for and written notice of the
meeting.
12. Transaction of such other business as may properly
come before the meeting.
13. Adjournment.
(i) Voting. Except in the election of directors, in which shareholders
shall be entitled to cumulate their votes upon compliance with the provisions of
the Ohio General Corporation Law, and except as otherwise provided in the
Articles, these Regulations, or in the laws of the State of Ohio, at every
meeting of shareholders, each shareholder entitled to vote at such meeting shall
have one vote in person or by proxy for each share of stock held by him and
registered in his name on the books of the Corporation as of the applicable
record date. At any meeting at which a quorum is present, all questions and
business which may come before the meeting shall be determined by a majority of
votes cast, except when a greater proportion is required by law, the Articles,
or these Regulations.
<PAGE> 6
(j) Proxies. A person who is entitled to attend a shareholders'
meeting, to vote thereat, or to execute consents, waivers and releases, may be
represented at such meeting or vote thereat, and execute consents, waivers, and
releases, and exercise any of his rights, by proxy or proxies appointed by an
instrument in writing executed by such person, or by his duly authorized
attorney, as provided by the laws of the State of Ohio. No appointment of a
proxy shall be valid after the expiration of eleven (11) months after it is made
unless the writing specifies the date on which it is to expire or the length of
time it is to continue in force.
(k) Inspectors of Election. The directors, in advance of any meeting of
shareholders, may appoint inspectors of election to act at such meeting or any
adjournment thereof. If inspectors are not so appointed, the officer or person
acting as chairman of any such meeting may, and on the request of any
shareholder or his proxy shall, make such appointment. In case any person
appointed as inspector fails to appear or to act, the vacancy may be filled by
appointment made by the directors in advance of the meeting, or at the meeting
by the officer or person acting as chairman. If there are three or more
inspectors, the decision, act, or certificate of a majority of them shall be
effective in all respects as the decision, act, or certificate of all. The
inspectors shall determine the number of shares outstanding, the voting rights
with respect to each, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies; receive votes,
ballots, consents, waivers, or releases; hear and determine all challenges and
questions arising in connection with the vote; count and tabulate all votes,
consents, waivers, and releases; determine and announce the result; and do such
acts as are proper to conduct the election or vote with fairness to all
shareholders. On request of any director, officer or shareholder of the
Corporation, the inspectors shall make
<PAGE> 7
a report in writing of any challenge, question, or matter determined by them and
execute a certificate of any fact found by them.
(l) List of Shareholders. At any meeting of shareholders, a list of
shareholders, alphabetically arranged, showing the number and classes of shares
held by each on the record date applicable to such meeting shall be produced on
the request of any shareholder.
SECTION 2. ACTION OF SHAREHOLDERS WITHOUT A MEETING.
Any action which may be authorized or taken at a meeting of the
shareholders may be authorized or taken without a meeting with the affirmative
vote or approval of, and in a writing or writing signed by, all of the
shareholders who would be entitled to notice of a meeting of the shareholders
held for such purpose, which writing or writings shall be filed with or entered
upon the records of the Corporation.
ARTICLE II
DIRECTORS
SECTION 1. GENERAL POWERS
The business, power and authority of this Corporation shall be
exercised, conducted and controlled by a Board of Directors, except where the
law, the Articles or these Regulations require action to be authorized or taken
by the shareholders. For their own government, the directors may adopt By-Laws
that are not inconsistent with the Articles or these Regulations.
<PAGE> 8
SECTION 2. ELECTION, NUMBER AND QUALIFICATION OF DIRECTORS
(a) Election. The directors shall be elected at the annual meeting of
shareholders, or if not so elected, at a special meeting of shareholders called
for that purpose. At any meeting of shareholders at which directors are to be
elected, only persons nominated as candidates shall be eligible for election.
(b) Number. The number of directors, which shall not be less than one
(1), may be fixed or changed at a meeting of the shareholders called for the
purpose of electing directors at which a quorum is present, by the affirmative
vote of the holders of a majority of the shares represented at the meeting and
entitled to vote on such proposal. The number of directors elected shall be
deemed to be the number of directors fixed unless otherwise fixed by resolution
adopted at the meeting at which such directors are elected. No reduction in the
number of directors shall of itself have the effect of shortening the term of
any incumbent director.
(c) Qualification. Directors need not be shareholders of the
Corporation.
SECTION 3. TERM OF OFFICE OF DIRECTORS
(a) Term. Each director shall hold office until the next annual meeting
of the shareholders and until his successor has been elected or until his
earlier resignation, removal from office, or death. Directors shall be subject
to removal as provided by statute or by other lawful procedures and nothing
herein shall be construed to prevent the removal of any or all directors in
accordance therewith.
(b) Resignation. A resignation from the Board of Directors shall be
deemed to take effect immediately upon its being received by any incumbent
corporate officer other than
<PAGE> 9
an officer who is also the resigning director, unless some other time is
specified therein. It shall not be necessary for a resignation to be accepted
before it becomes effective.
(c) Vacancy. In the event of any vacancy in the Board of Directors for
any cause, the remaining directors, though less than a majority of the whole
Board, may fill any such vacancy for the unexpired term.
SECTION 4. MEETING OF DIRECTORS
(a) Regular Meetings. A regular meeting of the Board of Directors shall
be held immediately following the adjournment of the annual meeting of the
shareholders or a special meeting of the shareholders at which directors are
elected. The holding of such shareholders' meeting shall constitute notice of
such directors' meeting and such meeting may be held without further notice.
Other regular meetings shall be held at such other times and places as may be
fixed by the directors.
(b) Special Meetings. Special meetings of the Board of Directors may be
held at any time upon call of the Chairman of the Board, the President, any
Vice-President, or any two directors.
(c) Place of Meeting. Any meeting of directors may be held at such
place within or without the State of Ohio as may be designated in the Notice of
said meeting.
(d) Notice of Meeting and Waiver of Notice. Notice of the time and
place of any regular or special meeting of the Board of Directors (other than
regular meeting of directors following the adjournment of the annual meeting of
the shareholders or following any special meeting of the shareholders at which
directors are elected) shall be given to each director by personal delivery,
telephone, mail, telegram or cablegram at least forty-eight (48) hours before
<PAGE> 10
the meeting, which notice need not specify the purpose of the meeting. Notice of
adjournment of a meeting need not be given at the time and place to which it is
adjourned are fixed and announced at such meeting. Notice of the time, place and
purpose of any meeting may be waived in writing, either before or after the
holding of such meeting, by any director, which writing shall be filed with or
entered upon the records of the meeting. The attendance of any director at any
such meeting without protesting the lack of proper notice prior to or at the
commencement of the meeting shall be deemed to be a waiver by him of notice of
such meeting.
SECTION 5. QUORUM AND VOTING
At any meeting of directors, not less than one-half of the whole
authorized number of directors is necessary to constitute a quorum for such
meeting, except that a majority of the remaining directors in office constitutes
a quorum for filing a vacancy in the Board. At any meeting at which a quorum is
present, all acts, questions and business which may come before the meeting
shall be determined by a majority of votes cast by the directors present at such
meeting, unless the vote of a greater number is required by the Articles,
Regulations or ByLaws.
SECTION 6. ACTION OF DIRECTORS WITHOUT A MEETING
Any action which may be authorized or taken at a meeting of the
directors may be authorized or taken without a meeting with the affirmative vote
or approval of, and in a writing or writings signed by, all the directors, which
writing or writings shall be filed with or entered upon the records of the
Corporation.
<PAGE> 11
SECTION 7. COMPENSATION OF DIRECTORS
The Board of Directors may allow compensation for attendance at
meetings or for any special services and may reimburse any director for any
reasonable expenses in connection with attending any Board meeting. Any member
may waive compensation for any meeting. Any director receiving compensation
under these provisions shall not be barred from serving the Corporation in any
other capacity and receiving compensation and reimbursement for such other
services.
SECTION 8. MEETINGS BY MEANS OF COMMUNICATION EQUIPMENT
Any meeting of the Board of Directors and any Committee of Directors
may be held through the use of the telephone or any other communications
equipment if all persons participating can hear each other. Participation in
such a meeting constitutes presence at a meeting of the Board of Directors or
Committee of Directors, as the case may be.
SECTION 9. ATTENDANCE AT MEETINGS OF PERSONS WHO ARE NOT DIRECTORS
Unless waived by a majority of directors in attendance, not less than
twenty-four (24) hours before any regular or special meeting of the Board of
Directors, any director who desires the presence at such meeting of not more
than one person who is not a director shall so notify all other directors,
request the presence of such person at the meeting, and state the reason in
writing. Such person will not be permitted to attend the directors' meeting
unless a majority of the directors in attendance vote to admit such person to
the meeting. Such vote shall constitute the first order of business for any such
meeting of the Board of Directors. Such right to attend, whether granted by
waiver or vote, may be revoked at any time during any such meeting by the vote
of a majority of the directors in attendance.
<PAGE> 12
SECTION 10. APPOINTMENT OF PROVISIONAL DIRECTOR
A provisional director may be appointed by the appropriate Court of
Common Pleas in accordance with the provisions of Section 1701.911 of the Ohio
Revised Code, and all provisions of these Regulations shall be read as being
subject to, and qualified by, that Section.
ARTICLE III
COMMITTEES
SECTION 1. APPOINTMENT
The Board of Directors, by resolutions adopted by a majority of the
whole Board, may from time to time appoint certain of its members (but in no
event more than five) to act as a committee or committees in the intervals
between meetings of the Board and may delegate to such committee or committees
powers to be exercised under the control and direction of the Board.
SECTION 2. EXECUTIVE COMMITTEE
In particular, the Board of Directors may appoint an Executive
Committee consisting of not more than 3 directors, one of whom shall be
designated as Chairman of the Executive Committee. During the intervals between
meetings of the Board of Directors the Executive Committee shall possess and may
exercise all of the powers of the Board of Directors in the management and
control of the business of the Corporation to the extent permitted by law and
may authorize the seal of the Corporation to be affixed to all documents which
may require it. All action taken by the Executive Committee shall be reported to
the Board of Directors at its first meeting thereafter. Each member of the
Executive Committee shall continue as a
<PAGE> 13
member thereof until the expiration of his term as a director, or until his
earlier resignation, unless sooner removed as a member or as a director.
SECTION 3. PROCEDURE; MEETINGS
Any committee appointed by the Board of Directors shall prescribe its
own rules for calling and holding meetings and its method or procedure, subject
to any rules prescribed by the Board of Directors, and shall keep regular
minutes of its meetings and deliver such minutes to the Board of Directors. The
Chairman of any, or, in his absence, a member of the committee chosen by a
majority of the members present, shall preside at meetings of that committee,
and another member thereof chosen by the committee shall act as Secretary of
that committee.
SECTION 4. QUORUM
A majority of any committee shall constitute a quorum for the
transaction of business, and the affirmative vote of a majority of the members
of that committee shall be required for any action of that committee; provided,
however, that when a committee of one member is authorized under the provisions
of Section l of this Article, such one member shall constitute a quorum.
SECTION 5. VACANCIES; CHANGES; DISCHARGE
The Board of Directors shall have the power at any time to fill
vacancies in, to change the membership of, and to discharge any committee.
SECTION 6. ACTION OF COMMITTEE MEMBERS WITHOUT A MEETING
Any action which may be authorized or taken at a meeting of any
committee of the Board of Directors may be authorized or taken without a meeting
with the affirmative vote
<PAGE> 14
or approval of, and in a writing or writings signed by, all members of that
committee, which writing or writings shall be filed with or entered upon the
records of the Corporation.
SECTION 7. COMPENSATION OF COMMITTEE MEMBERS
The Board of Directors may allow compensation for attendance at
committee meetings and for any special services, and may reimburse any director
for any reasonable expenses in connection with attending any committee meeting.
Any member may waive compensation for any meeting. Any committee member
receiving compensation under these provisions shall not be barred from serving
the Corporation in any other capacity and from receiving compensation and
reimbursement of reasonable expenses for such other services.
SECTION 8. MEETINGS BY MEANS OF COMMUNICATION EQUIPMENT
Any meeting of the Board of Directors and any Committee of Directors
may be held through the use of the telephone or any other communications
equipment if all persons participating can hear each other. Participation in
such a meeting constitutes presence at a meeting of the Committee of Directors.
ARTICLE IV
OFFICERS
SECTION 1. GENERAL PROVISIONS
The Board of Directors shall elect a President, a Secretary and a
Treasurer, and may elect a Chairman of the Board, one or more Vice-Presidents,
and such other officers, assistant officers and agents, as the Board may from
time to time deem necessary. The Chairman of the Board, if any, shall be a
director, but no one of the other officers need be a director. Any two or more
offices may be held by the same person, but no officer shall execute,
<PAGE> 15
acknowledge or verify any instrument in more than one capacity if such
instrument is required by law or by the Articles, the Regulations, or the
By-Laws, if any, to be executed, acknowledged or verified by two or more
officers.
SECTION 2. POWERS AND DUTIES
All officers, as between themselves and the Corporation, shall
respectively have such authority and perform such duties as are customarily
incident to their respective offices, and as may be specified from time to time
by the Board of Directors, regardless of whether such authority and duties are
customarily incident to such office. In the absence of any officer of the
Corporation, or for any other reason the Board of Directors may deem sufficient,
the Board of Directors may delegate for the time being, the powers or duties of
such officer, or any of them, to any other officer or to any director. The Board
of Directors may from time to time delegate to any officer authority to appoint
and remove subordinate officers and to prescribe their authority and duties. The
Vice President or Vice Presidents, the Assistant Secretary or Assistant
Secretaries, and the Assistant Treasurer or Assistant Treasurers, in the order
of their respective seniority, in the absence or disability of the President,
Secretary or Treasurer, respectively, shall perform the duties of such officer
and shall generally assist the President, Secretary or Treasurer, respectively.
SECTION 3. TERM OF OFFICE AND REMOVAL
(a) Term. Each officer of the Corporation shall hold office during the
pleasure of the Board of Directors, and unless sooner removed by the Board of
Directors, until the meeting of the Board of Directors following the date of
their election and until his successor is
<PAGE> 16
elected and qualified. A vacancy in any office arising from any cause may be
filled for the unexpired portion of the term by the Board of Directors.
(b) Removal. The Board of Directors may remove any officer at any time,
with or without cause, by the affirmative vote of a majority of directors in
office. Such removal shall not prejudice the contract rights, if any, of the
person so removed.
SECTION 4. COMPENSATION OF OFFICERS
Unless compensation is otherwise determined by a majority of the
directors at a regular or special meeting of the Board of Directors, or unless
such determination is delegated by the Board of Directors to another officer or
officers, the President of the Corporation from time to time shall determine the
compensation to be paid to all officers and other employees for services
rendered to the Corporation.
SECTION 5. THE CHAIRMAN OF THE BOARD
The Chairman of the Board, if any, shall be an officer of the
Corporation and, subject to the direction of the Board of Directors, shall
perform such executive, supervisory and management functions and duties as may
be assigned to him from time to time by the Board of Directors. He shall, if
present, preside at all meetings of stockholders and of the Board of Directors.
SECTION 6. THE PRESIDENT
(a) The President shall be the chief executive officer of the
Corporation and, subject to the direction of the Board of Directors, shall have
general charge of the business, affairs and property of the Corporation and
general supervision over its other officers and agents. In general, he shall
perform all duties incident to the office of President and shall see
<PAGE> 17
that all orders and resolutions of the Board of Directors are carried into
effect. In addition to and not in limitation of the foregoing, the President
shall be empowered to authorize any change of the registered officer or
statutory agent (or both) of the Corporation in the State of Ohio.
(b) Unless otherwise prescribed by the Board of Directors, the
President shall have full power and authority on behalf of the Corporation to
attend, act and vote at any meeting of security holders of other corporations in
which the Corporation may hold securities. At such meeting the President shall
possess and may exercise any and all rights and powers incident to the ownership
of such securities which the Corporation might have possessed and exercised if
it had been present. The Board of Directors may from time to time confer like
powers upon any other person or persons.
SECTION 7. THE VICE PRESIDENT
The Vice President, if any (or in the event there be more than one, the
Vice Presidents in the order designated, or in the absence of any designation,
in the order of their election), shall, in the absence of the President or in
the event of his disability, perform the duties and exercise the powers of the
President and shall generally assist the President and perform such other duties
and have such other powers as may from time to time be prescribed by the Board
of Directors.
SECTION 8. THE SECRETARY
The Secretary shall attend all meetings of the Board of Directors and
all meetings of stockholders and record all votes and the proceedings of the
meetings in a book to be kept for that purpose and shall perform like duties for
the Executive Committee or other committees, if required. He shall give, or
cause to be given, notice of all meetings of stockholders and
<PAGE> 18
special meetings of the Board of Directors, and shall perform such other duties
as may from time to time be prescribed by the Board of Directors, the Chairman
of the Board or the President, under whose supervision he shall act. He shall
have custody of the seal of the Corporation, and he, or an Assistant Secretary,
shall have authority to affix the same to any instrument requiring it, and, when
so affixed, the seal may be attested by his signature or by the signature of
such Assistant Secretary . The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing thereof by his signature.
SECTION 9. THE ASSISTANT SECRETARY
The Assistant Secretary, if any (or in the event there be more than
one, the Assistant Secretaries in the order designated, or in the absence of any
designation, in the order of their election), shall, in the absence of the
Secretary or in the event of his disability, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
powers as may from time to time be prescribed by the Board of Directors.
SECTION 10. THE TREASURER
The Treasurer shall have the custody of the corporate funds and other
valuable effects, including securities, and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may from time to time 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 Chairman of the Board, the
President and the Board of
<PAGE> 19
Directors, at regular meetings of the Board, or whenever they may require it, an
account of all his transactions as Treasurer and of the financial condition of
the Corporation.
SECTION 11. THE ASSISTANT TREASURER
The Assistant Treasurer, if any (or in the event there shall be more
than one, the Assistant Treasurers in the order designated, or in the absence of
any designation, in the order of their election), shall, in the absence of the
Treasurer or in the event of his disability, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such other
powers as may from time to time be prescribed by the Board of Directors.
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. RIGHT OF INDEMNIFICATION. Each director, officer and member of a
committee of this Corporation, and any person who may have served at the request
of this Corporation as a director, officer or member of a committee of any other
Corporation in which this Corporation is a creditor, his heirs, executors and
administrators, shall be indemnified by the Corporation against all costs and
expenses reasonably incurred by him concerning, or in connection with, the
defense of any claim asserted or suit or proceeding brought against him by
reason of his conduct or actions as a director, officer or member of a committee
of this Corporation, or a director, officer or member of a committee of such
other Corporation, whether or not he continues to be a director, officer or
member of a committee at the time of incurring such costs or expenses, except
costs and expenses incurred in relation to matters as to which such director,
officer or member of a committee shall have been willfully derelict in the
performance of his duty as such director, officer or member of a committee. Such
costs and expenses shall include the costs of
<PAGE> 20
reasonable settlements (with or without suit), judgments, attorneys' fees, costs
of suit, fines and penalties and other liabilities (other than amounts paid by
any such person to this Corporation or any such other corporation).
SECTION 2. DEFINITION OF PERFORMANCE. For the purposes of this Article, a
director, officer or member of a committee shall conclusively be deemed not to
have been willfully derelict in the performance of his duty as such director,
officer or member of a committee:
(a) Determination by Suit. In a matter which shall have been the
subject of a suit or proceeding in which he was a party which is
disposed of by adjudication on the merits, unless he shall have been
finally adjudged in such suit or proceeding to have been willfully
derelict in the performance of his duty as such director, officer or
member of a committee, or
(b) Determination by Committee. In a matter not falling within (l) next
preceding if either a majority of disinterested members of the Board of
Directors or a majority of a committee of disinterested shareholders of
the Corporation, (excluding therefrom any director, officer or member
of a committee) selected as hereinafter provided shall determine that
he was not willfully derelict. Such determination shall be made by the
disinterested members of the Board of Directors except where such
members shall determine that such matter should be referred to said
committee of disinterested shareholders.
SECTION 3. SELECTION OF COMMITTEE. The selection of a committee of shareholders
provided above may be made by the majority vote of the disinterested directors
or, if there be no disinterested director or directors, by the chief executive
officer of the Corporation. A director
<PAGE> 21
or shareholder shall be deemed disinterested in a matter if he has no interest
therein other than as a director or shareholder of the Corporation as the case
may be. The Corporation shall pay the fees and expenses of the shareholders or
directors, as the case may be, incurred in connection with making a
determination as above provided.
SECTION 4. NON-COMMITTEE DETERMINATION. In the event that a director, officer or
member of a committee shall be found by some other method not to have been
willfully derelict in the performance of his duty as such director, officer or
member of a committee, then such determination as to dereliction shall not be
questioned on the ground that it was made otherwise than as provided above.
SECTION 5. INDEMNIFICATION BY LAW. The foregoing right of indemnification shall
be in addition to any rights to which any such person may otherwise be entitled
as a matter of law.
ARTICLE VI
` SECURITIES HELD BY THE CORPORATION
SECTION 1. TRANSFER OF SECURITIES OWNED BY THE CORPORATION
All endorsements, assignments, transfers, stock powers, share powers or
other instruments of transfer of securities standing in the name of the
Corporation shall be executed for and in the name of the Corporation by the
President, by a Vice-President, by the Secretary or by the Treasurer or by any
other person or persons as may be thereunto authorized by the Board of
Directors.
SECTION 2. VOTING SECURITIES HELD BY THE CORPORATION
The Chairman of the Board, President, any Vice-President, Secretary or
Treasurer, in person or by another person thereunto authorized by the Board of
Directors, in
<PAGE> 22
person or by proxy or proxies appointed by him, shall have full power and
authority on behalf of the Corporation to vote, act and consent with respect to
any securities issued by other corporations which the Corporation may own.
ARTICLE VII
SHARE CERTIFICATES
SECTION 1. TRANSFER AND REGISTRATION OF CERTIFICATES
The Board of Directors shall have authority to make such rules and
regulations, not inconsistent with law, the Articles or these Regulations, as it
deems expedient concerning the issuance, transfer and registration of
certificates for shares and the shares represented thereby and may appoint
transfer agents and registrars thereof.
SECTION 2. SUBSTITUTED CERTIFICATES
Any person claiming that a certificate for shares has been lost, stolen
or destroyed, shall make an affidavit or affirmation of that fact, and, if
required, shall give the Corporation (and its registrar or registrars and its
transfer agent or agents, if any) a bond of indemnity, in such form and with one
or more sureties satisfactory to the Board, and, if required by the Board of
Directors, shall advertise the same in such manner as the Board of Directors may
require, whereupon a new certificate may be executed and delivered of the same
tenor and for the same number of shares as the one alleged to have been lost,
stolen or destroyed.
ARTICLE VIII
TRANSACTIONS BETWEEN CORPORATION
AND ITS DIRECTORS OR OFFICERS
No contract or transaction shall be void or voidable with respect to
the Corporation for the reason that it is between the Corporation and one or
more of its directors
<PAGE> 23
or officers, or between the Corporation and any partnership, corporation, trust,
association or other organization or entity in which one or more of its
directors or officers are directors, trustees, or officers, or have a financial
or personal interest, or for the reason that one or more interested directors or
officers participate in or vote at the meeting of the directors or committee
thereof which authorizes such contract or transaction, if in any such case (a)
the material facts as to his or their relationship or interest and as to the
contract or transaction are disclosed or are known to the directors or the
committee and the directors or committee, in good faith reasonably justified by
such facts, authorize the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested directors
constitute less than a quorum; or (b) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the shareholders entitled to vote thereon and the contract or
transaction is specifically approved at a meeting of the shareholders held for
such purpose by the affirmative vote of the holders of shares entitling them to
exercise a majority of the vote and power of the Corporation held by persons not
interested in the contract or transaction; or (c) the contract or transaction is
fair as to the Corporation as of the time it is authorized or approved by the
directors, a committee thereof, or the shareholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the directors, or of a committee thereof which authorizes the contract or
transaction. The directors, by the affirmative vote of a majority of those in
office, and irrespective of any financial or personal interest of any of them,
shall have authority to establish reasonable compensation, which may include
pension, disability, and death benefits, for services to the Corporation by
directors and officers, or to delegate such authority to one or more officers or
directors.
<PAGE> 24
ARTICLE IX
FISCAL YEAR
Unless otherwise designated by resolution of the Board of Directors,
the first fiscal year of the Corporation after the adoption of this Code of
Regulations shall end on December 31. Subsequently, the fiscal year of the
Corporation shall commence on January 1 in each year and end on December 31, or
be such other period as the Board of Directors may designate by resolution.
ARTICLE X
DIVIDENDS
Subject to the provisions of the Articles of Incorporation, dividends
upon the outstanding capital stock of the Corporation may be declared by the
Board of Directors at any regular or special meeting, pursuant to law, and may
be paid in cash, in property or in shares of the Corporation's capital stock.
ARTICLES XI
RESERVES
The Board of Directors shall have full power, subject to the provisions
of law and the Articles of Incorporation, to determine whether any, and, if so,
what part, of the funds legally available for the payment of dividends shall be
declared as dividends and paid to the stockholders of the Corporation. The Board
of Directors, in its sole discretion, may fix a sum which may be set aside or
reserved over and above the paid-in capital of the Corporation for working
capital or as a reserve for any proper purpose, and may, from time to time,
increase, diminish or vary such fund or funds.
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ARTICLE XII
BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records of
account, together with minutes of the proceedings of its incorporators,
shareholders, directors, and committees of the directors, and records of its
shareholders showing their names and addresses and the number and class of
shares issued or transferred of record to or by them from time to time.
ARTICLE XIII
SEAL
The Board of Directors may provide for a corporate seal which shall be
circular in form and contain such legend as the Board of Directors shall
determine, consistent with the laws of Ohio. In absence of such provision by the
Board of Directors, the corporation shall not have a seal.
ARTICLE XIV
CONSISTENCY WITH ARTICLES OF INCORPORATION
If any provision of these Regulations shall be inconsistent with the
Corporation's Articles of Incorporation (and as they may be amended from time to
time), the Articles of Incorporation (as so amended at the time) shall govern.
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ARTICLE XV
SECTION HEADINGS
The headings contained in this Code of Regulations are for reference
purposes only and shall not be construed to be part of and/or shall not affect
in any way the meaning or interpretation of this Code of Regulations.
ARTICLE XVI
AMENDMENTS
This Code of Regulations of the Corporation (and as it may be amended
from time to time) may be amended or added to by the affirmative vote or the
written consent of the shareholders of record entitled to exercise a majority of
the voting power on such proposal; provided, however, that if an amendment or
addition is adopted by written consent without a meeting of the shareholders, it
shall be the duty of the secretary to enter the amendment or addition in the
records of the Corporation, and to mail a copy of such amendment or addition to
each shareholder of record who would be entitled to vote thereon and did not
participate in the adoption thereof.
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EXHIBIT 3.13
CERTIFICATE OF INCORPORATION
OF
MODERN WINDOW ACQUISITION CORP.
FIRST: The name of the Corporation is MODERN WINDOW ACQUISITION CORP.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington,
County of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in and to do any
lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is one hundred thousand (100,000) shares of common
stock, par value $.01 per share.
FIFTH: The name and mailing address of the Incorporator of the
Corporation is as follows:
NAME MAILING ADDRESS
AAP Holdings, Inc. 812 Huron Road, East, No. 880
Cleveland, Ohio 44115-1126
SIXTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders.
(1) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the By-Laws of the Corporation.
(2) The number of directors of the Corporation shall be as from time to
time fixed by, or in the manner provided in, the By-Laws of the Corporation.
Election of directors need not be by written ballot unless the By-Laws so
provide.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or
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places as may be designated from time to time by the Board of Directors or in
the By-Laws of the Corporation.
EIGHTH: The liability of directors of the Corporation is hereby
eliminated to the full extent permitted by Section 102(b)(7) of the Delaware
General Corporation Law or any successor provisions.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this Certificate, hereby declaring and certifying
that this is its act and deed and the facts herein stated are true, and
accordingly has caused to be set hereunder its hand this 6th day of August,
1997.
AAP HOLDINGS, INC.
By:/s/ Tracey Stockton
----------------------------------
Tracey Stockton
Assistant Secretary
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EXHIBIT 3.14
MODERN WINDOW ACQUISITION CORP.
BY-LAWS
ARTICLE I. Offices.
1.1 Registered Office. The registered office of the Corporation in the
State of Delaware shall be located in the City of Wilmington, County of New
Castle and the Agent in charge thereof shall be The Corporation Trust Company.
The Corporation may also have offices at such other places within or without the
State of Delaware as the Board of Directors may from time to time appoint or as
the business of the Corporation may require.
1.2 Principal Office. The principal office of the Corporation need not
be identical with the registered office, and may be changed from time to time as
the Board of Directors may determine.
ARTICLE II. Stockholders.
2.1 Annual Meetings. The annual meeting of the Stockholders shall be
held on the first day of April in each year, commencing in 1998, at 10:00
o'clock A.M. local time or on such other date and at such other times within any
particular calendar yew as the Board of Directors may determine. If the day
fixed for the annual meeting shall be a legal holiday in the State of Delaware,
such meeting shall be held on the next succeeding business day. If the annual
meeting has not been held during a calendar year, any Stockholder may call such
meeting by following the procedure set forth in Section 2.2 hereof.
At the annual meeting, the Stockholders shall elect Directors
for the ensuing year and may transact such other business as may properly come
before the meeting.
2.2 Special Meetings. Special meetings of the Stockholders may be
called at any time by the Chief Executive Officer, or by the Board of Directors,
or by the Stockholders entitled to cast at least one-fifth (1/5) of the votes
which all Stockholders are entitled to cast at the particular meeting. Upon
written request of any person or persons who have duly called a special meeting,
the Secretary shall fix the date of the meeting to be held not more than sixty
(60) days after receipt of the request and give due notice thereof to the
Stockholders entitled to vote thereat. If the Secretary shall neglect or refuse
to fix such date or give such notice, the person or persons calling the meeting
may do so.
2.3 Place of Meeting. The Board of Directors may designate any place,
either within or without the State of Delaware, as the place of meeting for any
annual or special meeting of the Stockholders. If no designation is made by the
Board of Directors, the place of meeting shall be at the registered office of
the Corporation in the State of Delaware.
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2.4 Notice of Meeting. Written notice shall, unless otherwise provided
by statute, be given to Stockholders entitled to vote at the meeting who are
Stockholders as of the record date as provided in Section 2.6 hereof, not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by sending a copy thereof through the mail, or by telegram,
charges prepaid, to the address of the Stockholder appearing on the books of the
Corporation, or supplied by the Stockholder to the Corporation for the purpose
of notice. Such notice shall state the place, date and hour of the meeting. When
required by these By-Laws or by statute such notice shall also state the general
nature of the business to be transacted.
2.5 Sufficiency of Notice. Any notice required hereunder shall be
deemed to have been given to the person entitled thereto (a) if sent by mail,
when deposited in the United States mail, post prepaid, or (b) when lodged with
a telegraph office for transmission with charges prepaid, or (c) when delivered
personally.
Whenever notice is required to be given, a waiver thereof in
writing signed by the person or persons entitled to such notice, whether signed
before or after the time stated, shall be deemed equivalent to the giving of
such notice. Attendance of a person at any meeting, either in person or by
proxy, shall constitute a waiver of notice of such meeting, except where a
person attends a meeting for the express and stated purpose of objecting to the
transaction of any business because the meeting was not lawfully called or
convened.
2.6 Record Date. The Board of Directors may fix a record date for
purposes of determining the stockholders entitled to notice of or to vote at any
meeting of the stockholders or any adjournment thereof. That record date (i) may
not precede the date upon which the resolution fixing the record date is
adopted, and (ii) it can not be more than sixty days, nor less than ten days
preceding the meeting for which the record date is set.
In the event that the Board of Directors is fixing a record
date for determining the stockholders entitled to consent to corporate action in
writing without a meeting, the record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
shall not be more than ten days after the date upon which the resolution fixing
the record dated was so adopted.
In order to determine the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date which shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors and shall not be more than sixty days prior to such action.
If no record date is fixed:
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(a) The record date for determining the stockholders entitled
to notice of or to vote at any meeting of the stockholders or any adjournment
thereof shall be at the close of business on the day next preceding the day on
which notice is given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held, provided however, that
the Board of Directors may fix a new record date for an adjourned meeting.
(b) The record date for determining the stockholders entitled
to consent to corporate action in writing without a meeting, WHEN NO PRIOR
ACTION BY THE BOARD OF DIRECTORS IS REQUIRED BY STATUTE, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation or its agent having custody of the
corporate record book.
(c) The record date for determining the stockholders entitled
to consent to corporate action in writing without a meeting, WHEN PRIOR ACTION
BY THE BOARD OF DIRECTORS IS REQUIRED BY STATUTE, shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action.
(d) The record date for determining the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
2.7 Voting List. The officer or agent having charge of the
transfer book for shares of the Corporation shall make and certify, at least ten
(10) days before each meeting of Stockholders, a complete list of the
Stockholders entitled to vote at the meeting or any adjournment therefore,
arranged in alphabetical order, with the address and the number of shares held
by each. The list shall be kept on file for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held and shall be subject
to inspection by any Stockholder for any purpose germane to the meeting at any
time during usual business hours, and shall also be produced and kept open at
the time and place of the meeting, and shall be subject to the inspection of any
Stockholder during the whole time of the meeting. The original stock ledger
transfer book shall be prima facie evidence as to who are the Stockholders
entitled to examine such list or stock ledger or transfer books, or to vote, in
person or by proxy, at any meeting of the Stockholders.
2.8 Quorum. Except as otherwise required by Law, the presence of
Stockholders, in person or by proxy, entitled to cast at least a majority of the
votes which all Common Stockholders (plus such other Stockholders who may from
time to time be entitled to vote with the holders of Common Shares) are entitled
to cast shall constitute a quorum.
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With respect to the consideration of any particular matter as to which the
Stockholders of any class or series shall be entitled to cast a vote separate
from the vote of the Common Stockholders, the presence of Stockholders, in
person or by proxy, entitled to cast at least a majority of the votes which all
such class or series of Stockholders are entitled to cast on such particular
matter shall constitute a quorum of such class or Series of Stockholders for the
purpose of considering such matters. The Stockholders present at a duly
organized meeting can continue to do business until adjournment, notwithstanding
the withdrawal of enough Stockholders to leave less than a quorum.
If a meeting cannot be organized because a quorum has not
attended, those present may adjourn the meeting to such time and place as they
may determine, When a meeting called for the election of Directors has been once
adjourned because a quorum had not attended, those Stockholders entitled to vote
in the election of Directors who attend the second of such adjourned meetings,
although less than a quorum as fixed in these By-Laws or in the Certificate of
Incorporation or by statute, shall nevertheless constitute a quorum for the
purpose of electing Directors.
2.9 Acts of Stockholder. Unless a greater or different vote shall be
required as to a particular matter by the Certificate of Incorporation or by
these By-Laws or by applicable statute, an act authorized by the vote of a
majority of those Common Shares (plus such other shares which may from time to
time be entitled to vote with the Common Shares) present in person or by proxy
at a duly organized meeting shall be the act of the Stockholders.
2.10 Adjournment. Adjournment or adjournments at any annual or special
meeting may be taken as may be directed by a majority of votes cast by the
Stockholders present in person or by proxy entitled to cast the votes which the
Common Stockholders (plus such other Stockholders who shall at the time be
entitled to vote with the holders of Common Shares on the matters to be
considered at the meeting), may cast. When a meeting is adjourned, it shall not
be necessary to give any notice of the adjourned meeting other than by
announcement at the meeting at which such adjournment is taken. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
2.11 Proxies. At all meetings of Stockholders, a Stockholder entitled
to vote on a particular matter may vote in person or may authorize another
person or persons to act for him by proxy. Every proxy shall be executed in
writing by the Stockholder, or by his duly authorized attorney in fact. Such
proxies shall be filed with the Secretary of the Corporation before or at the
time of the meeting. A proxy, unless coupled with an interest, shall be
revocable at will, notwithstanding any other agreement or any provision in the
proxy to the contrary, but the revocation of the proxy shall not be effective
until notice thereof has been given to the Secretary of the Corporation. The
Secretary may treat any proxy delivered to him as valid, unless before the vote
is counted or the authority is exercised, written notice of
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any invalidity, together with such supporting information as shall enable a
judgment to be rendered, is given to the Secretary.
2.12 Voting Rights. Unless otherwise provided in the Certificate of
Incorporation or in a duly filed statement establishing the rights of classes or
series, only the holders of Common Stock shall be entitled to vote at a meeting
of the Stockholders, and every Stockholder having the right to vote shall be
entitled to one vote for every share of Common Stock standing in his name on the
books of the Corporation.
2.13 Nomination of Directors. Nominations for election to the office of
Director at an annual or special meeting of Stockholders shall be made by the
Board of Directors, or by the Executive Committee, or by petition in writing
delivered to the Secretary of the Corporation not fewer than thirty-five (35)
days prior to such Stockholders' meeting, signed by the holders of at least one
percent (1%) of the Stockholders' shares entitled to be voted in the election of
Directors. Unless nominations shall have been made as aforesaid, they shall not
be considered at such Stockholders' meeting unless the number of persons
nominated as aforesaid shall be fewer than the number of persons to be elected
to the office of Director at such meeting, or unless persons duly nominated
shall have failed to be elected at such meeting and the persons elected as
Directors shall be fewer than the number of persons to be elected to the office
of Director at such meeting, in which events nominations may be made at the
Stockholders meeting by any person entitled to vote in the election of
directors.
2.14 Election by Ballot. The election of Directors shall be by written
ballot.
2.15 Judges of Election. In advance of any meeting of Stockholders, the
Board of Directors may appoint Judges of Election, who need not be Stockholders,
to act at such meeting or any adjournment thereof. The number of Judges shall be
one or three, the Judges of Election shall determine the number of shares
outstanding and the voting power of each; the shares represented at the meeting;
the existence of a quorum; the authenticity, validity and effect of proxies;
hear and determine all challenges and questions arising in connection with the
right to vote; receive, count and tabulate all votes or ballots, and determine
the result; and do such other acts as may be necessary and proper to conduct the
election or vote with fairness to all Stockholders. On request of the Chairman
of the Meeting, or of any Stockholder or his proxy, the Judges shall make a
report in writing of any challenge or question or matter determined by them, and
execute a certificate of any fact found by them. If there be three Judges of
Election, the decision, act or certificate of a majority shall be effective in
all respects as the decision and/or certificate of all. Any report or
certificate made by the Judges of Election shall be prima facie evidence of the
facts stated therein.
2.16 Consent of Stockholders in Lieu of Meeting. Any action required to
be taken at any annual or special meeting of Stockholders of the Corporation, or
any action which may be taken at any annual or special meeting of Stockholders,
may be taken without a meeting without prior notice and without a vote, if a
consent in writing setting forth the
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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 and separately dated at the time of signing by each such
Stockholder. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
Stockholders who have not consented in writing.
2.17 Cumulative Voting. At each election for Directors, every
Stockholder shall have one vote for each share of stock owned by such
Stockholder, or, if the certificate of incorporation so provides, to cumulate
the vote of said shares, and give one candidate as many votes as the number of
directors multiplied by the aggregate number of such Stockholder's votes shall
equal, or to distribute the votes on the same principle among as many candidates
as the Stockholder may see fit. The candidates receiving the highest number of
votes, up to the number of Directors to be elected, shall be elected.
ARTICLE III. Board of Directors
3.1 Number, Tenure and Qualifications. The business and affairs of the
Corporation shall be managed by its Board of Directors, one or more in number,
as may be determined by the Board of Directors from time to time, who shall be
natural persons of full age who need not be residents of the State of Delaware
and who need not be Stockholders in the Corporation. Each Director shall hold
office until the next succeeding annual meeting, or until his successor shall
have been elected and shall qualify.
3.2 Powers and Authorization. In addition to the powers and authority
by these By-Laws expressly conferred, the Board of Directors may exercise all of
the powers of the Corporation and do all lawful acts not by statute or by the
Certificate or by those By-Laws directed or required to be exercised or done
only by the Shareholders. The Board shall have the power to delegate any of the
powers exercised or exercisable by the Board to any standing or special
committee, or to any officer or agent, or to appoint any person to be the agent
of the Corporation, with such powers, including the power to subdelegate, and
upon such terms as the Board shall deem appropriate.
3.3 Meetings. Meetings of the Board of Directors shall be held at such
times and places, either within or without the State of Delaware, as may be
fixed by Resolution of the Board, or by the Chief Executive Officer, or upon
written demand of any two Directors.
3.4 Notice. Notice of a meeting of Directors or of any Committee of the
Board of Directors shall be delivered at least one day prior to such meeting by
oral, telegraphic or written notice. If mailed, such notice shall be deemed to
be delivered on the second day following the day deposited in the United States
mail, addressed to the Director at his business address, with postage thereon
prepaid. If notice be given by telegram, such notice shall be deemed to be
delivered on the day the telegram is delivered prepaid to the telegraph
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company, addressed to the Director at his business office. Notice of a meeting
need only state the place, day and hour of the said meeting.
A Director may waive notice of any meeting in a writing signed
either before or after the time stated. The attendance of a Director at a
meeting shall constitute a waiver of notice of such meeting, except where a
Director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting was not lawfully called or
convened.
3.5. Quorum. A majority of the Directors then in office shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, but if less than such quorum is present at a meeting, a majority
of the Directors present may adjourn the meeting from time to time without
further notice.
Directors shall be deemed present at a meeting of the Board of
Directors if by means of conference telephone or similar communications
equipment all persons participating in the meeting can hear each other.
The act of the majority of these Directors voting at a meeting
at which a quorum is present shall be the act of the Board of Directors.
3.6 Unanimous Consent. Any action which may be taken at the meeting of
the Directors, or by action of the members of the Executive Committee or by the
members of any other committee appointed by the Board, may be taken without a
meeting, if a consent or consents in writing setting forth the action so taken
shall be signed by all of the Directors or the members of the committee, as the
case may be, and filed with the Secretary of the Corporation.
3.7 Compensation. Directors as such need not receive any compensation
for their services. By Resolution of the Board, a stated salary may be fixed for
the Directors, or a fixed sum for and expenses of, attendance may be allowed for
attendance at each regular or special meeting of the Board. Nothing herein
contained shall be construed to preclude any Director from serving the
Corporation as a member of a committee or an officer or in any other capacity
and receiving compensation therefor.
3.8 Committees of the Board. The Board may, by Resolution adopted by a
majority of the whole Board, delegate two or more of its number to constitute an
Executive Committee, which, unless otherwise provided in such Resolution, shall
have and exercise the authority of the Board of Directors in the management of
the business and affairs of the Corporation. The Board may by Resolution adopted
by a majority of the whole Board delegate two or more of its members to act as a
committee to exercise all power and authority which the Board might exercise in
matters as to which the committee is authorized to act.
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The presence in person or as hereafter provided of one-half
(1/2) of the members of the Executive Committee or any other Committee shall
constitute a quorum for the transaction of business at any meeting of such
Committee, and the act of a majority of those members of such Committee voting
at a meeting at which a quorum is present shall be the act of the Committee.
Members of the Executive Committee or any other Committee shall be deemed as
being present at a meeting of such Committee if by means of conference telephone
or similar communications equipment all persons participating in the meeting can
hear each other. In the absence or disqualification of any member of such
Committee or Committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
3.9 Removal of Directors. Any individual Director may be removed from
office with cause by the vote of Stockholders entitled to cast at least a
majority of the votes which all Stockholders would be entitled to cast at any
annual election of Directors; provided, however, that if the certificate of
incorporation provides for the cumulation of votes in the election of Directors,
such removal shall not occur if the votes of a sufficient number of shares are
cast against the Resolution for his rem oval which if cumulatively voted at an
annual meeting of Directors would be sufficient to elect one or more Directors.
The entire Board of Directors may be removed from office
without assigning any cause by the vote of Stockholders entitled to cast at
least a majority of the votes Stockholders would be entitled to cast at any
annual election of Directors.
3.10 Vacancies. Vacancies in the Board of Directors, including
vacancies resulting from an increase in the number of Directors, shall be filled
by a majority vote of the remaining members of the Board though less than a
quorum. A Director elected to fill a vacancy shall be a Director until a
successor is elected by the Shareholders, who may make such election at the next
annual meeting of the Shareholders or any special meeting duly called for that
purpose and held prior thereto.
ARTICLE IV. Officers
4.1 Executive Officers. The Executive Officers of the Corporation shall
be chosen by the Directors and shall be a Chief Executive Officer, Secretary,
and Treasurer. The Board of Directors may also choose a Chairman of the Board, a
President, one or more Vice Presidents and such other officers and agents as it
shall deem necessary, who shall hold their offices for such terms and shall have
such authority and shall perform such duties as from time to time shall be
prescribed by the Board.
4.2 Qualifications. Any number of offices may be held by the same
person. The Chief Executive Officer, the President and the Vice President, if
any, and Secretary
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shall be natural persons of full age. The Treasurer, if a natural person, shall
be of MI age. It shall not be necessary for the officers to be Directors.
4.3 Salaries. The salaries of the Chief Executive Officer, any Chairman
of the Board, President and Vice Presidents, the Secretary and the Treasurer of
the Corporation shall be fixed by the Board of Directors.
4.4 Term of Office; Removal. The officers of the Corporation shall hold
office for one year and until their successors are chosen and qualify.
Notwithstanding the foregoing, every officer and agent may be
removed at any time by the Board of Directors, without assigning any cause
therefor.
4.5 Duties of the Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the Stockholders and Directors at which he is
present. He shall advise the Chief Executive Officer and other officers of the
Corporation on matters of general policy and shall perform such other duties as
may be assigned to him from time to time by the Board of Directors.
4.6 Duties of the Chief Executive Officer. The Chief Executive Officer
of the Corporation, in the absence of the Chairman of the Board, shall preside
at all meetings of the Stockholders and of the Board of Directors; he shall have
general and active management of the business of the Corporation, and shall see
that all orders and resolutions of the Board are carried into effect, subject,
however, to the right of the Directors to delegate any specific powers, except
such as may be by statute exclusively conferred on the Chief Executive Officer,
to any other officer or officers of the Corporation. He shall execute bonds,
mortgages and other contracts requiring a seal,under the seal of the
Corporation. He shall be ex-officio a member of all committees, and shall have
the general powers and duties of supervision and management usually vested in
the office of President of a corporation. He shall have the power to appoint and
discharge, subject to the approval of the Directors, employees and agents of the
Corporation and fix their compensation, make and sign contracts and agreements
in the name and behalf of the Corporation and while the Directors and Executive
Committee are not in session, he shall have general management and control of
the business and affairs of the Corporation; he shall see that the books,
reports, statements and certificates required by the statute under which the
Corporation is organized or any other laws applicable thereto are properly kept,
made, and filed according to law; he shall generally do and perform all acts
incident to the office of President of a corporation, or which are authorized or
required by law.
4.7 Duties of the President. He shall advise the Chief Executive
Officer and other officers of the Corporation on matters of general policy and
shall perform such other duties as may be assigned to him from time to time by
the Chief Executive Officer and the Board of Directors.
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4.8 Duties of Vice Presidents. Any Vice Presidents chosen by the Board
shall be executive officers of the Corporation who shall assist the Chairman of
the Board and the Chief Executive Officer and have such powers and duties as may
be assigned from time to time by resolution of the Board of Directors, the Chief
Executive Officer or Chairman of the Board. The Board of Directors may elect a
senior Vice President to assist the Chairman of the Board and Chief Executive
Officer in carrying out their duties, in supervising the activities and
personnel of the Corporation, and generally to perform such functions as may be
designated by the Chief Executive Officer, and the Chairman of the Board.
4.9 Duties of Secretary. The Secretary shall attend all sessions of the
Board and all meetings of the Stockholders and act as clerk thereof, and record
all the votes of the Corporation and the minutes of all its transactions in a
book to be kept for that purpose; and shall perform like duties for all
committees of the Board of Directors when required. He shall give, or cause to
be given, notice of all meetings of the Stockholders and the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or Chief Executive Officer, and under whose supervision he shall be.
He shall keep in safe custody the corporate seal of the Corporation, and when
authorized by the Board or Chief Executive Officer affix the same to any
instrument requiring it.
4.10 Duties of Assistant Secretary. In the absence of the Secretary or
when the Board of Directors or Chief Executive Officer determines that it would
be inconvenient for the Secretary to carry out his duties, the Assistant
Secretary shall perform the duties of the Secretary, as directed by the Board of
Directors or Chief Executive Officer.
4.11 Duties of the Treasurer. The Treasurer shall have the custody of
all funds, securities, evidences of an indebtedness and other valuable documents
of the Corporation; he shall receive and give or cause to be given receipts and
acquittances for money paid in on account of the Corporation and shall pay out
of the funds on hand all just debts of the Corporation of whatever nature upon
maturity of the same; he shall enter or cause to be entered in the books of the
Corporation to be kept for that purpose full and accurate accounts of all monies
received and paid out on account of the Corporation and, whenever required by
the Chief Executive Officer or the Directors, he shall render to the Chief
Executive Officer and Board of Directors, at the regular meetings of the Board,
or whenever they may require it, a statement of his cash accounts and an account
of all his transactions as Treasurer and of the financial condition of the
Corporation; he shall keep or cause to be kept such other books as will show a
true record of the expenses, losses, gains, assets and liabilities of the
Corporation; he shall, unless otherwise determined by the Directors, have charge
of the original stock books, transfer books and stock ledgers and act as
transfer agent in respect to the stock securities of the Corporation; and he
shall perform all the other duties incident to the office of Treasurer of a
corporation. He shall give the Corporation a bond for the faithful discharge of
his duties in such amount and with such surety as the Board shall prescribe.
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4.12 Vacancies. If the office of any officer or agent one or more,
becomes vacant for any reason, the Board of Directors may choose a successor or
successors, who shall hold office at the pleasure of the Board.
ARTICLE V. Indemnification.
Each person who is, has been, or shall hereafter be, a director or
officer of the Corporation, or who is serving, may have served, or shall serve
at its request as a director or officer of another corporation, shall be
indemnified by the Corporation to the fullest extent to which indemnification is
permitted by subsections (a) through (i) of Section 145 of the Delaware General
Corporation Law.
The foregoing rights of indemnification shall inure to the benefit of
the personal representatives of such persons, and shall be in addition to any
other rights to which any such persons may be entitled to at law or agreement or
otherwise.
ARTICLE VI. Corporate Records and Statement.
6.1 Records. There shall be kept by the Corporation, either within or
without the State of Delaware, a record of the proceedings of the Stockholders
and of the Directors, and its By-Laws, including all amendments or alterations
thereto to date. An original or duplicate share register shall be kept at either
the registered office, or at the office of its transfer agent or registrar,
giving the names of the Stockholders, their respective addresses, and the number
and classes of shares held by each. The Corporation shall also keep appropriate,
complete and accurate books or records of account, which may be kept at its
registered office, or its principal place of business.
6.2 Annual Statement. The Chief Executive Officer and Board of
Directors shall present at each annual meeting of Stockholders such statement of
the business and affairs of the Corporation for the preceding year as they shall
deem appropriate. Upon written request of any Stockholder, the Corporation shall
mail to such Stockholder its balance sheet as at the end of the preceding fiscal
year, and its profit and loss statements for such fiscal year. Such statements
shall be prepared and presented in whatever manner the Board of Directors shall
deem advisable and need not be verified by a Certified Public Accountant.
ARTICLE VII. Share Certificates, Transfer of Stock, Etc.
7.1 Issuance. The Board of Directors shall have the power, by
Resolution duly adopted, to issue from time to time, in whole or in part, the
kinds or classes of shares authorized in the Certificate of Incorporation.
Share certificates shall bear the signature of the Chairman,
the Vice Chairman, die President or any Vice President, and the Secretary, any
Assistant Secretary, the
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Treasurer or any Assistant Treasurer, and the corporate seal, which may be a
facsimile, engraved or printed. Where such certificate is signed by a transfer
agent or a registrar, the signature of such officers upon such certificate may
be a facsimile, engraved or printed.
7.2 Transfers of Shares. Transfer of shares shall be made on the books
of the Corporation upon surrender of the certificates therefor, endorsed by the
person named in the certificate or by attorney, lawfully constituted in writing.
No transfer need be made inconsistent with the provisions of the Uniform
Commercial Code or other applicable Federal, State or Local Law.
No transfer or assignment shall affect the right of the
Corporation to pay any dividend due upon the stock, or to treat the registered
holder as the holder in fact, until such transfer or assignment is registered on
the books of this Corporation.
7.3 Absolute Owner. The Corporation shall be entitled to treat the
registered holder of any shares of the Corporation as the absolute owner
thereof, and accordingly shall not be bound to recognize any equitable or other
claim to, or interest in, such share, on the part of any other person, whether
or not the Corporation shall have express or other notice thereof.
7.4 Lost Destroyed or Mutilated Certificates. In the event that a share
certificate shall be lost, destroyed or mutilated, a new certificate may be
issued therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.
ARTICLE VIII. Miscellaneous Provisions.
8.1 Signatures on Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
8.2 Securities of Other Corporations. The Chief Executive Officer, or
the Secretary, shall have full power to vote, appoint proxies, or otherwise
perform any act as a Stockholder with respect to any shares or other securities
of any Corporation owned by this Corporation, including the power to sell,
convert, exchange, pledge or encumber such securities.
8.3 Fiscal Year. The fiscal year shall be such date as shall be
determined by the Board of Directors.
ARTICLE IX. Amendments.
9.1 These By-Laws may be altered, amended or repealed by a majority of
the members of the Board of Directors, or by a majority of those Common Shares
(plus such
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other shares as may then be entitled to vote with the Common Shares) present in
person or by proxy at any regular or special meeting duly organized.
* * * * * *
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EXHIBIT 3.15
CERTIFICATE OF INCORPORATION
OF
THERMETIC GLASS ACQUISITION CORPORATION
FIRST: The name of the Corporation is THERMETIC GLASS ACQUISITION
CORPORATION.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington,
County of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in and to do any
lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is one hundred thousand (100,000) shares of common
stock, par value $.01 per share.
FIFTH: The name and mailing address of the Incorporator of the
Corporation is as follows:
NAME MAILING ADDRESS
AAP Holdings, Inc. 812 Huron Road, East, No. 880
Cleveland, Ohio 44115-1126
SIXTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders.
(1) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the By-Laws of the Corporation.
(2) The number of directors of the Corporation shall be as from time to
time fixed by, or in the manner provided in, the By-Laws of the Corporation.
Election of directors need not be by written ballot unless the By-Laws so
provide.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or
<PAGE> 2
places as may be designated from time to time by the Board of Directors or in
the By-Laws of the Corporation.
EIGHTH: The liability of directors of the Corporation is hereby
eliminated to the full extent permitted by Section 102(b)(7) of the Delaware
General Corporation Law or any successor provisions.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this Certificate, hereby declaring and certifying
that this is its act and deed and the facts herein stated are true, and
accordingly has caused to be set hereunder its hand this 23rd day of June, 1997.
AAP HOLDINGS, INC.
By:/s/ Tracey Stockton
-----------------------------------
Tracey Stockton
Assistant Secretary
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<PAGE> 3
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
THERMETIC GLASS ACQUISITION CORPORATION
THERMETIC GLASS ACQUISITION CORPORATION, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation") does hereby certify as follows:
FIRST: That the Corporation, by the unanimous written consent of its
Board of Directors, filed with the Minutes of the Board, duly adopted
resolutions setting forth a proposed amendment to the Certificate of
Incorporation of the Corporation, declaring such amendment to be
advisable and submitted the amendment to the stockholders of the
Corporation for consideration. Such resolutions provide as follows:
RESOLVED: That Article I of the Certificate of Incorporation
of Thermetic Glass Acquisition Corporation be amended in its
entirety as follows:
1. The name of the Corporation is
THERMETIC GLASS, INC.
SECOND: That, thereafter, the amendment was duly adopted by written
consent of the sole stockholder of the Corporation in accordance with
Section 228 of the General Corporation Law of the State of Delaware.
THIRD: That such amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, Thermetic Glass Acquisition Corporation has caused
this Certificate to be signed by its Assistant Secretary, this 18th day of July,
1997.
THERMETIC GLASS ACQUISITION CORPORATION
By:/s/ Tracey M . Stockton
-------------------------------------------
Tracey M. Stockton, Assistant Secretary
<PAGE> 1
EXHIBIT 3.16
THERMETIC GLASS ACQUISITION CORPORATION
BY-LAWS
ARTICLE I. Offices.
1.1 Registered Office. The registered office of the Corporation in the
State of Delaware shall be located in the City of Wilmington, County of New
Castle and the Agent in charge thereof shall be The Corporation Trust Company.
The Corporation may also have offices at such other places within or without the
State of Delaware as the Board of Directors may from time to time appoint or as
the business of the Corporation may require.
1.2 Principal Office. The principal office of the Corporation need not
be identical with the registered office, and may be changed from time to time as
the Board of Directors may determine.
ARTICLE II. Stockholders.
2.1 Annual Meetings. The annual meeting of the Stockholders shall be
held on the first day of April in each year, commencing in 1998, at 10:00
o'clock A.M. local time or on such other date and at such other times within any
particular calendar yew as the Board of Directors may determine. If the day
fixed for the annual meeting shall be a legal holiday in the State of Delaware,
such meeting shall be held on the next succeeding business day. If the annual
meeting has not been held during a calendar year, any Stockholder may call such
meeting by following the procedure set forth in Section 2.2 hereof.
At the annual meeting, the Stockholders shall elect Directors for
the ensuing year and may transact such other business as may properly come
before the meeting.
2.2 Special Meetings. Special meetings of the Stockholders may be
called at any time by the Chief Executive Officer, or by the Board of Directors,
or by the Stockholders entitled to cast at least one-fifth (1/5) of the votes
which all Stockholders are entitled to cast at the particular meeting. Upon
written request of any person or persons who have duly called a special meeting,
the Secretary shall fix the date of the meeting to be held not more than sixty
(60) days after receipt of the request and give due notice thereof to the
Stockholders entitled to vote thereat. If the Secretary shall neglect or refuse
to fix such date or give such notice, the person or persons calling the meeting
may do so.
2.3 Place of Meeting. The Board of Directors may designate any place,
either within or without the State of Delaware, as the place of meeting for any
annual or special meeting of the Stockholders. If no designation is made by the
Board of Directors, the place of meeting shall be at the registered office of
the Corporation in the State of Delaware.
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2.4 Notice of Meeting. Written notice shall, unless otherwise provided
by statute, be given to Stockholders entitled to vote at the meeting who are
Stockholders as of the record date as provided in Section 2.6 hereof, not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by sending a copy thereof through the mail, or by telegram,
charges prepaid, to the address of the Stockholder appearing on the books of the
Corporation, or supplied by the Stockholder to the Corporation for the purpose
of notice. Such notice shall state the place, date and hour of the meeting. When
required by these By-Laws or by statute such notice shall also state the general
nature of the business to be transacted.
2.5 Sufficiency of Notice. Any notice required hereunder shall be
deemed to have been given to the person entitled thereto (a) if sent by mail,
when deposited in the United States mail, post prepaid, or (b) when lodged with
a telegraph office for transmission with charges prepaid, or (c) when delivered
personally.
Whenever notice is required to be given, a waiver thereof in
writing signed by the person or persons entitled to such notice, whether signed
before or after the time stated, shall be deemed equivalent to the giving of
such notice. Attendance of a person at any meeting, either in person or by
proxy, shall constitute a waiver of notice of such meeting, except where a
person attends a meeting for the express and stated purpose of objecting to the
transaction of any business because the meeting was not lawfully called or
convened.
2.6 Record Date. The Board of Directors may fix a record date for
purposes of determining the stockholders entitled to notice of or to vote at any
meeting of the stockholders or any adjournment thereof. That record date (i) may
not precede the date upon which the resolution fixing the record date is
adopted, and (ii) it can not be more than sixty days, nor less than ten days
preceding the meeting for which the record date is set.
In the event that the Board of Directors is fixing a record date
for determining the stockholders entitled to consent to corporate action in
writing without a meeting, the record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
shall not be more than ten days after the date upon which the resolution fixing
the record dated was so adopted.
In order to determine the stockholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date which shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors and shall not be more than sixty days prior to such action.
If no record date is fixed:
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(a) The record date for determining the stockholders entitled
to notice of or to vote at any meeting of the stockholders or any adjournment
thereof shall be at the close of business on the day next preceding the day on
which notice is given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held, provided however, that
the Board of Directors may fix a new record date for an adjourned meeting.
(b) The record date for determining the stockholders entitled
to consent to corporate action in writing without a meeting, WHEN NO PRIOR
ACTION BY THE BOARD OF DIRECTORS IS REQUIRED BY STATUTE, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation or its agent having custody of the
corporate record book.
(c) The record date for determining the stockholders entitled
to consent to corporate action in writing without a meeting, WHEN PRIOR ACTION
BY THE BOARD OF DIRECTORS IS REQUIRED BY STATUTE, shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action.
(d) The record date for determining the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
2.7 Voting List. The officer or agent having charge of the
transfer book for shares of the Corporation shall make and certify, at least ten
(10) days before each meeting of Stockholders, a complete list of the
Stockholders entitled to vote at the meeting or any adjournment therefore,
arranged in alphabetical order, with the address and the number of shares held
by each. The list shall be kept on file for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held and shall be subject
to inspection by any Stockholder for any purpose germane to the meeting at any
time during usual business hours, and shall also be produced and kept open at
the time and place of the meeting, and shall be subject to the inspection of any
Stockholder during the whole time of the meeting. The original stock ledger
transfer book shall be prima facie evidence as to who are the Stockholders
entitled to examine such list or stock ledger or transfer books, or to vote, in
person or by proxy, at any meeting of the Stockholders.
2.8 Quorum. Except as otherwise required by Law, the presence of
Stockholders, in person or by proxy, entitled to cast at least a majority of the
votes which all Common Stockholders (plus such other Stockholders who may from
time to time be entitled to vote with the holders of Common Shares) are entitled
to cast shall constitute a quorum.
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With respect to the consideration of any particular matter as to which the
Stockholders of any class or series shall be entitled to cast a vote separate
from the vote of the Common Stockholders, the presence of Stockholders, in
person or by proxy, entitled to cast at least a majority of the votes which all
such class or series of Stockholders are entitled to cast on such particular
matter shall constitute a quorum of such class or Series of Stockholders for the
purpose of considering such matters. The Stockholders present at a duly
organized meeting can continue to do business until adjournment, notwithstanding
the withdrawal of enough Stockholders to leave less than a quorum.
If a meeting cannot be organized because a quorum has not attended,
those present may adjourn the meeting to such time and place as they may
determine, When a meeting called for the election of Directors has been once
adjourned because a quorum had not attended, those Stockholders entitled to vote
in the election of Directors who attend the second of such adjourned meetings,
although less than a quorum as fixed in these By-Laws or in the Certificate of
Incorporation or by statute, shall nevertheless constitute a quorum for the
purpose of electing Directors.
2.9 Acts of Stockholder. Unless a greater or different vote shall be
required as to a particular matter by the Certificate of Incorporation or by
these By-Laws or by applicable statute, an act authorized by the vote of a
majority of those Common Shares (plus such other shares which may from time to
time be entitled to vote with the Common Shares) present in person or by proxy
at a duly organized meeting shall be the act of the Stockholders.
2.10 Adjournment. Adjournment or adjournments at any annual or special
meeting may be taken as may be directed by a majority of votes cast by the
Stockholders present in person or by proxy entitled to cast the votes which the
Common Stockholders (plus such other Stockholders who shall at the time be
entitled to vote with the holders of Common Shares on the matters to be
considered at the meeting), may cast. When a meeting is adjourned, it shall not
be necessary to give any notice of the adjourned meeting other than by
announcement at the meeting at which such adjournment is taken. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
2.11 Proxies. At all meetings of Stockholders, a Stockholder entitled
to vote on a particular matter may vote in person or may authorize another
person or persons to act for him by proxy. Every proxy shall be executed in
writing by the Stockholder, or by his duly authorized attorney in fact. Such
proxies shall be filed with the Secretary of the Corporation before or at the
time of the meeting. A proxy, unless coupled with an interest, shall be
revocable at will, notwithstanding any other agreement or any provision in the
proxy to the contrary, but the revocation of the proxy shall not be effective
until notice thereof has been given to the Secretary of the Corporation. The
Secretary may treat any proxy delivered to him as valid, unless before the vote
is counted or the authority is exercised, written notice of
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any invalidity, together with such supporting information as shall enable a
judgment to be rendered, is given to the Secretary.
2.12 Voting Rights. Unless otherwise provided in the Certificate of
Incorporation or in a duly filed statement establishing the rights of classes or
series, only the holders of Common Stock shall be entitled to vote at a meeting
of the Stockholders, and every Stockholder having the right to vote shall be
entitled to one vote for every share of Common Stock standing in his name on the
books of the Corporation.
2.13 Nomination of Directors. Nominations for election to the office of
Director at an annual or special meeting of Stockholders shall be made by the
Board of Directors, or by the Executive Committee, or by petition in writing
delivered to the Secretary of the Corporation not fewer than thirty-five (35)
days prior to such Stockholders' meeting, signed by the holders of at least one
percent (1%) of the Stockholders' shares entitled to be voted in the election of
Directors. Unless nominations shall have been made as aforesaid, they shall not
be considered at such Stockholders' meeting unless the number of persons
nominated as aforesaid shall be fewer than the number of persons to be elected
to the office of Director at such meeting, or unless persons duly nominated
shall have failed to be elected at such meeting and the persons elected as
Directors shall be fewer than the number of persons to be elected to the office
of Director at such meeting, in which events nominations may be made at the
Stockholders meeting by any person entitled to vote in the election of
directors.
2.14 Election by Ballot. The election of Directors shall be by written
ballot.
2.15 Judges of Election. In advance of any meeting of Stockholders, the
Board of Directors may appoint Judges of Election, who need not be Stockholders,
to act at such meeting or any adjournment thereof. The number of Judges shall be
one or three, the Judges of Election shall determine the number of shares
outstanding and the voting power of each; the shares represented at the meeting;
the existence of a quorum; the authenticity, validity and effect of proxies;
hear and determine all challenges and questions arising in connection with the
right to vote; receive, count and tabulate all votes or ballots, and determine
the result; and do such other acts as may be necessary and proper to conduct the
election or vote with fairness to all Stockholders. On request of the Chairman
of the Meeting, or of any Stockholder or his proxy, the Judges shall make a
report in writing of any challenge or question or matter determined by them, and
execute a certificate of any fact found by them. If there be three Judges of
Election, the decision, act or certificate of a majority shall be effective in
all respects as the decision and/or certificate of all. Any report or
certificate made by the Judges of Election shall be prima facie evidence of the
facts stated therein.
2.16 Consent of Stockholders in Lieu of Meeting. Any action required to
be taken at any annual or special meeting of Stockholders of the Corporation, or
any action which may be taken at any annual or special meeting of Stockholders,
may be taken without a meeting without prior notice and without a vote, if a
consent in writing setting forth the
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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 and separately dated at the time of signing by each such
Stockholder. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
Stockholders who have not consented in writing.
2.17 Cumulative Voting. At each election for Directors, every
Stockholder shall have one vote for each share of stock owned by such
Stockholder, or, if the certificate of incorporation so provides, to cumulate
the vote of said shares, and give one candidate as many votes as the number of
directors multiplied by the aggregate number of such Stockholder's votes shall
equal, or to distribute the votes on the same principle among as many candidates
as the Stockholder may see fit. The candidates receiving the highest number of
votes, up to the number of Directors to be elected, shall be elected.
ARTICLE III. Board of Directors
3.1 Number, Tenure and Qualifications. The business and affairs of the
Corporation shall be managed by its Board of Directors, one or more in number,
as may be determined by the Board of Directors from time to time, who shall be
natural persons of full age who need not be residents of the State of Delaware
and who need not be Stockholders in the Corporation. Each Director shall hold
office until the next succeeding annual meeting, or until his successor shall
have been elected and shall qualify.
3.2 Powers and Authorization. In addition to the powers and authority
by these By-Laws expressly conferred, the Board of Directors may exercise all of
the powers of the Corporation and do all lawful acts not by statute or by the
Certificate or by those By-Laws directed or required to be exercised or done
only by the Shareholders. The Board shall have the power to delegate any of the
powers exercised or exercisable by the Board to any standing or special
committee, or to any officer or agent, or to appoint any person to be the agent
of the Corporation, with such powers, including the power to subdelegate, and
upon such terms as the Board shall deem appropriate.
3.3 Meetings. Meetings of the Board of Directors shall be held at such
times and places, either within or without the State of Delaware, as may be
fixed by Resolution of the Board, or by the Chief Executive Officer, or upon
written demand of any two Directors.
3.4 Notice. Notice of a meeting of Directors or of any Committee of the
Board of Directors shall be delivered at least one day prior to such meeting by
oral, telegraphic or written notice. If mailed, such notice shall be deemed to
be delivered on the second day following the day deposited in the United States
mail, addressed to the Director at his business address, with postage thereon
prepaid. If notice be given by telegram, such notice shall be deemed to be
delivered on the day the telegram is delivered prepaid to the telegraph
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company, addressed to the Director at his business office. Notice of a meeting
need only state the place, day and hour of the said meeting.
A Director may waive notice of any meeting in a writing signed
either before or after the time stated. The attendance of a Director at a
meeting shall constitute a waiver of notice of such meeting, except where a
Director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting was not lawfully called or
convened.
3.5. Quorum. A majority of the Directors then in office shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, but if less than such quorum is present at a meeting, a majority
of the Directors present may adjourn the meeting from time to time without
further notice.
Directors shall be deemed present at a meeting of the Board of
Directors if by means of conference telephone or similar communications
equipment all persons participating in the meeting can hear each other.
The act of the majority of these Directors voting at a meeting at
which a quorum is present shall be the act of the Board of Directors.
3.6 Unanimous Consent. Any action which may be taken at the meeting of
the Directors, or by action of the members of the Executive Committee or by the
members of any other committee appointed by the Board, may be taken without a
meeting, if a consent or consents in writing setting forth the action so taken
shall be signed by all of the Directors or the members of the committee, as the
case may be, and filed with the Secretary of the Corporation.
3.7 Compensation. Directors as such need not receive any compensation
for their services. By Resolution of the Board, a stated salary may be fixed for
the Directors, or a fixed sum for and expenses of, attendance may be allowed for
attendance at each regular or special meeting of the Board. Nothing herein
contained shall be construed to preclude any Director from serving the
Corporation as a member of a committee or an officer or in any other capacity
and receiving compensation therefor.
3.8 Committees of the Board. The Board may, by Resolution adopted by a
majority of the whole Board, delegate two or more of its number to constitute an
Executive Committee, which, unless otherwise provided in such Resolution, shall
have and exercise the authority of the Board of Directors in the management of
the business and affairs of the Corporation. The Board may by Resolution adopted
by a majority of the whole Board delegate two or more of its members to act as a
committee to exercise all power and authority which the Board might exercise in
matters as to which the committee is authorized to act.
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The presence in person or as hereafter provided of one-half (1/2)
of the members of the Executive Committee or any other Committee shall
constitute a quorum for the transaction of business at any meeting of such
Committee, and the act of a majority of those members of such Committee voting
at a meeting at which a quorum is present shall be the act of the Committee.
Members of the Executive Committee or any other Committee shall be deemed as
being present at a meeting of such Committee if by means of conference telephone
or similar communications equipment all persons participating in the meeting can
hear each other. In the absence or disqualification of any member of such
Committee or Committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
3.9 Removal of Directors. Any individual Director may be removed from
office with cause by the vote of Stockholders entitled to cast at least a
majority of the votes which all Stockholders would be entitled to cast at any
annual election of Directors; provided, however, that if the certificate of
incorporation provides for the cumulation of votes in the election of Directors,
such removal shall not occur if the votes of a sufficient number of shares are
cast against the Resolution for his removal which if cumulatively voted at an
annual meeting of Directors would be sufficient to elect one or more Directors.
The entire Board of Directors may be removed from office without
assigning any cause by the vote of Stockholders entitled to cast at least a
majority of the votes Stockholders would be entitled to cast at any annual
election of Directors.
3.10 Vacancies. Vacancies in the Board of Directors, including
vacancies resulting from an increase in the number of Directors, shall be filled
by a majority vote of the remaining members of the Board though less than a
quorum. A Director elected to fill a vacancy shall be a Director until a
successor is elected by the Shareholders, who may make such election at the next
annual meeting of the Shareholders or any special meeting duly called for that
purpose and held prior thereto.
ARTICLE IV. Officers
4.1 Executive Officers. The Executive Officers of the Corporation shall
be chosen by the Directors and shall be a Chief Executive Officer, Secretary,
and Treasurer. The Board of Directors may also choose a Chairman of the Board, a
President, one or more Vice Presidents and such other officers and agents as it
shall deem necessary, who shall hold their offices for such terms and shall have
such authority and shall perform such duties as from time to time shall be
prescribed by the Board.
4.2 Qualifications. Any number of offices may be held by the same
person. The Chief Executive Officer, the President and the Vice President, if
any, and Secretary
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shall be natural persons of full age. The Treasurer, if a natural person, shall
be of MI age. It shall not be necessary for the officers to be Directors.
4.3 Salaries. The salaries of the Chief Executive Officer, any Chairman
of the Board, President and Vice Presidents, the Secretary and the Treasurer of
the Corporation shall be fixed by the Board of Directors.
4.4 Term of Office; Removal. The officers of the Corporation shall hold
office for one year and until their successors are chosen and qualify.
Notwithstanding the foregoing, every officer and agent may be
removed at any time by the Board of Directors, without assigning any cause
therefor.
4.5 Duties of the Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the Stockholders and Directors at which he is
present. He shall advise the Chief Executive Officer and other officers of the
Corporation on matters of general policy and shall perform such other duties as
may be assigned to him from time to time by the Board of Directors.
4.6 Duties of the Chief Executive Officer. The Chief Executive Officer
of the Corporation, in the absence of the Chairman of the Board, shall preside
at all meetings of the Stockholders and of the Board of Directors; he shall have
general and active management of the business of the Corporation, and shall see
that all orders and resolutions of the Board are carried into effect, subject,
however, to the right of the Directors to delegate any specific powers, except
such as may be by statute exclusively conferred on the Chief Executive Officer,
to any other officer or officers of the Corporation. He shall execute bonds,
mortgages and other contracts requiring a seal,under the seal of the
Corporation. He shall be ex-officio a member of all committees, and shall have
the general powers and duties of supervision and management usually vested in
the office of President of a corporation. He shall have the power to appoint and
discharge, subject to the approval of the Directors, employees and agents of the
Corporation and fix their compensation, make and sign contracts and agreements
in the name and behalf of the Corporation and while the Directors and Executive
Committee are not in session, he shall have general management and control of
the business and affairs of the Corporation; he shall see that the books,
reports, statements and certificates required by the statute under which the
Corporation is organized or any other laws applicable thereto are properly kept,
made, and filed according to law; he shall generally do and perform all acts
incident to the office of President of a corporation, or which are authorized or
required by law.
4.7 Duties of the President. He shall advise the Chief Executive
Officer and other officers of the Corporation on matters of general policy and
shall perform such other duties as may be assigned to him from time to time by
the Chief Executive Officer and the Board of Directors.
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4.8 Duties of Vice Presidents. Any Vice Presidents chosen by the Board
shall be executive officers of the Corporation who shall assist the Chairman of
the Board and the Chief Executive Officer and have such powers and duties as may
be assigned from time to time by resolution of the Board of Directors, the Chief
Executive Officer or Chairman of the Board. The Board of Directors may elect a
senior Vice President to assist the Chairman of the Board and Chief Executive
Officer in carrying out their duties, in supervising the activities and
personnel of the Corporation, and generally to perform such functions as may be
designated by the Chief Executive Officer, and the Chairman of the Board.
4.9 Duties of Secretary. The Secretary shall attend all sessions of the
Board and all meetings of the Stockholders and act as clerk thereof, and record
all the votes of the Corporation and the minutes of all its transactions in a
book to be kept for that purpose; and shall perform like duties for all
committees of the Board of Directors when required. He shall give, or cause to
be given, notice of all meetings of the Stockholders and the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or Chief Executive Officer, and under whose supervision he shall be.
He shall keep in safe custody the corporate seal of the Corporation, and when
authorized by the Board or Chief Executive Officer affix the same to any
instrument requiring it.
4.10 Duties of Assistant Secretary. In the absence of the Secretary or
when the Board of Directors or Chief Executive Officer determines that it would
be inconvenient for the Secretary to carry out his duties, the Assistant
Secretary shall perform the duties of the Secretary, as directed by the Board of
Directors or Chief Executive Officer.
4.11 Duties of the Treasurer. The Treasurer shall have the custody of
all funds, securities, evidences of an indebtedness and other valuable documents
of the Corporation; he shall receive and give or cause to be given receipts and
acquittances for money paid in on account of the Corporation and shall pay out
of the funds on hand all just debts of the Corporation of whatever nature upon
maturity of the same; he shall enter or cause to be entered in the books of the
Corporation to be kept for that purpose full and accurate accounts of all monies
received and paid out on account of the Corporation and, whenever required by
the Chief Executive Officer or the Directors, he shall render to the Chief
Executive Officer and Board of Directors, at the regular meetings of the Board,
or whenever they may require it, a statement of his cash accounts and an account
of all his transactions as Treasurer and of the financial condition of the
Corporation; he shall keep or cause to be kept such other books as will show a
true record of the expenses, losses, gains, assets and liabilities of the
Corporation; he shall, unless otherwise determined by the Directors, have charge
of the original stock books, transfer books and stock ledgers and act as
transfer agent in respect to the stock securities of the Corporation; and he
shall perform all the other duties incident to the office of Treasurer of a
corporation. He shall give the Corporation a bond for the faithful discharge of
his duties in such amount and with such surety as the Board shall prescribe.
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4.12 Vacancies. If the office of any officer or agent one or more,
becomes vacant for any reason, the Board of Directors may choose a successor or
successors, who shall hold office at the pleasure of the Board.
ARTICLE V. Indemnification.
Each person who is, has been, or shall hereafter be, a director or
officer of the Corporation, or who is serving, may have served, or shall serve
at its request as a director or officer of another corporation, shall be
indemnified by the Corporation to the fullest extent to which indemnification is
permitted by subsections (a) through (i) of Section 145 of the Delaware General
Corporation Law.
The foregoing rights of indemnification shall inure to the benefit of
the personal representatives of such persons, and shall be in addition to any
other rights to which any such persons may be entitled to at law or agreement or
otherwise.
ARTICLE VI. Corporate Records and Statement.
6.1 Records. There shall be kept by the Corporation, either within or
without the State of Delaware, a record of the proceedings of the Stockholders
and of the Directors, and its By-Laws, including all amendments or alterations
thereto to date. An original or duplicate share register shall be kept at either
the registered office, or at the office of its transfer agent or registrar,
giving the names of the Stockholders, their respective addresses, and the number
and classes of shares held by each. The Corporation shall also keep appropriate,
complete and accurate books or records of account, which may be kept at its
registered office, or its principal place of business.
6.2 Annual Statement. The Chief Executive Officer and Board of
Directors shall present at each annual meeting of Stockholders such statement of
the business and affairs of the Corporation for the preceding year as they shall
deem appropriate. Upon written request of any Stockholder, the Corporation shall
mail to such Stockholder its balance sheet as at the end of the preceding fiscal
year, and its profit and loss statements for such fiscal year. Such statements
shall be prepared and presented in whatever manner the Board of Directors shall
deem advisable and need not be verified by a Certified Public Accountant.
ARTICLE VII. Share Certificates, Transfer of Stock, Etc.
7.1 Issuance. The Board of Directors shall have the power, by
Resolution duly adopted, to issue from time to time, in whole or in part, the
kinds or classes of shares authorized in the Certificate of Incorporation.
Share certificates shall bear the signature of the Chairman, the
Vice Chairman, die President or any Vice President, and the Secretary, any
Assistant Secretary, the
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Treasurer or any Assistant Treasurer, and the corporate seal, which may be a
facsimile, engraved or printed. Where such certificate is signed by a transfer
agent or a registrar, the signature of such officers upon such certificate may
be a facsimile, engraved or printed.
7.2 Transfers of Shares. Transfer of shares shall be made on the books
of the Corporation upon surrender of the certificates therefor, endorsed by the
person named in the certificate or by attorney, lawfully constituted in writing.
No transfer need be made inconsistent with the provisions of the Uniform
Commercial Code or other applicable Federal, State or Local Law.
No transfer or assignment shall affect the right of the Corporation
to pay any dividend due upon the stock, or to treat the registered holder as the
holder in fact, until such transfer or assignment is registered on the books of
this Corporation.
7.3 Absolute Owner. The Corporation shall be entitled to treat the
registered holder of any shares of the Corporation as the absolute owner
thereof, and accordingly shall not be bound to recognize any equitable or other
claim to, or interest in, such share, on the part of any other person, whether
or not the Corporation shall have express or other notice thereof.
7.4 Lost Destroyed or Mutilated Certificates. In the event that a share
certificate shall be lost, destroyed or mutilated, a new certificate may be
issued therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.
ARTICLE VIII. Miscellaneous Provisions.
8.1 Signatures on Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
8.2 Securities of Other Corporations. The Chief Executive Officer, or
the Secretary, shall have full power to vote, appoint proxies, or otherwise
perform any act as a Stockholder with respect to any shares or other securities
of any Corporation owned by this Corporation, including the power to sell,
convert, exchange, pledge or encumber such securities.
8.3 Fiscal Year. The fiscal year shall be such date as shall be
determined by the Board of Directors.
ARTICLE IX. Amendments.
9.1 These By-Laws may be altered, amended or repealed by a majority of
the members of the Board of Directors, or by a majority of those Common Shares
(plus such
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other shares as may then be entitled to vote with the Common Shares) present in
person or by proxy at any regular or special meeting duly organized.
* * * * * *
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EXHIBIT 3.17
ARTICLES OF INCORPORATION
OF
WESTERN INSULATED GLASS, CO.
KNOW ALL MEN BY THESE PRESENTS:
ARTICLE I
Name
The name of this corporation shall be "Western Insulated Glass, Co."
ARTICLE II
Place of Business
The known place of business of the Corporation shall be 5621 South 25th
Street, Phoenix, Arizona 85040.
ARTICLE III
Purpose
The purpose for which this corporation is organized is the transaction
of any and all lawful business for which corporations may be incorporated under
the laws of the State of Arizona, as they may be amended from time to time, and
specifically, but not in limitation thereof, the purpose of manufacturing or
fabricating insulated or insulating products of all kinds, including but not
limited to glass, glass items and related materials.
ARTICLE IV
Initial Business
The corporation initially intends to conduct the business of
manufacturing or fabricating insulated or insulating products of all kinds,
including but not limited to glass, glass items and related materials.
<PAGE> 2
ARTICLE V
Authorized Capital
The authorized capital stock of the corporation shall consist of
1,000,000 shares of common stock without a par or stated value, and 2,000,000
shares of preferred stock without a par or stated value, but with a liquidation
preference of $1.00 per share and with a noncumulative dividend preference of
$.12 per share per annum. Any of said shares of stock shall be issued when
ordered by the Board of Directors for cash, for services or for real or personal
property, and any and all shares so issued, the full consideration for which as
fixed by the Board of Directors has been paid or delivered, shall be deemed
fully paid and nonassessable. Both the common shares and the preferred shares
shall have one vote per share on all corporate matters.
ARTICLE VI
Board of Directors
The initial Board of Directors shall consist of two (2) members. The
number of persons to serve thereafter on the Board of Directors shall be fixed
by the By-Laws. The names and addresses of the persons who are to serve as
directors until the first annual meeting of shareholders or until their
successors are elected and qualify are:
Benny J. Ellis
5621 South 25th Street
Phoenix, Arizona 85040
Linda M. Ellis
5621 South 25th Street
Phoenix, Arizona 85040
ARTICLE VII
Indemnification
Subject to the further provisions hereof, the corporation shall
indemnify any and all of its existing and former directors, officers, employees
and agents, and their personal representatives and heirs, against all expenses
incurred by them and each of them, including but not limited to legal fees,
judgments, penalties, and amounts paid in settlement or compromise, which may
arise or be incurred, rendered, or levied in any legal action brought or
threatened against any of them for or on account of any action or omission
alleged to have been committed while acting within the scope of service as a
director, officer, employee, or agent of the corporation, whether or not any
action is or has been filed against them and
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whether or not any settlement or compromise is approved by a court, and whether
or not the legal action brought or threatened is by or in the right of the
corporation or by any other person. Provided, however, that such indemnification
shall not be mandatory unless the Board of Directors determines that such person
did not act, fail to act, or refuse to act with gross negligence or with
fraudulent or criminal intent in regard to the matter involved in the action or
contemplated action; provided, further that the corporation shall have the right
to refuse indemnification in any instance in which the person to whom
indemnification would otherwise have been applicable shall have unreasonably
refused to permit the corporation, at its own expense and through counsel of its
own choosing, to defend him or her in the action. The right of indemnification
provided in these Articles shall not be exclusive of any other right which such
directors of officers of the corporation, and the other persons mentioned above,
may have or hereafter acquire. A member of any committee appointed by the Board
of Directors shall have the same right of indemnification as a director,
officer, employee, or agent, as specified herein, with respect to the alleged
acts or omissions by him as a member of such committee.
ARTICLE VIII
Statutory Agent
The name and address of the initial statutory agent of the corporate
are:
McCabe, Polese & Pietzsch, P.A.
300 East Osborn Road
Suite 2000
Phoenix, Arizona 85012
ARTICLE IX
The name and addresses of the incorporators of the corporation are:
Benny J. Ellis
5621 South 25th Street
Phoenix, Arizona 85040
Linda M. Ellis
5621 South 25th Street
Phoenix, Arizona 85040
All powers, duties,and responsibilities of the incorporators shall
cease at the time of acceptance of these Articles of Incorporation by the
Arizona Corporation Commission for filing.
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IN WITNESS WHEREOF, we, the undersigned, have hereunto signed our names
this 21st day of March, 1986.
/s/ Benny J. Ellis
----------------------------------------
Benny J. Ellis
/s/ Linda Ellis
----------------------------------------
Linda M. Ellis
"Incorporators"
McCabe, Polese & Pietzsch, A Professional Association, an Arizona
professional corporation, having been designated to act as Statutory Agent,
hereby consents to act in that capacity until removal or registration is
submitted in accordance with the Arizona Revised Statutes.
McCABE, POLESE & PIETZSCH, A
PROFESSIONAL ASSOCIATION, an Arizona
professional corporation
By/s/ P. Douglas Folk
--------------------------------------
"Statutory Agent"
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EXHIBIT 3.18
BY-LAWS
OF
WESTERN INSULATED GLASS, CO
ARTICLE I
OFFICES AND CORPORATE SEAL
1. Principal office. The corporation shall maintain a principal office
at its known place of business in Maricopa County, Arizona.
2. Other Offices. The corporation may also maintain offices at such
other place or places, either within or without the State of Arizona, as may be
designated from time to time by the Board of Directors, and the business of the
corporation may be transacted at such other offices with the same effect as that
conducted at the principal office.
3. Corporate Seal. A corporate seal shall not be requisite to the
validity of any instrument executed by or on behalf of the corporation, but
nevertheless if in any instance a corporate seal be used, the same shall be
impressed as follows: "Western Insulated Glass, Co." "Incorporated 1973."
ARTICLE II
SHAREHOLDERS
1. Shareholders' Meetings. All meetings of shareholders shall be held
at such place as may be fixed from time to time by the Board of Directors, or,
in the absence of direction by the Board of Directors, by the President or
Secretary of the corporation, either within or without the State of Arizona, as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
2. Annual Meetings. Annual meetings of shareholders shall be held on
the Third Monday in October if not a legal holiday, and, if a legal holiday,
then on the next secular day following, or at such other date and time as shall
be designated from time to time by the Board of Directors and stated in the
notice of the meeting. At the annual meeting, shareholders shall elect a Board
of Directors and transact such other business as may properly be brought before
the meeting.
3. List of Annual Meeting. Written notice of the annual meeting stating
the place, date, and hour of the meeting shall be given to each shareholder of
record entitled to vote at such meeting not less than ten nor more than fifty
days before the date of the
<PAGE> 2
meeting. Shareholders entitled to vote at the meeting shall be determined as of
four o'clock in the afternoon on the day before notice of the meetings is sent.
4. List of Shareholders. The officer who has charge of the ledger of
the corporation shall prepare and make, at least ten days before every meeting
of shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address and the number
of shares registered in the name of each shareholder. Such list shall be open to
examination of any shareholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
is to be held, which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any shareholder present.
5. Special Meetings of Shareholders. Special meetings of the
shareholders, for any purposes, unless otherwise proscribed by statute or by the
Articles of Incorporation, may be called by the President and shall be called by
the President or Secretary at the request in writing of a majority of the Board
of Directors, or at the request in writing of shareholders owning a majority in
amount of the entire capital shares of the corporation issued, outstanding, and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meetings.
6. Notice of Special Meetings. Written notice of a special meeting
stating the place, date, and hour of the meeting and the purpose or purposes for
which the meeting is called shall be given, not less than ten nor more than
fifty days before the date of the meetings, to each shareholder of record
entitled to vote at such meeting. Business transacted at any special meeting of
shareholders shall be limited to the purpose stated in the notice, shareholders
entitled to vote at the meeting shall be determined as of four o'clock in the
afternoon on the day before notice of the meeting is sent.
7. Quorum and Adjournment. The holders of a majority of the shares
issued, outstanding, and entitled to vote at the meeting, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
statute or by the Articles of Incorporation. If, however, such quorum shall not
be present or represented at any meeting of the shareholders, the shareholders
entitled to vote at the meeting, present in person or represented by proxy,
shall have power to adjourn the meeting to another time or place, without notice
other than announcement at the meeting at which adjournment is taken, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record entitled to vote at the
meeting.
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8. Majority Required. When a quorum is present at any meeting, the vote
of the holders of a majority of the voting power present, whether in person or
represented by proxy, shall decide any question brought before such meetings,
unless the question is one upon which, by express provision of the statutes or
of the Articles of Incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
9. Voting. At every meeting of the shareholders, each shareholder shall
be entitled to one vote in person or by proxy for each capital share having
voting power held by such shareholder, but no proxy shall be voted or acted upon
after eleven months from its date, unless the proxy provides for a longer
period.
10. Action without Meeting. Any action required or permitted to be
taken at any annual or special meeting of shareholders may be taken without a
meeting, without prior notice, and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of all of the
outstanding shares entitled to vote with respect to the subject matter of the
action.
11. Waiver of Notice. Attendance of a shareholder at a meeting shall
constitute waiver of notice of such meeting, except when such attendance at the
meeting is for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Any shareholder
may waive notice of any annual or special meeting of shareholders by executing a
written notice of waiver wither before or after the time of the meeting.
ARTICLE III
DIRECTORS
1. Number. The number of Directors which shall constitute the whole
Board shall not be fewer than two (2) nor more than seven (7). The Directors
shall be elected at the annual meeting of the shareholders, except as provided
in Section 2 of this ARTICLE III, and each Director elected shall hold office
until his or her successor is elected and qualified.
Directors need not be shareholders.
2. Vacancies. Vacancies and newly created directorships resulting from
any increase in the authorized number of Directors may be filled by the
affirmative vote of a majority of the remaining Directors then in office, though
not less than a quorum, or by a sole remaining Director, and the Directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and qualified, unless sooner displaced. If there are
no Directors in office, then an election of Directors may be held in the manner
provided by statute.
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3. Powers. The business and affairs of the corporation shall be managed
by its Board of Directors, which may exercise all such powers of the corporation
and do all such lawful acts as are not by statute, the Articles of
Incorporation, or these By-Laws directed or required to be exercised or done by
the shareholders.
4. Place of Meetings. The Board of Directors of the corporation may
hold meetings, both regular and special, either within or without the State of
Arizona.
5. Annual Meetings. The first meeting of each newly elected Board of
Directors shall be held immediately following the annual meeting of shareholders
and in the same place as the annual meeting of shareholders, and no notice to
the newly elected Directors of such meeting shall be necessary in order legally
to hold the meeting, providing a quorum shall be present. In the event such
meeting is not held, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the Directors.
6. Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and at such place as shall from time be
determined by the Board.
7. Special Meetings. Special meetings of the Board may be called by the
President or the Secretary upon one (1) day's notice to each Director, either
personally, by mail, by telegram, or by telephone; special meetings shall be
called by the President or Secretary in like manner and in like notice on the
written request of two (2) Directors.
8. Quorum. A majority of the membership of the Board of Directors shall
constitute a quorum, and the concurrence of a majority of those present shall be
sufficient to conduct the business of the Board, except as may be otherwise
specifically provided by statute or by the Articles of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
Directors then present may adjourn the meeting to another time or place, without
notice other than announcement at the meeting, until a quorum shall be present.
9. Action without Meeting. Unless otherwise restricted by the Articles
of Incorporation or these By-Laws, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting, if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or committee.
10. Committee. The Board of Directors, by resolution adopted by the
whole Board, may designate from among its members an executive committee or one
or more other committees. Members of such committees shall serve at the pleasure
of the Board of Directors, and each member of any such committee may be removed
with or without cause at
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any time by the Board of Directors acting at a meeting or by unanimous written
consent. In the event any vacancy occurs in any such committee, the vacancy
shall be filled by the Board of Directors. The executive committee, if any,
shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the corporation, but shall not possess
any authority of the Board of Directors prohibited by law. Any other committee
designated by the Board of Directors shall have and may exercise only such
powers as are expressly granted thereto by the whole Board and which are not
prohibited by law.
11. Compensation. 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 stated salaries as
Directors. 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. The amount or rate of such compensation of members of the
Board of Directors or of committees shall be established by the Board of
Directors and shall be set forth in the minutes of the Board.
12. Waiver of Notice. Attendance of a Director at a meeting shall
constitute waiver of notice of such meeting, except when the person attends the
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Any Director may waive
notice of any annual, regular, or special meeting of Directors by executing a
written notice of waiver either before or after the time of the meeting.
13. Miscellaneous Duties. If any payment made to an office of the
corporation, including, but not limited to, amounts paid as reimbursed expenses,
amounts paid under the corporation's medical expense or diagnostic procedures
reimbursement plan, if any, salary, bonus, commission, interest, rent,
entertainment expense, or any other form of compensation or fringe benefit paid
by the corporation to or on behalf of the officer, is disallowed, in whole or in
part, by the federal or any state government as a deductible expense to the
corporation for purpose of computing the corporation's federal or state income
taxes, the officer shall repay to the corporation said disallowed amount within
ninety (90) days after notice by the corporation to the officer that it does not
intend to further contest said disallowance by administrative or court
proceedings. The corporation shall not be obligated to contest or appeal any
assessment made by any federal or state government against the corporation.
It shall be the duty of the Board of Directors to enforce payment to
the corporation of any such amount disallowed. In lieu of payment by an officer,
and subject to the determination of the Board of Directors, proportionate
amounts may be withheld from future compensation paid to the officer until the
sum due the corporation has been paid in full. It
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shall be the duty of the Board of Directors to provide written notice to each
officer of this provision.
ARTICLE IV
OFFICERS
1. Designation of Titles. The officers of the corporation shall be
chosen by the Board of Directors and shall be a President, a Secretary, and a
Treasurer. The Board of Directors may also choose a Chairman of the Board, and
one or more Vice-Presidents, Assistant Secretaries, and Assistant Treasurers.
Any number of officers, except the offices of President and Secretary, may be
held by the same person, unless the Articles of Incorporation of these By-Laws
otherwise provide.
2. Appointment of Officers. The Board of Directors at its first meeting
after each annual meeting of shareholders shall choose a President, a Secretary,
and a Treasurer, each of whom shall serve at the pleasure of the Board of
Directors. The Board of Directors at any time may appoint a Chairman of the
Board and such other officers and agents at it shall deem necessary to hold
offices at the pleasure of the Board of Directors and to exercise such powers
and perform such duties as shall be determined from time to time by the Board.
3. Salaries. The salaries of the officers shall be fixed from time to
time by the Board of Directors, and no officer shall be prevented from receiving
such salary by reason of the fact that he is also a Director of the corporation.
The salaries of the officers or the rate by which salaries are fixed shall be
set forth in the minutes of the meetings of the Board of Directors.
4. Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification, or otherwise may be filled by the Board of Directors
at any time.
5. Chairman of the Board. The Chairman of the Board, if one shall have
been appointed and be serving, shall preside at all meetings of the Board of
Directors and shall perform such other duties as from time to time may be
assigned to him or her.
6. President. The President shall preside at all meetings of
shareholders, and if a Chairman of the Board shall not have been appointed, or
having been appointed shall not be serving or be absent, the President shall
preside at all meetings of the Board of Directors. He or she shall sign all
deeds and conveyances, all contracts and agreements, and all other instruments
requiring execution on behalf of the corporation, and shall act as operating and
directing head of the corporation, subject to policies established by the Board
of Directors.
7. Vice-Presidents. There shall be as many Vice-Presidents as shall be
determined by the Board of Directors from time to time, and they shall perform
such duties as
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from time to time may be assigned to them. Any one of the Vice-Presidents, as
authorized by the Board, shall have all the powers and perform all the duties of
the President in case of the President's temporary inability to act. In case of
the permanent absence or inability of the President to act, the office shall be
declared vacant by the Board of Directors and successor chosen by the Board.
8. Secretary. The Secretary shall see that the Minutes of all meetings
of shareholders, of the Board of Directors, and of any standing committees are
kept; shall be the custodian of the corporate seal and shall affix it to all
instruments when deemed proper by the Secretary; shall give or cause to be given
required notices of all meetings of the shareholders and of the Board of
Directors; shall have charge of all the books and records of the corporation
except the books of account, and in general shall perform all the duties
incident to the office of Secretary of a corporation, and such other duties as
may be assigned to him or her.
9. Treasurer. The Treasurer shall have general custody of all the funds
and securities of the corporation except such as may be required by law to be
deposited with any state official; shall see to the deposit of the funds of the
corporation in such bank or banks as the Board of Directors may designate; shall
direct and supervise the keeping of regular books of account; shall render
financial statements to the President, Directors, and shareholders at proper
times; and shall have charge of the preparation and filing of such reports,
financial statements, and returns as may be required by law. The Treasurer shall
give to the corporation such fidelity bond as may be required, the premium for
which shall be paid by the corporation as an operating expense.
10. Assistant Secretaries. There may be such number of Assistant
Secretaries as from time to time the Board of Directors may determine, and such
persons shall perform such functions as from time to time may be assigned to
them. No Assistant Secretary shall have power or authority to collect, account
for, or pay over any tax imposed by any federal, state, or city government.
11. Assistant Treasurers. There may be such number of Assistant
Treasurers as from time to time the Board of Directors may determine, and such
persons shall perform such functions as from time to time may be assigned to
them. No Assistant Treasurer shall have the power or authority to collect,
account for, or pay over any tax imposed by any federal, state, or city
government.
ARTICLE V
REPEAL, ALTERATION, OR AMENDMENT
These By-Laws may be repealed, altered, or amended, or substitute
By-Laws may be adopted, at any time only by a majority of the Board of
Directors.
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DATED: April 15, 1986
/s/ Benny J. Ellis
--------------------------------------
BENNY J. ELLIS, PRESIDENT
ATTEST:
/s/ Linda Ellis
- -----------------------------------
LINDA M. ELLIS, SECRETARY
8
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is executed as of the 17th
day of November, 1997 by and between AMERICAN ARCHITECTURAL PRODUCTS
CORPORATION, a Delaware corporation ("Company"), and FRANK J. AMEDIA
("Employee").
RECITALS
A. Company desires to retain Employee as its President and Chief
Executive Officer, in accordance with provisions of this Agreement.
B. Employee desires to act as Company's President and Chief Executive
Officer, in accordance with the provisions of this Agreement.
PROVISIONS
In consideration of the mutual covenants and agreements contained in
this Agreement, the parties agree as follows:
1. APPOINTMENT OF PRESIDENT AND CHIEF EXECUTIVE OFFICER. Company hereby
employs Employee to serve as its President and Chief Executive Officer. As the
President and Chief Executive Officer of Company, Employee shall (a) be
responsible for managing the day-to-day operations of Company, (b) be
responsible for developing Company's strategic plans, and (c) perform such other
services ana duties which are commensurate with Employee's position as President
and Chief Executive Officer as may be determined from time to time by Company's
Board of Directors.
2. PERFORMANCE. Employee shall devote his full time and effort to the
performance of his duties as an employee of Company and in accordance with the
policies and procedures and standards of performance in respect to the services
performed by him as are determined by the Board of Directors of Company from
time to time while this, Agreement is in force. This Agreement shall rot be
construed as preventing Employee from engaging in transactions unrelated to his
duties as an employee or from making investments of his assets, so long as they
do not conflict ut any manner with his employment as provided in this Agreement.
3. COMPENSATION. During, the "Term" of this Agreement (as that term is
defined in Section 9 of this Agreement), Employee shall receive compensation as
follows:
(a) Base Compensation. For all of the services to be rendered by
Employee in any capacity hereunder, Company will pay to employee the
sum of Twenty-Nine Thousand One Hundred Sixty-Six and 67/100 Dollars
($29,166.67) per month, payable in accordance with Company's normal
payroll practices ("Base Compensation").
<PAGE> 2
(b) Annual Bonus. In addition to the Base Compensation, Company will
pay to employee a bonus equal to (i) Employee's annual Base
Compensation, provided Company's pre;tax profits are equal to ten
percent (10%) of consolidated net sales for such fiscal year, (ii)
fifty percent (50%) of Employee's annual Base Compensation provided
Company's consolidated pre-tax profits are equal to five percent (5%)
of consolidated net sales for such fiscal year, (iii) a pro-rated
amount equal to fifty to one hundred percent (50-100%) of Employee's
Annual Base Compensation, provided Company's consolidated pre-tax
profits are equal to between five percent (5%) and ten percent (10%) of
consolidated net sales for such fiscal year, or (iv) an amount to be
established at the sole discretion of the Board of Directors, provided
Company's consolidated pre-tax profits are less than five percent (5%)
for such fiscal year (the "Annual Bonus"). The Annual Bonus shall be
determined by the Board of Directors within 90 days following the end
of each fiscal year and shall be paid to Employee no later an the 120th
day following the end of each fiscal year.
(c) Transaction Bonus. Upon the receipt by Company of the proceeds
of that certain Section 144A debt offering (the "Debt Offering")
substantially in accordance with the terms and conditions described in
the Indicative Term Sheet, dated November 3, 1997, and in the draft
Offering Memorandum, dated October 31, 1997, and upon the closing of
the Danvid Company acquisition and the Binnings Building Products, Inc.
acquisition, Company shall pay Employee a one-time bonus of Two Hundred
Fifty Thousand Dollars ($250,000).
(d) Stock Options. Incentive stock options will be provided to
Employee pursuant to the terns of the Incentive Stock Option Plan of
Company.
(e) Country Club Membership. The membership fee and monthly dues for
Employee to be a member of the Tippecanoe Country Club located in or
near Boardman, Ohio shall be paid by Company. In the event the
Tippecanoe Country Club is sold or ceases to operate for any reason, en
the country club membership fee and monthly dues for Employee to become
a member of a country club substantially similar to Tippecanoe County
Club shall be paid by Company.
4. VACATION. Employee shall be entitled to four (4) weeks paid vacation
per year and the weeks of vacation shall not accumulate from year to year.
5. INSURANCE. During the Term of this Agreement, Employee shall be
provided with insurance as follows:
(a) Health Insurance. Employee will be provided with the same
medical and dental coverage provided to all regular employees of
Company. Company will pay the cost of such medical and dental coverage
for Employee and his immediate family (i.e., spouse and dependent
children).
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<PAGE> 3
(b) Disability Insurance. Company will provide and pay the premiums
for a long-term disability policy providing for coverage in the amount
of sixty percent (60%) of Employee's current annual Base Compensation.
(c) Life Insurance. Company shall provide and pay the premiums on a
split-dollar life insurance policy on the life of Employee to include a
$1,000,000 benefit payable to Employee's beneficiaries upon his death
and a $2,000,000 benefit payable to Company on his death, in accordance
with the terms of a separate agreement to be provided.
6. AUTOMOBILE. During the Term of this Agreement, Company will provide
to Employee (a) a car allowance in the amount of Seven Hundred Fifty Dollars
($750.00) per month and (b) reimbursement for maintenance and insurance
maintained by Employee on the vehicle utilized by Employee for business
purposes.
7. DISCLOSURE OF INFORMATION. During the Term of this Agreement and for
a period of two (2) years after the termination of this Agreement, Employee
shall not disclose any confidential or proprietary information concerning
Company and/or its products, methods of doing business, and the needs of its
Customers and employees including, but not limited to, customer lists and
records, policy manuals, price lists, business contacts, processes, devices,
plans, models, inventions, proprietary technology, supply sources, opportunities
for new business, financial and business methods and activities, financial
records, trade secrets, business techniques or processes (collectively, the
"Confidential Information") to any person, corporation, partnership, sole
proprietorship, governmental agency, organization, joint venture, or other
entity other an in the performance of his duties under this Agreement in
accordance with the provisions of is Agreement, Confidential Information will
not include information that is publicly available or becomes publicly known or
available through actions which are not attributable, directly or indirectly, to
Employee. Should Employee violate is provision of this Agreement, Company shall
be entitled to an action for injunctive relief as well as monetary damages, and
any payments of compensation remaining to be paid to Employee shall terminate
and no longer be required to be paid to Employee
8. NON-COMPETITION AND NON-SOLICITATION.
(a) Non-Competition. As an inducement to Company to engage Employee,
Employee covenants with Company that during the Term of this Agreement
and for a period of two (2) years following the date of termination of
is Agreement by Company for cause or by Employee (de "Non-Compare
Period"), Employee shall not, individually, or for, on behalf of, or in
conjunction with, any other individual company or other entity or
person, directly or indirectly, own (in whole or in part), manage,
operate, control, be an agent for, participate in, or be connected in
any manner with the ownership, management, operation, or control of any
corporation, partnership, proprietorship, or other business entity
engaged in a business which is the same as, or similar to, or competes
with, Company in all countries where Company is conducting or engaging
in the building products business at any time during the Non-Compete
Period.
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<PAGE> 4
(b) Non-Solicitation; Non-Interference. During the Term of this
Agreement and ending three (3) years after the termination of is
Agreement by Company for cause or by Employee, Employee shall nor,
directly or indirectly:
(i) Solicit customers, business, patronage, or orders for
himself or for any person, firm, association, corporation, or other
entity engaged in a business that competes with Company's business,
or supervise sales agents or representatives in such sales
activities;
(ii) Employ or otherwise associate business with any officer or
employee of Company and/or any of its subsidiaries or affiliates; or
(iii) Induce any of officer, employee, or consultant of, or to,
Company and/or any of its subsidiaries or affiliates.
(c) Trade Secrets and Confidential Information. Employee
acknowledges that he has had, and during the Term shall continue to
have, access to and shall acquire Confidential Information. Employee
acknowledges at all of the Confidential Information is solely the
property of Company and constitutes trade secrets and confidential
information of Company and, upon termination of this Agreement,
Employee's knowledge of the Confidential Information shall enable him
to compete with Company in a manner likely to cause Company irrevocable
harm upon the disclosure of such matters. Employee hereby irrevocably
represents, warrants, and covenants that, during the Term of is
Agreement and ending two (2) years after the termination of this
Agreement by Employee or by Company for cause, he shall (i) not
disclose, directly or indirectly, any of the Confidential Information
to any individual, firm, corporation, or other entity, (ii) return all
of the Confidential Information his possession (without retaining
copies of any Confidential Information) to Company within five (5)
calendar days after the date his employment with Company is terminated
for any reason, and (iii) certify to Company that he has so complied.
9. TERM. Except in the case of earlier termination as specifically
provided for in Section 10 of this Agreement, the term of this Agreement shall
begin as of November 17, 1997, and shall continue for a period of three (3)
years thereafter, after which the term will continue on an annual basis until
one party notifies the other party, in writing, at least sixty (60) days prior
to its termination of is Agreement (the "Term"). In the event the Debt Offering
is not funded for any reason, this Agreement shall be null and void.
10. TERMINATION.
(a) Without Cause. The services of Employee may be terminated at
any time, without cause, by Employee or Company, upon Sixty (60) days'
advance written notice to the other party. the event Employee
terminates this Agreement, the obligations of each party under this
Agreement shall cease and shall be null and void upon the effective
date of such termination except for the provisions of Sections 7 and 8
of this Agreement which shall continue to be binding upon Employee
pursuant to their provisions and
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<PAGE> 5
except for the obligations to pay Employee any accrued but unpaid Base
Compensation, bonus (if any), and benefits. In the event Company
terminates this Agreement pursuant to the provisions of is Section
10(a), the obligations of each party under this Agreement shall cease
and shall be null and void upon the effective date of such lamination
except (i) for the provisions of Section 3(a), 5, and 12 of this
Agreement which shall continue to be binding upon Company and except
for the obligations to pay Employee any accrued but unpaid Base
Compensation, bonus (if any), and benefits, and (ii) the provisions of
Sections 7 and 8 of this Agreement which shall continue to be binding
upon Employee.
(b) By Company for Cause. Company may terminate Employee, for good
cause, at any time during the Term of this Agreement upon giving
Employee ten (10) days written notice of its intent to terminate his
service. In the event of such termination, Employee shall not be
entitled to any benefits, nights, bonuses, or privileges under this
Agreement past the day of termination except for payment of any accrued
but unpaid Base Compensation, bonus (if any), and benefits. "Good
cause" shall be defined as (i) a material breach of this Agreement,
(ii) the negligence or willful mis-performance or non-performance by
Employee of his obligations and/or dudes under is Agreement, or (iii)
the commission of fraudulent or criminal acts on the part of Employee
which are adverse to de interests of Company.
11. SUCCESSORS. This Agreement shall not be terminate by the voluntary
dissolution of Company or its parent, subsidiary or successor, or merger whereby
Company (or such parent, subsidiary or successor corporation) is not the
surviving or resulting corporation, or any transfer of substantially all of the
assets of Company. the event of any such merger or consolidation or transfer of
assets, the provisions of this Agreement shall inure to the benefit of the
entity to which assets shall be transferred.
12. PERSONAL SERVICES. The services of Employee are of a personal
nature to Company md may not be assigned or transferred by Employee to any other
person, firm, corporation, or other entity without the prior express and written
consent of Company which may be arbitrarily withheld.
13. NOTICES. All notices, demands and other communications to be given
or delivered pursuant to this Agreement shall be in writing and shall be deemed
to have been given after (a) personal delivery or (b) twenty-four (24) hours
from transmission by telecopier or facsimile or (c) three (3) days from deposit
the mails registered or certified mail, return receipt requested, and postage
prepaid to the party to whom notice is to be give, in any case at the following
addresses:
If to Employee: Frank J. Amedia
496 South Blaircliff Drive
Canfield, Ohio 44406
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If to Company: American Architectural Products Corporation
755 Boardman-Canfield Road, Building G - West
Boardman, Ohio 44512
Attn: Jonathan K. Schoenike
Facsimile: (330) 965-9915
with a copy to: American Commercial Holdings, Inc.
812 Huron Road, East, No. 880
Cleveland, Ohio 44115-1126
Attn: James E. Phillips
Facsimile: (216) 687-6740
or such other address as such party may designate from time to time in a notice
given thereunder.
14. GOVERNING LAW. It is agreed that this Agreement shall be governed
by, construed, and enforced in accordance with the laws of the State of Ohio.
15. ENTIRE AGREEMENT. This Agreement shall constitute the entire
agreement between the parties. Any prior understanding or representation of any
kind preceding the date of this Agreement shall not be binding upon either party
except to the extent incorporated in this Agreement.
16. MODIFICATIONS. Any modification of this Agreement or additional
obligation assumed by either party in connection with this Agreement shall be
binding only if evidenced in writing and signed by each party or an authorized
representative of each party.
17. NO WAIVER. The failure of either party to this Agreement to insist
upon the performance of any of the terms and conditions of this Agreement, or
the waiver of any breach of any of the terms and conditions of this Agreement,
shall not be construed as thereafter waiving any such teens and conditions, but
the same shall continue and remain in full force and effect as if no such
forbearance or waiver had occurred.
18. ATTORNEY FEES. In the event that any action is filed relation to
this Agreement, the unsuccessful party in the action shall pay to the successful
party, in addition to all the sums that either party may be called on to pay, a
reasonable sum for the successful party's attorney's fees.
19. EFFECT OF PARTIAL INVALIDITY. The invalidity of any portion of this
Agreement will not and shall not be deemed to affect the validity of any other
provision. In the event that any provision of this Agreement is held to be
invalid, the parties agree that the remaining provisions shall be deemed to be
in full force and effect as if they had been executed by both parties subsequent
to the expungement of the invalid provisions.
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20. PARAGRAPH HEADINGS. The titles to the paragraphs of this Agreement
are solely for the convenience of the parties and shall not be used to explain,
modify, simplify, or aid in the interpretation of the provisions of this
Agreement
21. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the heirs, personal representatives, successors, and permitted
assigns of the respective parties to this Agreement.
22. CHANGE IN CONTROL. In the event (a) all or substantially all of the
assets of Company are sold, (b) AAP Holdings, Inc. ("AAP") sells shares of
common stock of Company such at AAP no longer owns at least thirty-one percent
(31%) of the issued and outstanding shares of Company, or (c) Company merges
with or into another entity such at AAP does not own at least thirty-one percent
(31 %) of de ownership interest of such an entity (collectively, the "Change in
Control"), and if Employee notifies Company and AAP in writing on or within ten
(10) days after Employee knows such a Change ut Control has occurred that
Employee objects to the Change in Control, then Company shall pay to Employee an
amount equal to one times his Base Compensation.
23. REIMBURSEMENT OF EXPRESS. Upon the submission of invoices paid by
Employee to advisors he engaged to assist him in the negotiation and preparation
of is Agreement, Company shall reimburse Employee for all reasonable expenses
incurred by him in connection therewith up to an aggregate maximum amount of
$7,500 in accordance with Company's policies and procedures.
IN WITNESS WHEREOF, each party to this Agreement has caused it to be
executed on the date indicated on Page 1 of this Agreement.
EMPLOYEE: COMPANY:
AMERICAN ARCHITECTURAL PRODUCTS
CORPORATION
/s/ Frank J. Amedia By:/s/ George S. Hofmeister
- ------------------------------ --------------------------------
FRANK J. AMEDIA George S. Hofmeister
Chairman of the Board
7
<PAGE> 1
EXHIBIT 10.4a
OFFICE/SHOWROOM/WAREHOUSE
LEASE AGREEMENT
THE STATE OF TEXAS
COUNTY OF DALLAS
THIS LEASE AGREEMENT, made and entered into as of the day of
December, 1989, by and between the Landlord and Tenant hereinafter named.
W I T N E S S E T H:
1. Definitions and Basic Provisions. The following definitions and
basic provisions shall be used in conjunction with and limited by the reference
thereto in the provisions of this lease:
(a) "Landlord": Centre Consolidated Properties, Ltd.
(b) "Tenant": Danvid Company, Inc.
(c) "Premises" shall mean the space outlined in red on the
plan attached hereto as Exhibit "A," said premises consisting of 51,497 square
feet of net rentable area. (In determining net rentable area, all measurements
are from the outer surfaces of walls, whether exterior walls and/or hallway
walls, except party walls where measurements are from centerline.) The Premises
are located within the Beltline Business Center Office/Showroom/ Warehouse
project (the "Project'). The net rentable area of the project is 753,984 square
feet.
(d) "Lease Term": A period of sixty (60) months, commencing on
January 1, 1990 (the "Commencement date") and ending on December 31, 1994.
(e) "Basic Rental": $13,088.82 per month.
(f) "Security Deposit": $13,088.82.
(g) "Permitted Use": Manufacturing and assembly of aluminum
windows and doors.
2. Lease Grant. Landlord, in consideration of the rent to be paid and
the other covenants and agreements to be performed by Tenant and upon the terms
and conditions hereinafter stated, does hereby lease, demise and let unto Tenant
the premises (as defined in paragraph 1(c) hereof) commencing on the
commencement date (as defined in paragraph 1(d) hereof, or as adjusted as
hereinafter provided) and ending on the last day of the lease term, unless
sooner terminated as herein provided. 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 commencement date of this lease,
Landlord shall not be deemed to be in default hereunder, and Tenant agrees to
accept possession at such time as Landlord is able to tender the same and such
date shall be deemed to be the commencement date and this lease shall continue
<PAGE> 2
for the lease term described in paragraph 1(d) hereof, Landlord hereby waives
payment of rent covering any period prior to the tendering of possession of the
premises to Tenant hereunder. Likewise, should Tenant occupy the premises prior
to the commencement date specified in paragraph 1(d), the commencement date
shall be altered to coincide with said occupancy with the ending date of the
lease remaining unchanged. By occupying the premises, Tenant shall be deemed to
have accepted the same as suitable for the purpose herein intended and to have
acknowledged that the same comply fully with Landlord's covenants and
obligations.
3. Rent. In consideration of this lease, Tenant promises and agrees to
pay Landlord the basic rental (as defined in paragraph 1(e) hereof) without
deduction or set off, for each month of the entire lease term. One such monthly
installment together with the security deposit (as defined in paragraph 1(f)
hereof) shall be payable by Tenant to Landlord contemporaneously with the
execution hereof, and a like monthly installment shall be due and payable
without demand on or before the first day of each succeeding calendar month
during the term hereof. Rent for any fractional month at the beginning or end of
the lease shall be prorated. The security deposit shall be held by Landlord
without liability for interest and as security for the performance by Tenant of
Tenant's covenants and obligations under this lease, it being expressly
understood that such deposit shall not be considered an advance payment of
rental or a measure of Landlord's damages in case of default by Tenant. Upon the
occurrence of any event of default by Tenant, Landlord may, from time to time,
without prejudice to any other remedy, use such deposit to the extent necessary
to make good any arrearages of rent and any other damage, injury, expense or
liability caused to Landlord by such event of default. Following any such
application of the security deposit, Tenant shall pay to Landlord on demand the
amount so applied in order to restore the security deposit to its original
amount. If Tenant is not then in default hereunder, any remaining balance of
such deposit shall be returned by Landlord to Tenant upon termination of this
lease. If Landlord transfers its interest in the premises during the lease term,
Landlord may assign the security deposit to the transferee and thereafter shall
have no further liability for the return of such security deposit.
4. Rental Escalation. The basic rental payable under paragraph 1(e)
hereof is based on factors existing during the calendar year in which the lease
commences ("base year"), said factors including operating expenses which include
landscape, general maintenance, repairs, real property taxes, fire, casualty and
liability insurance, and management for the project. Expenses for landscape,
general maintenance and repairs shall not exceed a five percent (5%) increase
per year during the lease term. In the event that during the lease term said
operating expenses for 1991 or any succeeding calendar year exceed 1990 base
year expenses ("base expense rate") for the net rentable areas of the project
(as defined in paragraph 1(c) hereof), Tenant within thirty (30) days after
written notification of the foregoing by Landlord, shall:
(a) Pay to Landlord as additional rental Tenant's
proportionate share (6.8%), of such excess (the "Excess") over the base expense
rate for the year in question, said proportionate share being defined to mean a
fraction, the numerator of which is the square footage of the Premises set out
in paragraph 1(c), and the denominator of which is the total net rentable area
of the Project also set out in paragraph 1(c). The product resulting from the
application of such fraction to the Excess shall constitute the amount of
additional rent Tenant shall pay. Tenant shall, on demand, pay to Landlord such
amount.
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(b) Additionally, beginning January 1 of any calendar year
following a year in which there is an Excess, the basic rental per month set out
in paragraph 1(c) shall be increased by an amount equal to the additional rent
payable during the immediately preceding year (determined in accordance with
subparagraph 4(a) above), divided by twelve. Any such additional rent collected,
pursuant to this paragraph 4(b), shall be a credit against the amount of
additional rental, if any, due from Tenant pursuant to paragraph 4(a) for such
calendar year. After the end of every calendar year Landlord will deliver to
Tenant a statement including (i) the previous calendar years operating expenses
(as defined in paragraph 4), (ii) Tenant's proportionate share of any increases,
(iii) the net additional rent due pursuant to paragraph 4(a), if any, after
crediting to Tenant amounts paid as additional rent under 4(b) or the amount due
to be reimbursed to Tenant; provided, however, in no event shall the monthly
rental ever be less than the basic rental specified in paragraph 1(e).
Notwithstanding any expiration or termination of this lease prior to
the lease expiration date (except in the case of a cancellation by mutual
agreement) Tenant's obligation to pay any and all additional rent under this
lease shall cover all periods up to the lease expiration date. Landlord shall be
entitled to estimate the amount of additional rent which shall be due from
Tenant during the last year or portion of a year of the lease term at any time
within thirty (30) days prior to the expiration of the lease term, and Tenant
shall pay such amount to Landlord upon demand (subject to adjustments when
actual expenses are known). Tenant's obligation to pay any and all additional
rent under this lease and Landlord's and Tenant's obligation to make the
adjustments referred to in this paragraph 4 shall survive any expiration or
termination of this lease Landlord shall be entitled to make.
5. Services.
(a) Landlord agrees to make available to the premises at
Landlord's sole cost and expense (i) water at those points as shown on Exhibit
"B"; (ii) air conditioning and heating units at such locations and in such
amounts as shown in Exhibit "B"; (iii) electric services and outlets as shown on
Exhibit "B"; and (iv) electrical lighting services for all common areas in the
manner and as to the extent deemed by Landlord to be standard.
(b) Tenant shall pay for the electricity, gas and water
utilized in operating any and all facilities serving the leased premises.
(c) Failure to any extent to furnish or any stoppage or
interruption of these defined services resulting from any cause shall not render
Landlord liable in any respect for damages to either person, property or
business, nor be construed as an eviction of Tenant or work an abatement of
rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof.
Tenant shall have no claim for abatement of rent or damages on account of any
interruption in service occasioned thereby or resulting therefrom.
6. Leasehold Improvements. Landlord agrees to install at
Landlord's cost and expense the improvements described in Exhibit "B" attached
hereto. Landlord has made no representations as to the conditions of the
premises or the Building or to remodel, repair or decorate, except as expressly
set forth herein.
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7. Signs. Tenant shall have the right to install signs upon the
exterior of said building only when first approved in writing by Landlord in
Landlord's sole discretion and subject also to any applicable governmental laws,
ordinances, regulations and other requirements. Tenant shall remove all such
signs no later than thirty (30) days prior to the expiration of this Lease. In
the event Tenant fails to remove all such signs within the above time period,
Landlord shall be authorized to remove such signs on Tenant's behalf and at
Tenant's sole expense, and Tenant hereby agrees to indemnify and hold Landlord
harmless from and against any and all costs, expenses, claims and other
liabilities of any type arising out of such sign removal. All sign installments
and removals by Tenant shall be made in such a manner as to avoid injury to or
defacement of the Building and other improvements.
8. Use. Tenant shall use the premises only for the permitted use (as
defined in paragraph 1(g) hereof). Tenant will not occupy or use the premises,
or permit any portion of the premises to be occupied or used, for any business
or purpose other than the permitted use or for any use or purpose which is
unlawful in part or in whole or deemed to be disreputable in any manner or
extrahazardous on account of fire, nor permit anything to be done which will in
any way increase the rate of fire insurance on the Building or contents; and in
the event that, by reason of acts of Tenant, there shall by any increase in rate
of insurance on the Building or contents created by Tenant's acts or conduct of
business then such acts of Tenants shall be deemed to be an event of default
hereunder and Tenant hereby agrees to pay to Landlord the amount of such
increase on demand and acceptance of such payment shall not constitute a waiver
of any of Landlord's other rights provided herein. Tenant will conduct its
business and control its agents, employees and invitees in such a manner as not
to create any nuisance, nor interfere with, annoy or disturb other tenants or
Landlord in management of the Building. Tenant will maintain the premises in a
clean, healthful and safe condition and will comply with all laws, ordinances,
orders, rules and regulations (state, federal, municipal and other agencies or
bodies having any jurisdiction thereof) with reference to use, condition or
occupancy of premises. Tenant will not, without the prior written consent of
Landlord, [illegible], install lighting or decoration, or install any signs,
window or door lettering or advertising media of any type on or about the
premises or any part thereof. Should Landlord agree in writing to any of the
foregoing items in the preceding sentence, Tenant will maintain such permitted
item in good condition and repair at all times.
9. Repairs and Maintenance.
(a) By Landlord: Landlord shall at its expense maintain only the
roof, foundation, underground or otherwise concealed plumbing, and the
structural soundness of the exterior walls (excluding all windows, window glass,
plate glass, and all doors) of the Building in good repair and condition, except
for reasonable wear and tear. Landlord shall not be responsible for termite
eradication. Tenant shall give immediate written notice to Landlord of the need
for repairs or corrections and Landlord shall proceed promptly to make such
repairs or corrections. Landlord's liability hereunder shall be limited to the
cost of such repairs or corrections.
Landlord represents that at the beginning date of this Lease the
plumbing, and any fire protection sprinkler system, heating system,
air-conditioning equipment, and elevators are in
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good operating condition. In addition, Landlord shall maintain the paving
outside the Building, the landscaping and regular mowing of grass and any
railroad siding.
(b) By Tenant: Tenant shall at its expense and risk maintain all
other parts of the Building and other improvements on the demised premises in
good repair and condition, including but not limited to repairs (including all
necessary replacements) to the interior plumbing, windows, window glass, plate
glass, doors, heating system, air-conditioning equipment, fire protection
sprinkler system, elevators, and the interior of the Building in general. All
warranties and guarantees in effect on any of the items mentioned above will be
for Tenant's or Landlord's use as applicable.
In event Tenant should neglect reasonably to maintain the demised
premises, Landlord shall have the right (but not the obligation) to cause
repairs or corrections to be made and any reasonable costs therefor shall be
payable by Tenant to Landlord as additional rental on the next rental
installment date.
10. Alterations and Improvements. At the end or other termination of
this lease, Tenant shall deliver up the premises with all improvements located
thereon (except as otherwise herein provided) in good repair and condition,
reasonable wear and tear excepted, and shall deliver to Landlord all keys to the
premises. The cost and expense of any repairs necessary to restore the condition
of the leased premises to said condition in which they are to be delivered to
Landlord shall be borne by Tenant. Tenant will not make or allow to be made any
alterations or physical additions in or to the premises without the prior
written consent of Landlord, which consent shall not be unreasonably withheld as
to non-structural alterations. All alterations, additions or improvements
(whether temporary or permanent in character) made in or upon the premises,
either by Landlord or Tenant, shall be Landlord's property on termination of
this lease and shall remain on the premises without compensation to Tenant. All
furniture, movable trade fixtures and equipment installed by Tenant may be
removed by Tenant at the termination of this lease if Tenant so elects, and
shall be so removed if required by Landlord, or if not so removed shall, at the
option of Landlord, become the property of Landlord. All such installations,
removals and restoration shall be accomplished in a good workmanlike manner so
as not to damage the premises or the primary structure or structural qualities
of the Building or the plumbing, electrical lines or other utilities.
11. Common Areas. The use and occupation by Tenant of the leased
premises shall include the use in common with others entitled thereto of the
common areas, parking areas, service roads, loading facilities, sidewalks, and
other facilities as may be designated from time to time by Landlord, subject,
however, to the terms and conditions of this agreement and to reasonable rules
and regulations for the use thereof as prescribed from time to time by Landlord.
All common areas described above shall at all times be subject to the
exclusive control and management of Landlord, and Landlord shall have the right
from time to time to establish, modify and enforce reasonable rules and
regulations with respect to all facilities and areas mentioned in this Article.
Landlord shall have the right to construct, maintain, and operate lighting
facilities on all said areas and improvements; to police same; from time to time
to change the area, level, location and arrangement of parking areas and other
facilities hereinabove
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referred to; and to restrict parking by tenants, their officers, agents and
employees to employee parking areas.
All common areas and facilities not within the leased premises, which
Tenant may be permitted to use and occupy, are to be used and occupied under a
revocable license, and if the amount of such areas be diminished, Landlord shall
not be subject to any liability nor shall Tenant be entitled to any compensation
or diminution or abatement of rent, nor shall such diminution of such areas be
deemed constructive or actual eviction.
12. Assignment and Subletting.
(a) Tenant shall not, without Landlord's prior written
consent, assign, sublease, transfer, encumber this lease or any interest
therein. Any attempted assignment or sublease by Tenant in violation of the
terms and covenants of this paragraph shall be void.
(b) If Tenant requests Landlord's consent to an assignment of
the Lease or subletting of all or a part of the Premises, Landlord shall have
the option (without limiting Landlord's other rights hereunder) of terminating
this Lease upon thirty (30) days notice and of dealing directly with the
proposed assignee. If Landlord should fail to notify Tenant in writing of its
decision within a thirty (30) day period after Landlord shall be deemed to have
refused to consent to any assignment or subleasing, and to have elected to keep
this Lease in full force and effect.
(c) All cash or other proceeds of any assignment, sale or
sublease of Tenant's interest in this Lease, whether consented to by Landlord or
not, shall be paid to Landlord notwithstanding the fact that such proceeds
exceed the rentals called for hereunder, unless Landlord agrees to the contrary
in writing, and Tenant hereby assigns all rights it might have or ever acquire
in any such proceeds to Landlord. This covenant and assignment shall run with
the land and shall bind Tenant and Tenant's heirs, executors, administrators,
personal representatives, successors and assigns. Any assignee, sublessee or
purchaser of Tenant's interests in this Lease (all such assignees, sublessees
and purchasers being hereinafter referred to as "Successors"), by assuming
Tenant's obligations hereunder shall assume liability to Landlord for all
amounts paid to persons other than Landlord by such Successor in consideration
of any such sale, assignment or subletting, in violation of the provisions
hereof.
13. Indemnity. Landlord shall not be liable for and Tenant will
indemnify and save harmless Landlord of and from all fines, suits, claims,
demands, losses and actions (including attorneys' fees) for any injury to person
or damage to or loss of property on or about the premises caused by the
negligence or misconduct or breach of this lease by Tenant, its employees,
subtenants, invitees or by any other person entering the premises or the
Building under express or implied invitation of tenant or arising out of
Tenant's use of the premises. Landlord shall not be liable or responsible for
any loss or damage to any property or death or injury to any person occasioned
by theft, fire, Act of God, public enemy, injunction, riot, strike,
insurrection, war, court order, requisition or other governmental body or
authority, by other tenants of the Building or any other matter beyond control
of Landlord, or for any injury or damage or inconvenience which may arise
through repair or alteration of any part of the
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Building, or failure to make repairs, or from any cause whatever except
Landlord's gross negligence.
14. Liability Insurance. Tenant shall procure and maintain through the
Lease Term a policy or policies of public liability insurance, at its own cost
and expense, relating to its respective use and/or occupancy of the Premises,
with limits of not less than $1,000,000, with respect to injuries to or death of
any one person, and in an amount not less than $1,000,000 with respect to any
one accident or disaster, and of not less than $1,000,000 with respect to
property damaged or destroyed. Tenant shall obtain a written obligation from
each insurance company issuing the insurance required to be maintained by Tenant
pursuant to this paragraph to notify Landlord at least ten (10) days prior to
the expiration or cancellation of such insurance. Such policies or duly executed
certificates of insurance shall be promptly delivered to Landlord and renewals
thereof, as required, shall be delivered to Landlord at least thirty (30) days
prior to the expiration of the respective policies.
15. Subordination. Tenant accepts this Lease subject and subordinate to
any mortgage, deed of trust or other lien presently existing or hereafter
arising upon the Premises, or upon the Project and to any renewals, refinancing
and extensions thereof, but Tenant agrees that any such mortgagee shall have the
right at any time to subordinate such mortgage, deed of trust or other lien of
this Lease on such term and subject to such conditions as such mortgagee may
deem appropriate in its discretion. Landlord is hereby irrevocably vested with
full power and authority to subordinate this Lease to any first lien mortgage,
deed of trust or other first lien now existing or hereafter placed upon the
Premises, or the Project as a whole, and Tenant agrees upon demand to execute
such further instruments subordinating this Lease or attorning to the holder of
any such liens as Landlord may request. The terms of this Lease are subject to
approval by the Landlord's lender(s), and such approval is a condition precedent
to Landlord's obligations hereunder. In the event that Tenant should fail to
execute any subordination or other agreement required by this paragraph,
promptly as requested. Tenant hereby irrevocably constitutes Landlord as its
attorney in fact to execute such instrument in Tenant's name, place and stead,
it being agreed that such power is one coupled with an interest. Tenant agrees
that it will from time to time upon request by Landlord execute and deliver to
such persons as Landlord shall request a statement in recordable form certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the same is in full force and effect as so modified),
stating the dates to which rent and other charges payable under this Lease have
been paid, stating that Landlord is not in default hereunder (or if Tenant
alleges a default stating the nature of such alleged default) and further
stating such other matters as Landlord shall reasonably require.
16. Casualty Insurance. Landlord shall, at all times during this term
of this lease maintain a policy or policies of insurance with the premiums
thereon fully paid in advance, issued by and binding upon some solvent insurance
company, insuring the Building against loss or damage by fire, explosion, or
other hazards and contingencies Landlord's mortgagees may require; provided that
Landlord shall not be obligated to insure any furniture, equipment, machinery,
goods or supplies not covered by this lease which Tenant may bring or obtain
upon the leased premises, or any additional improvements which Tenant may
construct thereon.
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17. Inspection. Landlord or representatives shall have the right to
enter into and upon any and all parts of premises at reasonable hours to (i)
inspect same or clean or make repairs or alterations or additions as Landlord
may deem necessary (but without any obligation to do so, except as expressly
provided for herein), or (ii) show the premises to prospective tenants,
purchasers or lenders; and Tenant shall not be entitled to any abatement or
reduction of rent by reason thereof, nor shall such be deemed to be an actual or
constructive eviction.
18. Condemnation. If, during the term of this lease, or any extension
or renewal thereof, all of the Project should be taken for any public or
quasi-public use under any governmental law, ordinance or regulation or by right
of eminent domain or by private purchase in lieu thereof, this lease shall
terminate and the rent shall be abated during the unexpired portion of this
lease, effective on the date physical possession is taken by the condemning
authority, and Tenant shall have no claim against Landlord for the value of any
unexpired term of this lease.
In the event a portion but not all of the Project shall be taken for
any public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain, by private sale in lieu thereof and
the partial taking or condemnation shall render the Project unsuitable for
continued operation, then Landlord shall have the option, in its sole
discretion, of terminating this lease or, at Landlord's sole risk and expense,
restoring and reconstructing the Project to the extent necessary to make same
reasonably tenantable. Should Landlord elect to restore, the lease shall
continue in full force and effect with the rent payable during the unexpired
portion of this lease being adjusted to such an extent as may be fair and
reasonable under the circumstances, and Tenant shall have no claim against
Landlord for the value of any interrupted portion of this lease.
In the event of any condemnation or taking, total or partial, Tenant
shall not be entitled to any part of the award or price paid in lieu thereof,
and Landlord shall receive the full amount of such award or price. Tenant hereby
expressly waiving any right or claim to any part thereof.
19. Fire and Other Casualty. In the event that (i) the premises should
be totally destroyed by fire, tornado or other casualty or (ii) in the event the
premises or the Building should be so damaged that rebuilding or repairs cannot
be completed within one hundred eighty (180) days after the date of such damage,
or (iii) in the event of a material uninsured loss to the premises or Project,
Landlord may at its option terminate this lease, in which event the rent shall
be abated during the unexpired portions of this lease effective with the date of
such damage. In the event Landlord shall within thirty (30) days after the date
of such damage commence to rebuild or repair the premises and shall proceed with
reasonable diligence to restore the premises to substantially the same condition
in which it was immediately prior to the happening of the casualty, except that
Landlord shall not be required to rebuild, repair or replace any part of the
furniture, equipment, fixtures and other improvements which may have been placed
by Tenant or other tenants within the project or the premises. Unless the
casualty was a result of Tenant's fault or neglect, Landlord shall allow Tenant
a fair diminution of rent during the time the premises are unfit for occupancy.
In the event any mortgagee under a deed of trust, security agreement or mortgage
on the premises should require that the insurance proceeds be used to retire the
mortgage debt, Landlord shall have no obligation to rebuild and this lease shall
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terminate upon notice to Tenant. Any insurance which may be carried by Landlord
or Tenant against loss or damage to the project or to the premises shall be for
the sole benefit of the party carrying such insurance and under its sole
control.
20. Holding Over. Should Tenant, or any of its successors in interest,
hold over the premises, or any part thereof, after the expiration of the term of
this lease, unless otherwise agreed in writing, such hold over shall constitute
and be construed as tenancy for month to month only, at a rental equal to the
rent payable for the last month of the term of this lease plus fifty percent
(50%) of such amount. The inclusion of the preceding sentence shall not be
construed as Landlord's consent for the Tenant to hold over.
21. Taxes On Tenant's Property. Tenant shall be liable for all taxes
levied or assessed against personal property, furniture or fixtures placed by
Tenant in the premises. If any such taxes for which Tenant is liable are levied
or assessed against Landlord or Landlord's property and if Landlord elects to
pay the same or if the assessed value f Landlord's property is increased by
inclusion of personal property, furniture or fixtures placed by Tenant in the
premises, and Landlord elects to pay the taxes based on such increase, Tenant
shall pay to Landlord upon demand that part of such taxes for which Tenant is
primarily liable hereunder.
22. Events of Default. The following events shall be deemed to be
defaults by Tenant under this lease:
(a) Tenant shall fail to pay any installment of the rent
hereby reserved and such failure shall continue for a period of ten (10) days.
(b) Tenant shall fail to comply with any term, provision or
covenant of this lease, other than the payment of rent, and shall not cure such
failure within ten (10) days after written notice thereof to Tenant.
(c) Tenant shall make an assignment for the benefit of
creditors.
(d) Tenant shall file a petition under any section or chapter
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 proceeding filed against Tenant thereunder and such adjudication
shall not be vacated or set aside within thirty (30) days.
(e) A receiver or Trustee shall be appointed for all or
substantially all of the assets of Tenant and such receivership shall not be
terminated or stayed within thirty (30) days.
(f) Tenant shall desert or vacate any substantial portion of
the premises for a period of five (5) or more days.
23. Remedies. Upon the occurrence of any event of default specified in
paragraph 22 hereof, Landlord shall have the option to pursue any one 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 to do so,
Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in rent, enter upon and take possession and expel or
remove Tenant and any other person who may be occupying said premises or any
part hereof, by force if necessary,without being liable for prosecution or any
claim of damages 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, including the loss of rental for the remainder of the lease
term.
(b) Enter upon and take possession of the premises and expel
or remove Tenant and any other person who may be occupying the premises or any
part thereof, by force if necessary, without being liable for prosecution or any
claim for damages therefor, and if Landlord so elects, relet the premises on
such terms as Landlord shall deem advisable and receive the rent thereof; and
Tenant agrees to pay to Landlord on demand any deficiency that may arise by
reason of such reletting for the remainder of the lease term.
(c) Enter upon the premises by force if necessary, without
being liable for prosecution or any claim for damages therefor, 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 for such action.
No re-entry or taking possession of the premises by Landlord shall be
construed as an election on its part to terminate this lease, unless a written
notice of such intention be given to Tenant. Notwithstanding any such reletting
or re-entry or taking possession. Landlord may at any time thereafter elect to
terminate this lease for a previous default. 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 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. Landlord's acceptance of rent
following an event of default hereunder shall not be construed as Landlord's
waiver of such event of default. No waiver 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. 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 any other
violation of default. The loss or damage that Landlord may suffer by reason of
termination of this lease or the deficiency from any reletting as provided for
above shall include the expense of repossession and any repairs or remodeling
undertaken by Landlord following possession. Should Landlord at any time
terminate this lease for any default, in addition to any other remedy Landlord
may have, Landlord may recover from Tenant all damages Landlord may incur by
reason of such default, including the cost of recovering the premises and the
loss of rental for the remainder of the lease term.
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Landlord shall be in default hereunder in the event Landlord has not
begun and pursued with reasonable diligence the cure of any failure of Landlord
to meet its obligations hereunder within thirty (30) days of the receipt by
Landlord of written notice from Tenant of the alleged failure to perform. In no
event shall Tenant have the right to terminate or rescind this Lease as a result
of Landlord's default as to any covenant or agreement contained in this Lease or
as a result of the breach of any promise or inducement hereof, whether in this
Lease or elsewhere. Tenant hereby waives such remedies of termination and
rescission and hereby agrees that Tenant's remedies for default hereunder and
for breach of any promise or inducement shall be limited to a suit for damages
and/or inunction. In addition, Tenant hereby covenants that, prior to the
exercise of any such remedies, it will give the mortgagees holding mortgages on
the Project notice and a reasonable time to cure any default by Landlord.
24. Late Charges. Tenant hereby acknowledges that late payment to
Landlord of rent or other sums due hereunder will cause Landlord to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. If any rent or other sum due from Tenant is not received
by Landlord or Landlord's designated agent within ten (10) days after its due
date, then Tenant shall pay to Landlord a late charge to the maximum amount
permitted by law (and in the absence of any governing law, ten percent (10%) of
such overdue amount), plus any attorney's fees incurred by Landlord by reason of
Tenant's failure to pay rent and/or other charges when due hereunder. The
parties hereby agree that such late charges represent a fair and reasonable
estimate of the cost that Landlord will incur by reason of Tenant's late
payment. Landlord's acceptance of such late charges shall not constitute a
waiver of Tenant's default with respect to such overdue amount or estop Landlord
from exercising any of the other rights and remedies granted hereunder.
25. Surrender of Premises. No act or thing done by the Landlord or its
agents during the term hereby granted shall be deemed an acceptance of a
surrender of the premises unless Landlord expressly so indicates.
26. Attorney's Fees. In case it should be necessary or proper for
Landlord to bring any action under this lease or to consult or place said lease,
or any amount payable by Tenant thereunder, with an attorney concerning or for
the enforcement of any of Landlord's rights hereunder, then Tenant agrees in
each and any such case to pay to Landlord a reasonable attorneys' fee.
27. Landlord's Lien. In addition to the statutory landlord's lien,
Landlord shall have, at all times, a valid security interest to secure payment
of all rentals and other sums of money becoming due hereunder from Tenant, and
to secure payment of any damages or loss which Landlord may suffer by reason of
the breach by Tenant of any covenant, agreement or condition contained herein,
upon all goods, wares, equipment, fixtures, furniture, improvements and other
personal property of Tenant presently or which may hereafter be situated on the
premises, and all proceeds therefrom, and such property shall not be removed
therefrom without the consent of Landlord until all arrearages in rent as well
as any and all other sums of money then due to Landlord hereunder shall first
have been paid and discharged and all the covenants, agreements and conditions
hereof have been fully complied with and performed by Tenant. Upon the
occurrence of any event of default by Tenant, Landlord may, in addition to any
other remedies
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provided herein, enter upon the premises and take possession of any and all
goods, wares, equipment, fixtures, furniture, improvements and other personal
property of Tenant situated on the premises, without liability for trespass or
conversion and sell the same at public or private sale, with or without having
such property at the sale, after giving Tenant reasonable notice of the time and
place of any public sale or of the time after which any private sale is to be
made, at which sale the Landlord or its assigns may purchase unless otherwise
prohibited by law. Unless otherwise provided by law, and without intending to
exclude any other manner of giving Tenant reasonable notice, the requirement of
reasonable notice shall be met if such notice is given in the manner prescribed
in paragraph 29 of this lease at least five (5) days before the time of sale.
The proceeds from any such disposition, less any and all expenses connected with
the taking of possession, holding and selling of the property (including
reasonable attorneys' fees and other expenses), shall be applied as a credit
against the indebtedness secured by the security interest granted in this
paragraph 26. Any surplus shall be paid to Tenant or as otherwise required by
law, and the Tenant shall pay any deficiencies forthwith. Upon request by
Landlord, Tenant agrees to execute and deliver to Landlord a financing statement
in form sufficient to perfect the security interest of Landlord in the
aforementioned property and proceeds thereof under the provisions of the Uniform
Commercial Code in force in the State of Texas. The statutory lien for rent is
not hereby waived, the security interest herein granted being in addition and
supplementary thereto.
28. Mechanic's Liens. Tenant will not permit any mechanic's lien or
liens to be placed upon the premises of the Building or improvements thereon
during the term hereof caused by or resulting from any work performed, materials
furnished or obligation incurred by or at the request of Tenant, and in the case
of the filing of any such lien Tenant will promptly pay same. If default in
payment thereof shall continue for twenty (20) days after written notice thereof
from Landlord to the Tenant, the Landlord shall have the right and privilege at
Landlord's option of paying the same or any portion thereof without inquiry as
to the validity thereof, and any amounts so paid, including expenses and
interest, shall be so much additional indebtedness hereunder due from Tenant to
Landlord and shall be repaid to Landlord immediately on the rendition of bill
therefor, together with interest at ten percent (10%) per annum until repaid.
29. Waiver of Subrogation. Anything in this lease to the contrary
notwithstanding, the parties hereto hereby waive to the extent permitted by
their respective insurance carriers any and all rights of recovery, claim,
action or cause of action, against each other, their agents, officers, and
employees, for any loss or damage that may occur to the premises hereby demised,
or any improvements thereto, or said Building of which the premises are a part,
or any improvements thereto, by reason of fire, the elements or origin,
including negligence of the parties hereto, their agents, officers, and
employees.
30. Notices. Each provision of this Agreement, or of any applicable
governmental laws, ordinances, regulations, and other requirements with
reference to the sending, mailing or delivery of any notice, or with reference
to the making of any payment by Tenant to Landlord, shall be deemed to be
complied with when and if the following steps are taken:
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(a) All rent and other payment required to be made by Tenant
to Landlord hereunder shall be payable to Landlord in Dallas County, Texas, 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.
(b) Any notice or document required to be delivered hereunder
shall be deemed to be delivered if actually received and whether or not received
when deposited in the United States mail, postage prepaid, certified or
registered mail (with or without return receipt requested) addressed to the
parties hereto at the respective addresses set out opposite their names below,
or at such other address as they have theretofore specified by written notice
delivered in accordance herewith:
LANDLORD: Centre Consolidated Properties, Ltd.
P.OR. Box 802087
Dallas, Texas 75380-2087
TENANT: Danvid Company, Inc.
1813 Kelly Blvd.
Carrollton, Texas 75006
31. Force Majeure. Whenever a period of time is herein prescribed for
action to be taken by Landlord, the Landlord shall not be liable or responsible
for, and there shall be excluded from the computation for any such period of
time, any delays due to strikes, riots, Acts of God, shortages of labor or
materials, war, governmental laws, regulations or restrictions or any other
causes of any kind whatsoever which are beyond the control of Landlord.
32. Separability. If any clause or provision of this lease is illegal,
invalid or unenforceable under the 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 a clause or provision as may be possible and be
legal, valid and unenforceable.
33. Entire Agreement; Amendments; Binding Effect. This lease contains
the entire agreement between the parties and may not be altered, changed or
amended, except by instrument in writing signed by both parties hereto. No
provision of this lease shall be deemed to have been waived by Landlord unless
such waiver be in writing signed by Landlord and addressed to Tenant, nor shall
any custom or practice which may grow up between the parties in the
administration of the terms hereof be construed to waive or lessen the right of
Landlord to insist upon the performance by Tenant in strict accordance with the
terms hereof. The terms, provisions, covenants and conditions contained in this
lease shall apply to, inure to the benefit of and be binding upon the parties
hereto, and upon their respective successors in interest and legal
representatives, except as otherwise herein expressly provided.
34. Quiet Enjoyment. Provided Tenant has performed all of the terms,
covenants, agreements and conditions of this lease, including the payment of
rent, to be performed by
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<PAGE> 14
Tenant, Tenant shall peaceably and quietly hold and enjoy the premises for the
term hereof, without hindrance from Landlord, subject to the terms and
conditions of this lease.
35. Rules and Regulations. Tenant and Tenant's agents, employees, and
invitees will comply fully and all requirements of the rules and regulations of
the Building and related facilities which are attached hereto as Exhibit "C,"
and made a part hereof as though fully set out herein. Landlord shall at all
times have the right to change such rules and regulations or to promulgate other
rules and regulations in such reasonable manner as may be deemed advisable for
safety, care, or cleanliness of the Building and related facilities or premises,
and for preservation of good order therein, all of which rules and regulations,
changes and amendments will be forwarded to Tenant in writing and shall be
carried out and observed by Tenant. Tenant shall further be responsible for the
compliance with such rules and regulations by the employees, servants, agents,
visitors and invitees of Tenant.
36. Broker's or Agent's Commission. Tenant represents and warrants that
there are no claims for brokerage commissions or finder's fees in connection
with the execution of this lease, except as listed below, and Tenant agrees to
indemnify and hold harmless Landlord against all liabilities and costs arising
from such claims, including without limitation attorneys' fees in connection
therewith.
37. Gender. 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.
38. Joint and Several Liability. If there be more than one Tenant, the
obligations hereunder imposed upon Tenant shall be joint and several. If there
be a guarantor of Tenant's obligations hereunder, the obligations hereunder
imposed upon Tenant shall be the joint and several obligations of Tenant and
such guarantors and Landlord need not first proceed against the Tenant hereunder
before proceeding against such guarantor, nor shall any such guarantor be
released from its guaranty for any reason whatsoever, including without
limitation, in case of any amendments hereto, waivers hereof or failure to give
such guarantor any notices hereunder.
39. Captions. The captions contained in this lease are for convenience
of reference only, and in no way limit or enlarge the terms and conditions of
this lease.
40. Except as otherwise herein expressly provided, time is of the
essence of this Agreement.
41. The failure of Landlord to insist at any time upon the strict
performance of any covenant or agreement or to exercise any option, right, power
or remedy contained in this Lease shall not be construed as a waiver or a
relinquishment thereof for the future. No payment by Tenant or receipt by
Landlord of a lesser amount than the monthly installment of rent due under this
Lease shall be deemed to be other than on account of the earliest rent due
hereunder, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as rent be deemed an accord and satisfaction,
and Landlord's right to recover the balance of such rent or pursue any other
remedy in this Lease provided.
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<PAGE> 15
42. Special Provisions.
EXECUTED as of the date first above written.
LANDLORD:
By:/s/ [illegible] EVP
----------------------------------------
ATTEST: TENANT:
By:/s/ Paul Comer VP
- ---------------------- ----------------------------------------
(Title) (Title)
15
<PAGE> 16
ADDENDUM TO LEASE AGREEMENT
43. Renewal Options. If, at the end of the primary term of this Lease,
Lessee is not in default of any of the terms, conditions, or covenants of the
Lease, Lessee, but not any assignee or subtenant of Lessee, is hereby granted
one option(s) to renew this Lease for an additional term of five (5) years upon
the same terms and conditions as defined in this Lease with the following
exceptions:
(a) Renewal option term will contain no further renewal
options unless granted by Lessor in writing; and
(b) Rental for the renewed term shall be based on the then
prevailing rental rates for properties of equivalent quality, size, utility and
location, with the length of the Lease term and credit standing of Lessee to be
taken in account. If Lessee desires to renew this Lease, Lessee will notify
Lessor of its intention to renew no later than six months prior to the
expiration date of the Lease; Lessor shall, within the next fifteen (15) days,
notify Lessee in writing of its acceptance or rejection of the proposed rental
rate.
44. Right of First Refusal. If, at any time during the primary term of
this Lease, Lessee is not in default of any of the terms, conditions, or
covenants of the Lease, Lessee, but not any assignee or subtenant of Lessee, is
hereby granted the right of first refusal on any contiguous space upon the same
terms and conditions contained in this Lease with the following exceptions:
(a) Rental for the additional space shall be based on the then
prevailing rental rates for properties of equivalent quality, size, utility and
location.
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<PAGE> 17
EXHIBIT "A"
1813 KELLY BOULEVARD
CARROLLTON, TEXAS 75006
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<PAGE> 18
EXHIBIT 'B'
Landlord agrees to finished the leased space as per attached drawing to include
the following:
Electrical
Demo Repair and Install:
20 - 2 x 4 Layins
1 - 2 x 2 Layin
5 - Exit Lights with Battery Packs
4 - Exhaust Fan Hook-ups
67 - 8' Strips at 10' app
7 - 8' H.OR. Fixtures (repaired)
6 - 8' Strips (repaired)
4 - High Bay Fixtures (repaired)
7 - S/P Switches
13 - Duplex Receptacles (office)
10 - Phone Stub-ups (office)
13 - Duplex Receptacles (General in warehouse)
32 - Dedicated Quad Receptacles (warehouse)
13 - Dedicated Quad Receptacle Cord Drops
14 - Dedicated Duplex Receptacles Cord Drops
8 - Dedicated Circuit in Ceiling for future Drops
3 - Dedicated Duplex outlets for vending machines
2 - Dedicated Duplex Receptacles for Electric Water Coolers
1 - Water Heater Circuit 240 volt 1-Phase 30 amp.
1 - 150 amp. 3-Phase 240 volt machine
1 - 60 amp. 3-Phase 240 volt machine
1 - 40 amp. 3-Phase 240 volt machine
6 - 30 amp. 3-Phase 240 volt machine
4 - 30 amp. 3-Phase 240 volt Compressor Circuits
1 - 800 amp. 3-Phase 240 volt Service
Plumbing
Demo repair and install:
1-1/2" water service that includes concrete saw cut, removal and repour
of 138 square feet of concrete, also, a water fee to City of
Carrollton.
22 - Air Line Drops
70 - Quick Disconnects
2 - Hydrants inside
2 - Hydrants outside
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<PAGE> 19
6 - Water Closets, Kilgore #109 tank-type
2 - Handicap water closets
2 - Urinals Kilgore #402
10 - Lavatories Kilgore #301 Wall hung
2 - Electric water coolers, Halsey Taylor wm8A
1 - Electric water heater, 20 gallon state PV20
1 - Hub Drain
1 - Trap Primer, Josam #8825
2 - 3" Floor Drains, Josam 3000
Air piping to be sch. 40 blk steel pipe and fittings
Gas piping to be sch. 40 blk steel pipe and fittings
Domestic water to be type M copper
Sanitary waste and vent to be PBC DWV pipe and fittings
Saw Cut, removal and repour of approximately 468 square feet of
concrete.
Add approximately 740 square feet of office area to bring total AC
office to 2,004 square feet.
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EXHIBIT "C"
RULES AND REGULATIONS
1. Sidewalks, doorways, vestibules, halls, stairways and similar areas
shall not be obstructed by tenants or their officers, agents, servants, and
employees, or used for any purpose other than ingress and egress to and from the
leased premises and for going from one part of the Building to another part of
the Building.
2. Plumbing fixtures and appliances shall be used only for the purposes
for which constructed, and no sweeping, rubbish, rags or other unsuitable
materials shall be thrown or placed therein. Any stoppage or damage resulting to
any such fixtures or appliances from misuse on the part of a tenant or such
tenant's officers, agents, servants, and employees shall be paid by such tenant.
3. No signs, posters, advertisements, or notices shall be painted or
affixed on any of the windows or doors, or other part of the Building, except of
such color, size and style and in such places, as shall be first approved in
writing by the Landlord. No nails, hooks or screws shall be driven in to or
inserted in any part of the Building, except by building maintenance personnel
or as directed by the Landlord.
4. Directories will be placed by the Landlord, at Landlord's own
expense, in conspicuous places in the Building. No other directories shall be
permitted.
5. Tenants shall not do anything, or permit anything to be done, in or
about the Building, or bring or keep anything therein, that will in any way
increase the possibility of fire or other casualty or obstruct or interfere with
the rights of, or other wise injure or annoy, other tenants, or do anything in
conflict with the valid pertinent laws, rules and regulations of any
governmental authority.
6. Landlord shall have the power to prescribe the weight and position
of safes or other heavy equipment, which may over stress any portion of the
floor. All damage done to the Building by the improper placing of heavy items
which over stress the floor will be repaired at the sole expense of the tenant.
7. A tenant shall notify the Landlord when safes or other equipment are
to be taken into or out of the Building. Moving of such items shall be done
under the supervision of the Landlord after receiving written permission from
him.
8. Each tenant shall cooperate with Building employees in keeping
premises neat and clean.
9. No birds, animals or reptiles, or any other creatures, shall be
brought into or kept in or about the building.
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<PAGE> 21
10. Should a tenant require telegraphic, telephonic, annunciator or any
other communication service, the Landlord will direct the electricians and
installers where and how the wires are to be introduced and placed, and none
shall be introduced or placed except as the Landlord shall direct.
11. No Access to Roof. Tenant shall have no right of access to the roof
of the Premises or the Building and shall not install, repair, place or replace
any aerial, fan, air conditioner or other device on the roof of the Premises or
the Building without the prior written consent of Landlord. Any aerial, fan, air
conditioner or device installed without such written consent shall be subject to
removal, at Tenant's expense, without notice, at any time.
12. Tenants shall not make or permit any improper noises in the
Building, or otherwise interfere in any way with other tenants, or persons
having business with them.
13. No equipment of any kind shall be operated on the leased premises
that could in any way annoy any other tenant in the Building without written
consent of the Landlord.
14. Tenants shall not use or keep in the Building any inflammable or
explosive fluid or substance, or any illuminating material, unless it is battery
powered, UL approved.
15. The Landlord has the right to evacuate the Building in event of
emergency or catastrophe.
16. The Landlord reserves the right to rescind any of these Rules and
make such other and further Rules and Regulations as in the judgment of Landlord
shall from time to time be needed for the safety, protection, care and
cleanliness of the Building, the operation thereof, the preservation of good
order therein, and the protection and comfort of its tenants, their agents,
employees and invitees, which rules when made and notice thereof given to a
tenant shall be binding upon him in like manner as if originally herein
prescribed. In the event of any conflict, inconsistency, or other differences
between the terms and provisions of these Rules and Regulations, as now or
hereafter in effect and the terms and provisions of any lease now or hereafter
in effect between Landlord and any tenant in the Building, Landlord shall have
the right to rely on the term or provision in either such lease or such Rules
and Regulations which is most restrictive on such tenant and most favorable to
Landlord.
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<PAGE> 22
EXHIBIT "D"
SIGN SPECIFICATIONS
A. Type of Sign
Mounted directly onto the wall.
B. Size of Sign
Maximum letter size is 24", minimum letter size is 12". Multiple rows
are not to exceed 28" total height including space.
Overall length cannot exceed 75% of frontage measurement. Example: 40
ft. frontage is allowed 30 ft. Not to exceed 60 feet.
Size must conform to city requirements.
C. Number of Signs and Logos
If lease space fronts on more than one side, another sign may be
allowed on other wall, and size of sign will be determined by that wall
on which it is mounted. Generally speaking, one sign will be allowed.
Logs subject to landlord and architects' approval.
Important
Sign drawings must be submitted for landlord and architects' written
approval before fabrication.
Purpose
Our purpose in providing the tenants with these requirements is to
create a good business image and give the impression of quality and
professionalism.
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<PAGE> 1
EXHIBIT 10.4b
LEASE EXTENSION AGREEMENT TO INDUSTRIAL LEASE AGREEMENT
THIS LEASE EXTENSION AGREEMENT TO THE INDUSTRIAL LEASE AGREEMENT (the
"Lease Extension Agreement") is made and entered into by and between Beltline
Business Center Limited Partnership ("Landlord") and Danvid Company, Inc.
("Tenant").
R E C I T A L S
A. Centre Consolidated Properties, Ltd. (the "Original Landlord") and
Tenant have heretofore entered into a Lease Agreement (the "Original Lease")
executed by Tenant and Original Landlord in December 1989 (said Original Lease
as heretofore amended is hereinafter referred to as the "Lease") covering
portions of a building located at 1813 Kelly Boulevard within the Beltline
Business Center, Carrollton, Texas and more specifically described in the
attached Exhibit A (the "Premises"). The Premises are located within the
Beltline Business Center Office/Showroom/Warehouse project located on a tract of
land more specifically described in Exhibit B (the "Project").
B. Subsequently, Landlord acquired from the Original Landlord, and the
Original Landlord assigned to Beltline Business Center LTD Partnership, all of
the Original Landlord's interest in and to the Lease. The correct name of the
Landlord is Beltline Business Center Limited partnership which is a Texas
limited partnership.
C. Subsequently, the Lease was amended by the (First) Amended dated
April 26, 1991, Second Amendment dated March 19, 1992, Third Amendment dated
January 21, 1994 and Fourth Amendment dated March 15, 1995.
D. The purpose of this Lease Extension Agreement, among other things,
is to (i) modify and extend the Lease Term to December 31, 2004; (ii) modify the
Basic Rental amount paid per month; (iii) modify the Security Deposit with an
additional deposit amount; and (iv) outline an agreement regarding the parking
issues.
E. Unless specifically stated otherwise, all defined terms used in this
Lease Extension Agreement shall have the same definition given to them in the
Lease.
NOW, THEREFORE, for and in consideration of the above recitals and the
mutual covenants of the parties hereto, it is hereby agreed that the Lease be
and is hereby amended as follows:
1. SUBPARAGRAPH 1(a) "LANDLORD" of the Lease is hereby modified and
amended to reflect that Beltline Business Center Limited Partnership is now
Landlord.
2. SUBPARAGRAPH 1(d) "LEASE TERM" is hereby modified and amended to
reflect a period of ninety-six (96) months commencing on January 1, 1997 and
ending on December 31, 2004. Upon 90 days (minimum) advance written, irrevocable
notice, Tenant may terminate the Lease effective on each of its annual
anniversary dates beginning January 1, 2002. To be
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<PAGE> 2
effective, the notice must be accompanied by a payment of the Termination
Payment listed in the schedule (the "Rental Schedule") below.
3. SUBPARAGRAPH 1(c) "BASIC RENTAL" is hereby modified and amended to
reflect new monthly rental payments on 168,616 square feet in accordance with
the Rental Schedule as well as the new Lease Term.
<TABLE>
<CAPTION>
RENTAL SCHEDULE
---------------
RATE ANNUAL MONTHLY TERMINATION
PERIOD /SF RENTAL RENTAL PAYMENT
<S> <C> <C> <C> <C>
Jan. 1, 1997 through Dec. $3.00 $505,848.00 $42,154.00
31, 1997
Jan. 1, 1998 through Dec. $3.10 $522,709.60 $43,559.13
31, 1998
Jan. 1, 1999 through Dec. $3.20 $539,571.20 $44,964.27
31, 1999
Jan. 1, 2000 through Dec. $3.30 $556,432.80 $46,369.40
31, 2000
Jan. 1, 2001 through Dec. $3.40 $573,294.40 $47,774.53
31, 2001
Jan. 1, 2002 through Dec. $3.45 $581,725.20 $48,477.10 $124,565.07
31, 2002
Jan. 1, 2003 through Dec. $3.50 $590,156.00 $49,179.67 $83,275.23
31, 2003
Jan. 1, 2004 through Dec. $3.55 $598,586.80 $49,882.23 $41,753.54
31, 2004
</TABLE>
4. SUBPARAGRAPH 1(f) "SECURITY DEPOSIT" is hereby modified and amended
to reflect $46,545.03.
5. PARAGRAPH 4 "RENTAL ESCALATION" is unchanged.
6. PARAGRAPH 8 "USE" shall be expanded to include the following
provisions:
(a) Landlord and Tenant agree to use their best efforts to
work with the City of Carrollton to allow for Tenant, at its sole cost and
expense, to obtain any necessary conditional use permit, variances, or licenses
as may be required by the City to utilize the property for Tenant's normal
conduct of business. Tenant agrees that should off-site parking for Tenant's
personnel become necessary in order to resolve parking restrictions enforced by
the City of Carrollton, Tenant will provide, at Tenant's sole expense, off-site
parking and transportation for a maximum of 225 off-site parking spaces for
Tenant's employees.
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<PAGE> 3
Additionally, tenant and Landlord, or Tenant's personnel and Landlord's
personnel, hereby agree to assist each other in meetings and negotiations with
the City of Carrollton in an attempt to resolve the parking restrictions at
Beltline Business Center, if requested by either party.
Tenant currently has 237 attributed parking spaces of the 741 parking
spaces that the City of Carrollton allows for the Project. Tenant can continue
to use the 237 spaces. Landlord has 504 spaces dedicated for other tenants.
Landlord has applied to the City of Carrollton for recognition of an additional
141 spaces resulting from a redesign of the property to bring the total
available in the Project to 882. Landlord needs additional spaces in order to
lease approximately 32,000 square feet of empty space. Landlord agrees to allow
Tenant to use 32, or 22.33%, of the additional spaces upon approval by the City.
If the City approves less than the 882 requested spaces, Tenant's additional
spaces shall be reduced by the 22.33% factor accordingly. I f Tenant expands
into additional space, then Tenant would be allocated the additional parking
spaces attributed to the added space. Exhibit "C" shows the location of the 237
attributed parking spaces and the additional 32 proposed spaces. Exhibit "C" is
a modified proposal to meet City requirements and the other necessary parking
spaces for the Project. The City is currently reviewing and rearranging the
spaces. Within thirty (30) days of Tenant's written request, Landlord shall at
Landlord's sole cost and expense, mark Tenant's parking spaces which are not
already marked and which are not located in the lot fronting Premises (between
to the east building line of Premises and Kelly Boulevard), but the foregoing
shall not obligate Landlord than otherwise agreed above. Tenant may mark spaces
in the lot fronting Premises at its own cost and expense.
7. PARAGRAPH 30 "NOTICES" is hereby modified and amended to reflect the
Landlord's name and address and remittance instructions:
LANDLORD:
Beltline Business Center Limited Partnership
Attn: Bernie Jesmer, President of American Diversified Properties, Inc.
2225 East Beltline Road, Suite 321
Carrollton, Texas 75006
Business phone (214) 417-3877
REMIT PAYMENTS TO:
Beltline Business Center Limited Partnership
c/or Business Operations Support Systems, Inc.
Attn. David O'Connor
8140 Walnut Hill Lane, Suite 507
Dallas, Texas 75231-4350
8. PARAGRAPH 43 "RENEWAL OPTION." If at the end of the Lease Term on
December 31, 2004, and so long as Tenant is not then in default of any of the
terms, conditions or covenants of the Lease, Tenant (but not including any
assignee or subtenant of Tenant) may
25
<PAGE> 4
extend the Lease Term for one additional term of five (5) years (the "Renewal
Term") upon the same terms and conditions contained in this Lease with the
following exceptions:
(a) No further renewal options will be available unless
granted by Landlord in writing, which Landlord has no obligations to grant; and
(b) Rental Escalation and Basic Rental for the Renewal Term
(the "Renewal Basic Rental") shall be based on the then prevailing rental rates
for properties of equivalent quality, size, utility and location, with the
length of the Renewal Term and credit standing of Tenant to be taken into
account.
If Tenant desires to extend the Lease Term in accordance with the
Renewal Term pursuant to this paragraph, Tenant will notify Landlord of its
intention to renew no later than July 1, 2004 (the "Tenant's Renewal Notice").
The Tenant's Renewal Notice shall also set forth Tenant's determination of the
Renewal Basic Rental. Landlord shall, within fifteen (15) days following receipt
of Tenant's Renewal Notice, notify Tenant in writing of Landlord's acceptance or
rejection of the Renewal Basic Rental as proposed by Tenant. If Landlord and
Tenant are unable to agree on the appropriate Renewal Basic Rental, Landlord and
Tenant will agree on an appraiser who will determine for them the Renewal Basic
Rental. The cost of such appraiser shall be shared equally by Landlord and
Tenant.
9. PARAGRAPH 44 "RIGHT OF FIRST REFUSAL"
(a) If Tenant is not then in default of any of the terms,
conditions, or covenants of the Lease and if Landlord wishes to lease space in
the Project contiguous to the Premises (the "Subject Space") to a third party
other than the tenant then occupying Subject Space, Landlord shall advise Tenant
in writing of the space to be covered by the contemplated third-party lease, and
additionally specify the prevailing rental rate for properties of equivalent
quality, size, utility and location as to the Subject Space. Within ten (10)
business days following Tenant's receipt of Landlord's notice, Tenant shall
notify Landlord in writing whether it (a) desires to lease the Subject Space on
the same terms and conditions contained in this Lease, except at the rental rate
set forth in Landlord's notice, or (b) does not wish to exercise such option. If
Tenant fails to notify Landlord in writing within such ten (10) business day
period, Tenant will be deemed to have rejected such offer. If Tenant notifies
Landlord in writing within such ten (10) business day period that Tenant wishes
to lease Subject Space, Tenant shall amend the Lease for the Subject Space, on
the same terms and conditions set forth in this Lease, except the rental rate
for the Subject Space shall be the rate specified in Landlord's notice. Upon
Tenant's rejection of any offer pursuant to this paragraph, Tenant shall have no
further option or right of first refusal with respect to the Subject space so
long as a Lease is executed with the same third party. Tenant's rights under
this paragraph may be executed by Tenant, but not by any assignee or sublessee
or Tenant.
10. If a law, ordinance or regulation is hereafter adopted requiring
installation in the Project of any environmental protection equipment, then
Tenant shall pay tenant's proportionate share of the cost (amortized over the
full life of the equipment), maintenance and operating
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<PAGE> 5
expense of that equipment. If that requirement related solely to Tenant's use of
the Premises, then Tenant shall bear the entire expense.
11. PARAGRAPH 36 "BROKER'S OR AGENT'S COMMISSION" is hereby modified to
note that Tenant has engaged TRG Investment Corporation ("TRG") as its exclusive
real estate broker in negotiating this Lease Extension Agreement. Landlord
hereby agrees to pay to TRG $122,878.91 (the "Commission"). TRG, Thom Ridnour
and Brenda Ridnour (the "Broker Parties") execute this Lease Extension Agreement
for the purpose of acknowledging and confirming that the Commission constitutes
all amounts any of them may have or claim with respect to this Lease Extension
Agreement or the Original Lease, as amended, and hereby waive any and all rights
and claims any of them may have to any commission or other compensation in
connection therewith. The Broker parties represent and warrant that none of them
will share or pay, or is obligated to share or pay, any of the Commission to any
other person or entity.
12. ENVIRONMENTAL PROVISION. Tenant and Landlord shall not, and shall
not permit their employees, agents or contractors (within the scope of
employment, agency or contract) to, intentionally or accidentally release, emit,
dispose of or discharge any hazardous substance on the Project,in soil, surface
water or groundwater on or under the Project or in the air above the Project in
violation of any applicable environmental law or regulations. Each, Tenant and
Landlord, shall defend, indemnify and hold the other and its agents,
shareholders, partners, contractors, attorneys, employees, and representatives
(collectively, the "Indemnitees," and individually, "Indemnitee") harmless from
and against all liabilities, losses, charges, damages (including damages to
persons, entities, or the environment), costs and expenses asserted against or
payable by any Indemnitee and arising from or in any way connected with any
hazardous substance released, emitted, disposed of or discharged by the other or
its employees, agents or contractors on the Project, to soil, surface water or
ground water on or under the Project, or in the air above the Project. The
provisions of this paragraph shall survive (i) the termination of the Lease and
(ii) the sale of the project, as provided by applicable law. Notwithstanding any
other provision of this Lease, no assignment, sublease or transfer of Tenant's
interest in this Lease or any part thereof shall relieve Tenant of its
obligations, and no transfer of the ownership of the project shall relieve
Landlord of its obligations, under this paragraph.
13. AMERICANS WITH DISABILITIES ACT. If the Premises is now, or at any
time during the term of this Lease becomes, a "public accommodation" under the
Americans with Disabilities Act of 1990 (the "Act"), Tenant shall, at its own
expense, be responsible (a) for compliance with Title III of the Act to the
extent that the Act impose obligation on the procedure and design of any
alterations to the Premises made by the Tenant and (b) for making modification
in its policies, practices and procedures in connection with the operating of
the Tenant's business if a failure to make such modifications would constitute a
violation of the Act. Tenant shall indemnify and hold harmless Landlord with
respect to its failure to comply with the foregoing responsibilities.
14. ENTIRE AGREEMENT. The Original Lease as amended by the (First)
Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, and
this Lease Extension Agreement constitute the entire agreement between the
Landlord and Tenant, and between Landlord and Tenant, respectively, and Broker
Parties, in connection herewith. Any
27
<PAGE> 6
prior agreements are hereby superseded and replaced. There are no other
agreements, written or oral, which will survive the execution of this Lease
Extension Agreement.
15. EFFECTIVE DATE. The effective date of this Lease Extension
Agreement is the 29th day of September, 1996, except for the amendments of
Subparagraphs 1(d) and 1(e) herein, which are effective on January 1, 1997.
EXECUTED BY:
<TABLE>
<CAPTION>
LANDLORD: TENANT:
<S> <C>
Beltline Business Center Limited Partnership Danvid Company, Inc.
By its General Partner, Sagawa Investment, Inc.
By:/s/ Tetsuo Sagawa By: /s/ Paul Comer, Vice President
--------------------------------------- ------------------------------
Tetsuo Sagawa, President Paul Comer, Vice President
TENANT'S BROKER:
TRG Investment Corporation /s/ Thomas Ridnour
---------------------------------
Thomas Ridnour
By:/s/ Thomas R. Ridnour /s/ Brenda Ridnour
--------------------------------------- ---------------------------------
Thomas R. Ridnour, Vice President Brenda Ridnour
</TABLE>
28
<PAGE> 7
EXHIBIT "A"
ATTACHED TO AND MADE A PART
OF
LEASE AGREEMENT
Site Plan
[GRAPHICS OF SITE PLAN]
29
<PAGE> 8
Exhibit "B"
Being a tract of land located in the City of Carrollton, Dallas County, Texas,
being part of Belt Line Business Center, an Addition in the John M. Myers
Survey, Abstract 939, according to the plat thereof recorded in Volume 73093,
Page 2922 of the Map Records of Dallas County, Texas, and being described more
particularly as follows;
Beginning at a steel pin in concrete at the intersection of the north line of
Belt Line Road, 100 feet wide, with the east line of Vantage Drive, 50 feet
wide;
Thence N 00(degree)36' E, along the east line of Vantage Drive, a distance of
2196.44 feet to a steel rod for corner on the north line of said Belt Line
Business Center Addition;
Thence N 89(degree)38'30" E, along said Addition line, a distance of 608.85 feet
to a steel rod for corner on the west line of Kelly Boulevard, formerly
Kelly-Springfield Boulevard;
Thence S 00(degree)36' W, along the west line of Kelly Boulevard, a distance of
2185.24 feet to a cross cut in concrete at the northeast end of the intersection
cutoff to the north line of Belt Line Road;
Thence S 45(degree)18' W, along said cutoff, a distance of 21.32 feet to a steel
rod for corner on the north line of Belt Line Road;
Thence West, along the north line of Belt Line Road, a distance of 593.80 feet
to the place of beginning;
Containing 1,338,160 square feet of land or 30.720 acres.
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Exhibit C
[GRAPHIC OF SITE PLAN]
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Exhibit 10.5
AMENDED AND RESTATED
DETROIT REAL ESTATE BOARD FORM--
BUSINESS PROPERTY LEASE FORM 113-A
(1) This Lease Made as of this 25th day of June 1996 by and
between C. LANE MALLY the Lessor, hereinafter designated as the
Landlord, and MALLYCLAD CORPORATION, a Michigan corporation the
Lessee, hereinafter designated as the Tenant.
Description (2) WITNESSETH: The Landlord, in consideration of the rents
to be paid and the covenants and agreements to be performed by the
Tenant, does hereby lease unto the Tenant the following described
premises situated in the City of Madison Heights, County of
Oakland and State of Michigan,
to-wit:
A portion of the Building located at 31301 Mally Road
consisting of 34,306 square feet.
Terms (3) For the term of five (5) years from and after the first
day of January 1994.
Rent fully to be completed and ended, the Tenant yielding and paying
during the continuance of this lease unto the Landlord for rent of
said premises for said term, the sum of Eight Hundred Fifty-Seven
Thousand Six Hundred Fifty Dollars ($857,650.00) in lawful money
of the United States payable in monthly installments in advance,
upon the first day of each and every month as follows: $14,295.00.
Landlord acknowledges that all rent and other obligation has been
paid through June 25, 1996 and the next regular installment of
rent is due on July 1, 1996.
Rent (4) The Tenant hereby hires the said premises for the said
term as above mentioned and covenants well and truly to pay, or
cause to be paid unto the Landlord at the dates and times above
mentioned, the rent above reserved.
Insurance (5) See Addendum.
(6) If the Tenant shall default beyond any applicable cure
or grace period in any payment or expenditure other than rent
required to be paid or expended by the Tenant under the terms
hereof, the Landlord may at his option make such payment or
expenditure, in which event the amount thereof shall be payable as
rental to the Landlord by the Tenant on the next ensuing rent day
together with interest at 11% per annum from the date of such
payment or expenditure by the Landlord and on default in such
payment the Landlord shall have the same remedies as on default in
payment of rent.
(7) All payments of rent or other sums to be made to the
Landlord shall be made at such place as the Landlord shall
designate in writing from time to time.
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Assignment (8) The Tenant covenants not to assign or transfer this
lease or hypothecate or mortgage the same or sublet said premises
or any part thereof without the written consent of the Landlord.
Any assignment, transfer, hypothecation, mortgage or subletting
without said written consent shall give the Landlord the right to
terminate his lease and to re-enter and repossess the leased
premises. See Addendum.
Bankruptcy and
Insolvency (9) The Tenant agrees that if the estate created hereby
shall be taken in execution, or by other process of law, or if the
Tenant shall be declared bankruptcy or insolvent, according to
law, or any receiver be appointed for the business and property of
the Tenant, or if any assignment shall be made of the Tenant's
property for the benefit of creditors, then and in such event this
lease may be cancelled at the option of the Landlord.
Right to
Mortgage (10) The Landlord reserves the right to subject and
subordinate this lease at all times to the lien of any mortgage or
mortgages now or hereafter placed upon the Landlord's interest in
the said premises and on the land and buildings of which the said
premises are a part or upon any buildings hereafter placed upon
the land of which the leased premises form a part. And the Tenant
covenants and agrees to execute and deliver upon demand such
further instrument or instruments subordinating this lease to the
lien of any such mortgage or mortgages as shall be reasonably
required desired by the Landlord and any mortgagees or proposed
mortgagees. In no event shall Tenant's rights under this Lease be
disturbed by such mortgagee as long as Tenant is not in default
hereunder.
Use and
Occupancy (11) It is understood and agreed between the parties hereto
that said premises during the continuance of this lease shall be
used and occupied for industrial, office and warehouse use and for
no other purpose or purposes without the written consent of the
Landlord, and that the Tenant will not use the premises for any
purpose in violation of any law, municipal ordinance or
regulation.
Fire (12) It is understood and agreed that if the premises hereby
leased be damaged or destroyed in whole or in part by fire or
other casualty during the term hereof, the Landlord will repair
and restore the same to good tenantable condition with reasonable
dispatch, and that the rent herein provided for shall abate
entirely in case the entire premises are untenantable and pro rata
for the portion rendered untenantable, in case a part only is
untenantable, until the same shall be restored to a tenantable
condition; provided, however, that if the Tenant shall fail to
adjust his own insurance or to remove his damaged goods, wares,
equipment or property within a reasonable time, and as a result
thereof the repairing and restoration is delayed, there shall be
abatement of rental during the period of such resulting delay, and
provided further that if the Tenant shall use any part of the
leased premises for storage during the period of repair a
reasonable charge shall be made therefor against the Tenant, and
provided further that in case the leased premises, or the building
of which they are a part, shall be destroyed to the extent of more
than one-half of the value thereof, the Landlord or Tenant may at
his option terminate this lease forthwith by a written notice to
the Tenant.
Repairs See Addendum
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Insurance See Addendum
Tenant to
Indemnify See Addendum
Repairs and
Alterations (15) Except as provided in Paragraph 13 hereof, the Tenant
further covenants and agrees that he will, at his own expense,
during the continuation of this lease, keep the said premises and
every part thereof in as good repair and at the expiration of the
term yield and deliver up the same in like condition as when
taken, reasonable use and wear thereof and damage by the elements
and casualty excepted. The Tenant shall not make any alterations,
additions or improvements to said premises other than improvements
which are cosmetic in nature (e.g., carpeting, wallpaper,
painting, etc.) without the Landlord's written consent and all
alterations, additions or improvements made by either of the
parties hereto upon the premises, except movable office furniture
and trade fixtures put in at the expense of the Tenant, shall be
the property of the Landlord, and shall remain upon and be
surrendered with the premises at the termination of this lease,
without molestation or injury.
The Tenant covenants and agrees that if the demised premises
consists of only a part of a structure owned or controlled by the
Landlord, the Landlord may enter the demised premises at
reasonable times and install or repair pipes, wires and other
appliances or make any repairs deemed by the Landlord essential to
the use and occupancy of other parts of the Landlord's building.
Eminent Domain (16) If the whole or any part of the premises hereby leased
shall be taken by any public authority under the power of eminent
domain then the term of this lease shall cease on the part so
taken from the day the possession of that part shall be required
for any public purpose and the rent shall be paid up to that day
and from that day the Tenant shall have the right either to cancel
this lease and declare the same null and void or to continue in
the possession of the remainder of the same under the terms herein
provided, except that the rent shall be reduced in proportion to
the amount of the premises taken. All damages awarded for such
taking shall be awarded to the Landlord as compensation for
diminution in value to the leasehold or to the fee of the premises
herein leased; provided, however, that the Landlord shall not be
entitled to any portion of the award made to the tenant for loss
of business.
Reservation (17) The Tenant shall not erect any structure for storage or
any aerial, or use the roof for any purpose without the consent in
writing of the Landlord.
Care of
Premises (18) The Tenant shall not perform any acts or carry on any
practice which may injure the building and shall keep premises
under his control clean and free from rubbish, dirt, at all times,
and it is further agreed that in the event the Tenant shall not
comply with these provisions, the Landlord may enter upon said
premises and have rubbish, dirt and ashes removed, in which event
the Tenant agrees to pay all charges that the Landlord shall pay
for hauling rubbish, ashes and dirt. Said charges shall be paid to
the Landlord by the Tenant as soon as bill is presented to him.
See Addendum.
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Condition of
Premises at
Time of Lease (20) The Tenant further acknowledges that he has examined
the said leased premises prior to the making of this lease, and
knows the condition thereof, and that no representations as to the
condition or state of repairs thereof have been made by the
Landlord, or his agent, which are not herein expressed, and the
Tenant hereby accepts the leased premises in their present
condition at the date of the execution of this lease.
(21) The Landlord shall not be responsible or liable to the
Tenant for any loss or damage that may be occasioned by or through
the acts or omissions of persons occupying adjoining premises or
any part of the premises adjacent to or connected with the
premises hereby leased or any part of the building of which the
leased premises are a part or for any loss or damage resulting to
the Tenant or his property from bursting, stoppage or leaking of
water, gas, sewer or steam pipes, unless caused by the negligence
or willful misconduct of Landlord, its agents or contractors.
Re-Renting (22) The Tenant hereby agrees that for a period commencing
180 days prior to the termination of this lease, the Landlord may
show the premises to prospective Tenants, and 180 days prior to
the termination of this lease, may display in and about said
premises and in the windows thereof, the usual or ordinary "TO
RENT" signs.
Holding Over (23) It is hereby agreed that in the event of the Tenant
herein holding over after the termination of this lease,
thereafter the tenancy shall be from month to month in the absence
of a written agreement to the contrary.
Gas, Water,
Heat,
Electricity (24) The Tenant will pay all charges made against said
leased premises for gas, water, heat and electricity during the
continuance of this lease, as the same shall become due.
Advertising
Display (25) It is further agreed that all signs and advertising
displayed in and about the premises shall be such only as
advertise the business carried on upon said premises, and that the
Landlord shall control the character and size thereof, and that no
sign shall be displayed excepting such as shall be approved in
writing by the Landlord, and that no awning shall be installed or
used on the exterior of said building unless approved in writing
by the Landlord.
Access to
Premises (26) The Landlord shall have the right to enter upon the
leased premises at all reasonable hours for the purpose of
inspecting the same. If the Landlord reasonably deems any repairs
necessary and such repairs are Tenant's obligation under this
Lease, he may demand that the Tenant make the same and if the
Tenant refuses or neglects forthwith to commence such repairs and
complete the same with reasonable dispatch the Landlord may make
or cause to be made such repairs and shall not be responsible to
the Tenant for any loss or damage that may accrue to his stock or
business by reason thereof, and if the Landlord makes or causes to
be made such repairs the Tenant agrees that he will forthwith on
demand pay to the Landlord the cost thereof with interest at 11%
per annum, and if he shall make default in such payment the
Landlord shall have the remedies provided in Paragraph 6 hereof.
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Re-Entry (27) In case any rent shall be due and unpaid or if default
be made in any of the covenants herein contained, or if said
leased premises shall be deserted or vacated, then it shall be
lawful for the Landlord, his certain attorney, heirs,
representatives and assigns, to re-enter into, re-possess said
premises and the Tenant and each and every occupant to remove and
put out in any manner provided by law. If Tenant vacates the
premises, Tenant shall maintain reasonable levels of utility
service.
Quiet
Enjoyment (28) The Landlord covenants that the said Tenant, on payment
of all the aforesaid installments and performing all the covenants
aforesaid, shall and may peacefully and quietly have, hold and
enjoy the said demised premised for the term aforesaid.
Expenses--
Damages
Re-Entry (29) In the event that the Landlord shall, during the period
covered by this lease, obtain possession of said premises by
re-entry, summary proceedings, or otherwise, the Tenant hereby
agrees to pay the Landlord the reasonable expense incurred in
obtaining possession of said premises, and also all reasonable
expenses and commissions which may be paid in and about the
letting of the same, and all other damages.
Remedies and
Exclusive (30) It is agreed that each and every of the rights,
remedies and benefits provided by this lease shall be cumulative,
and shall not be exclusive of any other of said rights, remedies
and benefits, or of any other rights, remedies and benefits
allowed by law.
Waiver (31) One or more waivers of any covenant or condition by the
Landlords shall not be construed as a waiver of a further breach
of the same covenant or condition.
Delay of
Prosecution Text Deleted.
Notices (33) Whenever under this lease a provision is made for
notice of any kind it shall be deemed sufficient notice and
service thereof if such notice to the Tenant is in writing
addressed to the Tenant at his last known Post Office address or
at the leased premises and deposited in the mail with postage
prepaid and if such notice to the Landlord is in writing addressed
to the last known Post Office address of the Landlord and
deposited and deposited in the mail with postage prepaid. Notice
need be sent to only one Tenant or Landlord where the Tenant or
Landlord is more than one person.
(34) It is agreed that in this lease the word "he" shall be
used as synonymous with the words "she," "it" and "they," and the
word "his" synonymous with the words "her," "its" and "their."
(35) The covenants, conditions and agreements made and
entered into by the parties hereto are declared binding on their
respective heirs, successors, representatives and assigns.
(36) In the event security is given, Paragraph 37 of the
last page shall be deemed a part of this lease.
See Addendum attached hereto and incorporated herein by reference.
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IN WITNESS WHEREOF, the parties have hereunto set their
hands and seals the day and year first above written.
WITNESSED BY: LANDLORD:
/s/ C. Lane Mally (L.S.)
-------------------- -----------------------------------
C. LANE MALLY
(L.S.)
-------------------- -----------------------------------
TENANT:
(L.S.)
-------------------- -----------------------------------
MALLYCLAD CORPORATION
/s/George S. Hofmeister, Chairman (L.S.)
-------------------- -----------------------------------
Richard L. Pangrazzi
(L.S.)
-----------------------------------
IN CONSIDERATION of the letting of the premises in the
foregoing instrument described, and for the sum of one dollar, to
_______________ paid _______________ do hereby become surety for
the punctual payment of the rent and performance of the covenants
in said instrument mentioned, to be paid and performed by the
second part _______________ therein named; and if any default
shall at any time be made therein do hereby promise and agree to
pay unto the part _____ of the first part named in said
instrument, the said rent and arrears thereof that may be due, and
fully satisfy the condition of said instrument, and all damages
that may occur by reason of the non-fulfillment thereof, without
requiring notice or proof of the demand being made. The Landlord
shall not be held to strict construction adopted in cases of
principal and surety. The surety shall not have the right to claim
discharge, or plead by way of defense any extension of time given
by the Landlord, failure of the Landlord to give notice of
default, receipt by the Landlord of securities from the Tenant,
failure of the Landlord to pursue the Tenant and his property with
due diligence or to apply other remedies and other securities
which may possibly be available to the Landlord and any direct
release, unless it be in writing duly authorized and executed.
WITNESS _______ hand ___________ and seal _________ this
_______________ day of 19__.
_______________ (L.S.)
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STATE OF MICHIGAN )
) ss.
COUNTY OF ______ )
On this _________ day of ____________, in the year of our
Lord One Thousand Nine Hundred and ________________ before me, a
___________________ in and for said County, appeared
_______________________ to me personally known, who, being by me
sworn, did (1) ___________________ say that (2)
___________________ the ___________________ of ___________________
the corporation named in and which executed the within instrument,
and that the seal affixed to said instrument is the corporate seal
of said corporation, and that said instrument was signed and
sealed in behalf of said corporation by authority of its Board of
Directors; and said ___________________ acknowledges said
instrument to be the free act and deed of said corporation.
_______________________________
Notary Public County, Michigan
My Commission Expires
NOTE: If more than one officer acknowledges, insert at (1) "each
for himself" and (2) "they are respectively"
SECURITY PROVISION
Paragraph 37 (Refer to Paragraph 36 of Lease)
The Landlord herewith acknowledges the receipt of None
Dollars ($0.00), which he is to retain a security for the faithful
performance of all of the covenants, conditions, and agreements of
this lease, but in no event shall the Landlord be obligated to
apply the same upon rents or other charges in arrears or upon
damages for the Tenant's failure to perform the said covenants,
conditions, and agreements; the Landlord may so apply the security
at his option; and the Landlord's right to the possession of the
premises for non- payment of rent or for any other reason shall
not in any event be affected by reason of the fact that the
Landlord holds this security. The said sum if not applied toward
the payment of rent in arrears or toward the payment of damages
suffered by the Landlord by reason of the Tenant's breach of the
covenants, conditions, and agreements of this lease is to be
returned to the Tenant when this lease is terminated, according to
these terms, and in no event is the said security to be returned
until the Tenant has vacated the premises and delivered possession
to the Landlord.
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In the event that the Landlord repossesses himself of the
said premises because of the Tenant's default or because of the
Tenant's failure to carry out the covenants,conditions, and
agreements of this lease, the Landlord may apply the said security
upon all damages suffered to the date of said repossession and may
retain the said security to apply upon such damages as may be
suffered or shall accrue thereafter by reason of the Tenant's
defaults or breach. The Landlord shall not be obliged to keep the
said security as a separate fund, but may mix the said security
with his own funds.
LANDLORD:
/s/ C. Lane Mally (L.S.)
------------------------------
C. LANE MALLY
=======================================
Detroit Real Estate Board
BUSINESS PROPERTY LEASE
Landlord
-------------------------------
Tenant
---------------------------------
Premises
-------------------------------
From
-----------------------------------
To
-------------------------------------
=======================================
=======================================
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ADDENDUM TO AMENDED AND RESTATED LEASE DATED AS OF JUNE 25,
1996 BETWEEN C. LANE MALLY ("LANDLORD") AND MALLYCLAD
CORPORATION, A MICHIGAN CORPORATION ("TENANT")
1. CONFLICTS OR INCONSISTENCIES. In the event of any conflict or
inconsistency between the terms and conditions of this Addendum to Amended and
Restated Lease ("Addendum") and the terms and conditions of the Detroit Board of
Realtors Business Property Lease Form 113-A (the "Form Lease") to which this
Addendum is attached, the terms and conditions of this Addendum shall control
and prevail. The Form Lease and this Addendum are sometimes collectively
referred to as the "Lease."
2. INSURANCE.
(a) Landlord shall keep the building located on the premises
insured against damage and destruction by fire, vandalism and other
perils in the amount of the full replacement value of the building as
the value may exist from time to time. The insurance shall include an
extended coverage endorsement of the kind customarily required by
institutional lenders to repair and restore the building. Tenant shall
reimburse Landlord for Tenant's Pro-Rata Share (as hereinafter defined)
of the cost of such insurance within thirty (30) days of a written
request therefor by Landlord. Such payment request shall be accompanied
by a copy of the invoice for such insurance. The insurance for the
first and last year of the Lease term shall be equitably prorated by
the parties.
(b) Tenant, at Tenant's own cost and expense, will provide and
keep in full force and effect during the term of this Lease, public
liability insurance with limits of not less than One Million Dollars
($1,000,000) covering bodily injuries to persons, including death, and
loss of or damage to the property of others, in respect of any one
occurrence and in the aggregate. Landlord shall have the right to
require increases in the amount of such insurance, not more frequently
than annually, if reasonably required. Such insurance may be provided
under Tenant's blanket comprehensive liability insurance policy. A
certificate evidencing such insurance coverage shall be delivered to
Landlord prior to the commencement of the Term hereof. Such certificate
of insurance will provide for thirty (30) days advance notice in the
event of cancellation. Tenant's insurance shall be provided by a
company licensed to do business in Michigan and shall be otherwise
reasonably acceptable to Landlord.
(c) Landlord and Tenant do hereby each herewith and hereby release
and relieve the other, and waive the entire claim of recovery, for loss
of or damage to property arising out of or incident to fire, lightning,
and the other perils included in a standard fire insurance policy
containing a standard extended coverage and special extended coverage
endorsement or under a policy or policies insuring the same perils or
perils additional to those already described, when such property
constitutes the premises or the building or is in, on or about the
premises, building or land on which the building
<PAGE> 10
is situated, whether or not such loss or damage is due to the
negligence of Landlord or Tenant, their agents, employees, guests,
licensees, invitees or contractors. The release and waiver also applies
to each party's directors, officers, employees, shareholders, partners
and agents.
(d) Each of Landlord and Tenant shall cause its insurance carriers
to waive all rights of subrogation against the other party hereto to
the extent of Landlord's or Tenant's undertaking set forth in this
Paragraph 2.
3. REAL ESTATE TAXES.
(a) Tenant agrees to pay Tenant's Pro-Rata Share (as hereinafter
defined) of any and all real estate taxes and assessments, if any,
assessed upon the Building in which the leased premises are located and
common areas related thereto, which taxes and/or assessments shall have
been assessed and/or become due and payable during the term of this
Lease. Tenant shall pay such sums within thirty (30) days of a written
request therefor by Landlord, which request will be accompanied by a
copy of the tax bill. In no event, however, shall Tenant be obligated
to pay any such tax bill sooner than 14 days prior to the date a
penalty for nonpayment may be assessed by the taxing authority. Said
taxes shall be prorated and adjusted from the date of the Lease
commencement and the date of termination of this Lease based on the due
date method (i.e., on the basis that such taxes are paid in advance).
Tenant shall have the right to contest real estate taxes in any
reasonable manner and Landlord agrees to cooperate in connection with
any contest of the payment of real estate taxes by Tenant.
(b) Landlord represents and warrants to Tenant that the premises
do not consist of real property reserved for additional construction by
Landlord or which does not otherwise service the building located on
the premises.
(c) Landlord may take the benefit of the provisions of any statute
or ordinance permitting any assessment to be paid over a period of time
and the installments of such assessment, which become due and payable
during the term of the Lease, shall be included in the calculation of
real estate taxes; provided, however, that in the event that Landlord
elects to pay any special assessment in a lump sum, Landlord shall, for
purposes of calculating Tenant's Pro-Rata Share of real estate taxes
under this Lease, amortize such assessment over the longest period
allowed by law to pay such assessment and Landlord may include interest
at the rate that would be charged by the assessing authority had
Landlord elected to pay such assessment over such longest period.
(d) As used herein, "Tenant's Pro-Rata Share" shall mean a
fraction of the numerator of which is the rentable area of the leased
premises and the denomination of which is the rentable area of the
Building.
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4. ASSIGNMENT.
(a) Notwithstanding the provisions of Paragraph 8 of the Form
Lease, the Lease may be assigned, or the premises may be sublet, in
whole or in part, to (i) any corporation into or with which Tenant may
be merged or consolidated, (ii) any corporation which shall be an
affiliate, subsidiary, parent or successor of Tenant, (iii) a purchaser
of substantially all of Tenant's assets whose financial condition is
sufficient, in Landlord's reasonable judgment to permit such purchaser
to perform Tenant's executory obligations under this Lease, or (iv) a
partnership or limited liability company the majority interests in
which shall be owned by stockholders, officers or directors of Tenant.
Landlord's written consent shall be required with respect to the
transfers described in clauses (ii) and (iv) which consent shall be
given if such successor's financial condition is substantially equal to
or better than the financial condition of Tenant immediately prior to
such transfer.
(b) The consent by Landlord to any assignment of the Lease shall
not be construed as a release of Tenant from its obligations under this
Lease except for (i) an assignment made in connection with any of the
transactions described in sub clauses (i), (ii) and (iv) of
subparagraph (a) above, or (ii) an assignment to a party whose
financial condition is sufficient, in Landlord's reasonable judgment,
to permit such party to perform Tenant's executory obligations under
this Lease. In no event shall any such assignment release Tenant from
its obligations under paragraph 6(c)(ii) or for obligations owing to
the Landlord maturing prior to the assignment.
5. NONDISTURBANCE AGREEMENT. Tenant's obligation to subordinate this
Lease to the lien of any mortgagee or mortgage now or hereafter placed upon
Landlord's interest in the premises is hereby expressly conditioned on the
agreement of any such mortgagee to enter into a nondisturbance agreement in form
and substance reasonably satisfactory to Tenant. Such nondisturbance agreement
shall provide, among other things, that Tenant's quiet and peaceful possession
of the premises shall not be disturbed by any such mortgagee as long as Tenant
is not in default under this Lease. Landlord shall exercise its best efforts to
obtain such nondisturbance agreement within 30 days of the date hereof.
6. COMPLIANCE WITH LAWS.
(a) Landlord's Compliance. Landlord represents and warrants that
as of June 25, 1996 the premises and building comply with all
applicable laws, ordinances, rules, regulations, building or fire
protection codes (collectively, "Applicable Laws"). During the Lease
term, Landlord shall comply with all Applicable Laws regarding the
premises except to the extent Tenant must comply under subparagraph (b)
of this Paragraph 6.
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<PAGE> 12
(b) TENANT'S COMPLIANCE. Tenant shall comply with all Applicable
Laws:
(i) regarding the physical condition of the premises, but
only to the extent that the Applicable Laws pertain to the
particular manner in which Tenant uses the premises; or
(ii) that do not relate to the physical condition of the
premises but relate to the lawful use of the premises.
(c) ENVIRONMENTAL COMPLIANCE.
(i) Landlord's Obligations. Landlord shall not cause or
permit any Hazardous Material (as defined herein) to be released,
brought upon, stored, produced, emitted, disposed of or used upon,
about or beneath the building by Landlord, its agents, employees,
contractors, invitees or other tenants (other than Vyn-L
Corporation) except as permitted under and in full compliance with
all environmental laws.
Landlord shall indemnify, defend and hold Tenant harmless
from and against any and all Tenant's Environmental Damages (as
defined herein) which arise from: (A) the presence upon, about or
beneath the building or premises of any "Hazardous Materials" (as
defined herein) or of any chemical substance requiring remediation
under any federal, state or local statute, regulation, ordinance
or policy; or; (B) the breach of any of the provisions of this
Lease. For the purpose of this Lease, "Tenant's Environmental
Damages" shall mean: (1) all claims, judgments, damages,
penalties, fines, costs, liabilities and losses (including,
without limitation, diminution in the value of the building or
premises, damages for the loss of or restriction on use of
rentable or usable space or of any amenity of the premises; (2)
all sums paid for settlement of claims, attorneys fees,
consultant's fees and expert's fees; and (3) all costs incurred by
Tenant in connection with investigation of Hazardous Material (as
defined herein) upon, about or beneath the building or premises,
the preparation of any feasibility studies or reports and the
performance of any cleanup, remediation, removal or restoration
work required by any federal, state or local governmental agency
or political subdivision necessary for Tenant to make full
economic use of the premises, or otherwise required under this
Lease. Landlord's obligation under this subparagraph shall survive
the expiration or termination of this Lease. In no event shall
Tenant's Environmental Damages include damages resulting from the
breach by Tenant or its subtenants or assigns of their obligations
under subparagraph 6(c)(ii) hereof or resulting from the breach by
Vyn-L Corporation ("Vyn-L") or its subtenants or assigns of the
same environmental covenants contained in an Amended and Restated
Lease between Vyn-L and Landlord of even date herewith.
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(ii) Tenant's Obligations. Neither Tenant nor its agents,
employees or contractors shall cause or permit Hazardous Materials
to be brought upon, kept, or stored in, on or about the premises,
the building except as permitted under and in full compliance with
all environmental laws. If Tenant obtains knowledge of the actual
or suspected release of Hazardous Material, then Tenant shall
promptly notify Landlord of such actual or suspected release.
Tenant shall immediately notify Landlord of any inquiry, test,
investigation or enforcement proceeding by or against Tenant
involving a release. If Tenant or its agents, employees or
contractors shall cause or permit a release, then Tenant shall
promptly notify Landlord of such release and immediately begin
investigation and remediation of such release, as required by all
environmental laws. Tenant shall indemnify, defend and hold
Landlord harmless from and against Landlord's Environmental Damage
(as hereinafter defined) arising out of or related to Tenant's
breach of the covenants contained in this subparagraph (ii) from
and after June 25, 1996. For the purpose of this Lease,
"Landlord's Environmental Damages" shall mean: (1) all claims,
judgments, damages, penalties, fines, costs, liabilities and
losses (including, without limitation, diminution in the value of
the building or premises, damages for the loss of or restriction
on use of rentable or usable space or of any amenity of the
premises; (2) all sums paid for settlement of claims, attorneys
fees, consultant's fees and expert's fees; and (3) all costs
incurred by Landlord in connection with investigation of Hazardous
Material (as defined herein) upon, about or beneath the building
or premises, the preparation of any feasibility studies or reports
and the performance of any cleanup, remediation, removal or
restoration work required by any federal, state or local
governmental agency or political subdivision necessary for
Landlord to make full economic use of the premises, or otherwise
required under this Lease. Tenant's obligation under this
subparagraph shall survive the expiration or termination of this
Lease.
(iii) Landlord's Breach of Environmental Covenant. If any
release of Hazardous Material or the clean up of such release,
materially interferes with Tenant's use or occupancy of the
premises (other than a release for which Tenant, Vyn-L or their
respective agents, employees, contractors or assigns are
responsible), then (A) all basic rent and all other charges
payable under the Lease shall immediately abate during the period
of such interference (based on and to the extent which Tenant's
use of the premises is no longer fit for ordinary business
purposes (as reasonably determined by Tenant)); and (B) if such
interference continues for a period in excess of sixty (60) days
or poses a health hazard to Tenant's employees for any period of
time, then Tenant, at its option, can terminate this Lease.
"Hazardous Material" means any material or substance: (i)
defined as a "hazardous substance" pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601 et seq. and amendments thereto and regulations
promulgated thereunder; (ii) containing gasoline, oil, diesel fuel
or other petroleum products; (iii) defined as a "hazardous waste"
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<PAGE> 14
pursuant to the Federal Resource Conservation and Recovery Act
(42 U.S.C. Section 6901 et seq.) and amendments thereto and
regulations promulgated thereunder; (iv) containing
polychlorinated biphenyls (PCBs); (v) containing asbestos; (vi)
radioactive; (vii) biological or (viii) the presence of which
requires investigation or remediation under any federal, state or
local statute, regulation, ordinance or policy or which is or
becomes defined as a "hazardous waste" or "hazardous substance"
under any federal, state or local statute, regulation, ordinance
or policy and any toxic, explosive, corrosive or otherwise
hazardous substance, material or waste which is or becomes
regulated by any federal, state or local governmental authority,
or which causes a nuisance upon or waste to the premises.
6. LIABILITY, INSURANCE AND INDEMNITY.
(d) At and after the commencement date, Tenant agrees to defend,
indemnify and hold harmless Landlord from claims for bodily injury,
death or property damage arising from incidents which occur on the
premises caused by the negligence or willful misconduct of Tenant, its
agents, employees or invitees subject to the provisions of Paragraph 2
of this Addendum.
When the claim results from the joint negligence or willful misconduct
of Tenant and Landlord or Tenant and a third party unrelated to Tenant,
except Tenant's agents, employees or invitees, Tenant's duty to defend,
indemnify and hold Landlord harmless under this subparagraph shall be
in proportion to Tenant's allocable share of the joint negligence or
willful misconduct subject to the provisions of Paragraph 2 of this
Addendum.
(e) At and after the commencement date, Landlord agrees to
defend, indemnify and hold harmless Tenant from claims for bodily
injury, death or property damage arising from incidents which occur on
the premises caused by the negligence or willful misconduct of
Landlord, its agents, employees or invitees subject to the provisions
of Paragraph 2 of this Addendum.
When the claim results from the joint negligence or willful misconduct
of Landlord and Tenant or Landlord and a third party unrelated to
Landlord, except Landlord's agents, employees or invitees, Landlord's
duty to defend, indemnify and hold Tenant harmless under this
subparagraph shall be in proportion to Landlord's allocable share of
the joint negligence or willful misconduct subject to the provisions of
Paragraph 2 of this Addendum.
7. REPAIRS.
(f) Except as otherwise provided under this Lease, Tenant shall:
(i) keep the premises (including the cranes located
therein) and the north parking lot in the same condition and state
of repair which existed as
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<PAGE> 15
of the commencement date, ordinary wear and tear, loss by fire,
the elements or other casualty and loss due to the negligent or
willful misconduct of Landlord or any other tenant of the Building
(other than Vyn-L) or their respective agents, contractors or
invitees excepted;
(ii) make repairs and replacements to the premises or
building needed because of Tenant's misuse or negligence, except
to the extent that the repairs or replacements are covered by
Landlord's insurance or the insurance Landlord is required to
carry under this Lease, whichever is greater; and
(iii) Tenant shall arrange to have the lobby cleaned
periodically.
(g) Except for the repairs that Tenant must make under Paragraph
8(a), Landlord shall pay for and make all other repairs and
replacements to the premises, common areas and Building. Landlord shall
make the repairs and replacements and perform such other maintenance
service in order to maintain the Building in a condition comparable to
other industrial buildings of comparable age and quality in the Troy
Madison Heights area. The maintenance shall include the roof,
foundation, exterior walls, all structural components and all Building
systems. Landlord shall keep the common areas and all other areas under
the control of Landlord (including all roads, yards and parking areas)
clean and free from rubbish, dirt snow and ice at all times. Tenant
agrees to reimburse Landlord for Tenant's Pro-Rata Share of the
reasonable cost of day-to-day maintenance of the building's heating,
ventilating, air conditioning, electrical and mechanical system as well
as minor repair to the private road servicing the Building (such as
repair of potholes), provided, however, that in no event shall Tenant
be responsible for reimbursing Landlord for maintenance or repair
expenditures of a capital nature as determined in accordance with
generally accepted accounting principles. Tenant shall also reimburse
Landlord for Tenant's Pro-Rata Share of the reasonable costs of snow
removal and lawn service.
8. CONSENT OF LANDLORD. Whenever Tenant is required to obtain the
consent or approval of Landlord as to any matter, decision or request described
in the Lease, Landlord agrees not to unreasonably withhold or delay its decision
beyond fifteen (15) days. In the event that Landlord fails to respond to any
such request within such fifteen-day period, then such consent or approval shall
be deemed approved. In the event that Landlord's discretion is required to be
exercised as to any matter other than a consent or approval described above,
then Landlord agrees to exercise such discretion in a reasonable manner.
9. ATTORNEYS FEES. In any litigation between the parties regarding
the Lease, the losing party shall pay to the prevailing party all reasonable
expenses and court costs, including reasonable attorneys' fees incurred by the
prevailing party to the extent determined by the presiding judge. A party shall
be considered the prevailing party if:
(h) it initiated the litigation and substantially obtains the
relief it sought, either through a judgment or the losing party's
voluntary action before trial or judgment, unless otherwise expressly
agreed to in writing;
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(i) the other party withdraws its action without substantially
obtaining the relief it sought; or
(j) it did not initiate the litigation and judgment is entered
for either party, but without substantially granting the relief sought.
10. LANDLORD'S TITLE. Landlord represents, warrants and covenants that
it has lawful title to the premises in fee simple, that the premises are free
and clear of any and all liens, mortgages or other encumbrances (except a
mortgage held by First of America Bank) and that Landlord has the right and
power to make this Lease for the term aforesaid. Landlord further represents and
warrants to Tenant that the premises as of the commencement date will be fit for
the purpose intended.
11. EVENT OF DEFAULT. Tenant shall not be deemed to be in default
under this Lease unless (a) Tenant fails to pay any installment of rent when due
for a period of ten (10) days following written notice of nonpayment from
Landlord; or (b) Tenant fails to perform any other obligation required to be
performed by Tenant under this Lease for a period of thirty (30) days following
Tenant's receipt of written notice of such other default from Landlord. To the
extent such other default cannot reasonably be cured within a thirty (30) day
period, no default shall exist if Tenant begins to cure such default within such
thirty (30) day period and thereafter diligently proceeds to cure such default.
12. SIGNAGE. Tenant shall have the right to place a sign on the
building located on the premises subject to compliance with applicable sign
ordinances. Landlord may place signs in other parts of the Building after first
obtaining Tenant's prior written consent, which consent shall not be
unreasonably withheld.
13. DAMAGE TO PREMISES. Paragraph 12 of the Form Lease is hereby
restated in its entirety as follows:
"(12) It is understood and agreed that if the premises hereby
leased be damaged or destroyed in whole or in part by fire or
other casualty during the term hereof, that Landlord will repair
and restore the same to good tenantable condition with reasonable
dispatch and that the rent herein provided for shall abate
entirely in case the entire premises are untenantable. As used
herein, "untenantable" shall mean that the premises are not
reasonably fit for the conduct of Tenant's business operations. If
less than all of the premises are rendered untenantable by virtue
of the fire or other casualty, then Tenant shall be entitled to a
prorata abatement of rent unless the portion rendered untenantable
is so situated that Tenant's entire business operations are
materially adversely affected, in which event Tenant shall be
entitled to a full rental abatement. Tenant shall not be entitled
to an abatement of rent during any period of delay caused by
Tenant's failure to adjust its own insurance and/or Tenant's
failure to remove its damaged goods, wares, equipment or property
from the premises within a reasonable time. In the event that the
damage to the premises is so extensive that Landlord, using
reasonable efforts, will be unable to repair and restore the
premises within one hundred twenty (120)
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<PAGE> 17
days (or, if Landlord is preceding with due diligence, such
reasonable additional time as may be reasonably required under the
circumstances not to exceed 180 days in total) of the date of the
casualty, then either party shall have the right to terminate this
Lease by delivering written notice to the other. Upon delivery of
such written notice, this Lease shall automatically terminate and
neither party shall have any further obligation to the other
except for those provisions which by their terms are intended to
survive termination and except for obligations maturing prior to
the loss."
14. OPTION TO EXTEND TERM.
(k) Grant of Option. Tenant shall have the option to extend the
term of this Lease for 2 additional periods of 3 years each (each a
"Renewal Term"), as follows:
(i) Upon the expiration date of the initial term, Tenant
may extend the term of this Lease for the first Renewal Term (the
"First Renewal Term") by delivering written notice to Landlord of
Tenant's exercise of such option not less than one hundred eighty
(180) days prior to the expiration date.
(ii) Upon the expiration of the First Renewal Term, Tenant
may extend the term of this Lease for an additional 3 year period
by delivering written notice to Landlord of Tenant's exercise of
such option not less than one hundred eighty (180) days prior to
the expiration of the First Renewal Term.
(iii) Tenant shall not be entitled to extend the term of this
Lease if Tenant is in default under this Lease at the time Tenant
exercises the applicable option.
(l) Adjusted Base Rent. Tenant's possession of the leased
premises during each Renewal Term, if any, shall be under and subject
to all of the terms, covenants and conditions set forth in this Lease,
with the exception that the annual base rent for each Renewal Term
shall be adjusted as follows:
(i) The annual base rent for each Renewal Term shall be
determined by multiplying (a) the annual base rent payable by
Tenant during the last year of initial term or the last year of
the First Renewal Term, as applicable, by (b) a fraction, the
numerator of which shall be the Base Index (as hereinafter
defined) for the second full calendar month which precedes the
commencement date of the applicable Renewal Term, and the
denominator of which shall be the Base Index for the thirty eighth
full calendar month which precedes such commencement date.
(ii) As used herein, the term "Base Index" shall mean and
refer to the United States Department of Labor, Bureau of Labor
Statistics Revised Consumer Price Index for all Urban Consumers
(CPI-U) (1982-1984 = 100) for Detroit - Ann Arbor, Michigan, or
the successor such index. If the Base Index ceases to
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<PAGE> 18
use the 1982-1984 average equaling 100 as the basis of calculation
or if a change is made in the term or number of items contained in
the Base Index, or if the Base Index if altered, modified,
converted or revised in any other way, then the Base Index shall
be adjusted to the figure that would have been arrived at had the
change in the manner of computing the Base Index, in effect at the
date of this Lease, not been altered. If the Base Index is not
published by the Bureau of Labor Statistics or another
governmental agency at any time during the term of this Lease,
then any substitute or successor index published by the Bureau of
Labor Statistics or other governmental agency of the United
States, and similarly adjusted as aforesaid, shall be used. If the
Base Index (or successor or substitute index similarly adjusted)
is not available, a reliable governmental or other reputable
publication selected by Landlord and Tenant shall be used. If the
Base Index is not published for any month for which a computation
is required to be made under subparagraphs (b)(i) and (ii) above,
then the Base Index for the closest preceding month for which a
Base Index is available shall be used.
(iii) In the event Landlord lacks sufficient data to
determine the base rent for the Renewal Term, Tenant shall
continue to pay the monthly rent, and all other charges payable,
immediately prior to the commencement of the Renewal Term. As soon
as Landlord obtains the necessary data, it shall determine the
base rent for the Renewal Term and notify Tenant of such
adjustments in writing. If the amounts due following the
commencement of such Renewal Term exceed the amount previously
paid by Tenant for such period, Tenant shall forthwith pay the
difference to Landlord within thirty (30) days of a written demand
therefor.
(iv) The parties acknowledge that an adjacent suite is being
leased by Landlord to Vyn-L Corporation, which is an affiliate of
Tenant. The Vyn-L suite is not separated from the premises by
partitions. In the event either the premises or the Vyn-L suite is
leased or licensed, to a third party by Landlord, or a third party
occupies the Vyn-L suite through Landlord, then Landlord shall
cause a partition to be constructed separating the Vyn-L suite
from the premises. Such construction shall be performed with due
diligence during normal business hours and in a manner as to
minimize interference with Tenant's business.
15. LEASE STATUS. Landlord acknowledges and agrees that the Lease is
currently in full force and effect, that Tenant has performed all of its
obligations under the Lease through the date hereof and Landlord has no claim
against Tenant arising in connection with any breach of the Lease by Tenant or
otherwise relating to the landlord/tenant relationship or Tenant's occupancy of
the Leased Premises.
16. LATE PAYMENTS. Tenant shall pay Landlord a late payment fee equal
to four (4%) percent of any payment (not to exceed $200), which is not paid
within ten (10) days of the due date.
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17. SECOND FLOOR SPACE. The parties acknowledge that the premises
include space on the second floor of the Building which Tenant has been
occupying (the "Second Floor Space"). As rent for the Second Floor Space, Tenant
shall continue to pay Landlord the sum of $250 per month during the term of the
lease as the same may be extended. Tenant shall have the right to discontinue
its lease of the Second Floor Space upon 30 days prior written notice to
Landlord in which event Tenant shall be relieved of all obligations with respect
to the Second Floor Space including the obligation to pay rent for the Second
Floor Space. The Second Floor Space shall not be included in calculating
Tenant's Pro-Rata Share.
18. NORTH PARKING LOT. Tenant shall have exclusive use of the north
parking lot during the term of the Lease.
LANDLORD:
By: /s/ C. Lane Mally
-----------------------------------
C. Lane Mally
TENANT:
MALLYCLAD CORPORATION, a Michigan
corporation
By: /s/ George S. Hofmeister
-----------------------------------
Its:Chairman
----------------------------
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<PAGE> 1
Exhibit 10.6a
LEASE AGREEMENT
BETWEEN
J.M.J. PARTNERSHIP, an Ohio general partnership
LANDLORD
AND
THE NEW EDGEHILL CO., INC., a Delaware corporation
TENANT
DEMISED PREMISES: 195 Phillipi Road, Franklin Township, Franklin County, Ohio
<PAGE> 2
LEASE
THIS LEASE made this 28th day of November, 1990, by and between J.M.J.
PARTNERSHIP, an Ohio general partnership, with a mailing address at 4700 East
Fifth Avenue, Columbus, Ohio 43219 (hereinafter called "Landlord"), and THE NEW
EDGEHILL CO., INC., a Delaware corporation, with a mailing address c/o
Controller, Eagle Window and Door, Inc., 375 East 9th Street, Dubuque, Iowa
52001 (hereinafter called "Tenant").
W I T N E S S E T H :
ARTICLE I. DEMISED PREMISES:
Section 1. Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, upon and subject to the terms and provisions of this Lease, the
following described premises (sometimes hereinafter referred to as the "Demised
Premises" or "Premises"), being a free-standing office/warehouse building
consisting of approximately 60,000 square feet, situated upon approximately 3.44
acres of land, situated in Franklin Township, County of Franklin, State of Ohio.
The Demised Premises are outlined in red in Exhibit "A" attached hereto and made
a part hereof. The Demised Premises are located at 195 Phillipi Road, Columbus,
Ohio.
Section 2. Landlord additionally owns real property immediately to the
west of the Demised Premises consisting of approximately 2.5 acres of land, as
shaded on Exhibit "A" and marked "Reserved for Future Development" ("Rear
Parcel"). Although the Rear Parcel is not a part of the Demised Premises, it is
subject to an option to purchase pursuant to Article V.
ARTICLE II. TERM OF LEASE:
Section 1. Term. The term of this Lease shall be for a period of three
(3) years, beginning on the commencement date (as defined in Article II, Section
2), except that if such commencement date shall be a day other than the first
day of a month, then the period of time between the commencement date and the
first day of the month next following shall be added to the term of the Lease.
The term "Lease Year" or "Base Lease Year" as used herein shall mean a
period of 12 consecutive full calendar months commencing with the commencement
date; provided, however, if the commencement date is other than the first day of
a month, the lease year shall commence on the first day of the month next
following the commencement date.
Section 2. Commencement Date.
As herein used, the phrase "commencement date" shall mean (i) November
29, 1990; or (ii) the date on which Tenant takes possession of the Demised
Premises, whichever occurs first.
ARTICLE III. RENTAL:
Section 1. Rental.
During the term of this Lease, Tenant agrees to pay to Landlord, at
such place or places as Landlord may by notice in writing to Tenant from time to
time direct, annual rental as follows:
<TABLE>
<CAPTION>
LEASE YEAR ANNUAL RENTAL MONTHLY INSTALLMENT
---------- ------------- -------------------
<S> <C> <C> <C>
A. 1 $ 87,500.00 $ 7,291.67
B. 2 $156,000.00 $13,000.00
C. 3 $156,000.00 $13,000.00
</TABLE>
Monthly installments of rental shall be due and payable, in advance, on
the first day of each calendar month during the term of this Lease, without
demand, and without deduction or
1
<PAGE> 3
setoff; provided, however, that if the commencement date occurs on a date which
is not the first day of a calendar month, then Tenant's initial rental payment
hereunder shall be prorated on a daily basis for the period from the
commencement date to the end of the month, and shall be due and payable on the
commencement date.
Section 2. Payments.
All payments of annual rental and other payments required to be made by
Tenant to Landlord hereunder shall, unless Landlord directs Tenant otherwise by
written notice, be made to Landlord at 4700 East Fifth Avenue, Columbus, Ohio
43219.
ARTICLE IV. LANDLORD IMPROVEMENTS:
Section 1. On or before January 1, 1991, Landlord, at Landlord's sole
cost and expense, shall cause the electric service to the Demised Premises to be
increased to 1,000 amp, 3-phase, 240 volt service.
Section 2. As soon as possible following execution of this Lease,
Landlord shall cause the following additional improvements to be made to the
Demised Premises:
(a) Build an additional restroom in the warehouse area. Such
restroom shall include a total of four (4) fixtures and two (2) sinks.
Tenant shall have the right to specify the desired combination of water
closets and/or urinals.
(b) The office area shall be painted, carpeted and tiled as
per the layout attached hereto as Exhibit "B" and made a part hereof.
(c) The kitchen area shall be painted and the floor
re-tiled. The sink cabinet and sink in the kitchen area shall be
replaced with a comparable unit(s).
(d) An additional floor drain shall be installed in the
warehouse area, the location and type of which to be specified by
Tenant.
ARTICLE V. OPTION TO PURCHASE:
Throughout the term of this Lease, or any renewal term, Tenant shall
have the right and option to purchase the Demised Premises and Rear Parcel upon
and subject to the following terms, provisions and conditions:
(a) Subject to subparagraph (b) of this Article V, the
option price shall be $1,200,000 plus the actual cost of Landlord's
improvements pursuant to Article IV. The total option price shall
increase (but not decrease) on each anniversary of the Commencement
Date in the same percentage proportion that the "Consumer's Price
Index--U.S. City Average For All Items For All Urban Consumers"
(1982-84 = 100) published monthly in the Monthly Labor Review by the
United States Department of Labor (the "CPI") shall have increased
during the previous 12-month period. In the event (i) the CPI is
discontinued, comparable statistics on the purchasing power of the
consumer dollar, as published at the time of said discontinuation by a
responsible financial periodical of recognized authority selected by
Landlord and Tenant, shall be used for making the above computation (if
Lessor and Lessee are unable to agree, the matter shall be submitted to
arbitration), or (ii) the base year (1982-84 = 100) or other base year
used in computing the CPI is changed, the figures used in making the
foregoing adjustments shall accordingly be changed so that all
increases in the CPI are taken into account notwithstanding any change
in the base year. The option price shall not, however, increase during
any one lease year by more than five percent (5%). The CPI index value
at the beginning of the measuring twelve (12) month period shall
constitute one hundred percent (100%).
(b) During the initial twenty-four (24) months of the term
of this Lease, Landlord shall not develop or sell the Rear Parcel.
Landlord shall notify Tenant at least sixty (60) days prior to the
expiration of the initial twenty-four (24) months of
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<PAGE> 4
the term or provide at least thirty (30) days advance notice after the
initial twenty-four (24) months of the term, whichever is applicable,
of Landlord's intention to sell or otherwise develop the Rear Parcel.
In the event that Tenant fails to notify Landlord, in writing, of its
intention to exercise the option to purchase the Demised Premises and
Rear Parcel pursuant to this Article V, then Landlord may proceed with
its development plans. Tenant's option to purchase the Demised Premises
shall, however, continue provided however, that the option price shall
be reduced by an amount equal to $25,000 per acre as determined by a
survey of the Rear Parcel. The credit against the option price shall
increase corresponding to the percentage increase in the Consumer Price
Index as provided in Section (a) of this Article V.
(c) In the event of Tenant's exercise of the option to
purchase, Tenant shall satisfy itself as to the status of Landlord's
title. The Demised Premises and Rear Parcel, if applicable, shall be
conveyed to Tenant by transferable and recordable Limited Warranty Deed
free and clear of all liens and encumbrances except (a) those created
or assumed by Tenant; (b) zoning ordinances; (c) legal highways; and
(d) covenants, restrictions, conditions and easements of record which
do not unreasonably interfere with Tenant's lawful use as contemplated
by this Lease. Closing shall take place within thirty (30) days of the
date of Tenant's exercise of the option to purchase. The option price
shall be paid in cash, or substantial equivalent, at closing. Landlord
shall pay any applicable transfer tax.
(d) In the event that during the term of this Lease, or any
renewal term, Landlord receives a bona fide offer to purchase the
Demised Premises (or Rear Parcel following expiration of the initial
twenty-four (24) months of the term) which offer Landlord desires to
accept, Landlord shall provide to Tenant written notice of such offer
and fifteen (15) days in which to exercise the option to purchase the
Demised Premises and Rear Parcel (if not previously sold or developed
by Landlord). If the offered purchase price is less than Tenant's
option price, Tenant shall have the right to purchase the Demised
Premises and Rear Parcel (if applicable) at the offered price, but
otherwise in accordance with this Article V. In the event that Tenant
fails to notify Landlord of its intention to exercise its option to
purchase prior to the expiration of such fifteen (15) day period, then
Tenant's option to purchase shall terminate and Landlord may proceed to
close the transaction at the offered price or higher within six (6)
months of the date of such offer. In the event that the transaction
fails to close within such six (6) month period, then Tenant's option
to purchase shall be reinstated.
Section 2. In the event that Landlord elects to sell or otherwise
develop the Rear Parcel pursuant to this Article V, Tenant consents to
Landlord's creation of a reasonable easement for ingress and egress near and
along the northern boundary of the Demised Premises to provide access to and
from the public right-of-way. In the event that Tenant exercises its option to
purchase the Demised Premises, the deed from Landlord to Tenant shall reserve
such easement in favor of the Rear Parcel. In the event that the appropriate
governmental authority requires fee simple ownership of frontage along the
public right-of-way as a condition to granting permission to "split" the Rear
Parcel from the Demised Premises, and thereby create a separate tax parcel,
Tenant consents to the conveyance by Landlord, or reservation in the deed, of a
necessary strip of land along the northern boundary of the Demised Premises for
purposes of ingress and egress to the Rear Parcel, provided that Landlord shall,
in addition, grant to Tenant an easement over, across and through such strip.
All easements granted or reserved pursuant to this Section 2 of this Article V
shall be on a non-exclusive, perpetual basis except that upon expiration of the
term of this Lease, or any renewal term, and provided that Tenant has failed to
exercise its option to purchase, then any easements in favor of Tenant shall
terminate. The amount of land included in such strip shall not be included in
the calculation of Tenant's credit against the option price pursuant to Section
(b) of this Article V.
ARTICLE VI. COMMON AREAS:
In the event that the Rear Parcel is sold or otherwise developed by
Landlord, the strip of land along the northern boundary of the Demised Premises
shall be deemed to be a "common area" to be used in common with the owner(s) of
the Rear Parcel, including such owner(s)' employees, agents, and invitees. The
cost of maintenance of such common area shall be borne
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<PAGE> 5
by Tenant and the then owner or occupant of the Rear Parcel in proportion to
acreage, i.e., Tenant shall be responsible for approximately 57 percent of the
maintenance, repair and replacement costs of such common area and the owner
and/or occupant of the Rear Parcel shall be responsible for approximately 43
percent--subject to verification of acreage by survey.
ARTICLE VII. USE AND CARE OF PREMISES:
Tenant covenants and agrees that it will not use or permit any person
to use the Demised Premises or any part thereof (i) for any use or purpose other
than office, light manufacturing, distribution and sales of architectural
products -- and purposes reasonably related thereto, or (ii) in violation of the
laws of the United States of America, the state in which the Demised Premises
are situate, or any ordinances or other regulations of any municipality in which
the Demised Premises are situated or of any other lawful authorities. During the
term of this Lease, Tenant will also keep the Demised Premises in a clean and
wholesome condition and will in all respects and at all times fully comply with
all lawful health, fire and police regulations.
ARTICLE VIII. REPAIRS, MAINTENANCE AND ALTERATIONS:
Section 1. Landlord shall maintain in good order, condition and repair
and replace when necessary the exterior of the building portion of the Demised
Premises (except as hereafter provided) and structure of the building portion of
the Demised Premises.
Section 2. Tenant shall keep and maintain the Demised Premises, the
interior thereof and that portion of the exterior applicable solely to the
Demised Premises (e.g.--HVAC unit[s]) in good order, condition and repair and
replace when necessary--subject to damage or loss resulting from public taking,
fire or other cause beyond Tenant's control and reasonable wear and tear. As
used in the immediately preceding sentence, "the interior thereof" shall
include, without limitation, all doors, all glass, all plumbing, all mechanical,
all electrical, all HVAC systems and all other equipment, systems and component
parts--whether located within or without the Demised Premises. That portion of
the Demised Premises outside the building which is for the exclusive use of
Tenant shall be maintained and repaired by Tenant. Tenant shall, in addition,
maintain in good order, condition and repair and replace when necessary--subject
to damage or loss resulting from public taking, fire or other cause beyond
Tenant's control and reasonable wear and tear, the pavement surrounding the
building portion of the Demised Premises (subject to contribution from the owner
or occupant of the Rear Parcel, if applicable, pursuant to Article VI), all
exterior landscaping and all exterior lighting.
Section 3. Tenant shall not make or permit any alterations, additions,
modifications or improvements in, on, to or affecting the Demised Premises
without the prior written consent of Landlord. Any such alterations, additions,
modifications or improvements to which Landlord consents shall be performed in a
good and workmanlike manner in accordance with plans submitted to and approved
by Landlord and in accordance with all applicable requirements of governmental
authorities, and shall be and become a part of the Demised Premises.
Section 4. Before any contractors or subcontractors are permitted to
perform any work in, on or around the Demised Premises, whether such work be for
repairs, maintenance, replacements, alterations, additions or modifications, the
prior written consent and approval of Landlord for the use of such contractors
and subcontractors must be obtained.
Section 5. Landlord will use its best efforts to deliver possession of
the Demised Premises in a broom clean condition. Otherwise, however, Tenant
accepts the Demised Premises in an "as is" condition, subject, however, to
Landlord's obligations pursuant to Article IV.
ARTICLE IX. TENANT'S COVENANTS:
Tenant covenants and agrees as follows:
(a) To pay when due all amounts due for rent or otherwise
hereunder.
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(b) To procure any licenses or permits required for any permitted use
of the Demised Premises by Tenant; and upon the expiration or termination of
this Lease, to remove its goods and effects and those of all persons claiming
under it and to yield up peaceably to Landlord the Demised Premises in good
order, repair and condition in all respects, subject to (a) the limitations and
exceptions set forth in Article VIII, Section 2 above; and (b) Landlord's
obligation to obtain a valid certificate of occupancy within a reasonable time
after completion of the improvements pursuant to Article IV. Tenant shall comply
with all applicable codes and obtain appropriate permits with regard to
improvements installed by Tenant.
(c) To keep and maintain the sidewalks, driveways and parking lots
adjacent to the building portion of the Demised Premises clean and free from
rubbish, trash, garbage, snow and ice; to store all trash and garbage within the
Demised Premises or in a manner approved by Landlord, which approval shall not
be unreasonably withheld and to arrange for regular pickup of trash and garbage.
(d) Not to make any use of the Demised Premises which is improper,
offensive or contrary to any law or ordinance; nor to permit any act or thing to
be done on the Demised Premises which shall constitute a nuisance or which will
increase the cost of or otherwise render void or voidable any fire insurance
maintained on the Demised Premises.
(e) To pay promptly when due the entire cost of any work to the Demised
Premises undertaken by Tenant so that said Premises shall at all times be free
of all liens whether for labor, materials or otherwise; to procure all necessary
permits before undertaking such work to do all of such work in a good and
workmanlike manner, employing material of good quality and complying with all
governmental requirements; and to save Landlord harmless and indemnified from
all injury, loss, claims or damage to any person or property occasioned by or
growing out of such work.
(f) To permit Landlord and its agents to examine the Demised Premises
at reasonable times and to show the Demised Premises to prospective purchasers,
provided that Landlord shall not thereby unreasonably interfere with the conduct
of Tenant's business; to permit Landlord to enter the Demised Premises to make
such repairs, improvements, alterations or additions thereto as may be required
in order to comply with the requirements of any public authority having
jurisdiction of the Premises, or as may be required of Landlord under the terms
of this Lease provided that such entry shall not unreasonably interfere with the
conduct of Tenant's business.
(g) To pay for all utilities consumed by Tenant in connection with its
use of the Demised Premises, including, without limitation, all gas, electric,
heating and air conditioning charges and water and sewer charges.
ARTICLE X. LANDLORD'S COVENANTS, REPRESENTATIONS AND WARRANTIES:
Landlord covenants and represents as follows:
(a) Landlord has full legal right and authority to enter into and carry
out all of its obligations under this Lease.
(b) The Premises are, and to the best of Landlord's knowledge, will
continue to be zoned category "heavy manufacturing" which permits light
manufacturing and warehouse uses. To the best of Landlord's knowledge there are
no covenants, deed or occupancy certificate restrictions or reservations
prohibiting the use of the Demised Premises for these purposes.
(c) The Demised Premises have direct access to publicly maintained
roads suitable for heavy truck use at all seasons of the year.
(d) Landlord will obtain (and deliver a copy thereof to Tenant) a valid
certificate of occupancy for the Demised Premises within a reasonable time
period after the completion of Landlord's improvements subject, however, to
Tenant's obligation to construct its improvements in accordance with all
applicable codes, rules and/or regulations and provided,
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further, that Tenant has obtained the appropriate permits required as a result
of such improvements.
(e) The building portion of the Demised Premises are and will be on the
Commencement Date, free from building, safety and health code violations and
free from structural defects and all electrical, HVAC, plumbing and fire safety
and damage control systems will be in full normal operating condition on the
Commencement Date.
(f) The Demised Premises are presently served by city potable water and
sanitary sewer, by natural gas, electrical and telephone utility services all of
which are separately metered to the Demised Premises.
(g) The exterior paved portion of the Demised Premises is approximately
90' in width and 400' in depth and can accommodate approximately 30 automobile
parking spaces.
(h) Neither Landlord (nor any of its beneficial owners, officer,
managerial employees or consultants) have any knowledge of any (i) "Hazardous
Substances" (as defined under the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended) or any other hazardous,
toxic, septic, radioactive, explosive or carcinogenic materials which have been
treated, stored, generated or disposed of upon the Premises (including the
groundwater of the Premises) or (ii) any violation of any State, Federal or
Local law enacted for the protection of the environment or the safety of the
workers at the Premises except that Landlord is aware of those matters disclosed
by (a) report of an environmental audit of the Premises performed by S.E.A.,
Inc. dated June 23, 1989; and (b) an underground storage tank removal report
dated August 18, 1989. Tenant acknowledges receipt of copies of said reports.
Tenant has no objections to the information disclosed by said reports.
ARTICLE XI. INDEMNIFICATION AND INSURANCE:
Section 1. Fire and Extended Coverage Insurance.
Landlord shall maintain on the Demised Premises fire and extended
coverage insurance, in an amount not less than one hundred percent (100%) of the
full insurable value thereof, exclusive of the foundation.
Section 2. Tenant Indemnification and Liability Insurance.
Tenant shall indemnify and hold Landlord harmless from and against all
loss, liability or claims for injury to or death of persons or damage to
property sustained in, on or about the Demised Premises or resulting from the
occupancy or use thereof by Tenant or any of its employees, agents, licensees,
contractors, sublessees or assignees. Tenant shall at all times during the term
of this Lease, at its sole cost and expense, maintain and keep in full force and
effect for the mutual benefit of Tenant and Landlord comprehensive general
liability insurance against all claims for personal injury, death or property
damage occurring on or about the Demised Premises with minimum limits of
liability of One Million Dollars ($1,000,000) per person, One Million Dollars
($1,000,000) per occurrence and One Million Dollars ($1,000,000) property
damage. Such policy of insurance shall name Landlord as an insured party
thereunder and shall provide that it cannot be cancelled without at least 30
days prior written notice to Landlord. Tenant may comply with this Article XI,
Section 2 by including the Demised Premises in a "blanket policy" insuring other
properties owned or occupied by Tenant. Tenant shall provide to Landlord prior
to the Commencement Date, a certificate of such insurance, naming Landlord as an
additional insured party thereunder. Notwithstanding anything to the contrary
contained herein, to the extent that any loss, liability or claim is covered by
insurance, including reasonable attorney's fees and other defense costs,
Landlord releases and discharges Tenant of and from any such loss, liability or
claim and waives any right of subrogation in favor of Landlord's insurer.
Section 3. Tenant's Content Insurance.
Tenant shall at all times during the term of this Lease, at its sole
cost and expense, maintain and keep in full force and effect for the mutual
benefit of Tenant and Landlord fire and
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extended coverage insurance, in an amount not less than 100% of the replacement
value of all personal property of Tenant kept or maintained in the Demised
Premises and all leasehold improvements and fixtures contained within the
Demised Premises.
Section 4. Evidence of Insurance.
All insurance policies required to be maintained by Tenant under this
Article XI shall be effected under valid and enforceable policies issued by
insurers of recognized responsibility. Upon commencement of the term of this
Lease and not less than 10 days prior to the expiration dates of such policy or
policies, certificates of the initial policy or renewal policies, as the case
may be, or other satisfactory evidence of such insurance, shall be delivered by
Tenant to Landlord.
ARTICLE XII. ASSIGNMENT:
Tenant shall not assign this Lease or make any sublease of the Demised
Premises or any part thereof without Landlord's prior written consent, which
consent shall not unreasonably be withheld. Any attempted assignment or sublease
by Tenant without Landlord's consent shall be void and without legal effect. If
Landlord consents to an assignment or sublease, Tenant and the assignee and/or
subtenant shall be jointly and severally liable for all of Tenant's obligations
under this Lease, including all such obligations during any renewal term.
ARTICLE XIII. PERSONAL PROPERTY AND FIXTURES:
Section 1. Personal Property.
All goods and property of Tenant which are stored or kept in or on the
Demised Premises shall be at the sole risk of Tenant and Landlord shall not be
responsible in any way for any loss of or damage to the same. Provided that
Tenant is not then in default of its duties and obligations hereunder, Tenant
may remove such goods and property at any time during the term hereof; provided,
however, that any such goods or property which remains in the Demised Premises
after Tenant vacates the Demised Premises shall be removed by Tenant or shall
automatically become the property of Landlord who may dispose of it in any
manner that it deems appropriate--at the option of Landlord.
Section 2. Trade Fixtures.
All counters, shelving, refrigerating and other equipment and all other
trade and light fixtures installed by or at the expense of Tenant and all other
additions and/or improvements made to, in or on the Demised Premises by and at
the expense of Tenant which are susceptible of being removed from the Demised
Premises without injury thereto shall remain the property of Tenant, and
provided that Tenant is not then in default of its duties and obligations
hereunder, Tenant may, but shall not be obliged to, remove the same or any part
thereof at any time during the term hereof; provided that Tenant shall repair
all damages resulting from such removal to the reasonable satisfaction of
Landlord. Any such equipment remaining in the Demised Premises following the
vacation of the Premises by Tenant shall be removed by Tenant or shall
automatically become the property of Landlord who may dispose of the same in any
manner that it deems appropriate--at the option of Landlord.
ARTICLE XIV. SIGNS:
Tenant shall install, at its cost and expense, signage on the front of
the Demised Premises in conformity with all applicable laws and ordinances and
subject to the reasonable approval of Landlord.
Signage shall be limited solely to identify the business and operation
of Tenant. No other advertising or signage shall be permitted, including, but
without limitation, temporary or permanent signs on the exterior of the Demised
Premises or on any portion of the glass (exterior and interior).
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Tenant shall be responsible for repairs, maintenance and replacements
of the sign(s), supporting structures and lighting system. Tenant shall be
responsible for the cost and expense of all electricity used in connection with
such lighting, and, in the event the lighting system is not directly metered to
Tenant, Tenant shall pay its share of the cost and expense--based upon an
equitable and pro rata determination reasonably made by Landlord.
In the event that the Rear Parcel is sold or otherwise developed by
Landlord, Landlord reserves the right to utilize a portion of the frontage along
Phillipi Road for construction of a sign identifying the owner or occupant of
Rear Parcel. If a separate sign is not permitted under applicable governmental
code, Landlord reserves the right to "piggy back" or otherwise share Tenant's
sign. After construction of the additional portion of the sign, the cost of
maintenance, repair and/or replacement of such sign shall be shared equally
between Tenant and the owner(s) and/or occupant(s) of the Rear Parcel. Upon
exercise of Tenant's option to purchase, if any, Landlord may reserve a sign
easement along Phillipi Road in favor of the Rear Parcel.
ARTICLE XV. DESTRUCTION OF DEMISED PREMISES.
Section 1. Total or Partial Destruction.
It is mutually agreed by and between the Landlord and Tenant that if at
any time after the execution hereof, the improvements included with the Demised
Premises are destroyed or damaged by fire, the elements or casualty, in whole or
in part, this Lease shall not automatically terminate, but instead, the Tenant
shall notify Landlord in writing of such damage or destruction and shall
surrender possession of the Demised Premises to Landlord and thereupon, Landlord
may, at its option, terminate this Lease or replace the damaged improvements,
giving to the Tenant space equal to the present leased space and of the same
general type of construction or better, the same to be done as soon as possible
after the insurance adjustments, but in no event later than ninety (90) days
from the date of the receipt of said insurance adjustment. In the event of total
destruction as described above, if Landlord does not exercise its option to
terminate this Lease, Tenant's rent shall completely abate from the date of such
destruction until possession of the rebuilt Demised Premises is delivered to the
Tenant. In the event of a partial destruction or damage whereby the Tenant shall
be deprived of the occupancy of only a portion of the Demised Premises, if
Landlord does not exercise its option to terminate this Lease, a proportionate
allowance shall be made from the rent during such period, in the proportion
which the number of square feet of the Demised Premises which the Tenant is
deprived of by such damage or destruction and the making of repairs bears to the
total square feet in the Demised Premises; and Landlord shall use its best
efforts to repair such partial destruction or damage within one hundred twenty
(120) days of its occurrence. If such total or partial destruction is due to the
fault or neglect of Tenant, Tenant's employees, agents, visitors or licensees,
then without prejudice to any other rights and remedies of Landlord and without
prejudice to the rights of subrogation of Landlord's insurer, the damage shall
be repaired by Landlord in the manner hereinbefore set forth; provided, however,
there shall be no apportionment or abatement of rent; otherwise, the Landlord
shall proceed diligently to rebuild said Demised Premises or repair damage
thereto in compliance with its covenants herein. No penalty shall accrue for
reasonable delay which may arise by reason of adjustment of insurance on the
part of the Landlord. Landlord's obligations to repair or rebuild shall be
limited to a basic building and the replacement of any interior work which may
have originally been installed at Landlord's cost according to this Lease. In
the event Landlord elects to terminate the Lease as provided above, then the
Lease shall be terminated as of the date of damage and rent shall be adjusted to
said date. Notwithstanding anything to the contrary contained herein, in the
event of total or partial destruction of the Demised Premises giving rise to
Landlord's right to terminate this Lease, Tenant shall have the right, but not
the obligation, to exercise its option to purchase and receive an assignment of
the proceeds of Landlord's insurance policy(ies) covering the Demised Premises.
ARTICLE XVI. TAKING:
Section 1. If, prior to the expiration of the term hereof, all or
substantially all of the Demised Premises shall be taken under the power of
eminent domain, then this Lease and the term thereof shall cease and terminate
as of the date of such taking, provided, however, that in
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such event Tenant shall have the right to exercise its option to purchase
pursuant to Article V and shall be entitled to receive the entire condemnation
award.
Section 2. If, prior to the expiration of the term hereof, any public
or private authority shall, under the power of eminent domain, take a part of
the Demised Premises, then either party may, at their election, terminate this
Lease by giving the other notice of the exercise of its election within thirty
(30) days after it shall receive notice of such taking. In the event of
termination under the provisions of this Article XVI, Section 2, this Lease and
the term hereof shall cease and terminate as of the date of such taking and any
unearned rent or other charges, if any, paid in advance shall be refunded to
Tenant, provided, however, that in such event Tenant shall have the right to
exercise its option to purchase and shall be entitled to receive the entire
condemnation award. Notwithstanding anything to the contrary contained herein, a
taking of up to 25 feet along the public right-of-way shall not give rise to a
right to terminate by either Landlord or Tenant. Compensation payable to
Landlord, as a result of such partial taking, shall be credited against the
Option Price.
Section 3. If neither Landlord or Tenant shall have the right to
terminate by reason of any such taking, or in the event that Landlord or Tenant,
having such right, shall not elect to terminate as aforesaid, then this Lease
and the term hereof shall continue in full force and effect, and Landlord shall,
at its expense, use its best efforts to forthwith restore what may remain of the
Demised Premises, including any and all improvements made theretofore, the
parking areas, driveway and other paved areas to substantially the same
condition they were in prior to such taking. In the event that Tenant exercises
its option to purchase the Demised Premises and Rear Parcel, if applicable,
subsequent to such taking, the option price shall be reduced by the amount
received by Landlord from the condemning authority.
Section 4. Except as otherwise provided in this Article XVI, the entire
award arising out of any such taking shall belong to Landlord without any
deduction therefrom for any leasehold estate or interest now or hereafter vested
in Tenant. Despite anything herein to the contrary contained, Tenant shall not
be prevented from making a claim in its own name against any such condemning
authority with respect to any furniture, trade fixtures, trade equipment,
merchandise or personal property of any kind belonging to Tenant and not forming
part of the real estate, or for the cost of moving all of the same.
Section 5. For all purposes herein, a taking shall include a voluntary
or settled deed, easement or otherwise by Landlord executed and delivered as a
result of a settled transaction with the appropriate governmental authority.
ARTICLE XVII. ADDITIONAL RENT:
Section 1. Taxes and Assessments.
Landlord, throughout the term, or any renewal term, shall be
responsible for payment of taxes and assessments attributable to the Demised
Premises and Rear Parcel provided, however, that Tenant agrees to pay to
Landlord, as additional rental hereunder, one hundred percent (100%) of the
increase in such taxes and assessments attributable to the Demised Premises and
Rear Parcel after the Commencement Date. For purposes of calculating increases
in taxes and assessments, taxes and assessments payable by Landlord after the
Commencement Date shall be those which Landlord is required to pay during the
term, notwithstanding that all or a portion of such taxes and/or assessments are
attributable to a period of time prior to the Commencement Date. Landlord shall
either bill the charge on a monthly estimated basis--subject to adjustment when
the actual cost is determined--or following payment of the taxes and
assessments. Increases in taxes and assessments, if applicable, shall be
prorated through termination. If Landlord sells or otherwise develops the Rear
Parcel, and if a separate tax parcel is not created, Tenant's share of increases
in real estate taxes and assessments shall be equitably apportioned, taking into
account land and building valuations.
ARTICLE XVIII. DEFAULT/REMEDIES:
If Tenant fails to pay when due any installment of rent, additional
rent or any other payment to be made by Tenant hereunder, and if the same
remains unpaid for a period of ten
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(10) days after it shall have become due, or if Tenant fails to keep and perform
any of the other covenants, agreements, conditions, duties or obligations
required to be kept and performed by it pursuant to the terms of this Lease, and
if such failure continues for a period of thirty (30) days after written notice
thereof is given to Tenant, or if Tenant abandons or vacates the Demised
Premises during the term of this Lease, or makes an assignment for the benefit
of creditors, or suffers a receiver to be appointed in any action or proceeding
by or against it, or if a case under any chapter of the U.S. Bankruptcy Code is
commenced by or against Tenant, or if Tenant's interest in the Demised Premises
is sold upon execution or other legal process, Landlord may enter into and upon
the Demised Premises, and again have and possess and enjoy the same as if this
Lease had not been made, and thereupon, the duties and obligations of Landlord
hereunder shall terminate without prejudice, however, to the right of Landlord
to recover from Tenant all rents and other amounts due under the provisions of
this Lease, and the entire amount of unpaid rent due or thereafter to become due
hereunder shall, without further notice or other action on the part of Landlord,
accelerate and immediately become due and payable. The commencement of a
proceeding or suit in forcible entry and detainer, or in ejectment or otherwise,
after any default by Tenant shall be equivalent in every respect to actual entry
by Landlord. In the event of any such default by Tenant and entry by Landlord,
Landlord may, but shall not be required to, relet the Demised Premises for the
remainder of the term of this Lease for the highest rent reasonably obtainable
therefor, and Landlord may recover from Tenant any deficiency between the amount
so obtained and the amount of rent hereinbefore reserved. Notwithstanding the
foregoing, Landlord shall provide to Tenant written notice of monetary defaults
and ten days in which to cure such default provided, however, that such written
notice shall only be required by Landlord twice during each lease year.
Notwithstanding the foregoing provisions, in the event any installment
of rent, additional rent or any other payment to be made by Tenant hereunder is
not paid within ten (10) days of the date due, then, and in that event, Landlord
may assess a late charge in the amount of five percent (5%) of the unpaid
installment of rent, additional rent or other payment--which assessment shall be
on a monthly basis until paid. Failure on the part of Landlord to assess shall
not waive any rights of Landlord to assess at a later date or assess for future
unpaid installments of rent, additional rent or other payments.
ARTICLE XIX. MISCELLANEOUS PROVISIONS:
Section 1. Subordination.
Tenant shall, upon the request of Landlord in writing, subordinate this
Lease and the lien hereof by executing promptly, without cost, any instruments
which may be necessary or desirable to evidence such subordination, to the lien
of any present or future mortgage or mortgages upon the Demised Premises or any
property of which the Demised Premises are a part, irrespective of the time of
execution or the time of recording of any such mortgage or mortgages, provided
that the holder of any such mortgage shall enter into a written agreement with
Tenant to the effect that in the event of foreclosure or other action taken
under the mortgage by the holder thereof this Lease and the rights of Tenant
hereunder, including Tenant's option to purchase, shall not be disturbed but
shall continue in full force and effect so long as Tenant shall not be in
default hereunder. The word "mortgage" as used herein includes mortgages, other
similar instruments and modifications, extensions, renewals and replacements
thereof, and any and all advances thereunder. Landlord shall permit no liens to
be placed against the Demised Premises in an aggregate amount in excess of
Tenant's option price, including principal, accrued interest and any prepayment
penalties.
Section 2. Self-Help.
If Tenant shall default in the performance or observance of any
agreement, condition or other provision in this Lease contained on its part to
be performed or observed, and shall not cure such default within thirty (30)
days after notice in writing from the other party specifying the default,
Landlord may, at its option, without waiving any claims for breach of agreement,
at any time thereafter cure such default for the account of Tenant, and Tenant
shall reimburse Landlord for any amount paid and any expense or contractual
liability so incurred, and any amounts due from Tenant shall be deemed
additional rent due and payable with the next installment of minimum rent;
provided, however, that Landlord may cure any such default as
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aforesaid prior to the expiration of said waiting period but after notice to
Tenant, if it is necessary to protect the Demised Premises or to prevent injury
or damage to persons or property.
Section 3. Quiet Enjoyment.
Landlord covenants and agrees with Tenant that upon Tenant paying the
rent and observing and performing all the terms, covenants and conditions on
Tenant's part to be observed and performed, Tenant may peaceably and quietly
have, hold and enjoy the Demised Premises without hindrance or molestation.
Section 4. Extension Periods.
All of the terms, provisions, covenants and agreements in this Lease
contained shall apply during any extension or extensions of the original term
hereof, except as specifically provided herein or in any extension agreements
hereafter executed by Landlord and Tenant.
Section 5. Delays.
In the event Landlord shall be required to do any act hereunder, the
time for the performance thereof shall be extended by a period equal to any
delay caused by or resulting from Act of God, war, civil commotion, fire or
other casualty, labor difficulties, shortages of labor, materials or equipment,
governmental regulations, delays caused by Tenant, delays in securing financing
or other causes beyond Landlord's reasonable control, whether such time be
designated by a fixed date, a fixed time or a "reasonable time."
Section 6. Holding Over.
In the event that Tenant shall continue in occupancy of the Demised
Premises after the expiration of the term of this Lease, such occupancy shall
not be deemed to extend or renew the terms of this Lease, but such occupancy
shall continue as a tenancy at will upon the covenants, provisions and
conditions herein contained at the rental in effect during the last lease year
of the term, prorated and payable for the period of such occupancy. Landlord may
terminate such tenancy at any time on three (3) days written notice.
Section 7. Waivers.
Failure by Landlord to complain of any act or omission on the part of
Tenant, no matter how long the same may continue, shall not be deemed to be a
waiver by Landlord of any of its rights hereunder. No waiver by Landlord at any
time, expressed or implied, of any breach of any provision of this Lease shall
be deemed a waiver of a breach of any other provision of this Lease or a consent
to any subsequent breach of the same or any other provisions. If any action by
Tenant shall require the consent or approval of Landlord, the Landlord's consent
to or approval of such action on any one occasion shall not be deemed a consent
to or approval of said action on any subsequent occasion or a consent to or
approval of any other action on the same or any subsequent occasion. Any and all
rights and remedies which Landlord may have under this Lease or by operation of
law, either at law or in equity, upon any breach, shall be distinct, separate
and cumulative and shall not be deemed inconsistent with each other; and no one
of them, whether exercised by Landlord or not, shall be deemed to be in
exclusion of any other; and any two or more or all of such rights and remedies
may be exercised at the same time.
Section 8. Notices.
All notices and other communications authorized or required hereunder
shall be in writing and shall be given by mailing the same by certified mail or
registered mail, return receipt requested, postage prepaid, and any such notice
or other communication shall be deemed to have been given when received by the
party to whom such notice or other communication shall be addressed. If intended
for Landlord the same shall be mailed to Landlord at 4700 East Fifth Avenue,
Columbus, Ohio 43219 with a copy to Gerald H. Swedlow, Attorney at Law, 65 East
State Street, Suite 910, Columbus, Ohio 43215, or at such other address as
Landlord may hereafter designate by notice to Tenant; and if intended for
Tenant, the same shall be mailed to
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Tenant c/o Controller, Eagle Window and Door, Inc., 375 East 9th Street,
Dubuque, Iowa 52001 or at such other address as Tenant may hereafter designate
by notice to Landlord.
Section 9. Invalidity of Particular Provisions.
If any term or provision of this Lease or the application thereof to
any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.
Section 10. Definitions of Parties.
The word "Landlord" and the pronouns referring thereto shall mean,
where the context so admits or requires, the persons, firm or corporation named
herein as Landlord, and if there is more than one Landlord, the covenants of
Landlord shall be the joint and several obligations of each of them, and if
Landlord is a partnership, the covenants of Landlord shall be the obligations of
the firm only and shall not be the obligations of the partners. Any pronoun
shall be read in the singular or plural number and in such gender as the context
may require. Except as hereinafter otherwise provided, the terms and provisions
of this Lease shall be binding upon and inure to the benefit of the heirs,
executors, administrators, successors and assigns, respectively, of Landlord and
Tenant. The word "Landlord" as used herein shall mean only the owner for the
time being of Landlord's interest in this Lease and such owner and each
succeeding owner shall be liable hereunder only during the period of its
respective ownership.
Section 11. Marginal Notes.
The marginal notes used as headings for the various articles of this
Lease are used only as a matter of convenience for reference, and are not to be
construed as part of this Lease or to be used in determining the intent of the
parties to this Lease.
Section 12. Entire Agreement.
This instrument, together with all exhibits and/or attachments hereto,
contains the entire and only agreement between the parties concerning the
subject matter hereof, and no oral statements or representations or prior
written matters not contained in this instrument shall have any force or effect.
Except as otherwise expressly provided herein, this Lease supersedes and
replaces any prior lease relating to the Demised Premises. This Lease shall not
be modified in any way except by a writing executed by both parties.
Section 13. Security Deposit.
Tenant shall deposit with Landlord simultaneously with the execution
hereof the sum of Seven Thousand Two Hundred Ninety-One and 67/100 Dollars
($7,291.67). Said deposit shall be held by Landlord, without liability for
interest, as security for the faithful performance by Tenant of all of its
duties and obligations hereunder. If any of the rent or other charges payable by
Tenant to Landlord hereunder shall be overdue and unpaid or should Landlord make
any payments on behalf of Tenant, or if Tenant shall fail to perform any of the
terms of this Lease, then Landlord may, at its option and without prejudice to
any other remedy which Landlord may have under the terms hereof, appropriate and
apply said deposit, or any part thereof, to compensate Landlord towards the
payment of rent, additional charges or loss or damage sustained by Landlord due
to such breach on the part of Tenant, and Tenant shall forthwith upon demand
restore said security deposit to the original sum deposited. Should Tenant
promptly pay all rent as the same becomes due hereunder, and otherwise perform
all of its duties and obligations hereunder, said deposit shall be returned in
full to Tenant at the end of the term of this Lease. In the event of bankruptcy
or other proceedings by or against Tenant, the amount deposited pursuant to this
Article XVIII, Section 13 shall be deemed to be applied to the payment of rent
and other charges due Landlord for all periods prior to the filing of such
proceedings.
12
<PAGE> 14
Section 14. Condition of Demised Premises.
Subject to Article IV, upon the commencement of the term of this Lease,
Landlord shall deliver possession of the Demised Premises to Tenant in a
tenantable condition. Subject to Article IV, Tenant hereby acknowledges that it
has examined the Demised Premises and agrees that the same are in a tenantable
condition.
Section 15. Liens and Claims.
Tenant shall at all times keep the Demised Premises and the Landlord's
estate or interest therein free and clear from all claims, liens and
encumbrances caused by or through the occupancy of the Demised Premises by
Tenant or occurring as a result of construction work, repairs, alterations,
additions or restoration work required or permitted to be done by Tenant
pursuant to the terms of this Lease, and Tenant shall indemnify and save
Landlord harmless from and against all loss, costs, expense and attorneys' fees
incurred or expended in connection with any such claim, lien or encumbrance or
the prosecution or defense of any such suit, action or proceeding relating to
the same.
Section 16. Landlord's Non-Liability.
Landlord shall not be liable: (a) for any expense, damage or injury
done or occasioned by or from the electrical, gas, water, steam, odors, oil,
heating, air conditioning, plumbing, sprinkler and sewer systems in, upon or
about the Demised Premises or the building in which the Demised Premises are
located, (b) for any expense, damage or injury occasioned by water, snow or ice,
or dampness being upon or coming through the roof, trap door, walls, floors,
windows, doors, sewers or otherwise, (c) for any expense, damage or injury
arising from acts of negligence or omissions of Tenant, its employees or
invitees or other tenants or their employees or invitees, (d) for the acts of
any owners or occupants of adjoining or contiguous property, (e) for any
expense, damage or injury incurred by reason of forced entry or attempt thereof,
(f) for acts by the public or caused by operations or construction of any
private, public or quasi-public work, or (g) for any latent defect in the
Demised Premises or in the building of which it forms a part or for any change
or modification thereof. Landlord shall not be liable for any expense, damage or
injury occasioned by reason of the construction of the Demised Premises, or for
failure to keep the Demised Premises in repair unless written notice of the need
for repairs has been given Landlord and a reasonable time has elapsed, and
Landlord fails to make such repairs. In any event, Landlord shall not be liable
for any expense, or damage to Tenant's leasehold improvements, fixtures,
merchandise or other personal property resulting from fire or other hazard,
regardless of the cause thereof, and Tenant hereby releases Landlord from all
liability for such damage including subrogation claims by Tenant's insurance
carrier.
Section 17. Acts Beyond Control of Landlord.
In the event that Landlord shall be delayed or hindered in or prevented
from the performance of any act required hereunder by reason of strikes,
lockouts, labor troubles, inability to procure materials, failure of power,
restrictive governmental laws or regulations, riots, insurrection, war or other
reason of a like nature not the fault of the Landlord in performing work or
doing acts required under the terms of this Lease, then performance of such act
shall be excused for the period of the delay and the period equivalent to the
period of such delay. This provision shall not operate to excuse Tenant from
prompt payment of all rent and other payments required by the terms of this
Lease.
Section 18. Estoppel Certificates.
The Tenant agrees, at any time and from time to time, upon not less
than ten (10) days prior request by Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing certifying, if such be the case, that
this Lease is unmodified and in full force and effect (or, if there have been
modifications, stating the modifications, and that the Lease, as modified, is in
full force and effect), and that there are no defenses or offsets thereto then
accrued, or stating those claimed by Tenant, and the dates to which the rent or
other charges have been paid, it being intended that any such statement
delivered pursuant to this Article XVIII, Section 20
13
<PAGE> 15
may be relied upon by any prospective purchaser of, or any prospective holder of
a mortgage upon the fee of the Demised Premises, or by any other properly
interested party.
Section 19. Miscellaneous Payments.
Unless otherwise specifically provided in this Lease, all payments,
reimbursements and charges to be made by Tenant shall be paid within five (5)
days of billing from Landlord.
Section 20. Governing Law.
This Lease shall be governed by and construed in accordance with the
laws of the state in which the Demised Premises are situate.
Section 21. Option to Renew.
Tenant shall have the right and option to renew the term of this Lease
for an additional three (3) year term. Tenant shall exercise such option, if at
all, by providing to Landlord not less than six (6) months notice prior to the
expiration of the initial term. Rent for the renewal term shall be as follows:
<TABLE>
<CAPTION>
RENEWAL LEASE YEAR ANNUAL RENTAL MONTHLY INSTALLMENT
------------------ ------------- -------------------
<S> <C> <C> <C>
A. 4 $156,000.00 $13,000.00
B. 5 $162,000.00 $13,500.00
C. 6 $168,000.00 $14,000.00
</TABLE>
Except for increased rental, as above provided, all terms, provisions
and conditions of this Lease, including the option to purchase the Demised
Premises and Rear Parcel, if applicable, shall continue in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Lease as of the day
and year first above written.
Signed and Acknowledged LANDLORD:
in the Presence of:
J.M.J. PARTNERSHIP, an Ohio general partnership
/s/ Ruth E. Booth
- ---------------------------------
/s/ [illegible] By:/s/ Jeff Block
- --------------------------------- -----------------------------------
Jeff D. Block, Partner
TENANT:
THE NEW EDGEHILL CO., INC., a Delaware
corporation
/s/ Ruth E. Booth By:/s/ Donald Stevens
- ----------------------------- -----------------------------------
/s/ [illegible] Its:Vice President
- ----------------------------- -----------------------------------
14
<PAGE> 16
STATE OF OHIO :
: ss:
COUNTY OF FRANKLIN :
The foregoing instrument was acknowledged before me this 28th day of
November, 1990, by Jeff D. Block, partner, on behalf of J.M.J. Partnership, an
Ohio general partnership.
/s/ Gerald Swedlow
---------------------------
Notary Public
STATE OF OHIO :
: ss:
COUNTY OF FRANKLIN :
The foregoing instrument was acknowledged before me this 28th day of
November, 1990, by Donald Stevens, the Vice President of The New Edgehill Co.,
Inc., a Delaware corporation, on behalf of the corporation.
/s/ Gerald Swedlow
---------------------------
Notary Public
15
<PAGE> 17
EXHIBIT A
[GRAPHIC OF SITE]
16
<PAGE> 18
CORRECTIVE AMENDMENT TO LEASE AGREEMENT
This Amendment pertains to and is part of the original integration of a
Lease Agreement dated November 28, 1990 between J.M.J. Partnership ("Landlord")
and the New Edgehill Co., Inc. ("Tenant").
1. The first sentence of paragraph (d) of Article V is amended to read
as follows: "In the event that after the first twenty-four (24) months have
elapsed during the remainder of the term of this Lease, or any renewal term,
Landlord receives a bona fide offer to purchase the Rear Parcel, which offer
Landlord desires to accept, Landlord shall provide to Tenant written notice of
such offer and fifteen (15) days in which to exercise the option to purchase
both the Demised Premises and the Rear Parcel." It is not intended that the
Landlord shall have the right to sell the Demised Premises so as to either
defeat or require early exercise of Tenant's option with respect to the Demised
Premises, but Tenant may not exercise its option to the Rear Parcel separately
from the Demised Premises but only as to both the Rear Parcel and Demised
Premises together. The second sentence of Article V paragraph (d) means that in
such event the Tenant's option price shall be the lesser of (i) the option price
for the Demised Premises and Rear Parcel as computed under paragraph (a) of
Article V or (ii) the option price computed under paragraph (a) of Article V,
plus the offered price for the Rear Parcel but minus an amount equal to the
"credit" computed under paragraph (b) of Article V as of the date of exercise of
the Option.
2. The following additional sentence is added to Article VIII Section
2: "The Tenant shall, so long as the Rear Parcel has not been sold or leased to
another Tenant, or developed by Landlord for its own active use reasonably
maintain the lawn on the Rear Parcel and keep the Rear Parcel reasonably clear
from surface litter."
3. The following additional Section 22 is added to Article XIX of the
Lease:
Notwithstanding any other provision of the Lease, Tenant shall not have
any responsibility or obligation for clean up, remediation or defense,
or indemnification for any environmental pollution or impairment not
caused by the operations of Tenant at the Premises.
J.M.J. PARTNERSHIP THE NEW EDGEHILL CO., INC.
By /s/ Jeff Block By /s/ B.J. Silverman
----------------------------- --------------------------------
Its General Partner Its Secretary
---------------------------- ------------------------------
1
<PAGE> 1
Exhibit 10.6b
LEASE MODIFICATION NO. 1
THIS LEASE MODIFICATION NO. 1 ("Modification No. 1") is made this 19th
day of October, 1992, by and between J.M.J. PARTNERSHIP ("Landlord") and The
American Glassmith, Inc. formerly named THE NEW EDGEHILL CO., INC. ("Tenant").
BACKGROUND INFORMATION
A. Landlord and Tenant are parties to a Lease and Corrective Amendment
to Lease Agreement dated November 28, 1990 ("Lease").
B. Landlord and Tenant desire to modify and amend the Lease.
STATEMENT OF MODIFICATION
1. Attached to this Modification No. 1 and marked Exhibit "A," is a
drawing, which drawing outlines the Demised Premises. This drawing/Exhibit "A"
shall be substituted for the drawing/Exhibit "A" attached to the Lease.
2. Throughout the Lease is reference to the so-called Rear
Parcel--which is set forth on the original Exhibit "A" and was the subject of
certain purchase options and restrictions as otherwise contained in the Lease.
Landlord and Tenant agree that all references to the Rear Parcel shall be
deleted and of no further force or effect. Therefore, Demised Premises, as
reflected on the new Exhibit "A" (attached) constitutes the sole subject of the
Lease.
3. Article V (a) of the Lease provides for an option price of
$1,200,000 plus actual cost of Landlord's Improvements pursuant to Article IV.
Said option price is subject to increase (but not decrease) based upon the CPI.
Inasmuch as the so-called Rear Parcel reference has been deleted and
the land otherwise the subject of the purchase option reduced, pursuant to the
provisions of subsection (b), Article V, the option price shall be reduced by an
amount equal to $25,000 per acre as determined by a survey of the so-called Rear
Parcel. In fact, the parcel deleted is less than the original acreage contained
in the Rear Parcel with a corresponding increase to the size of the Demised
Premises. The amount deleted constitutes 1.5 acres. Therefore, the purchase
price option shall be reduced by $37,500.
4. In addition to the lease of the Demised Premises, Landlord includes
a so-called Maneuvering Easement--a copy of which is marked Exhibit "B,"
attached hereto and made a part hereof. This Maneuvering Easement will be
obtained from the property owner to the north of the Demised Premises. In
connection with the use of the Maneuvering Area, Tenant shall be responsible for
all maintenance and repair and shall indemnify and hold harmless Landlord from
any loss, claim, damage or demand resulting from Tenant's use of the easement
and Maneuvering Area.
5. Within a reasonable time following satisfaction of the contingency
(see below), subject to weather conditions, Landlord shall, at its cost and
expense, make improvements to the land behind the building--which land is
included within the Demised Premises--for the purpose of providing additional
parking. Such costs shall be added to Landlord's costs as otherwise provided in
Article IV of the Lease.
The improvements to be provided by Landlord are set forth in the
letter/proposal marked Exhibit "C," attached hereto and made a part hereof.
6. Notwithstanding anything to the contrary contained herein, this
Modification No. 1 shall be subject to and contingent upon Landlord's ability to
close the transaction for the sale of that portion of the Rear Parcel (1.5
acres) to the party acquiring the property to the north--which property is part
of the Maneuvering Area. In the event, for any reason whatsoever, closing of
that transaction does not take place on or before January 31, 1993, then, and in
that event, this Modification No. 1 shall be of no force or effect.
1
<PAGE> 2
7. Except as provided herein, all of the terms, provisions and
conditions of the Lease, as amended, shall continue in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Modification
No. 1 as of the day and year first above written.
Signed and acknowledged in
the presence of: LANDLORD:
/s/ Jeri Block J.M.J. PARTNERSHIP
- ----------------------------
/s/ Ruth Booth
- ----------------------------
By: /s/ Jeff Block
--------------------------------
Jeff D. Block, Partner
TENANT: THE AMERICAN GLASSMITH, INC.
FORMERLY NAMED
THE NEW EDGEHILL CO., INC.
/s/ Charles A. Walker
- ----------------------------
/s/ Mary E. Simmers By: /s/ Timothy Wadhams
- ---------------------------- --------------------------------
Its: Vice President
-------------------------------
STATE OF OHIO :
: SS:
COUNTY OF FRANKLIN :
The foregoing instrument was acknowledged before me this 19th day of
October, 1992 by Jeff D. Block, partner, on behalf of J.M.J. Partnership.
/s/ Ruth E. Booth
--------------------------------
Notary Public
STATE OF MICHIGAN :
: ss:
COUNTY OF WAYNE :
The foregoing instrument was acknowledged before me this 15th day of
October, 1992 by Timothy Wadhams, the Vice President of The New Edgehill Co.,
Inc., on behalf of the corporation.
/s/ Beth Klenczar
--------------------------------
Notary Public
2
<PAGE> 3
EXHIBIT A
LEGAL DESCRIPTION
PARCEL No. 1:
Being in Survey No. 1482 Virginia Military Lands, and being part of that 187.612
acre tract (Tract "C") conveyed by the Westfield Corporation to the Peoples
Development Company by deed of record in Deed Book 1670, page 140, Recorder's
Office, Franklin County, Ohio, and being more particularly described as follows:
Beginning at a spike in the center line of Phillipi Road, in the east line of
the above mentioned tract (said spike being the northeast corner of a 5.986 acre
tract conveyed to the Oliver Corporation); thence S. 86(degree) 10' 45" W.
869.24 feet to an iron pin passing an iron pin on line and in the west right of
way line of Phillipi Road at 30.00 feet; thence N. 3(degree) 50' 58" W. 340 feet
to an iron pin; thence N. 86(degree) 10' 45" E. 869.43 ft. to a spike in the
center line of Phillipi Road, passing an iron pin on line and in the west right
of way line of Phillipi Road at 809.43 feet, thence S. 3(degree) 48' 45" E. with
the center line of Phillipi Road, 340 ft. to the place of beginning, containing
6.785 acres, more or less, subject to all legal highways.
PARCEL NO. 2:
Being in Survey No. 1482, Virginia Military Lands, and being part of the 5.986
acre tract conveyed by the Peoples Development Company to The Oliver
Corporation, by deed of record in Deed Book 1879, Page 114, Recorder's Office,
Franklin County, Ohio, and being more particularly described as follows:
Beginning at an iron pin in the northeast corner of said Oliver Tract; thence N.
86(degree) 10' 41" E. with the north line of said tract 85.00 ft. to an iron
pin; thence S. 31(degree) 28' 25" W. 147.02 ft. to an iron pin at the
intersection with the west line of said tract; thence N. 3(degree) 50' 48" W.
with said west line 120.00 ft. to the place of beginning, containing 0.117
acres, more or less, subject to all legal highways.
3
<PAGE> 4
CONSENT OF GUARANTOR
The undersigned, Guarantor, of the Lease between J.M.J. Partnership
("Landlord") and The New Edgehill Co., Inc. ("Tenant") does hereby consent to
Lease Modification No. 1 and agrees that the terms, provisions and conditions
contained herein are part of the Lease and said Guarantor is otherwise fully
bound under the term of its Guarantee.
MASCO INDUSTRIES, INC.
By:/s/ Timothy Wadhams
-------------------------------------
Title:Vice President
----------------------------------
3
<PAGE> 5
Exhibit "B"
MANEUVERING AREA EASEMENT AGREEMENT
THIS AGREEMENT is entered into as of this ____ day of __________, 1992,
by and between NATIONAL RX SERVICES NO. 2, INC., an Ohio corporation ("National
Rx"), and J.M.J., an Ohio general partnership ("J.M.J.").
RECITALS
WHEREAS, National is the fee owner of certain real estate located at
255 Phillipi Road, in the County of Franklin, City of Columbus and the State of
Ohio, more particularly described in Exhibit "A" attached hereto and
incorporated herein (such property is hereinafter referred to as the "National
Rx Property").
WHEREAS, J.M.J. is the fee owner of a parcel of real estate located to
the south and adjacent to the National Rx Property which property is more
particularly described in Exhibit "B" attached hereto and incorporated herein
(such property is hereinafter referred to as the "J.M.J. Property").
WHEREAS, as part of the consideration for National Rx's purchase from
J.M.J. of a parcel of real estate located adjacent to the National Rx Property,
National Rx has agreed to grant J.M.J. this maneuvering area easement for
J.M.J.'s use in connection with the loading docks on J.M.J.'s Property;
NOW THEREFORE, in consideration of the above and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
agree as follows:
1. National Rx hereby grants to J.M.J. a non-exclusive, perpetual
easement for the use of the area described in Exhibit "C" attached hereto and
incorporated herein ("Maneuvering Area"), as a maneuvering area for vehicles
which make pick-ups and deliveries to the loading docks located on the north
side of the building located on the J.M.J. property.
2. J.M.J. shall use the Maneuvering Area solely for the purpose of the
maneuvering of vehicles in connection with the loading docks and not as a
parking area or as a means of ingress and/or egress to the J.M.J. property from
the National Rx Property or to the National Rx Property.
3. National Rx shall have the right to erect permanent or temporary
barriers to separate the Maneuvering Area from the remaining parking area on its
property in order to prevent the use of the Maneuvering Area as a means of
access, ingress or egress to the J.M.J. Property.
4. National Rx may at its option integrate the Maneuvering Area into
the parking area on its property so that its employees, tenants, invitees and
licensees can use the Maneuvering Area as a means of convenient access to the
other parts of its property, provided that such use does not interfere with its
use as a maneuvering area by J.M.J.
5. This Agreement is not intended and shall not be construed as a
dedication for public use, and the parties shall refrain from any actions that
would cause such dedication. National Rx shall have the right to take such steps
as may be necessary to avoid a dedication.
6. J.M.J. shall be solely responsible for costs and expenses associated
with the care, maintenance and repair of the Maneuvering Area. If J.M.J. fails
to fulfill its duties with respect to the care, maintenance and repair of the
Maneuvering Area, National Rx may, but shall not be obligated to, pay the costs
and expenses associated with said care, maintenance and repair; provided that
J.M.J. shall be liable to National Rx for the costs and expenses associated with
such care, maintenance or repair together with interest at the statutory rate
allowable pursuant to O.R.C. Section 1343.03(A), as amended. Provided, however,
that National Rx shall be responsible for the repair of any damage to the
Maneuvering Area caused by National Rx, its employees, tenants, invitees and
licensees.
1
<PAGE> 6
7. The provisions of this Agreement shall run with the land and be
binding upon and inure to the benefit of the parties hereto, and their
successors and assigns.
8. This Agreement may not be amended except by an instrument in
writing, in recordable form, signed by both parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
Signed in the Presence of: NATIONAL RX SERVICES NO. 2, INC., an Ohio
corporation
/s/ Jeri Booth By: /s/ Charles A. Mele
- -------------------------- -------------------------------------------
/s/ William Shields Its: Vice President - General Counsel
- -------------------------- -------------------------------------------
J.M.J., an Ohio general partnership
/s/ Ruth E. Booth By: /s/ Jeff Block
- -------------------------- -------------------------------------------
Jeff Block, General Partner
/s/ Jeri Block
- --------------------------
STATE OF NEW JERSEY :
: ss.
COUNTY OF BERGEN :
Before me, a Notary Public for the State of Ohio, personally appeared
Charles A. Mele, as Vice President of National Rx Services No. 2, Inc., an Ohio
corporation, on behalf of the corporation, who signed the foregoing instrument,
and who acknowledged the same as the free act and deed of the corporation.
IN WITNESS WHEREOF, I hereunto subscribe my signature and affix my seal
this 7th day of October, 1992.
/s/ Patricia Strauch
------------------------------------------------
Notary Public
STATE OF OHIO :
: ss.
COUNTY OF FRANKLIN :
Before me, a Notary Public for the State of Ohio, personally appeared
Jeff Block, ______--________ and ______--___________, General Partners of
J.M.J., an Ohio general partnership, who signed the foregoing instrument, and
who acknowledged the same as their free act and deed on behalf of the
partnership.
IN WITNESS WHEREOF, I hereunto subscribe my signature and affix my seal
this 2nd day of October, 1992.
/s/ Ruth E. Booth
-----------------------------------------
Notary Public
2
<PAGE> 7
EXHIBIT B
[GRAPHIC OF PREMISES]
1
<PAGE> 8
EXHIBIT C
[GRAPHIC OF PREMISES]
1
<PAGE> 1
Exhibit 10.6c
LEASE MODIFICATION NO. 2
THIS LEASE MODIFICATION NO. 2 ("Modification No. 2") is made this 8th
day of June, 1993, by and between J.M.J. PARTNERSHIP ("Landlord") and THE
AMERICAN GLASSMITH, INC., f/k/a THE NEW EDGEHILL CO., INC. ("Tenant").
BACKGROUND INFORMATION
A. Landlord and Tenant are parties to a Lease and Corrective Amendment
to Lease Agreement dated November 28, 1990 and a Lease Modification No. 1 dated
October 19, 1992. The foregoing documents are collectively referred to as the
"Lease."
B. Landlord and Tenant desire to further modify and amend the Lease.
STATEMENT OF MODIFICATION
1. The term of the Lease shall be extended for a period of two (2)
years beginning December 1, 1993 and expiring November 30, 1995.
2. Tenant shall have the right and option to renew the term of this
Lease for an additional two (2) year term. Tenant shall exercise such option, if
at all, by providing to Landlord not less than three hundred sixty-five (365)
days written notice prior to the expiration of the term.
3. Section 21, Article XIX, shall be deleted--which dealt with the
previous agreed upon option--being replaced with the foregoing provision.
4. Annual rental for the period through November 30, 1993, shall
continue at the rate of $156,000, payable in monthly installments of $13,000.
Beginning December 1, 1993, annual rental shall be One Hundred Sixty-Two
Thousand Dollars ($162,000.00) payable in monthly installments of Thirteen
Thousand Five Hundred Dollars ($13,500.00).
In the event the two (2) year renewal option is exercised, during that
period of time, annual rental shall be One Hundred Sixty-Eight Thousand Dollars
($168,000.00) payable in monthly installments of Fourteen Thousand Dollars
($14,000.00).
5. Except as provided herein, all of the terms, provisions and
conditions of the Lease, as amended, shall continue in full force and effect.
SIGNED AND ACKNOWLEDGED LANDLORD:
IN THE PRESENCE OF:
J.M.J. PARTNERSHIP
/s/ Laurie H. Fulford
- -------------------------------
Laurie H. Fulford
- -------------------------------
[PRINT NAME]
/s/ Frank N. Albanece
- -------------------------------
Frank N. Albanece By:/s/ Jeff Block
- ------------------------------- ----------------------------------
[PRINT NAME] Jeff D. Block, Partner
1
<PAGE> 2
TENANT:
THE AMERICAN GLASSMITH, INC.
/s/ Charles A. Walken
- ---------------------------------
Charles A. Walken
- ---------------------------------
[PRINT NAME]
/s/ Nancy S. Steinrock
- ---------------------------------
Nancy S. Steinrock By:/s/ Timothy Wadhams
- --------------------------------- ------------------------------------
[PRINT NAME]
Its:Vice President
-----------------------------------
STATE OF OHIO :
: ss:
COUNTY OF FRANKLIN :
The foregoing instrument was acknowledged before me this 8th day of
June, 1993, by Jeff D. Block, Partner, on behalf of J.M.J. Partnership.
/s/ Ruth E. Booth
---------------------------------------
Notary Public
STATE OF MICHIGAN :
: ss:
COUNTY OF WAYNE :
The foregoing instrument was acknowledged before me this 4 day of June,
1993, by Timothy Wadhams, the Vice President of The American Glassmith, Inc., on
behalf of the corporation.
/s/ Maxine E. Crandall
---------------------------------------
Notary Public
CONSENT OF GUARANTOR
The undersigned, Guarantor, of the Lease between J.M.J. Partnership
(Landlord) and The American Glassmith, Inc. (Tenant) does hereby consent to
Lease Modification No. 2 and agrees that the terms, provisions and conditions
contained herein are part of the Lease and said Guarantor is otherwise fully
bound under the terms of its Guarantee.
MASCO INDUSTRIES, INC.
By:/s/ Timothy Wadhams
------------------------------------
Its:Vice President
-----------------------------------
2
<PAGE> 1
Exhibit 10.6d
LEASE MODIFICATION NO. 3
THIS LEASE MODIFICATION NO. 3 ("Modification No. 3") is made this 31st
day of January, 1995, by and between J.M.J. PARTNERSHIP ("Landlord") and THE
AMERICAN GLASSMITH, INC., f/k/a THE NEW EDGEHILL CO., INC. ("Tenant").
BACKGROUND INFORMATION
A. Landlord and Tenant are parties to a Lease and Corrective Amendment
to Lease Agreement dated November 28, 1990, a Lease Modification No. 1 dated
October 19, 1992 and a Lease Modification No. 2 dated June 8, 1993. The
foregoing documents are collectively referred to as the "Lease."
B. Landlord and Tenant desire to further modify and amend the Lease.
STATEMENT OF MODIFICATION
1. The term of the Lease shall be extended and shall now expire March
31, 1996.
2. Tenant shall have the right and option to renew the term of this
Lease for an additional two (2) year term. Tenant shall exercise such option, if
at all, by providing to Landlord not less than three hundred sixty-five (365)
days' written notice prior to the expiration of the term.
3. Section 2, Lease Modification No. 2, shall be deleted--which dealt
with the previous agreed upon option--being replaced with the foregoing
provision.
4. Annual rental for the period through November 30, 1995, shall
continue at the rate of One Hundred Sixty-Two Thousand Dollars ($162,000.00)
payable in monthly installments of Thirteen Thousand Five Hundred Dollars
($13,500.00). Beginning December 1, 1995, annual rental shall be One Hundred
Sixty-Eight Thousand Dollars ($168,000.00) payable in monthly installments of
Fourteen Thousand Dollars ($14,000.00).
In the event the two (2) year renewal option is exercised, during that
period of time, annual rental shall be One Hundred Sixty-Eight Thousand Dollars
($168,000.00) payable in monthly installments of Fourteen Thousand Dollars
($14,000.00).
5. Except as provided herein, all of the terms, provisions and
conditions of the Lease, as amended, shall continue in full force and effect.
SIGNED AND ACKNOWLEDGED LANDLORD:
IN THE PRESENCE OF:
J.M.J. PARTNERSHIP
/s/ Gerald H. Swedlow
- -------------------------------
Gerald H. Swedlow
- -------------------------------
[PRINT NAME]
/s/ Julia A. Jacoby
- -------------------------------
Julia A. Jacoby By: /s/ Jeff Block
- ------------------------------- -------------------------------
[PRINT NAME] Jeff D. Block, Partner
3
<PAGE> 2
TENANT:
THE AMERICAN GLASSMITH, INC.
/s/ Kevin I. Green
- -------------------------------
Kevin I. Green
- -------------------------------
[PRINT NAME]
/s/ Elizabeth A. Reed
- -------------------------------
Elizabeth A. Reed By: /s/ David A. Doran
- ------------------------------- -------------------------------
[PRINT NAME]
Its: Assistant Secretary
-------------------------------
STATE OF MICHIGAN :
: ss:
COUNTY OF WAYNE :
The foregoing instrument was acknowledged before me this 8th day of
February, 1995, by David A. Doran, the Assistant Secretary of American
Glassmith, Inc., on behalf of the corporation.
/s/ Kevin I. Green
------------------------------------
Notary Public
STATE OF OHIO :
: ss:
COUNTY OF FRANKLIN :
The foregoing instrument was acknowledged before me this 31st day of
January, 1995, by Jeff D. Block, Partner, on behalf of J.M.J. Partnership.
/s/ Gerald H. Swedlow
------------------------------------
Notary Public
CONSENT OF GUARANTOR
The undersigned, Guarantor, of the Lease between J.M.J. Partnership
(Landlord) and American Glassmith, Inc. (Tenant) does hereby consent to Lease
Modification No. 3 and agrees that the terms, provisions and conditions
contained herein are part of the Lease and said Guarantor is otherwise fully
bound under the terms of its Guarantee.
MASCOTECH, INC., a Delaware corporation,
f/k/a MASCO INDUSTRIES, INC.
By:/s/ Eugene A. Gargaro, Jr.
-------------------------------------
Its:Secretary
------------------------------------
4
<PAGE> 1
Exhibit 10.6e
LEASE MODIFICATION NO. 4
THIS LEASE MODIFICATION NO. 4 ("Modification No. 4") is made effective
March 31, 1995, by and between J.M.J. PARTNERSHIP ("Landlord") and AMERICAN
GLASSMITH, INC., f/k/a THE NEW EDGEHILL CO., INC. ("Tenant").
BACKGROUND INFORMATION
A. Landlord and Tenant are parties to a Lease and Corrective Amendment
to Lease Agreement dated November 28, 1990, a Lease Modification No. 1 dated
October 19, 1992, a Lease Modification No. 2 dated June 8, 1993 and a Lease
Modification No. 3 dated January 31, 1995. The foregoing documents are
collectively referred to as the "Lease."
B. Landlord and Tenant desire to further modify and amend the Lease.
STATEMENT OF MODIFICATION
1. The time period for option to renew the term of the Lease shall be
extended to the close of business on or before May 31, 1995.
2. As consideration for the extension, Tenant shall pay within five (5)
business days after full execution of this Lease Modification No. 4 the sum of
Two Thousand Five Hundred Dollars ($2,500.00). An additional payment of Two
Thousand Five Hundred Dollars ($2,500.00) will be payable by Tenant to Landlord
on or before May 1, 1995.
3. Tenant shall have the right to further extend the time period for
the option to renew the term of the Lease for up to four (4) calendar months
(June-September). In order to further extend, however, Tenant must pay to
Landlord the additional sum(s) of Two Thousand Five Hundred Dollars ($2,500.00)
for each additional month extension--which payment must be made on or before the
first (1st) day of the applicable calendar month. Therefore, in order to extend
the time period through June 30, 1995, Tenant must make the additional payment
of Two Thousand Five Hundred Dollars ($2,500.00) on or before June 1, 1995.
4. As provided above, the requirement to pay Two Thousand Five Hundred
Dollars ($2,500.00) on or before May 1, 1995 is an absolute requirement.
Subsequent payments of Two Thousand Five Hundred Dollars ($2,500.00) are at
Tenant's discretion if it desires to further extend as above provided.
5. All payments made and to be made under the foregoing provisions
shall be non-refundable and not credited against rent or charges. Such payment
shall be deemed consideration for the extension granted by Landlord.
6. Initially, the term shall now expire May 31, 1996. In the event the
additional extensions are exercised by Tenant, as above provided, the term shall
automatically be extended for a like period. Therefore, if Tenant exercises all
of its options to extend the time for exercise of the renewal, the initial term
shall expire September 30, 1996.
7. The purchase option contained in Article V of the Lease shall be
deleted and of no further force or effect.
8. Attached to this Modification No. 4 is a copy of a drawing submitted
by the Franklin County Engineering Department. Landlord intends to convey by
deed, easement or otherwise, the property required by Franklin County, and
Tenant consents to and approves of such deed or easement. For the purposes of
Article XVI of the Lease, the twenty-five foot (25') provision shall be measured
from the new right-of-way.
9. Except as provided herein, all of the terms, provisions and
conditions of the Lease, as amended, shall continue in full force and effect.
1
<PAGE> 2
SIGNED AND ACKNOWLEDGED LANDLORD:
IN THE PRESENCE OF:
J.M.J. PARTNERSHIP
/s/ Kelly A. Caudill
- ------------------------------
Kelly A. Caudill
- ------------------------------
[PRINT NAME]
/s/ Julia A. Jacoby
- ------------------------------
Julia A. Jacoby By: /s/ Jeff Block
- ------------------------------ -----------------------------------
[PRINT NAME] Jeff D. Block, General Partner
TENANT:
AMERICAN GLASSMITH, INC.
/s/ Kevin I. Green
- ------------------------------
Kevin I. Green
- ------------------------------
[PRINT NAME]
/s/ M. Feher
- ------------------------------
M. Feher By: /s/ Timothy Wadhams
- ------------------------------ ------------------------------------
[PRINT NAME]
Its: Vice President/Treasurer
-----------------------------------
STATE OF OHIO :
: ss:
COUNTY OF FRANKLIN :
The foregoing instrument was acknowledged before me this 6th day of
April, 1995, by Jeff D. Block, General Partner, J.M.J. Partnership.
/s/ Julia A. Jacoby
----------------------------------------
Notary Public
STATE OF MICHIGAN :
: ss:
COUNTY OF WAYNE :
The foregoing instrument was acknowledged before me this 4th day of
April, 1995, by Timothy Wadhams, the Vice President of American Glassmith, Inc.,
on behalf of the corporation.
/s/ Kevin I. Green
----------------------------------------
Notary Public
2
<PAGE> 3
CONSENT OF GUARANTOR
The undersigned, Guarantor, of the Lease between J.M.J. Partnership
(Landlord) and American Glassmith, Inc. (Tenant) does hereby consent to Lease
Modification No. 3 and agrees that the terms, provisions and conditions
contained herein are part of the Lease and said Guarantor is otherwise fully
bound under the terms of its Guarantee.
MASCOTECH, INC., a Delaware corporation,
f/k/a MASCO INDUSTRIES, INC.
By: /s/ Eugene A. Gargaro, Jr.
-----------------------------------
Its: Secretary
-----------------------------------
3
<PAGE> 4
ATTACHMENT
[GRAPHIC OF SITE MAP]
4
<PAGE> 1
Exhibit 10.6f
LEASE MODIFICATION NO. 5
THIS LEASE MODIFICATION NO. 5 ("Modification No. 5") is made effective
August 31, 1995, by and between J.M.J. PARTNERSHIP ("Landlord") and AMERICAN
GLASSMITH, INC., f/k/a THE NEW EDGEHILL CO., INC. ("Tenant").
BACKGROUND INFORMATION
A. Landlord and Tenant are parties to a Lease and Corrective Amendment
to Lease Agreement dated November 28, 1990, a Lease Modification No. 1 dated
October 19, 1992, a Lease Modification No. 2 dated June 8, 1993, a Lease
Modification No. 3 dated January 31, 1995, and a Lease Modification No. 4 dated
March 31, 1995. The foregoing documents are collectively referred to as the
"Lease."
B. Landlord and Tenant desire to further modify and amend the Lease.
STATEMENT OF MODIFICATION
1. Providing Tenant makes the extension payment of Two Thousand Five
Hundred Dollars ($2,500) on or before September 1, 1995, the time period for the
option to renew shall be September 30, 1995.
2. Tenant shall have the right to further extend the time period for
the option to renew the term of Lease for up to three (3) periods of two (2)
calendar months (October/November, December/January and February/March). In
order to further extend, however, Tenant must pay to Landlord the additional
sum(s) of Six Thousand Dollars ($6,000) for each additional two (2) month
extension - which payment must be made on or before the first (1st) day of the
first (1st) calendar month of the two (2) month period. Therefore, in order to
extend the time period through November 30, 1995, Tenant must make the
additional payment of Six Thousand Dollars ($6,000) on or before October 1,
1995.
3. In the event the payment for September 1995 is not made or
subsequent payments are not made, then, and in that event, the option to renew
shall be of no further force or effect.
4. The term now expires August 31, 1996. In the event the extension for
September 1995 applies, the term shall expire September 30, 1996. However, if
the additional extensions are exercised by Tenant, as above provided, the term
shall automatically be extended for a like period. Therefore, if Tenant
exercises all of its options to extend the time for exercise of the renewal, the
initial term shall expire March 31, 1997.
5. Except as provided herein, all of the terms, provisions and
conditions of the Lease, as amended, shall continue in full force and effect.
SIGNED AND ACKNOWLEDGED LANDLORD:
IN THE PRESENCE OF:
J.M.J. PARTNERSHIP
/s/ Nancy A. May
- ------------------------------
Nancy A. May
- ------------------------------
[PRINT NAME]
/s/ Kristina McConnell
- ------------------------------
Kristina McConnell By: /s/ Jeff Block
- ------------------------------ -----------------------------------
[PRINT NAME] Jeff D. Block, General Partner
[SIGNATURES CONTINUED ON NEXT PAGE]
1
<PAGE> 2
TENANT:
AMERICAN GLASSMITH, INC.
/s/ Jodie C. Warsow
- -------------------------------
Jodie C. Warsow
- -------------------------------
[PRINT NAME]
/s/ Claudia L. Georges
- -------------------------------
Claudia L. Georges By: /s/ David A. Doran
- ------------------------------- --------------------------------------
[PRINT NAME]
Its: Assistant Secretary
-------------------------------------
STATE OF OHIO :
: ss:
COUNTY OF FRANKLIN :
The foregoing instrument was acknowledged before me this 12th day of
September, 1995, by Jeff D. Block, General Partner, J.M.J. Partnership.
/s/ Kristina McConnell
-------------------------------------------
Notary Public
STATE OF MICHIGAN :
: ss:
COUNTY OF WAYNE :
The foregoing instrument was acknowledged before me this 1st day of
September, 1995, by David A. Doran, the Assistant Secretary of American
Glassmith, Inc., on behalf of the corporation.
/s/Jodi C. Warsow
-------------------------------------------
Notary Public
CONSENT OF GUARANTOR
The undersigned, Guarantor, of the Lease between J.M.J. Partnership
(Landlord) and American Glassmith, Inc. (Tenant) does hereby consent to Lease
Modification No. 5 and agrees that the terms, provisions and conditions
contained herein are part of the Lease and said Guarantor is otherwise fully
bound under the terms of its Guarantee.
MASCOTECH, INC., a Delaware corporation,
f/k/a MASCO INDUSTRIES, INC.
By: /s/ [illegible]
--------------------------------------
Its: President
--------------------------------------
2
<PAGE> 1
Exhibit 10.6g
LEASE MODIFICATION NO. 6
THIS LEASE MODIFICATION NO. 6 ("Modification No. 6") is made this 19th
day of June 1996, by and between J.M.J. PARTNERSHIP ("Landlord") and AMERICAN
GLASSMITH, INC., fka HOFFER'S OH HOLDINGS, INC. ("Tenant").
BACKGROUND INFORMATION
A. Landlord and MASCOTECH GLASS, INC., fka AMERICAN GLASSMITH, INC. and
THE NEW EDGEHILL CO., INC., were parties to a Lease and Corrective Amendment to
Lease Agreement dated November 28, 1990, Lease Modification No. 1 dated October
19, 1992, Lease Modification No. 2 dated June 8, 1993, Lease Modification No. 3
dated January 31, 1995, Lease Modification No. 4 dated March 31, 1995 and Lease
Modification No. 5 dated August 31, 1995. The foregoing documents are
collectively referred to as the "Lease."
B. The Lease pertains to real property owned by Landlord at 195
Phillipi Road, Franklin Township, Franklin County, Ohio.
C. MASCOTECH GLASS, INC. assigned all of its right, title and interest
in and to the Lease to Tenant pursuant to ASSIGNMENT AND ASSUMPTION OF LEASE
dated March 25, 1996. Said ASSIGNMENT AND ASSUMPTION OF LEASE was consented to
by Landlord pursuant to CONSENT AND RELEASE BY LANDLORD dated March 25, 1996.
D. Landlord and Tenant desire to further modify and amend the Lease.
STATEMENT OF MODIFICATION
1. The existing provisions in the Lease for renewal options shall be
terminated and of no further force or effect.
2. The term of the Lease shall be extended and shall continue for a
period of three (3) years, expiring April 30, 1999. During this period of time,
annual rental shall be one hundred sixty-eight thousand dollars ($168,000)
payable in equal monthly installments of fourteen thousand dollars ($14,000).
3. Tenant shall have the right to renew the term for one (1) period of
three (3) years--beginning May 1, 1999 and expiring April 30, 2002. In order to
exercise the renewal option, Tenant must give Landlord written notice on or
before April 30, 1998. Otherwise, the option to renew shall lapse and be of no
further force or effect.
4. In the event of renewal, annual rent and monthly installment during
the renewal term shall be as follows:
<TABLE>
<CAPTION>
MONTHLY INSTALLMENT
RENEWAL YEAR ANNUAL RENT OF ANNUAL RENT
------------ ----------- --------------
<S> <C> <C> <C>
a. 1 $172,000 $14,333.33
b. 2 $176,000 $14,666.67
c. 3 $184,000 $15,333.33
</TABLE>
5. Except as provided herein, all of the terms, provisions and
conditions of the Lease, as amended, shall continue in full force and effect.
1
<PAGE> 2
SIGNED AND ACKNOWLEDGED LANDLORD:
IN THE PRESENCE OF:
J.M.J. PARTNERSHIP
/s/ Nancy S. May
- ----------------------------------
Nancy S. May
- ----------------------------------
[PRINT NAME]
/s/ Kristina McConnell
- ----------------------------------
Kristina McConnell By: /s/ Jeff Block
- ---------------------------------- ----------------------------------
[PRINT NAME] Jeff D. Block, General Partner
TENANT:
AMERICAN GLASSMITH, INC.
- ----------------------------------
- ----------------------------------
[PRINT NAME]
/s/ Mark Kochevar
- ----------------------------------
Marl Kochevar By:/s/ Robert C. Kastin
- ---------------------------------- -----------------------------------
[PRINT NAME]
Its: Vice President
---------------------------------
STATE OF OHIO :
: ss:
COUNTY OF FRANKLIN :
The foregoing instrument was acknowledged before me this 19th day of
June, 1996 by Jeff D. Block, general partner, J.M.J. Partnership.
/s/ Kristina McConnell
--------------------------------------
Notary Public
STATE OF MINNESOTA :
: ss:
COUNTY OF HENNEPINSS :
The foregoing instrument was acknowledged before me this 10th day of
June, 1996 by Robert Kastin, Vice President, American Glassmith, Inc., on behalf
of the corporation.
/s/ Marilyn A. Daniels
--------------------------------------
Notary Public
2
<PAGE> 1
Exhibit 10.7
LEASE SUMMARY PAGE
DATE: March 14, 1997
TENANT: Western Insulated Glass, Co.
5621 South 25th Street
Phoenix, Arizona 85040-3698
LANDLORD: Benny J. Ellis
Linda M. Ellis
637 East Leah Lane
Gilbert, Arizona 85234-2421
PREMISES: Building Address: 5621 South 25th Street
Phoenix, Arizona
TERM: Period: Five (5) years
Commencement Date: March 14, 1997
Ending Date: March 13, 2002
RENT: Base Monthly Rent: $16,000.00
LANDLORD: TENANT:
WESTERN INSULATED GLASS CO.
/s/ Benny Ellis By: /s/ Benny Ellis
- ---------------------------- ---------------------------------
Benny J. Ellis Benny J. Ellis, President
Date: 031497 Date: 031497
---------------------- -------------------------------
/s/ Linda Ellis /s/ Frank J. Amedia, CEO
- ----------------------------
Linda M. Ellis
Date: 031497
----------------------
<PAGE> 2
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease"), made this l4th day of March, 1997,
by and among BENNY J. ELLIS and LINDA M. ELLIS, husband and wife, 637 East Leah
Lane, Gilbert Arizona 85234-2421 (hereinafter referred to collectively as the
"Landlord") and WESTERN INSULATED GLASS, CO., 5621 South 25th Street, Phoenix,
Arizona 85040-3698 (hereinafter referred to as the "Tenant").
W I T N E S S E T H:
The parties hereto, in consideration of the mutual covenants,
agreements and premises hereinafter stated and intending to be legally bound,
hereby agree as follows:
1. THE LEASED PREMISES: The Landlord does agree to let and demise to
the Tenant, and Tenant does agree to take and hereby does take from the Landlord
the following described premises together with all fixtures and improvement
thereon, to wit:
Lots 6 and 7, SOUTHERN GARDENS INDUSTRIAL PARK-PHASE II, as recorded
in Book 122 of Maps 53 in records of Maricopa County, Arizona (the
"Lots and Improvements")
and the following described parcel, to wit:
Lot 8, SOUTHERN GARDENS INDUSTRIAL PARK-PHASE II, as recorded in
Book 122 of Maps 53 in records of Maricopa County, Arizona (the
"Lot")
The Lots and Improvements and the Lot shall hereinafter be referred to in the
collective as "the Premises", and has the commonly known address of:
5621 South 25th Street
Phoenix, Arizona 85040-3698
2. TERM: The initial term of this Lease shall be for a period of five
(5) years commencing on the date of this Agreement (the "Initial Term"). Upon
commencement of this Lease, the 1994 Lease shall terminate pursuant to paragraph
33 of this Lease.
3. RENEWAL TERMS: Tenant shall have the right to extend the Initial
Term of this Lease for two (2) periods of five (5) years each. For the purposes
of this paragraph 3, the first five (5) year term shall be referred to as the
"First Renewal Term" and the second five (5) year terms shall be referred to as
the "Second Renewal Term." Each Renewal Term shall be upon the same terms and
conditions of this Lease (except as to Base Rent, as hereinafter defined);
provided written notice of Tenant's election to extend is given to Landlord at
least ninety (90) days prior to the expiration of the then existing term. Upon
the exercise of any such
<PAGE> 3
option, all terms and conditions contained in this Lease shall be applicable to
each Renewal Term to the same extent as they apply to the Initial Term.
4. BASE RENT: During the term of this Lease, the Tenant shall pay to
Landlord as the base monthly rent (hereinafter the "Base Rent" or "Base Monthly
Rent") for the herein demised Premises the sum of $16,000. In addition to the
Base Monthly Rent, Tenant shall also pay to Landlord any assessment or tax
(other than net income tax), including real property taxes and general and
special assessments ("real property taxes"), and any other tax or assessment,
including but not limited to the so-called "rental tax", levied and assessed
against the Premises, other improvements, and land of which the Premises are a
part, levied by any Federal, State or local authority upon the rental or the
receipt thereof. Rent is due and payable on or before the fifteenth (15th) day
of each month. Any Rent not paid by the twenty-fifth (25th) day of the month
shall be in cash or certified funds and shall bear a late charge equal to five
percent (5%) of the gross monthly rent. In addition to such late charge, such
unpaid amounts shall bear interest at twelve percent (12%) per annum from the
date due to the date of payment.
5. RENEWAL TERM RENT: Base Monthly Rent for the Renewal Terms shall be
calculated as follows:
BMR X CCPI
----------
FRTR = BCPI
FRTR X CCPI
-----------
SRTR = BCPI
where: FRTR = First Renewal Term Rent
SRTR = Second Renewal Term Rent
BMR = Base Monthly Rent
CCPI = Current Year CPI
BCPI = Base Year CPI
"CPI" shall mean the United States Department of Labor, Bureau of Labor
Statistics, Consumer Price Index for All Urban Consumers (CPI-U) for the
Phoenix, Arizona Area, All Items (1982=100).
"Base Year CPI" shall mean the CPI during the month in which this Lease
commenced, or if no CPI is published for that month, the first month prior
thereto in which the CPI was published.
"Current Year CPI" shall mean the CPI during the month in which the
Renewal Term commences. In the event that the CPI during the month in which the
Renewal Term commences is not available at the commencement of the Renewal Term,
the most current CPI for the month shall be used. At such time as the CPI for
the month in which the Renewal Term commences is available, the Renewal Term
Rent shall be recomputed, and any positive difference shall be
2
<PAGE> 4
paid by Tenant to Landlord within thirty (30) days after the final computation
of the Renewal Term Rent and any negative difference credited by Landlord to
future payments of Renewal Term Rent to become due from Tenant during the
Renewal Term.
If the Bureau of Labor Statistics shall change its base period and/or
the index number for the base period, the old index number shall be converted
into the new index number for purposes of this Lease. If the CPI is
discontinued, comparable statistics on the purchasing power of the consumer
dollar, as published by the U.S. Government, or in the absence thereof, by a
responsible financial periodical of recognized authority selected by Landlord
shall be used.
All rental and other payments shall be paid to Landlord at 637 East
Leah Lane, Gilbert, Arizona 85234-2421, or at such other place as may from time
to time be designated by Landlord in writing at least ten (10) days prior to the
next ensuing payment date.
6. RIGHT OF FIRST REFUSAL: In the event Landlord solicits or receives
any one offer or offers to sell the Premises (the "Third Party Offer") at any
time during the Initial Term or the Renewal Terms, Tenant shall have a right of
first refusal with respect to each such offer. Upon receipt of an offer to sell,
Landlord shall provide Tenant with written notice of the terms and conditions of
such offer within three (3) business days of receipt. Tenant shall have thirty
(30) calendar days from the date of receipt within which to accept or reject
such offer, on the same terms as the Third Party Offer.
7. REPRESENTATIONS OF TENANT: Tenant represents, covenants and warrants
to Landlord that Tenant is a duly organized, validly existing corporation in
good standing under the laws of the State of Arizona, that it will operate the
business located on the Premises, that it is authorized to transact business in
the State of Arizona, and that it is fully authorized to enter into and execute
this Lease and perform the obligations hereunder.
8. COMPLIANCE WITH LAW: Tenant shall procure all necessary permits,
certificates, licenses, and other authorizations required by the laws of the
State of Arizona, Maricopa County, or the ordinances of the City of Phoenix
relating to the Tenant's business and the Tenant's use and occupancy of the
Premises, and shall at all times and at Tenant's own expense perform and fully
satisfy all laws, statutes, regulations and ordinances of the United States,
State of Arizona, County of Maricopa, City of Phoenix, or any other agency or
governing body which may relate to or affect the occupancy of the Premises by
the Tenant including, but not limited to, all applicable environmental and
health laws.
9. HOLDING OVER: If Tenant should hold over after the term of this
Lease, Tenant shall become a Tenant on a month-to-month basis at a rental rate
in an amount equal to 110% of the last Base Monthly Rental, plus all other
charges payable hereunder, provided, however, no such hold over tenancy shall
continue for a period greater than three (3) months. Said sum(s) shall be
payable in advance on the fifteenth (15th) day of each month upon all of the
terms, covenants and conditions herein specified.
10. OCCUPANCY: Tenant shall use the Premises for the manufacturing and
sale of aluminum and glass products; provided, however, that no part of the
Premises shall be
3
<PAGE> 5
occupied or used by any person(s) for any purpose, or in any manner as shall be
contrary to law or as to create a nuisance or as to commit waste of the
Premises, and Tenant shall, allowing for reasonable wear and tear, at all times
keep the entire Premises, including all improvements, clean and in good order
and repair. Tenant shall store all goods, materials and merchandise incidental
to the business in a safe manner. Tenant agrees that the Premises shall be
Leased in an "as-is" and "as-shown" condition, with no representation or
warranty of any type or nature being made by Landlord. Tenant agrees that it is
leasing the Premises solely upon the basis of its investigation and not on the
basis of any representation or warranty, express or implied, written or oral,
made by Landlord or his agents or employees. Without limiting the generality of
the foregoing, Landlord makes no warranty as to the sufficiency of the Premises
for Tenant's purposes or the square footage contained within, except as
expressly set forth elsewhere in this Lease.
11. UTILITIES AND TAXES: In addition to all base rent paid hereunder,
(A) Tenant shall be responsible for and shall pay all costs of
utilities, when due and before delinquent, charged against said Premises by
reason of the Tenant's use thereof, including but not limited to water, gas,
electricity, telephone, waste control or other services.
(B) Tenant shall pay, prior to delinquency, all taxes assessed
and/or levied upon trade fixtures, furnishings, equipment and all other personal
property owned by or leased to Tenant and contained in the Premises. Tenant
shall also pay, prior to delinquency, any license fee and/or commercial rental
tax imposed on the Premises or the income derived therefrom by any authority
having the direct or indirect power to tax any legal or equitable interest in
the property. Tenant shall provide Landlord with satisfactory evidence of
payment. If Tenant should fail to make any tax payments prior to such payments
becoming delinquent, Tenant shall be responsible for the payment of any
penalties thereby incurred.
(C) Landlord shall be responsible for paying all real property
taxes and general and special assessments ("real property taxes") levied and
assessed against the Premises, other improvements, and land of which the
Premises are a part. Landlord, in conjunction with and at the cost of the
Tenant, will seek a reduction in the assessed valuation of the Premises or
contest any real property taxes as deemed necessary.
12. REPAIRS AND MAINTENANCE:
(A) Landlord's Maintenance Obligation: Landlord shall repair and
maintain the structural portions of the Premises, including the basic plumbing,
electrical systems, parking lot, and roof. Except as provided in Paragraph 18
hereof, there shall be no abatement of rent and no liability of Landlord by
reason of any injury to or interference with Tenant's business arising from the
making of any repairs, alterations, or improvements in or to any portion of the
Premises or in or to fixtures, appurtenances and equipment therein.
4
<PAGE> 6
(B) Tenant's Obligation:
(1) Tenant shall be responsible for all janitorial services on
the leased Premises.
(2) By taking possession of the Premises, Tenant shall be
deemed to have accepted the Premises as being in good condition, sanitary order,
and repair, and takes possession of the Premises subject to all applicable
zoning, municipal, county and state laws, ordinances and regulations governing
and regulating the use of the Premises, and any covenants or restrictions of
record, and accepts this Lease subject thereto and to all matters disclosed
thereby. Tenant acknowledges that Landlord has made no representations or
warranties as to the operating condition of the Premises. Tenant shall, at
Tenant's sole cost and expense, keep the Premises and every part thereof in good
condition and repair, damage thereto from causes beyond the control of Tenant
and ordinary wear and tear excepted.
(3) If Tenant fails to perform Tenant's obligations under this
Paragraph 11(B), Landlord may at Landlord's option enter upon the Premises after
forty-eight (48) hours prior notice to Tenant and put the same in good order,
condition and repair and the cost thereof together with interest thereon at the
rate of 12% per annum shall be due and payable as additional rent to Landlord
together with Tenant's next rent installment.
(4) On the last day of the term hereof, or on any sooner
termination, Tenant shall surrender the Premises to Landlord in the same
condition as received, broom clean, ordinary wear and tear excepted. Tenant
shall repair any damage to the Premises occasioned by the removal of Tenant's
trade fixtures, furnishings and equipment, which repair shall include the
patching and filling of holes and repair of structural damage.
13. SIGNS, ALTERATIONS, REPAIRS AND IMPROVEMENTS:
(A) Tenant may, at its own expense, erect signs upon said Premises
or make alterations, additions or improvements in or to the Premises; provided,
however, that the signs on the exterior of the building or any alterations,
additions or improvements shall be subject to any and all governmental rules,
codes, regulations or deed restrictions pertaining to the Premises; and,
provided further, that before any additions, alterations or improvements are
made or before any sign is placed upon the Premises, the prior written consent
of the Landlord shall be had and obtained; and, provided further, that except
for the addition and/or improvement described in paragraph 12.(B) hereof, any of
said alterations, additions or improvements to said Premises shall at once
become a part of the realty demised herein and be surrendered to Landlord at the
expiration of the Lease except movable signs and movable fixtures.
(B) The parties hereto acknowledge and understand, prior to the
commencement of this Lease, the Tenant installed and owns that certain crane
currently affixed to the Premises (the "crane"). Upon the expiration of this
Lease for any reason or upon the sale of the Premises, the Tenant and/or
purchaser will have the right to remove the crane from the Premises or purchase
the crane from the Tenant; provided however, that if the purchaser and/or Tenant
elects not to purchase the crane, then the Landlord shall have the right to
purchase the
5
<PAGE> 7
crane at its then fair market value as determined by an appraiser selected by
the Tenant.
14. ENTRY ON PREMISE BY LANDLORD: Tenant will permit Landlord and/or
its representative(s) to enter the Premises at all reasonable times, upon 48
hours prior notice, for the purpose of inspecting the same and for the
purpose(s) set forth in Paragraph 12 hereof.
15. LIENS: Tenant is not required to make any improvements on the
Premises and is not permitted to change or alter the premises without Landlord's
prior written consent; however, if Tenant does so with Landlord's prior written
consent, it will have no authority as agent or otherwise to bind the Landlord or
to subject the Landlord's interest in the Premises to any claims for
materialmen's or mechanic's liens or otherwise. Tenant covenants and agrees that
it will not, during the term of the Lease, suffer or permit any lien to be
attached to or upon the Premises. The Tenant hereby expressly agrees to save an
hold harmless the Landlord from or against any such lien or claim of lien.
16. ASSIGNMENT AND SUBLETTING: Without the previous written consent of
Landlord, neither the Tenant nor the Tenant's legal representative(s) or
successor(s) in interest shall assign or mortgage this Lease or sublet the whole
or any part of the Premises. Any consent by the Landlord to any act of
assignment or subletting shall be held to apply only to the specific transaction
thereby authorized. Such consent shall not be construed as a waiver of the duty
of the Tenant to obtain from the Landlord the Landlord's consent to any other
subsequent assignment or subletting, or as modifying or limiting the rights of
the Landlord under the foregoing covenant of the Tenant not to assign or sublet
without such consent. The written consent of Landlord to any assignment or
subletting of the whole or any part of the Premises shall not release Tenant
from any of the terms, conditions or obligations of this Lease. Landlord shall
not unreasonably withhold consent to the assignment of the Lease or the
subletting of the whole or any part of the Premises. Notwithstanding the
foregoing, Tenant shall have the right to assign this Lease, in whole or in
part, to an affiliate of Tenant and/or in connection with a statutory merger or
the sale of all or substantially all of the stock or assets of Tenant and/or in
connection with the sale of the group(s), division(s) or section(s) of Tenant
occupying the Leased Premises; provided, however, any successor of Tenant shall
assume in writing, by instrument reasonably satisfactory to Landlord all of
Tenant's obligations contained in this Lease.
17. TRANSFER OF LANDLORD'S INTEREST: Landlord may, at its option,
transfer title to the Premises or assign its interest in the Lease, subject to
Tenant's interest under this Lease. Upon the closing of such transfer or
assignment, any and all security or damage deposits shall be turned over to
transferee or assignee, and Landlord shall be discharged from all its
obligations arising under this Lease.
18. TENANT'S DEFAULT; LANDLORD'S RIGHTS:
The occurrence of any one or more of the following events shall
constitute an event of default and breach of this Lease:
(A) If Tenant be in default in the performance of any covenant of
this Lease (other than the covenants for the payment of rentals) and if such
default is not cured within thirty
6
<PAGE> 8
(30) days after written notice thereof is given by the Landlord; or, if such
default shall be of such a nature that it cannot be cured completely within such
thirty (30) day period, if the Tenant shall not have promptly commenced within
such thirty (30) day period or shall not thereafter proceed with reasonable
diligence and in good faith to remedy such default; or
(B) If the Tenant abandons or vacates the Premises. The terms
"vacate" and "abandon" shall be deemed to include, without limitation, the
broadest meaning of those terms, the failure of Tenant to be open for business
in the Premises for a period of ten (10) consecutive business days, unless such
failure is excused or permitted under the express agreement of the Landlord; or
(C) If this Lease shall be assigned or the Premises sublet other
than in accordance with the terms of this Lease; or
(D) If Tenant shall be in default in the payment of any rent or
other payment provided for herein and such default is not cured within ten (10)
days after its due date; or
(E) If Tenant shall be in default under that certain Unsecured
Promissory Note in the original principal amount of $225,000.00 of even date
with this Lease executed by Forte Computer Easy, Inc., a Utah corporation, in
favor of Benny J. Ellis; or
(F) If Tenant breaches any of its representations, covenants, and
warranties contained in this Lease and such breach would have a material adverse
effect on Tenant's ability to perform its obligations under this Lease; or
(G) If Tenant makes a general assignment for the benefit of
creditors; or
(H) If Tenant files a voluntary petition for relief or if a
petition against Tenant in a proceeding under the federal bankruptcy laws or
other insolvency laws is filed and not withdrawn or dismissed within forty-five
(45) days thereafter, or if under the provisions of any law providing for
reorganization or winding up of a business entity, any court of competent
jurisdiction assumes jurisdiction, custody or control of Tenant or any
substantial part of its property and such jurisdiction, custody or control
remains in force unrelinquished, unstayed or unterminated for a period of
forty-five (45) days; or
(I) If, in any proceeding or action in which Tenant is a party, a
trustee, receiver, agent or custodian is appointed to take charge of the
Premises or of Tenant's property (or has the authority to do so) for the purpose
of enforcing a lien against the Premises or of Tenant's property.
The Landlord may treat the occurrence of any one or more of the
foregoing events as a breach of this Lease, and in addition to any or all other
rights or remedies of Landlord hereunder and by the law provided, Landlord shall
have, at his option and without further notice or demand of any kind to Tenant
or any other person:
7
<PAGE> 9
(1) The right to declare the term hereof ended and to re-enter and
take possession of the Premises and remove all persons therefrom, and Tenant
shall have no further claim thereon or hereunder, or
(2) The right, without declaring this Lease ended, to re-enter the
Premises and occupy or lease the whole or any part thereof for and on account of
Tenant and upon such terms and conditions and for such rent as Landlord may deem
proper and to collect said rent and any other rent that may thereafter become
payable and apply the same toward the amount due or thereafter to become due
from Tenant and on account of such expenses of such subletting and other damages
sustained by Landlord; and should such rental be less than that herein agreed to
be paid by Tenant, Tenant agrees to pay such deficiencies to Landlord in advance
on the fifteenth (15th) day of each month and to pay the Landlord forthwith upon
any such reletting the costs and expenses the Landlord may incur by reason
thereof, and should such rental be more than that herein agreed to be paid by
Tenant, Landlord shall hold said sums interest-free to be applied to future
damages.
In the event of Tenant's default and Landlord's retaking of possession
of the Premises, whether this Lease is terminated by Landlord or not, Tenant
agrees to pay to Landlord as an additional item of damages the cost of repairs,
alterations, leasing commissions and Landlord's other expenses incurred in
reletting the Premises to a new tenant.
Nothing in this paragraph shall be deemed to require the Landlord to give the
Tenant any notice, other than such notice as may be required by any controlling
law or statute of the State of Arizona, prior to the commencement of an unlawful
detainer action for nonpayment of rent, it being intended hereby that a five (5)
day notice, as such, is only for the purpose of creating a conditional
limitation hereunder pursuant to which this Lease shall terminate.
19. DEFAULT BY LANDLORD: In the event Landlord shall neglect or fail to
perform or observe any of the covenants, provisions or conditions contained in
this Lease on his part to be performed or observed and such neglect or failure
shall continue for thirty (30) days after written notice of default (or in cases
where more than thirty (30) days shall be required because of the nature of the
default, if Landlord shall fail to proceed diligently to cure such default after
notice), then and in that event Landlord shall be responsible to Tenant for any
and all damages sustained by Tenant as a result of Landlord's breach; further,
after such notice Tenant shall have the right to cure any such default at
Landlord's expense, including in such expenditure all costs incurred to cure
such default or breach of Lease.
20. INDEMNITY: Tenant shall indemnify and hold harmless Landlord
against any expense (including Landlord's reasonable attorneys' fees), loss or
liability paid, suffered or incurred by Landlord as the result of any breach by
the Tenant, Tenant's agents, servants, employees, visitors, patrons, or
licensees, or any covenant or condition of this Lease, or as the result of
Tenant's use or occupancy of the Premises, or the carelessness, negligence or
improper conduct of the Tenant, Tenant's agents, employees, visitors, patrons or
licensees. The Tenant's liability under this Lease extends to the acts and
omissions of any subtenant, and any agent, servant, employee, visitor, patron or
licensee of Tenant.
8
<PAGE> 10
Landlord shall indemnify and hold harmless Tenant against any expense
(including Tenant's reasonable attorneys' fees), loss or liability paid,
suffered or incurred by Tenant as the result of any breach by the Landlord,
Landlord's agents, servants, employees, visitors, patrons, or licensees, or any
covenant or condition of this Lease, or as the result of Landlord's use or
occupancy of the Premises, or the carelessness, negligence or improper conduct
of the Landlord, Landlord's agents, employees, visitors, patrons or licensees.
The Landlord's liability under this Lease extends to the acts and omissions of
any subtenant, and any agent, servant, employee, visitor, patron or licensee of
Landlord.
21. ATTORNEY'S FEES: In the event that it becomes necessary for either
party to employ an attorney to enforce the terms of this Lease, or protect the
rights of either party hereunder and such party is successful in connection
therewith, the other party agrees to pay to such party reasonable attorney's
fees and costs incurred thereby.
22. DESTRUCTION: If the Premises shall, without fault of Tenant, be
destroyed or be so damaged as to become wholly or partially untenantable by fire
or other casualty, then if the Landlord shall, by writing delivered to Tenant
within forty-five (45) days after such damage or destruction, elect to rebuild
or repair the damaged portion of the Premises, this Lease shall remain in force
and Landlord shall rebuild or repair the Premises within a reasonable time after
such option, putting the Premises in as good condition as they were prior to the
time of destruction or damage, and for that purpose Landlord may enter said
Premises; provided, however, that during the time of the rebuilding or
repairing, there shall be an abatement of rent as to that portion of the
Premises rendered untenantable. If Landlord does not elect as aforesaid to
rebuild or repair, the Landlord shall have possession of the Premises hereby
let, and Tenant shall deliver and surrender to Landlord such possession, and
this Lease shall become void and the term hereby created shall end; and on such
delivery and surrender being made, or on the recovery of said Premises by
Landlord, the obligation to pay rent shall cease, but until such delivery and
surrender or recovery, the obligation to pay rent shall not cease. If Landlord
is unable to collect the insurance proceeds applicable to such damage because of
some action or inaction on the part of Tenant, its employees, licensees or
invitees, then the cost of repairing such damage shall be paid by Tenant.
23. EMINENT DOMAIN: In the event that the Premises shall be lawfully
and totally condemned or taken for any public use, either Landlord or Tenant may
terminate this Lease upon sixty (60) days written notice to the other. In the
event of a partial taking or condemnation which is not substantial enough to
destroy the usefulness of the Premises for the purposes for which it was leased,
this Lease shall continue in full force and effect, except that effective as of
the date of the actual taking, the rent shall be reduced by that amount
representing the part of the rent applicable to the portion taken. Landlord
shall be entitled to receive the entire award in any condemnation, and Tenant
shall receive no part of this award.
24. QUIET ENJOYMENT: If and so long as the Tenant pays the rent
reserved by this Lease, and performs and observes all of the covenants and
provisions hereof, the Tenant shall quietly enjoy the use of the Premises;
provided, however, that the Landlord reserves the right during the term of this
Lease to enter the Premises at a reasonable hour for the purpose
9
<PAGE> 11
of inspecting the Premises, and for the purpose of making such repairs as
Landlord may deem necessary for the protection and preservation of the Premises.
25. SUBORDINATION: This Lease is subject and subordinate to all ground
or underlying leases and to all mortgages which may now or hereafter affect such
leases or the real property of which the Premises form a part, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
This clause shall be self-operative and no further instrument of subordination
shall be required by any mortgagee or Landlord. In confirmation of such
subordination, Tenant shall execute promptly any certificate that Landlord may
request.
26. SUCCESSORS: It is understood that the terms and conditions of this
Lease shall inure to the benefit of the heirs, personal representatives,
successors and assigns of the parties hereto.
27. INSURANCE: Tenant shall, at its own expense, procure and maintain
policies of (a) liability insurance on the Premises specifically insuring both
the Tenant and Landlord against such liability in a sum not less than One
Million Dollars ($1,000,000) bodily injury and Two Hundred Fifty Thousand
Dollars ($250,000) property damage, and the Tenant shall furnish the Landlord
with a copy of said policy. The Landlord shall carry adequate insurance against
loss or damage to both realty and personally owned by the Landlord from
windstorm, fire and other risks usually covered under an extended coverage fire
insurance policy. Tenant agrees not to suffer anything to be done or remain upon
or about the Premises which will invalidate any policy of insurance upon the
Premises. Each insurance policy required hereunder shall by its terms provide
that it shall not be modified without prior written consent of Landlord and
shall not be canceled unless thirty (30) days notice thereof is given by the
insurer to Landlord.
28. INSOLVENCY OR BANKRUPTCY: In the event of bankruptcy, insolvency or
receivership of the Tenant and such proceeding not be dismissed within
forty-five (45) days thereafter, then this Lease may, at the Landlord's option,
terminate and any interest in and to the Premises shall not become an asset in
any of such proceedings.
29. REPRESENTATIONS: This Lease contains the entire agreement between
the parties and shall not be modified in whole or in part unless by an amendment
signed by both parties. No other representations, expressed or implied, are made
except as contained herein.
30. NOTICES: All notices to be given under this Lease shall be in
writing, mailed by certified mail return receipt requested, postage prepaid, or
delivered to the other party at the address
Landlord: Benny J. Ellis
637 East Leah Lane
Gilbert, Arizona 85234-2421
Facsimile: ________________
10
<PAGE> 12
Tenant: Western Insulated Glass, Co.
5621 South 25th Street
Phoenix, Arizona 85040-3698
Facsimile: (602) 243-3119
31. TIME IS OF THE ESSENCE: Time is of the essence as to each and every
term contained herein.
32. NO WAIVER: The failure of the Landlord or Tenant to insist in any
one or more instances upon the strict performance of any of the terms of this
Lease shall not be construed as a waiver of the term, but the same shall
continue in full force and effect. No waiver by the Landlord or Tenant shall be
deemed to have been made unless expressed in writing and signed by the Landlord
or Tenant, as the case may be.
33. TERMINATION OF PREVIOUS LEASE: Upon commencement of the Initial
Term of this Lease, the 1994 Lease shall terminate and shall be null and void,
and the parties hereto shall be released from all rights, remedies, liabilities
and obligations under the 1994 Lease.
34. LIMITATIONS: Not withstanding any contrary provision contained in
the Lease, the liability of Landlord to Tenant for the breach of any covenant,
obligation or duty of Landlord contained in or arising from this Lease shall be
limited solely to Landlord's interest in the Premises and shall not be
enforceable against any other assets of Landlord.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first above written.
WESTERN INSULATED GLASS, CO.,
an Arizona corporation
"Tenant"
/s/ Benny Ellis By: /s/ Benny Ellis
- --------------------------------- -------------------------------
BENNY J. ELLIS Benny J. Ellis, President
"Landlord"
/s/ Linda Ellis /s/ Frank J. Amedia, CEO
- ---------------------------------
LINDA M. ELLIS
"Landlord"
11
<PAGE> 1
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12
(Dollars in thousands)
<TABLE>
<CAPTION>
PREDECESSORS COMPANY
------------------------------------------------------------ ---------------------------------
COMBINED PRO FORMA
1992 1993 1994 1995 1996 1996 1996(1) 1996(2)
---- ---- ---- ---- ---- ---- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss) from
continuing operations
before income taxes
and extraordinary items $237 $(8,493) $(6,848) $(10,086) $(2,606) $1,401 $(1,205) $(7,234)
Adjustments:
Fixed charges as
summarized below 1,674 2,357 2,404 2,082 1,334 828 2,162 16,436
------ ------ ------- ------ ------- ------ ------ ------
Earnings, as adjusted $1,911 $(6,136) $(4,444) $(8,004) $(1,272) $2,229 $957 $9,202
====== ======= ======= ======= ======= ====== ===== ======
Fixed Charges:
Interest on indebtedness
including amortization
of deferred finance costs $1,368 $2,023 $2,040 $1,755 $1,143 $756 $1,899 $15,557
Interest portion of
rent expense 306 334 364 327 191 72 263 879
------ ------ ----- ----- ------ ----- ----- -------
Total Fixed Charges $1,674 $2,357 $2,404 $2,082 $1,334 $828 $2,162 $16,436
====== ====== ====== ====== ====== ===== ====== =======
Ratio of earnings to
fixed charges 1.14 N/A(3) N/A(3) N/A(3) N/A(3) 2.69 N/A(3) N/A(3)
====== ======= ====== ====== ====== ==== ====== =======
Fixed charges in excess
of earnings N/A $8,493 $6,848 $10,086 $2,606 N/A $1,205 $7,234
====== ====== ======= ====== ====== ==== ====== ======
COMPANY
------------------------------------
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------
COMBINED PRO FORMA
1996(1) 1997 1997(2)
-------- ---- ---------
<S> <C> <C> <C>
Earnings:
Income (loss) from
continuing operations
before income taxes
and extraordinary items $(2,264) $640 $(3,642)
Adjustments:
Fixed charges as
summarized below 1,515 2,469 12,209
------- ----- ------
Earnings, as adjusted $(749) $3,109 $8,567
====== ====== =======
Fixed Charges:
Interest on indebtedness
including amortization
of deferred finance costs $1,324 $2,313 $11,753
Interest portion of
rent expense 191 156 456
------ ------- -----
Total Fixed Charges $1,515 $2,469 $12,209
====== ====== =======
Ratio of earnings to
fixed charges N/A(3) 1.26 N/A(3)
====== ====== =======
Fixed charges in excess
of earnings $2,264 N/A $3,642
====== ====== =======
</TABLE>
(1) - The financial data for Combined 1996 include
the 1996 financial data of the Predecessors
and the 1996 financial data of the Company
without considering the effects on fixed
charges of purchase accounting or the change
in capital structure relating to the
acquisitions of Mallyclad, Vyn-L, Eagle,
Taylor or Forte.
(2) - The pro forma financial data of the Company
were derived from the unaudited pro forma
financial information included in the
Prospectus.
(3) - No ratio is presented as earnings for the
period were less than the fixed charges.
<PAGE> 1
EXHIBIT 21
Subsidiaries of American Architectural Products Corporation:
American Glassmith Acquisition Corporation
Binnings Building Products, Inc.
DCI/DWC Acquisition Corporation
Eagle & Taylor Company
Forte, Inc.
Modern Window Acquisition Corporation
Thermetic Glass, Inc.
Western Insulated Glass, Co.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
American Architectural Products Corporation
Boardman, Ohio
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated March 14, 1997 except for Note 5
which is as of March 31, 1997, relating to the consolidated financial statements
of American Architectural Products Corporation, our report dated April 28, 1997
relating to the combined financial statements of Mallyclad Corporation and Vyn-L
Corporation and our report dated October 20, 1997 relating to the combined
financial statements of Danvid Company, Inc. and Danvid Window Company, which
are contained in that Prospectus, and of our report dated March 14, 1997,
relating to the financial statement schedule of American Architectural Products
Corporation and our report dated October 20, 1997 relating to the financial
statement schedules of Danvid Company, Inc. and Danvid Window Company, which are
contained in Part II of the Registration Statement.
We also consent to the reference to us under the captions "Experts" and
"Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure" in the Prospectus.
BDO SEIDMAN, LLP
Troy, Michigan
January 9, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
inclusion of our report dated January 31, 1997, on the combined financial
statements of Eagle Window & Door, Inc. and Subsidiaries and Taylor Building
Products Company (wholly-owned subsidiaries) for the years ended December 31,
1995 and 1994, and for the eight month period ended August 29, 1996; our report
dated June 3, 1997, on the financial statements of Western Insulated Glass, Co.
for the year ended October 31, 1996; and our report dated May 28, 1996, on the
consolidated financial statements of Forte Computer Easy, Inc. and Subsidiaries
for the year ended December 31, 1995 in the Company's Prospectus constituting a
part of this Form S-4 Registration Statement.
We also consent to the reference to us under the captions "Experts" and
"Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure" contained in the Prospectus.
Semple & Cooper, LLP
Certified Public Accountants
Phoenix, Arizona
January 13, 1998
<PAGE> 1
EXHIBIT 23.4
The Board of Directors
American Architectural Products Corporation
We consent to the inclusion of our reports dated October 3, 1997, with
respect to the balance sheet of Thermetic Glass Inc. as of December 31, 1996,
and the related statements of operations and accumulated deficit and cash flows
and the related financial statement schedule for the year then ended, which
reports appear in the Form S-4 of American Architectural Products Corporation
dated January 13, 1998 and to the reference to our firm under the heading of
"Experts."
Clifton Gunderson L.L.C.
Peoria, Illinois
January 13, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To whom it may concern:
As independent public accountants, we hereby consent to the use of our
report on the financial statements and schedule of Danvid Company, Inc. and
Danvid Window Company dated October 13, 1995, and to all references to our Firm,
included in or made part of the American Architectural Products Corporation Form
S-4 Registration Statement filed January 14, 1998.
Fox, Byrd & Golden
Dallas, Texas
January 14, 1998
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports on the financial statements and schedule of Binnings Building Products,
Inc. dated March 21, 1997 (except with respect to the matters discussed in Note
10 as to which the date is December 10, 1997), and March 21, 1997, respectively,
and to all references to our Firm, included in or made part of the American
Architectural Products Corporation Form S-4 Registration Statement filed January
14, 1998.
ARTHUR ANDERSEN LLP
Greensboro, North Carolina,
January 14, 1998.
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors and officers
of American Architectural Products Corporation, a Delaware corporation, which is
filing a Registration Statement on Form S-4 with the Securities and Exchange
Commission, Washington, D.C. 20549 under the provisions of the Securities Act of
1933, as amended (the "Securities Act"), hereby constitute and appoint Frank J.
Amedia, Joseph Dominijanni and Jonathan K. Schoenike, and each of them, the
individual's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the person and in his or her name, place
and stead, in any and all capacities, to sign such Registration Statement and
any or all amendments, including post-effective amendments, to the Registration
Statement, including a Prospectus or an amended Prospectus therein and any
registration statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act, and all other documents in
connection therewith to be filed with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact as agents or any of them, or their substitutes, or
substitute may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ George S. Hofmeister Chairman of the Board and Director December 17, 1997
- ---------------------------
George S. Hofmeister
/s/ Frank J. Amedia President, Chief Executive Officer December 17, 1997
- --------------------------- and Director (Principal Executive
Frank J. Amedia Officer)
/s/ Joseph Dominijanni Treasurer and Director December 17, 1997
- ---------------------------
Joseph Dominijanni
/s/ Richard L. Kovach Vice President and Chief Financial December 17, 1997
- --------------------------- Officer (Principal Financial Officer)
Richard L. Kovach
/s/ John J. Cafaro Director December 17, 1997
- ---------------------------
John J. Cafaro
/s/ William R. Jackson, Jr. Director December 17, 1997
- ---------------------------
William R. Jackson, Jr.
/s/ John Masternick Director December 17, 1997
- ------------------------
John Masternick
/s/ James E. Phillips Director December 17, 1997
- ---------------------------
James E. Phillips
/s/ Charles E. Trebilcock Director December 17, 1997
- ---------------------------
Charles E. Trebilcock
/s/ James K. Warren Director December 17, 1997
- ---------------------------
James K. Warren
</TABLE>
<PAGE> 1
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
--------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
--------------------------
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
(Exact name of OBLIGOR as specified in its charter)
Delaware 87-0365268
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
EAGLE & TAYLOR COMPANY
(Exact name of OBLIGOR as specified in its charter)
Delaware 34-1834358
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
<PAGE> 2
- 2 -
--------------------------
FORTE, INC.
(Exact name of OBLIGOR as specified in its charter)
Ohio 34-1642023
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
WESTERN INSULATED GLASS, CO.
(Exact name of OBLIGOR as specified in its charter)
Arizona 86-0270495
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
THERMETIC GLASS, INC.
(Exact name of OBLIGOR as specified in its charter)
Delaware 31-1545334
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
BINNINGS BUILDING PRODUCTS, INC.
(Exact name of OBLIGOR as specified in its charter)
Delaware 13-3325772
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
DCI/DWC ACQUISITION CORPORATION
(Exact name of OBLIGOR as specified in its charter)
Delaware 34-1851239
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
MODERN WINDOW ACQUISITION CORPORATION
(Exact name of OBLIGOR as specified in its charter)
Delaware 31-1555134
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
<PAGE> 3
- 3 -
--------------------------
AMERICAN GLASSMITH ACQUISITION CORPORATION
(Exact name of OBLIGOR as specified in its charter)
Delaware 34-1851339
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
755 Boardman-Canfield Road 44512
Boardman, Ohio (Zip code)
(Address of principal executive offices)
--------------------------
11-3/4% Senior Notes Due 2007
(Title of the indenture securities)
<PAGE> 4
- 4 -
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.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
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 THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
The obligors currently are not in default under any of its outstanding
securities for which United States Trust Company of New York is
Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11,
12, 13, 14 and 15 of Form T-1 are not required under General
Instruction B.
16. LIST OF EXHIBITS
T-1.1 -- Organization Certificate, as amended, issued by the
State of New York Banking Department to transact
business as a Trust Company, is incorporated by
reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE> 5
- 5 -
16. LIST OF EXHIBITS
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New
York, as amended, is incorporated by reference to
Exhibit T-1.4 to Form T-1 filed on September 15, 1995
with the Commission pursuant to the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform
Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b)
of the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the
trustee pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of January 6, 1998, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States Trust
Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility 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 6th day
of January 1998.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ Cynthia Chaney
------------------------
Cynthia Chaney
Assistant Vice President
CC/pg
<PAGE> 6
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
/s/Gerard F. Ganey
------------------
By: Gerard F. Ganey
Senior Vice President
<PAGE> 7
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
SEPTEMBER 30, 1997
($ IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Cash and Due from Banks $ 116,582
Short-Term Investments 183,652
Securities, Available for Sale 691,965
Loans 1,669,611
Less: Allowance for Credit Losses 16,067
----------
Net Loans 1,653,544
Premises and Equipment 61,796
Other Assets 125,121
----------
TOTAL ASSETS $2,832,660
==========
LIABILITIES
Deposits:
Non-Interest Bearing $ 541,619
Interest Bearing 1,617,028
----------
Total Deposits 2,158,647
Short-Term Credit Facilities 365,235
Accounts Payable and Accrued Liabilities 141,793
----------
TOTAL LIABILITIES $2,665,675
==========
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 49,542
Retained Earnings 99,601
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes 2,847
----------
TOTAL STOCKHOLDER'S EQUITY 166,985
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $2,832,660
==========
</TABLE>
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
November 13, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
AS OF DECEMBER 31, 1996 AND FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000940034
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUN-19-1996
<PERIOD-END> DEC-31-1996
<CASH> 964,062
<SECURITIES> 0
<RECEIVABLES> 6,741,694
<ALLOWANCES> 439,000
<INVENTORY> 10,971,144
<CURRENT-ASSETS> 19,366,051
<PP&E> 16,460,159
<DEPRECIATION> 321,315
<TOTAL-ASSETS> 42,743,891
<CURRENT-LIABILITIES> 19,190,317
<BONDS> 17,532,570
10,000
0
<COMMON> 486,058
<OTHER-SE> 4,261,701
<TOTAL-LIABILITY-AND-EQUITY> 42,743,891
<SALES> 25,248,908
<TOTAL-REVENUES> 25,248,908
<CGS> 19,026,604
<TOTAL-COSTS> 19,026,604
<OTHER-EXPENSES> 4,059,868
<LOSS-PROVISION> 12,546
<INTEREST-EXPENSE> 755,758
<INCOME-PRETAX> 1,401,089
<INCOME-TAX> 640,000
<INCOME-CONTINUING> 761,089
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 761,089
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
AS OF SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS THEN ENDED AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000940034
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,266,922
<SECURITIES> 0
<RECEIVABLES> 10,389,186
<ALLOWANCES> 643,000
<INVENTORY> 13,525,627
<CURRENT-ASSETS> 26,628,001
<PP&E> 20,739,761
<DEPRECIATION> 1,838,088
<TOTAL-ASSETS> 57,048,874
<CURRENT-LIABILITIES> 26,395,673
<BONDS> 19,134,260
0
0
<COMMON> 13,074
<OTHER-SE> 6,200,619
<TOTAL-LIABILITY-AND-EQUITY> 57,048,874
<SALES> 65,019,846
<TOTAL-REVENUES> 65,019,846
<CGS> 50,977,914
<TOTAL-COSTS> 50,977,914
<OTHER-EXPENSES> 11,184,292
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,313,057
<INCOME-PRETAX> 640,257
<INCOME-TAX> 256,928
<INCOME-CONTINUING> 383,329
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 383,329
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF EAGLE WINDOW & DOOR, INC. AND SUBSIDIARIES
AND TAYLOR BUILDING PRODUCTS COMPANY (WHOLLY-OWNED SUBSIDIARIES) AS OF DECEMBER
31, 1995 AND FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001052497
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 750,361
<SECURITIES> 0
<RECEIVABLES> 6,954,830
<ALLOWANCES> 445,418
<INVENTORY> 8,330,593
<CURRENT-ASSETS> 16,484,210
<PP&E> 24,411,807
<DEPRECIATION> 15,651,008
<TOTAL-ASSETS> 25,300,379
<CURRENT-LIABILITIES> 26,806,716
<BONDS> 0
0
0
<COMMON> 211,851
<OTHER-SE> (4,976,988)
<TOTAL-LIABILITY-AND-EQUITY> 25,300,379
<SALES> 72,962,690
<TOTAL-REVENUES> 72,962,690
<CGS> 67,642,530
<TOTAL-COSTS> 67,642,530
<OTHER-EXPENSES> 12,334,102
<LOSS-PROVISION> 840,042
<INTEREST-EXPENSE> 1,755,177
<INCOME-PRETAX> (9,945,502)
<INCOME-TAX> (3,557,425)
<INCOME-CONTINUING> (6,388,077)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,388,077)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF EAGLE WINDOW & DOOR, INC. AND SUBSIDIARIES
AND TAYLOR BUILDING PRODUCTS COMPANY (WHOLLY-OWNED SUBSIDIARIES) AS OF AUGUST
29, 1996 AND FOR THE EIGHT MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001052497
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> AUG-29-1996
<CASH> 395,859
<SECURITIES> 0
<RECEIVABLES> 7,736,517
<ALLOWANCES> 791,521
<INVENTORY> 8,483,224
<CURRENT-ASSETS> 16,929,840
<PP&E> 25,305,652
<DEPRECIATION> 18,339,312
<TOTAL-ASSETS> 23,989,556
<CURRENT-LIABILITIES> 26,149,924
<BONDS> 0
0
0
<COMMON> 211,851
<OTHER-SE> 5,520,631
<TOTAL-LIABILITY-AND-EQUITY> 23,989,556
<SALES> 39,971,058
<TOTAL-REVENUES> 39,971,058
<CGS> 33,832,799
<TOTAL-COSTS> 33,832,799
<OTHER-EXPENSES> 7,090,630
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,142,519
<INCOME-PRETAX> (2,594,095)
<INCOME-TAX> (907,933)
<INCOME-CONTINUING> (1,686,162)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,686,162)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF MALLYCLAD CORPORATION AND VYN-L CORPORATION
AS OF DECEMBER 31, 1995 AND FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001052497
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 110,599
<SECURITIES> 0
<RECEIVABLES> 530,410
<ALLOWANCES> 0
<INVENTORY> 430,902
<CURRENT-ASSETS> 1,120,924
<PP&E> 2,417,443
<DEPRECIATION> 2,268,378
<TOTAL-ASSETS> 1,329,470
<CURRENT-LIABILITIES> 533,829
<BONDS> 0
0
0
<COMMON> 88,000
<OTHER-SE> 707,641
<TOTAL-LIABILITY-AND-EQUITY> 1,329,470
<SALES> 3,991,882
<TOTAL-REVENUES> 3,991,882
<CGS> 3,520,971
<TOTAL-COSTS> 3,520,971
<OTHER-EXPENSES> 648,990
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (140,946)
<INCOME-TAX> (20,686)
<INCOME-CONTINUING> (120,260)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (120,260)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF MALLYCLAD CORPORATION AND VYN-L CORPORATION
AS OF JUNE 30, 1996 AND FOR THE SEVEN MONTHS THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001052497
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 229,615
<SECURITIES> 0
<RECEIVABLES> 358,731
<ALLOWANCES> 7,000
<INVENTORY> 285,635
<CURRENT-ASSETS> 918,877
<PP&E> 2,421,415
<DEPRECIATION> 2,304,178
<TOTAL-ASSETS> 1,069,010
<CURRENT-LIABILITIES> 285,040
<BONDS> 0
0
0
<COMMON> 88,000
<OTHER-SE> 695,970
<TOTAL-LIABILITY-AND-EQUITY> 1,069,010
<SALES> 1,915,620
<TOTAL-REVENUES> 1,915,620
<CGS> 1,596,753
<TOTAL-COSTS> 1,596,753
<OTHER-EXPENSES> 349,671
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (11,671)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,671)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,671)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF FORTE COMPUTER EASY, INC. AND SUBSIDIARY AS
OF DECEMBER 31, 1995 AND FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000940034
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 143,254
<SECURITIES> 0
<RECEIVABLES> 437,160
<ALLOWANCES> 299,939
<INVENTORY> 1,666,832
<CURRENT-ASSETS> 2,525,192
<PP&E> 5,603,441
<DEPRECIATION> 1,196,182
<TOTAL-ASSETS> 7,397,621
<CURRENT-LIABILITIES> 2,072,293
<BONDS> 4,265,102
0
0
<COMMON> 484,601
<OTHER-SE> 648,915
<TOTAL-LIABILITY-AND-EQUITY> 7,397,621
<SALES> 5,426,260
<TOTAL-REVENUES> 5,426,260
<CGS> 4,540,722
<TOTAL-COSTS> 4,540,722
<OTHER-EXPENSES> 747,659
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 352,403
<INCOME-PRETAX> (105,509)
<INCOME-TAX> (54,971)
<INCOME-CONTINUING> (50,538)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (50,538)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FIANCIAL STATEMENTS OF FORTE COMPUTER EASY, INC. AND SUBSIDIARY AS
OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000940034
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 255,549
<SECURITIES> 0
<RECEIVABLES> 198,394
<ALLOWANCES> 0
<INVENTORY> 1,782,078
<CURRENT-ASSETS> 2,294,597
<PP&E> 5,139,602
<DEPRECIATION> 1,118,303
<TOTAL-ASSETS> 6,667,333
<CURRENT-LIABILITIES> 1,002,400
<BONDS> 4,671,684
0
0
<COMMON> 484,601
<OTHER-SE> 648,800
<TOTAL-LIABILITY-AND-EQUITY> 6,667,333
<SALES> 2,635,113
<TOTAL-REVENUES> 2,635,113
<CGS> 2,087,032
<TOTAL-COSTS> 2,087,032
<OTHER-EXPENSES> 497,196
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 285,646
<INCOME-PRETAX> (76,508)
<INCOME-TAX> (29,000)
<INCOME-CONTINUING> (47,508)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (47,508)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF WESTERN INSULATED GLASS, CO. AS OF OCTOBER
31, 1996 AND FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001052502
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<CASH> 296,387
<SECURITIES> 0
<RECEIVABLES> 664,163
<ALLOWANCES> 0
<INVENTORY> 865,392
<CURRENT-ASSETS> 1,844,054
<PP&E> 1,158,000
<DEPRECIATION> 953,517
<TOTAL-ASSETS> 2,084,527
<CURRENT-LIABILITIES> 2,121,346
<BONDS> 0
426,099
0
<COMMON> 47,344
<OTHER-SE> (510,262)
<TOTAL-LIABILITY-AND-EQUITY> 2,084,527
<SALES> 5,820,726
<TOTAL-REVENUES> 5,820,726
<CGS> 3,867,411
<TOTAL-COSTS> 3,867,411
<OTHER-EXPENSES> 1,304,102
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 641,099
<INCOME-TAX> 228,584
<INCOME-CONTINUING> 412,515
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 412,515
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF WESTERN INSULATED GLASS, CO. AS OF JANUARY
31, 1997 AND FOR THE THREE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001052502
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 265,150
<SECURITIES> 0
<RECEIVABLES> 579,818
<ALLOWANCES> 0
<INVENTORY> 824,402
<CURRENT-ASSETS> 1,682,955
<PP&E> 1,182,207
<DEPRECIATION> 971,000
<TOTAL-ASSETS> 1,935,793
<CURRENT-LIABILITIES> 1,912,928
<BONDS> 0
426,099
0
<COMMON> 47,344
<OTHER-SE> (450,578)
<TOTAL-LIABILITY-AND-EQUITY> 1,935,793
<SALES> 1,331,549
<TOTAL-REVENUES> 1,331,549
<CGS> 950,287
<TOTAL-COSTS> 950,287
<OTHER-EXPENSES> 283,281
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,119)
<INCOME-PRETAX> 93,257
<INCOME-TAX> 33,573
<INCOME-CONTINUING> 59,684
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,684
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THERMETIC GLASS, INC. AS OF DECEMBER 31,
1996 AND FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001052500
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,948
<SECURITIES> 0
<RECEIVABLES> 594,025
<ALLOWANCES> 0
<INVENTORY> 846,088
<CURRENT-ASSETS> 1,512,124
<PP&E> 2,757,287
<DEPRECIATION> 1,086,926
<TOTAL-ASSETS> 3,289,996
<CURRENT-LIABILITIES> 1,352,127
<BONDS> 1,866,747
0
0
<COMMON> 1,000
<OTHER-SE> 70,122
<TOTAL-LIABILITY-AND-EQUITY> 3,289,996
<SALES> 4,966,666
<TOTAL-REVENUES> 4,966,666
<CGS> 4,190,384
<TOTAL-COSTS> 4,190,384
<OTHER-EXPENSES> 822,785
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 235,062
<INCOME-PRETAX> (265,215)
<INCOME-TAX> 677,124
<INCOME-CONTINUING> (942,339)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (942,339)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THERMETIC GLASS, INC. AS OF JUNE 30,
1997 AND FOR THE SIX MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001052500
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 697,358
<ALLOWANCES> 0
<INVENTORY> 1,013,359
<CURRENT-ASSETS> 1,765,534
<PP&E> 2,770,892
<DEPRECIATION> 1,213,000
<TOTAL-ASSETS> 3,433,871
<CURRENT-LIABILITIES> 1,823,129
<BONDS> 1,636,482
0
0
<COMMON> 1,000
<OTHER-SE> (30,814)
<TOTAL-LIABILITY-AND-EQUITY> 3,433,871
<SALES> 2,305,029
<TOTAL-REVENUES> 2,305,029
<CGS> 1,936,713
<TOTAL-COSTS> 1,936,713
<OTHER-EXPENSES> 340,583
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 126,315
<INCOME-PRETAX> (102,936)
<INCOME-TAX> 0
<INCOME-CONTINUING> (102,936)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (102,936)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF DANVID COMPANY, INC. AND DANVID WINDOW
COMPANY AS OF JULY 27, 1997 AND FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001052507
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-27-1997
<PERIOD-START> JUL-29-1996
<PERIOD-END> JUL-27-1997
<CASH> 1,059,761
<SECURITIES> 1,052,250
<RECEIVABLES> 4,768,609
<ALLOWANCES> 125,600
<INVENTORY> 1,151,992
<CURRENT-ASSETS> 8,234,517
<PP&E> 1,472,929
<DEPRECIATION> 1,029,858
<TOTAL-ASSETS> 8,841,130
<CURRENT-LIABILITIES> 3,862,543
<BONDS> 118,781
0
0
<COMMON> 2,000
<OTHER-SE> 4,735,244
<TOTAL-LIABILITY-AND-EQUITY> 8,841,130
<SALES> 42,003,176
<TOTAL-REVENUES> 42,003,176
<CGS> 33,807,196
<TOTAL-COSTS> 33,807,196
<OTHER-EXPENSES> 5,677,527
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,656
<INCOME-PRETAX> 2,628,972
<INCOME-TAX> 834,705
<INCOME-CONTINUING> 1,794,267
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,794,267
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF BINNINGS BUILDING PRODUCTS, INC. AS OF
DECEMBER 31, 1996 AND FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001052505
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 844,000
<SECURITIES> 0
<RECEIVABLES> 5,035,000
<ALLOWANCES> 223,000
<INVENTORY> 6,549,000
<CURRENT-ASSETS> 13,047,000
<PP&E> 18,267,000
<DEPRECIATION> 8,461,000
<TOTAL-ASSETS> 23,366,000
<CURRENT-LIABILITIES> 11,683,000
<BONDS> 20,904,000
0
1,792,000
<COMMON> 2,000
<OTHER-SE> (4,404,000)
<TOTAL-LIABILITY-AND-EQUITY> 23,366,000
<SALES> 43,060,000
<TOTAL-REVENUES> 43,060,000
<CGS> 30,191,000
<TOTAL-COSTS> 30,191,000
<OTHER-EXPENSES> 8,778,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,370,000
<INCOME-PRETAX> 1,667,000
<INCOME-TAX> 29,000
<INCOME-CONTINUING> 1,638,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,638,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF BINNINGS BUILDING PRODUCTS, INC. AS OF
SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001052505
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,074,000
<SECURITIES> 0
<RECEIVABLES> 5,101,000
<ALLOWANCES> 378,000
<INVENTORY> 5,351,000
<CURRENT-ASSETS> 12,111,000
<PP&E> 9,930,000
<DEPRECIATION> 8,461,000
<TOTAL-ASSETS> 22,489,000
<CURRENT-LIABILITIES> 18,000,000
<BONDS> 20,889,000
0
1,792,000
<COMMON> 2,000
<OTHER-SE> (4,126,000)
<TOTAL-LIABILITY-AND-EQUITY> 22,489,000
<SALES> 33,932,000
<TOTAL-REVENUES> 33,932,000
<CGS> 24,653,000
<TOTAL-COSTS> 24,653,000
<OTHER-EXPENSES> 7,342,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,574,000
<INCOME-PRETAX> 336,000
<INCOME-TAX> 8,000
<INCOME-CONTINUING> 328,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 328,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
