-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cf/C3MlnVQvXp/J3xaRcoqSIivCx1OgWmcqjr41GSMUr7qZxWHDvDtOdI+B9BFhw 5slEOcddQ/zTmzZ6rks9wg== 0000950137-98-002426.txt : 19980612 0000950137-98-002426.hdr.sgml : 19980612 ACCESSION NUMBER: 0000950137-98-002426 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 19980610 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOME PRODUCTS INTERNATIONAL INC CENTRAL INDEX KEY: 0000814457 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 362490451 STATE OF INCORPORATION: DE FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-56549 FILM NUMBER: 98646101 BUSINESS ADDRESS: STREET 1: 4501 WEST 47TH ST CITY: CHICAGO STATE: IL ZIP: 60632 BUSINESS PHONE: 3128901010 MAIL ADDRESS: STREET 1: 4501 WEST 47TH STREET CITY: CHICAGO STATE: IL ZIP: 60632 FORMER COMPANY: FORMER CONFORMED NAME: SELFIX INC DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHUTTERS INC CENTRAL INDEX KEY: 0001063733 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 363572036 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-56549-01 FILM NUMBER: 98646102 BUSINESS ADDRESS: STREET 1: 4501 W. 47TH ST CITY: CHICAGO STATE: IL ZIP: 60632 BUSINESS PHONE: 7738901010 MAIL ADDRESS: STREET 1: 4501 W. 47TH ST CITY: CHICAGO STATE: IL ZIP: 60632 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TAMOR CORP CENTRAL INDEX KEY: 0001063735 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 042073885 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-56549-02 FILM NUMBER: 98646103 BUSINESS ADDRESS: STREET 1: 4501 W. 47TH ST CITY: CHICAGO STATE: IL ZIP: 60632 BUSINESS PHONE: 7738901010 MAIL ADDRESS: STREET 1: 4501 W. 47TH ST CITY: CHICAGO STATE: IL ZIP: 60632 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEYMOUR HOUSEWARES CORP CENTRAL INDEX KEY: 0001063739 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 042073885 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-56549-03 FILM NUMBER: 98646104 BUSINESS ADDRESS: STREET 1: 4501 W. 47TH ST CITY: CHICAGO STATE: IL ZIP: 60632 BUSINESS PHONE: 7738901010 MAIL ADDRESS: STREET 1: 4501 W. 47TH ST CITY: CHICAGO STATE: IL ZIP: 60632 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SELFIX INC /DE/ CENTRAL INDEX KEY: 0001063765 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 362490451 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-56549-04 FILM NUMBER: 98646105 BUSINESS ADDRESS: STREET 1: 4501 W 47TH ST CITY: CHICAGO STATE: IL ZIP: 60632 BUSINESS PHONE: 7738901010 MAIL ADDRESS: STREET 1: 4501 W 47TH ST CITY: CHICAGO STATE: IL ZIP: 60632 S-4 1 S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 10, 1998 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ HOME PRODUCTS INTERNATIONAL, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3089 36-4147027 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ 4501 WEST 47TH STREET, CHICAGO, ILLINOIS 60632 (773) 890-1010 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ SELFIX, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3089 36-2490451 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ 4501 WEST 47TH STREET, CHICAGO, ILLINOIS 60632 (773) 890-1010 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ SHUTTERS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ILLINOIS 3089 36-3572036 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ 4501 WEST 47TH STREET, CHICAGO, ILLINOIS 60632 (773) 890-1010 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ TAMOR CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MASSACHUSETTS 3089 04-2073885 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ 4501 WEST 47TH STREET, CHICAGO, ILLINOIS 60632 (773) 890-1010 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ SEYMOUR HOUSEWARES CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3089 35-1873567 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ 4501 WEST 47TH STREET, CHICAGO, ILLINOIS 60632 (773) 890-1010 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ JAMES R. TENNANT CHIEF EXECUTIVE OFFICER 4501 WEST 47TH STREET, CHICAGO, ILLINOIS 60632 (773) 890-1010 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) 2 ------------------------ WITH A COPY TO: KENNETH G. KOLMIN, ESQ. SONNENSCHEIN NATH & ROSENTHAL 8000 SEARS TOWER, CHICAGO, ILLINOIS 60606 (312) 876-8000 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] _________ If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] _________ ------------------------ CALCULATION OF REGISTRATION FEE
============================================================================================================================== PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------------ 9 5/8% Senior Subordinated Notes due 2008........................ $125,000,000 100% $125,000,000 $36,875 - ------------------------------------------------------------------------------------------------------------------------------ Guarantees of the 9 5/8% Senior Subordinated Notes.............. (1) (1) $125,000,000 (1) ==============================================================================================================================
(1) This Registration Statement covers the Guarantees to be issued by certain subsidiaries of Home Products International, Inc. of its obligations under the 9 5/8% Senior Subordinated Notes. Such Guarantees are to be issued for no additional consideration, and therefore no registration fee is required. ------------------------ THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ================================================================================ 3 HOME PRODUCTS INTERNATIONAL, INC. SELFIX, INC. SHUTTERS, INC. TAMOR CORPORATION SEYMOUR HOUSEWARES CORPORATION ------------------------ CROSS REFERENCE SHEET PURSUANT TO REGULATION S-K, ITEM 501(B), SHOWING LOCATION OF INFORMATION REQUIRED BY ITEMS OF FORM S-4
FORM S-4 ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS -------------------------------- --------------------------------- 1. Forepart of Registration Statement and Outside Front Cover Page of Prospectus..... Facing Page of Registration Statement; Outside Front Cover Page of Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus.............................. Inside Front and Outside Back Cover Pages of Prospectus; Available Information 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information.............. Prospectus Summary; Risk Factors; Selected Historical Financial Data 4. Terms of the Transaction................... Prospectus Summary; The Exchange Offer; Description of the Exchange Notes 5. Pro Forma Financial Information............ Unaudited Pro Forma Combined Financial Data 6. Material Contracts with the Company Being Acquired................................... * 7. Additional Information Required for Reoffering by Persons and Parties Deemed to be Underwriters............................ The Exchange Offer; Plan of Distribution 8. Interests of Named Experts and Counsel..... * 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities................................ * 10. Information With Respect to S-3 Registrants................................ Selected Historical Financial Data; Unaudited Pro Forma Combined Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business 11. Incorporation of Certain Information by Reference.................................. Incorporation of Certain Documents by Reference 12. Information With Respect to S-2 or S-3 Registrants................................ * 13. Incorporation of Certain Information by Reference.................................. * 14. Information With Respect to Registrants Other Than S-2 or S-3 Registrants.......... * 15. Information With Respect to S-3 Companies.................................. * 16. Information With Respect to S-2 or S-3 Companies.................................. * 17. Information With Respect to Companies Other Than S-2 or S-3 Companies.................. * 18. Information if Proxies, Consents or Authorization Are to be Solicited.......... * 19. Information if Proxies, Consents or Authorizations Are Not to be Solicited, or in an Exchange Offer....................... Management; Principal Stockholders; Certain Transactions
- --------------- * Not applicable or answer is in the negative. 4 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE. SUBJECT TO COMPLETION, DATED JUNE 10, 1998 PROSPECTUS HOME PRODUCTS INTERNATIONAL, INC. OFFER TO EXCHANGE UP TO $125,000,000 OF ITS 9 5/8% SENIOR SUBORDINATED NOTES DUE 2008 FOR ANY AND ALL OUTSTANDING 9 5/8% SENIOR SUBORDINATED NOTES DUE 2008 ------------------------ THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED ------------------------ Home Products International, Inc. ("HPI" and, together with its subsidiaries, the "Company") hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and the accompanying Letter of Transmittal (which together constitute the "Exchange Offer") to exchange $1,000 principal amount of 9 5/8% Senior Subordinated Notes due 2008 (the "Exchange Notes") of HPI for each $1,000 principal amount of the issued and outstanding 9 5/8% Senior Subordinated Notes due 2008 (the "Original Notes," and the Original Notes and the Exchange Notes, collectively, the "Notes") of HPI from the Holders (as defined herein) thereof. As of the date of this Prospectus, there is $125,000,000 aggregate principal amount of the Original Notes outstanding. The terms of the Exchange Notes are identical in all material respects to the Original Notes, except that the Exchange Notes have been registered under the Securities Act of 1933, as amended (the "Securities Act"), and therefore will not bear legends restricting their transfer and will not contain certain provisions providing for the payment of liquidated damages to the holders of the Original Notes under certain circumstances relating to the Exchange and Registration Rights Agreement (as defined herein), which provisions will terminate as to all of the Notes upon the consummation of the Exchange Offer. The Company will accept for exchange any and all Original Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on , 1998, unless extended by the Company in its sole discretion (the "Expiration Date"). Tenders of Original Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange Offer is subject to certain customary conditions. See "The Exchange Offer." The Exchange Notes will be general unsecured obligations of the Company, and will be subordinated in right of payment to all existing and future Senior Indebtedness (as defined) of the Company. The Exchange Notes will rank pari passu in right of payment with any other Senior Subordinated Indebtedness (as defined) of the Company and will rank senior in right of payment to all other Subordinated Obligations (as defined) of the Company. The Company's payment obligations under the Exchange Notes will be unconditionally guaranteed, jointly and severally (the "Guarantees"), on a senior subordinated basis by each Restricted Subsidiary (as defined) of the Company and any future Restricted Subsidiary of the Company other than any Foreign Subsidiary, as defined (the "Subsidiary Guarantors"). The Guarantees will be general unsecured obligations of the Subsidiary Guarantors that will be subordinated to all existing and future Guarantor Senior Indebtedness (as defined) of the Subsidiary Guarantors. As of March 28, 1998, after giving effect to the Refinancing (as defined), (i) the outstanding Senior Indebtedness of the Company, including the Subsidiary Guarantors, would have been $9.2 million, all of which would have been Secured Indebtedness (as defined), (ii) the Company, including the Subsidiary Guarantors, would have had no Subordinated Obligation outstanding and no Senior Subordinated Indebtedness outstanding other than the Notes, (iii) the outstanding Guarantor Senior Indebtedness of the Subsidiary Guarantors would have been $6.7 million, all of which would have been Secured Indebtedness, and (iv) the Subsidiary Guarantors would have had no Guarantor Senior Subordinated Indebtedness (as defined) and no Guarantor Subordinated Obligation (as defined). See "Description of the Exchange Notes." (continued on following page) ------------------------ SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING ORIGINAL NOTES IN THE EXCHANGE OFFER. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ THE DATE OF THIS PROSPECTUS IS JUNE 10, 1998. 5 The Original Notes were sold by the Company on May 14, 1998, to Chase Securities Inc. ("CSI") and NationsBanc Montgomery Securities LLC (the "Initial Purchasers") in a transaction not registered under the Securities Act in reliance upon an exemption under the Securities Act (the "Initial Offering"). The Initial Purchasers subsequently placed the Original Notes with qualified institutional buyers in reliance upon Rule 144A under the Securities Act ("Rule 144A"). Accordingly, the Original Notes may not be reoffered, resold or otherwise transferred in the United States unless registered under the Securities Act or unless an applicable exemption from the registration requirements of the Securities Act is available. The Exchange Notes are being offered hereunder to satisfy the obligations of the Company under that certain Exchange and Registration Rights Agreement, dated as of May 14, 1998, by and among the Company and the Initial Purchasers (the "Exchange and Registration Rights Agreement"), entered into in connection with the Initial Offering. See "The Exchange Offer -- Purpose and Effect of the Exchange Offer." The Original Notes were not registered under the Securities Act in reliance upon an exemption from the registration requirements thereof. In general, the Original Notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act. The Exchange Notes are being offered hereby in order to satisfy certain obligations of the Company contained in the Exchange and Registration Rights Agreement. Based on interpretations by the staff of the Securities and Exchange Commission (the "Commission") set forth in no-action letters issued to third parties, the Company believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for Original Notes may be offered for resale, resold or otherwise transferred by any holder thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 promulgated 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 holder's business, such holder has no arrangement with any person to participate in the distribution of such Exchange Notes and neither such holder nor any such other person is engaging in or intends to engage in a distribution of such Exchange Notes. Notwithstanding the foregoing, 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. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with any resale of Exchange Notes received in exchange for such Original Notes where such Original Notes were acquired by such broker-dealer as a result of market making activities or other trading activities (other than Original Notes acquired directly from the Issuers). The Company has agreed that, for a period of 180 days after the date of this Prospectus, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." UNTIL , 1998 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER), ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. The Company will not receive any proceeds from the Exchange Offer. The Company will pay all of the expenses incident to the Exchange Offer. Tenders of Original Notes pursuant to the Exchange Offer may be withdrawn as provided herein at any time prior to the Expiration Date (as defined herein). The Exchange Offer is subject to certain customary conditions. This Prospectus has been prepared for use in connection with the Exchange Offer and may be used by CSI in connection with offers and sales related to market making transactions in the Notes. CSI may act as principal or agent in such transactions. Such sales will be made at prices related to prevailing market prices at the time of sale. See "Plan of Distribution." i 6 The Company's Common Stock is listed on the Nasdaq Stock Market under the symbol "HPII." There has not previously been any public market for the Original Notes or the Exchange Notes. The Company does not intend to list the Exchange Notes on any securities exchange, but the Original Notes are eligible for trading in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") market. There can be no assurance that an active market for the Exchange Notes will develop. See "Risk Factors -- Absence of Public Market." Moreover, to the extent that the Original Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Original Notes could be adversely affected. Interest on the Exchange Notes will accrue from the last interest payment date on which interest was paid on the Original Notes surrendered in exchange therefor or, if no interest has been paid on the Original Notes, from the Issue Date (as defined), and will be payable semi-annually on May 15 and November 15 of each year, commencing on November 15, 1998. The Notes will mature on May 15, 2008. Except as described below, the Company may not redeem the Notes prior to May 15, 2003. 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, plus accrued and unpaid interest thereon, if any, to the date of redemption. In addition, at any time and from time to time prior to May 15, 2001, the Company may, subject to certain requirements, redeem up to 35% of the aggregate principal amount of the Notes at a price of 109.625% of the principal amount thereof, plus accrued and unpaid interest thereon to the redemption date, with the net cash proceeds of one or more public offerings of common stock of the Company, providing that at least 65% of the original aggregate principal amount of the Notes remains outstanding immediately after the occurrence of such redemption. The Notes will not be subject to any sinking fund requirement. Upon a Change of Control (as defined), each holder of Notes will have the right to require the Company to repurchase all or any part of such holder's Notes at a price equal to 101% of the principal amount of the Notes together with accrued and unpaid interest thereon, if any, to the date of purchase. See "Description of the Exchange Notes." THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF ORIGINAL 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. NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER, SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. The Exchange Notes will be available initially only in book-entry form. Except as may be described under "Book-Entry; Delivery and Form," the Company expects that the Exchange Notes issued pursuant to the Exchange Offer will be represented by one or more duly registered Global Notes (as defined), that will be deposited with, or on behalf of, the Depository Trust Company ("DTC") and registered in its name or in the name of Cede & Co., its nominee. Beneficial interests in the Global Note representing the Exchange Notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its participants. After the initial issuance of the Global Note, Exchange Notes in certificated form will be issued in exchange for the Global Note only in accordance with the terms and conditions set forth in the Indenture. See "Book-Entry; Delivery and Form." This Prospectus incorporates documents by reference which are not presented herein or delivered herewith. These documents are available upon request from James E. Winslow, Executive Vice President, Chief Financial Officer and Secretary, Home Products International, Inc., 4501 West 47th Street, Chicago, ii 7 Illinois 60632, (773) 890-1010. In order to ensure timely delivery of the documents, any request should be made by , 1998 (five days before the Expiration Date). THE CONTENTS OF THIS PROSPECTUS ARE NOT TO BE CONSTRUED AS LEGAL, BUSINESS OR TAX ADVICE. EACH PROSPECTIVE PARTICIPANT IN THE EXCHANGE OFFER SHOULD CONSULT ITS OWN ATTORNEY, BUSINESS ADVISOR OR TAX ADVISOR AS TO LEGAL, BUSINESS OR TAX ADVICE. PROSPECTIVE INVESTORS MAY OBTAIN ADDITIONAL INFORMATION UPON REQUEST FROM THE INITIAL PURCHASERS OR THE COMPANY WHICH THEY MAY REASONABLY REQUIRE IN CONNECTION WITH THE DECISION TO PARTICIPATE IN THE EXCHANGE OFFER. FORWARD LOOKING STATEMENTS THIS PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE COMPANY, INCLUDING STATEMENTS UNDER THE CAPTIONS "SUMMARY," "UNAUDITED PRO FORMA COMBINED FINANCIAL DATA," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS." ALL OF THESE FORWARD LOOKING STATEMENTS ARE BASED ON ESTIMATES AND ASSUMPTIONS MADE BY MANAGEMENT OF THE COMPANY WHICH, ALTHOUGH BELIEVED TO BE REASONABLE, ARE INHERENTLY UNCERTAIN. THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED UPON SUCH ESTIMATES AND STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH ESTIMATES WILL BE REALIZED AND IT IS LIKELY THAT ACTUAL RESULTS WILL DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH DIFFERENCES INCLUDE: (1) INCREASED COMPETITION; (2) INCREASED COSTS; (3) LOSS OR RETIREMENT OF KEY MEMBERS OF MANAGEMENT; (4) INCREASES IN THE COMPANY'S COST OF BORROWING OR UNAVAILABILITY OF ADDITIONAL DEBT OR EQUITY CAPITAL; (5) ADVERSE STATE OR FEDERAL LEGISLATION OR REGULATION OR ADVERSE DETERMINATIONS BY REGULATIONS; AND (6) CHANGES IN GENERAL ECONOMIC CONDITIONS AND/OR IN THE MARKETS IN WHICH THE COMPANY MAY, FROM TIME TO TIME, COMPETE. MANY OF SUCH FACTORS ARE BEYOND THE CONTROL OF THE COMPANY AND ITS MANAGEMENT. FOR FURTHER INFORMATION OR OTHER FACTORS WHICH COULD AFFECT THE FINANCIAL RESULTS OF THE COMPANY AND SUCH FORWARD LOOKING STATEMENTS, SEE "RISK FACTORS." iii 8 SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and Consolidated Financial Statements (including the related notes) appearing elsewhere in this Prospectus. As used herein and except as the context may otherwise require, (i) the "Company" or "HPI" means, collectively, Home Products International, Inc., a Delaware corporation, which is a holding company not engaged in any business other than holding the capital stock of its consolidated subsidiaries, Selfix, Inc., a Delaware corporation ("Selfix"), Seymour Housewares Corporation, a Delaware corporation ("Seymour"), Tamor Corporation, a Massachusetts corporation ("Tamor"), and Shutters, Inc., an Illinois corporation ("Shutters"), (ii) "Selfix" includes both Selfix and, unless the context otherwise requires, Shutters (which was previously a wholly-owned subsidiary of Selfix), (iii) "Tamor" includes both Tamor and Housewares Sales, Inc., a Massachusetts corporation and Tamor's wholly-owned distribution subsidiary, (iv) the "Tamor Acquisition" refers to the acquisition by the Company of the business of Tamor, effective as of January 1, 1997 and (v) the "Seymour Acquisition" refers to the acquisition by the Company of the business of Seymour, which was acquired after the close of fiscal 1997 on December 30, 1997. The pro forma financial data for (i) fiscal 1996 give effect to the Tamor Acquisition as though it had occurred on the first day of fiscal 1996, (ii) the first quarter of fiscal 1997 and the fiscal year 1997 give effect to the Seymour Acquisition, the New Credit Facility (as hereinafter defined) and the Initial Offering (as hereinafter defined) as though they had occurred on the first day of fiscal 1997 and (iii) the first quarter of fiscal 1998 give effect to the New Credit Facility and the Initial Offering as if they had occurred on the first day of fiscal 1998. THE COMPANY OVERVIEW The Company, based in Chicago, Illinois, is a leading designer, manufacturer and marketer of a broad range of value-priced, quality consumer houseware products in the United States. The Company's significant product lines include (i) ironing boards, covers and pads, (ii) home/closet organization products, (iii) plastic storage containers and totes, (iv) laundry accessories, (v) bath and shower organization products, (vi) juvenile products and (vii) home improvement products. HPI's ability to provide a substantial array of up-to-date, quality products on a timely basis, combined with its commitment to provide additional support services to its customers (such as just-in-time delivery, product planograms and point-of-purchase advertising) has enabled the Company to become a preferred supplier to the large, national retailers carrying its products and to establish a leading market position in several product lines. The Company's strong relationships with its base of retailers (including Wal-Mart, Target and Kmart) provide a large and efficient distribution channel for its products. These relationships enable the Company to work with retailers to develop products that are well received by both the retailer and the end-user. On a pro forma basis, the Company's combined net sales and EBITDA for the twelve month period ended March 28, 1998, would have been $219.4 million and $32.3 million, respectively. The Company has actively pursued a growth strategy of selectively acquiring and integrating complementary houseware manufacturers. This has enabled the Company to become one of the leading suppliers and cost-effective manufacturers of houseware products in the United States. The Company believes it has demonstrated its ability to identify, purchase and integrate companies which offer complementary product lines and to derive significant manufacturing and operating efficiencies from such acquisitions. For example, the acquisitions of Tamor in January 1997 and Seymour in December 1997 strengthened the Company's ability to offer "one-stop shopping" for a wide range of houseware products to its retail customers. These acquisitions, combined with internal growth, have increased the Company's net sales from approximately $35.2 million in fiscal year 1992 to approximately $222.3 million in fiscal year 1997 (on a pro forma basis), while EBITDA margins have increased from 7.4% to 14.5% (on a pro forma basis) during the same period. The additional product offerings resulting from both strategic acquisitions and an active product development program have strengthened the Company's relationships with its existing customer base of national retailers, enabling the Company to obtain increased dedicated retail shelf space for its expanding product lines. Management believes that the Company has established a platform to continue this consolidation and product 1 9 development strategy within the highly fragmented houseware products industry and that such strategy will further position the Company for continued growth in the retail distribution channel. The Company continues to look for opportunities to acquire companies that fit within its acquisition strategy. To that end, the Company has had, and continues to have, numerous discussions with potential acquisition candidates. As of the date of this Prospectus, the Company has made a number of oral and written acquisitions proposals to certain of such candidates, but has not entered into any binding agreements. While the Company believes that it is likely to enter into one or more agreements in the near future with respect to such potential acquisitions, no assurance can be given that such agreements will be reached or that any of such potential acquisitions will be consummated. Industry sources estimate that the total housewares industry in the United States is approximately $54 billion in size. Within the housewares industry, HPI currently offers products in the home organization, laundry management and home improvement segments. Management estimates that the current market size in the United States for these segments is between $5 billion and $8 billion. This market is served by a highly fragmented manufacturer base. The Company currently operates in several categories including (i) ironing boards, covers and pads, (ii) home/closet organization products, (iii) plastic storage containers and totes, (iv) laundry accessories, (v) bath and shower organization products, (vi) juvenile products and (vii) home improvement products. In the opinion of management, the housewares industry is driven by (i) retailers committing an increasing amount of shelf space to storage products, (ii) retailers consolidating the number of their suppliers, (iii) new household and home office formations, (iv) a movement away from generic products towards items designed to perform specific functions and (v) overall retailer consolidation. COMPETITIVE STRENGTHS Management believes that the following competitive strengths contribute to the Company's position as a leading manufacturer and marketer of popular houseware products and serve as a foundation for the Company's business strategy. - LEADING MARKET POSITION. Management believes that the Company has a leading market position in each of the product categories in which its products compete. In particular, management believes that the Company is the leading ironing board, cover and pad manufacturer in the United States and is the nation's leading supplier of plastic clothes hangers. The Company's home organization products, including plastic clothes hangers, are marketed under the Selfix and Tamor brand names, which are widely recognized in the industry. Management believes the Company's broad product offerings in the home organization products category provide it with a competitive advantage over other manufacturers. In the bath and shower products segment, management believes the Company is a leading producer of plastic bath and shower accessories commanding the second largest market share in the United States. In the storage container market, management believes the Company ranks third in market share in the United States. Through both acquisitions and internal product development, the Company seeks to enhance its position as a leading supplier of housewares in a highly fragmented industry. - ESTABLISHED DISTRIBUTION NETWORK. The Company has established a broad distribution network serving both domestic and international markets. The Company's houseware products are sold through national and regional retailers, hardware and homecenter stores, food and drug stores, juvenile stores, specialty stores, and to hotels. Management believes that its distribution network allows it to successfully launch new products and broaden existing product lines with greater consumer acceptance. The Company's distribution network also provides marketing and distribution synergies for its acquired businesses, which generally are suppliers of houseware products marketed through many of the same retail distribution channels. - STRONG, COLLABORATIVE RELATIONSHIPS WITH RETAILERS. The Company maintains close and interactive relationships with a diverse customer base of retailers by focusing on new product development and creative marketing and packaging ideas. The Company has also strengthened its relationships with major customers through acquisitions which have enabled it to supply its customers with a broader selection of houseware product lines, resulting in increased retail shelf space devoted to the Company's products. HPI offers customer-specific merchandising programs which management believes enable retailers and distributors to achieve a higher gross margin on the Company's products than with the products of a number of its nationally 2 10 known competitors. For instance, the Company provides its customers with a variety of retail support services, including customized merchandise planogramming, small shipping packs, point-of-purchase displays, electronic data interchange ("EDI") and just-in-time product delivery. The Company also utilizes its customers' point of sale ("POS") information to allow the Company to better monitor product sales. Management believes that its prompt and reliable product delivery of value-priced, high-volume products enables its customers to maintain minimal inventories. - INNOVATIVE, CONSUMER-DRIVEN PRODUCT LINE EXTENSIONS. The Company develops and introduces innovative products with features and benefits that are designed to meet the needs and demands of consumers. New products or product line extensions are frequently developed or acquired after consultation with the Company's major retail customers. This enables the Company to leverage its existing customer base, to expand its product offerings and to assess the potential viability of products prior to development. Typically, the Company's new product introductions are developed by making incremental modifications to its market-proven products. During 1997, approximately 60 new products and product improvements were launched by the Company, with each of the Company's business units introducing at least one new product line. - FLEXIBLE, LOW-COST MANUFACTURER. The Company operates a network of efficient manufacturing facilities that result in favorable per unit product costs. Recent acquisitions have enabled the Company to broaden its product base, expand its sales and distribution capabilities and increase manufacturing and distribution synergies, while achieving significant scale in manufacturing. For instance, management estimates that the Company is the largest United States manufacturer of full-size ironing boards, building approximately 14,200 units per day. This volume enables the Company to purchase rolled steel in bulk and achieve economies of scale. Similarly, it is a large processor of various grades of plastic resin, utilizing approximately 85 injection molding machines to process approximately 85 million pounds of plastic resin per year. The Company is able to achieve cost advantages through the use of off-prime grades of resin that are typically bought through brokers in the secondary market. The Company also processes approximately seven million yards of fabric annually, utilizing its domestic operations, as well as its Reynosa, Mexico facility for those aspects of production that are more labor intensive. The Company seeks to maximize its operating efficiency by ensuring that each plant has flexible manufacturing capabilities as well as utilizing its Mexico operation and Asian outsourcing opportunities to lower production costs. In addition, the Company is able to utilize excess capacity in its plants to meet peak demand and optimize production planning. - EXPERIENCED MANAGEMENT TEAM. The Company's senior management team has a wide range of experience in the production, development and marketing of housewares and related products. Leading the Company's senior management team is Mr. James R. Tennant, the Company's Chairman and Chief Executive Officer, who has 20 years of corporate management experience in marketing-oriented capacities. Mr. Tennant has been with HPI since 1994. Mr. Stephen R. Brian, the President and Chief Operating Officer of the Company, has 29 years experience in management and production capacities with major consumer product companies, including General Electric Corporation and Sunbeam. Mr. James E. Winslow, Executive Vice President and Chief Financial Officer of the Company, has 16 years of financial management experience in the consumer products industry, including 11 years with Wilson Sporting Goods. Mr. Winslow has been with HPI since 1994. Furthermore, the Company's operations are managed by experienced consumer product and manufacturing professionals. BUSINESS STRATEGY The Company intends to continue to take advantage of consolidation opportunities in the housewares industry and to continue to grow by expanding its product offerings through strategic acquisitions and by capitalizing on established distribution channels to increase sales. The Company's strategy for achieving that objective includes the following key elements: - LEVERAGE MARKET SHARE POSITION. The Company intends to maintain a leading market position in the United States in each of the product segments in which it operates and intends to leverage its market strength to introduce new products in all of its product categories. Through acquisitions of companies with complementary product lines and through an internal product development program, the Company expects to 3 11 continue to increase sales and to become a leading supplier of new product categories as well as additional products in its existing product categories. Management believes that such growth will enable the Company to expand its merchandising relationships with its existing key customers, and to increase its presence in these customers' stores, which in turn would give the Company additional leverage to support further growth. - CONTINUE BUILDING STRATEGIC SUPPLIER RELATIONSHIPS. Management believes that national retailers are increasingly interested in establishing "one-stop shopping" supplier relationships for their store chains to enhance their margins and operating efficiencies. In addition, these mass merchandisers have come to expect value-added services (such as merchandise planogramming and EDI) that are primarily offered by large suppliers. Management believes that the breadth of the Company's product offerings, combined with the value-added services it provides, will enable the Company to continue to build close and interactive relationships with its retailers, capture larger market share and garner incremental shelf space for its products. - LAUNCH PRODUCT LINE IMPROVEMENTS AND NEW PRODUCTS. The Company has successfully launched product line improvements and new products and intends to continue to do so by capitalizing on its strong relationships with its retailers. In 1997, the Company introduced approximately 60 new products and product improvements, which accounted for approximately 13% of the Company's 1997 revenues (excluding sales generated from laundry management products). Through these product introductions, the Company's products are kept up-to-date and appealing for both the retailer and end-user. The Company is also able to manage its research and development expenditures at levels below those of its competitors as most of these product innovations and improvements require only minimal feature enhancements and relatively limited technological input. Management believes that innovative product introductions will further enhance revenue growth, profitability and market share. - INCREASE MARKET PENETRATION. The Company expects that strategic acquisitions, as well as internally developed new product lines, will result in increased penetration of its existing markets and enable it to develop and extend its customer base both in the United States and internationally. The Company also plans to expand its export sales team and leverage established contacts with key distributors to continue to increase its sales internationally. - PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES. Management anticipates that the fragmented nature of the housewares industry will continue to provide significant opportunities for growth through strategic acquisitions of complementary businesses. Management intends to continue to acquire businesses at attractive multiples of cash flow and achieve operational and distribution efficiencies through integration of complementary businesses. The Company's acquisition strategy focuses on businesses with product offerings which (i) offer product expansion into related categories, (ii) focus on products which can be marketed through the Company's existing distribution channels and (iii) enhance manufacturing efficiencies by increasing throughput and lowering per unit production costs, thereby increasing the Company's marketing and distribution efficiencies. Management will also consider strategic joint ventures which would provide access to new products, technologies or markets. The Company continues to look for opportunities to acquire companies that fit within its acquisition strategy. To that end, the Company has had, and continues to have, numerous discussions with potential acquisition candidates. As of the date of this Prospectus, the Company has made a number of oral and written acquisitions proposals to certain of such candidates, but has not entered into any binding agreements. While the Company believes that it is likely to enter into one or more agreements in the near future with respect to such potential acquisitions, no assurance can be given that such agreements will be reached or that any of such potential acquisitions will be consummated. 4 12 THE INITIAL OFFERING Original Notes................ The Original Notes were sold by the Company on May 14, 1998 (the "Initial Offering"), to Chase Securities Inc. and NationsBanc Montgomery Securities LLC (the "Initial Purchasers") pursuant to a Purchase Agreement, dated as of May 7, 1998, by and among the Company, certain of its subsidiaries and the Initial Purchasers (the "Purchase Agreement"). The Initial Purchasers subsequently resold the Original Notes to qualified institutional buyers pursuant to Rule 144A under the Securities Act ("Rule 144A"). Exchange and Registration Rights Agreement.............. Pursuant to the Purchase Agreement, the Company and the Initial Purchasers entered into an Exchange and Registration Rights Agreement (the "Exchange and Registration Rights Agreement"), dated as of May 14, 1998 (the "Issue Date"), which grants the holders of the Original Notes certain exchange and registration rights. The Exchange Offer is intended to satisfy such exchange and registration rights, which rights shall terminate upon consummation of the Exchange Offer. See "The Exchange Offer -- Purpose and Effect of the Exchange Offer." THE EXCHANGE OFFER Securities Offered............ $125,000,000 aggregate principal amount of 9 5/8% Senior Subordinated Notes due 2008, of the Company (the "Exchange Notes"). The Exchange Offer............ $1,000 principal amount of Exchange Notes in exchange for each $1,000 principal amount of Original Notes. As of the date hereof, $125,000,000 aggregate principal amount of Original Notes are outstanding. The Company will issue the Exchange Notes to holders as promptly as practicable after the Expiration Date. Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that Exchange Notes issued pursuant to the Exchange Offer in exchange for Original Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holder's business and that such holder does not intend to participate and has no arrangement or understanding with any person to participate in the distribution of such Exchange Notes. Any participating broker-dealer (an "Exchanging Dealer") that acquired Original Notes for its own account as a result of market making activities or other trading activities may be a statutory underwriter. Each Exchanging 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, an 5 13 Exchanging Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by an Exchanging Dealer in connection with resales of Exchange Notes received in exchange for Original Notes where such Original Notes were acquired by such Exchanging 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, it will make this Prospectus available to any Exchanging Dealer for use in connection with any such resale. See "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 exemption therefrom, 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. Accrued Interest on the Exchange Notes and the Original Notes.............. Interest on the Exchange Notes issued pursuant to the Exchange Offer will accrue from the last interest payment date on which interest was paid on the Original Notes surrendered in exchange therefor or, if no interest has been paid on the Original Notes, from the Issue Date. Holders whose Original Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Original Notes. Conditions to the Exchange Offer......................... The Exchange Offer is subject to certain customary conditions, which may be waived by the Company. See "The Exchange Offer -- Conditions." Procedures for Tendering Original Notes................ Each holder of Original Notes wishing to accept the Exchange Offer must complete, sign and date the accompanying Letter of Transmittal, or a facsimile thereof (or, in the case of a book-entry transfer, transmit an Agent's Message (as defined) in lieu thereof), in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile (or Agent's Message), together with the Original Notes and any other required documentation to the Exchange Agent (as defined) at the address set forth herein. By executing the Letter of Transmittal (or transmitting an Agent's Message), each holder will represent to the Company that, among other things, the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the holder, that neither the holder nor any such other person has any arrangement 6 14 or understanding with any person to participate in the distribution of such Exchange Notes and that neither the holder nor any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. See "The Exchange Offer -- Purpose and Effect of the Exchange Offer" and "-- Procedures for Tendering." Untendered Original Notes..... Following the consummation of the Exchange Offer, holders of Original Notes eligible to participate but who do not tender their Original Notes will not have any further exchange or registration rights and such Original Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Original Notes could be adversely affected. See "Risk Factors -- Absence of Public Market." Consequences of Failure to Exchange...................... Original Notes that are not exchanged pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Original Notes may be resold only (i) to the Company, (ii) pursuant to Rule 144A or Rule 144 under the Securities Act or pursuant to some other exemption under the Securities Act, (iii) outside the United States to a foreign person pursuant to the requirements of Rule 904 under the Securities Act, or (iv) pursuant to an effective registration statement under the Securities Act. See "The Exchange Offer -- Consequences of Failure to Exchange." Shelf Registration Statement..................... If any holder of Original Notes (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) is not eligible under applicable securities laws to participate in the Exchange Offer and such holder has satisfied certain conditions relating to the provision of information to the Company for use therein, and under certain other circumstances, the Company has agreed to use its reasonable best efforts to file with the Commission a shelf registration statement (the "Shelf Registration Statement"), and to use its reasonable best efforts to have such Shelf Registration Statement declared effective. the Company has agreed to maintain the effectiveness of the Shelf Registration Statement for, under certain circumstances, a maximum of two years, to cover resales of the Original Notes held by any such holders. Special Procedures for Beneficial Owners............. Any beneficial owner whose Original Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering its Original Notes, either make appropriate arrangements to register ownership of the Original Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. 7 15 Guaranteed Delivery Procedures.................... Holders of Original Notes who wish to tender their Original Notes and whose Original Notes are not immediately available or who cannot deliver their Original Notes (or comply with the procedures for book-entry transfer), the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent (or transmit an Agent's Message in lieu thereof) prior to the Expiration Date must tender their Original Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures." Withdrawal Rights............. Tenders may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Acceptance of Original Notes and Delivery of Exchange Notes....................... The Company will accept for exchange any and all Original Notes that are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered as promptly as practicable following the Expiration Date. See "The Exchange Offer -- Terms of the Exchange Offer." Use of Proceeds............... There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. Exchange Agent................ LaSalle National Bank. THE EXCHANGE NOTES General....................... The form and terms of the Exchange Notes are the same as the form and terms of the Original Notes (which they replace) except that (i) the issuance of the Exchange Notes will have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof, and (ii) the holders of Exchange Notes will not be entitled to certain rights under the Exchange and Registration Rights Agreement, including the provisions providing for an increase in the interest rate on the Original Notes in certain circumstances relating to the timing of the Exchange Offer, which rights will terminate when the Exchange Offer is consummated. See "The Exchange Offer -- Purpose and Effect of the Exchange Offer." The Exchange Notes will evidence the same debt as the Original Notes and will be entitled to the benefits of the Indenture. See "Description of the Exchange Notes." The Original Notes and the Exchange Notes are referred to herein collectively as the "Notes." Issuer........................ Home Products International, Inc. Securities Offered............ $125,000,000 aggregate principal amount of 9 5/8% Senior Subordinated Notes due 2008 of the Company. Maturity Date................. May 15, 2008. Interest Payment Dates........ May 15 and November 15 of each year, commencing on November 15, 1998. Guarantees.................... The Company's payment obligations under the Notes will be jointly and severally guaranteed on a senior subordinated basis by 8 16 each of the Company's Restricted Subsidiaries (as defined) other than any Foreign Subsidiary (as defined). The Guarantees will be subordinated in right of payment to all existing and future Senior Indebtedness of the Subsidiary Guarantors, including the guarantees of Senior Indebtedness issued by the Subsidiary Guarantors under the New Credit Facility. See "Description of the Exchange Notes -- Subsidiary Guarantees." Optional Redemption........... Except as described below, the Notes will not be redeemable at the Company's option prior to May 15, 2003. Thereafter, the Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' advance notice, at the redemption prices set forth herein, plus accrued and unpaid interest thereon, if any, to the applicable redemption date. In addition, at any time and from time to time, prior to May 15, 2001, the Company may redeem up to 35% of the original aggregate principal amount of the Notes at a redemption price of 109.625% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the redemption date, with the net cash proceeds of one or more public offerings of common stock of the Company; provided that at least 65% of the original aggregate principal amount of Notes remains outstanding immediately after the occurrence of such redemption. See "Description of the Exchange Notes -- Optional Redemption." Change of Control............. Upon the occurrence of a Change of Control each holder of Notes will have the right to require the Company to repurchase all or any part of such holder's Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest, to the date of purchase. See "Description of the Exchange Notes -- Change of Control." Ranking....................... The Notes will be general unsecured obligations of the Company that will be subordinated to all existing and future Senior Indebtedness of the Company. The Notes will rank pari passu in right of payment with any other Senior Subordinated Indebtedness of the Company and will rank senior in right of payment to all other Subordinated Obligation of the Company. The Guarantees will be general unsecured obligations of the Subsidiary Guarantors that will be subordinated to all existing and future Guarantor Senior Indebtedness of the Subsidiary Guarantors. At March 28, 1998, after giving pro forma effect to the Refinancing, (i) the outstanding Senior Indebtedness of the Company, including the Subsidiary Guarantors, would have been $9.2 million, all of which would have been Secured Indebtedness, (ii) the Company, including the Subsidiary Guarantors, would have had no Subordinated Obligation outstanding and no Senior Subordinated Indebtedness outstanding other than the Notes, (iii) the outstanding Guarantor Senior Indebtedness of the Subsidiary Guarantors would have been $6.7 million, all of which would have been Secured Indebtedness, and (iv) the Subsidiary Guarantors would have had no Guarantor Senior Subordinated Indebtedness and no Guarantor Subordinated Obligation. See "Description of the Exchange Notes -- Ranking and Subordination." 9 17 Restrictive Covenants......... The Indenture will contain certain covenants that, among other things, will limit the ability of the Company and/or its Restricted Subsidiaries to (i) incur additional indebtedness, (ii) pay dividends or make certain other restricted payments, (iii) make investments, (iv) enter into transactions with affiliates, (v) make certain asset dispositions and (vi) merge or consolidate with, or transfer substantially all of its assets to, another person. The Indenture also will limit the ability of the Company to create restrictions on the ability of Restricted Subsidiaries to pay dividends or make any other distributions. In addition, the Company will be obligated, under certain circumstances, to offer to repurchase the Notes with the net cash proceeds of certain sales or other dispositions of assets. However, all of these limitations and prohibitions are subject to a number of important qualifications. See "Description of the Exchange Notes -- Certain Covenants." Use of Proceeds............... The Company will not receive any proceeds from the Exchange Offer. The Company used the net proceeds from the Initial Offering, together with borrowings under a new $100 million senior secured revolving credit facility (the "New Credit Facility" and, together with the Initial Offering, the "Refinancing") which the Company concurrently entered into with The Chase Manhattan Bank: (i) to repay approximately $122 million of outstanding indebtedness under the Company's prior credit facility and to pay certain fees, prepayment penalties and expenses related to such repayment; (ii) to pay certain other fees and expenses incurred in connection with the Refinancing; and (iii) for working capital and general corporate purposes. See "Use of Proceeds." RISK FACTORS See "Risk Factors" for a discussion of certain factors that should be considered before tendering Original Notes in exchange for Exchange Notes. These risk factors are generally applicable to the Original Notes as well as the Exchange Notes. ------------------------ The principal executive offices of the Company are located at 4501 West 47th Street, Chicago, Illinois 60632, and the Company's telephone number is (773) 890-1010. 10 18 SUMMARY PRO FORMA COMBINED FINANCIAL DATA THE COMPANY The following table sets forth certain unaudited summary pro forma combined financial data of the Company for the periods ended and as of the dates indicated. The unaudited pro forma statement of operations data give effect to the Seymour Acquisition and related financing and the Refinancing as if they had occurred at the beginning of the periods indicated. An effective tax rate of 40% has been assumed for all periods; however, the year ended December 27, 1997 and the fifty-two weeks ended March 28, 1998, include a $3.1 million benefit due to the reduction of an income tax valuation allowance. The unaudited pro forma balance sheet data reflect the Refinancing as if it had occurred on March 28, 1998. The "Other Data" below, not directly derived from the Unaudited Pro Forma Combined Financial Data, or the HPI or Seymour historical consolidated financial statements, have been presented to provide additional analysis. The Summary Pro Forma Combined Financial Data do not purport to represent what the Company's financial position or results of operations would actually have been had the Seymour Acquisition or the Refinancing in fact occurred on the assumed dates or to project the Company's financial position or results of operations for any future date or period. The Summary Pro Forma Combined Financial Data have been derived from, and should be read in conjunction with, the Unaudited Pro Forma Combined Financial Data and the notes thereto, the respective historical consolidated financial statements of HPI and Seymour and the notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus.
THIRTEEN THIRTEEN FIFTY-TWO WEEKS WEEKS WEEKS YEAR ENDED ENDED ENDED ENDED DEC. 27, MARCH 29, MARCH 28, MARCH 28, 1997 1997 1998 1998 ---------- --------- --------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA: Net sales..................................... $222,287 $55,282 $52,408 $219,413 Gross profit(a)............................... 64,499 15,680 15,953 64,772 Operating profit.............................. 15,349 4,022 5,094 16,421 Interest (expense)(b)......................... (15,537) (4,043) (3,482) (14,976) Earnings (loss) before income taxes and extraordinary item......................... (920) 122 1,625 583 Income tax (expense) benefit.................. 3,511 (49) (650) 2,910 Earnings before extraordinary item............ 2,591 73 975 3,493 Earnings before extraordinary item per share -- basic............................. $ 0.38 $ 0.01 $ 0.12 $ 0.48 Earnings before extraordinary item per share -- diluted........................... $ 0.37 $ 0.01 $ 0.12 $ 0.46 OTHER DATA: Gross profit margin(a)........................ 29.0% 28.4% 30.4% 29.5% EBITDA(c)..................................... $ 32,335 $ 8,099 $ 8,036 $ 32,272 EBITDA margin(c).............................. 14.5% 14.7% 15.3% 14.7% Cash interest expense(b)(d)................... $ 14,922 $ 3,890 $ 3,320 $ 14,352 Capital expenditures.......................... 11,031 1,038 4,092 14,085 Ratio of total debt to EBITDA................. -- -- -- 4.2x Ratio of EBITDA to cash interest expense(d)... 2.2x 2.1x 2.4x 2.2x
11 19
AS ADJUSTED AS OF MARCH 28, 1998 ----------- (DOLLARS IN THOUSANDS) BALANCE SHEET DATA (END OF PERIOD): Working capital(e).......................................... $ 24,285 Total assets................................................ 227,268 Total debt, including capital lease obligations............. 134,166 Total stockholders' equity.................................. 52,765
- --------------- (a) Gross profit is defined as net sales less cost of goods sold. Gross profit margin is computed as gross profit as a percentage of net sales. (b) Had the Company's equity offering, which was completed in July 1997, occurred on the first day of fiscal 1997, interest expense would have been reduced by $0.9 million for the year ended December 27, 1997, $0.5 million for the thirteen weeks ended March 29, 1997, and $0.4 million for the fifty-two weeks ended March 28, 1998. (c) EBITDA is defined as the sum of (i) earnings before income taxes and extraordinary item, (ii) interest expense, (iii) interest income, (iv) depreciation and amortization, (v) one-time charges in the third and fourth quarter of 1997 of $2.6 million relating to the consolidation and disposition of certain Seymour manufacturing operations, (vi) a $0.6 million one-time write-off in the third quarter of 1997 of an asset eliminated in connection with the termination of Seymour's defined benefit pension plan and (vii) certain other one-time items totaling $0.3 million during the third and fourth quarters of 1997. Management believes that the consolidation of the Seymour manufacturing operations should enable it to generate an additional $1.8 million in annual cost savings following the completion of the consolidation. However, no assurance can be given that such savings will be realized. Management believes that EBITDA is a measure commonly used by analysts and investors to determine a company's ability to service and incur debt. Accordingly, this information has been presented to permit a more complete analysis. EBITDA should not be considered a substitute for net income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. EBITDA margin is computed as EBITDA as a percentage of net sales. (d) Ratio of EBITDA to cash interest expense represents EBITDA divided by total interest expense, net of deferred financing cost amortization. (e) Working capital is computed as current assets less current liabilities. 12 20 RISK FACTORS Prospective investors should carefully consider the following risk factors in addition to the other information included in this Prospectus before tendering Original Notes in exchange for Exchange Notes. The risk factors set forth below are generally applicable to the Original Notes as well as the Exchange Notes. This Prospectus contains, in addition to historical information, certain forward-looking statements that are subject to risks and other uncertainties. The Company's actual results may differ materially from those anticipated in these forward-looking statements. Factors that might cause such a difference include those discussed below, as well as general economic and business conditions, competition and other factors discussed elsewhere in this Prospectus. All forward-looking statements attributed to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements set forth herein. SUBSTANTIAL LEVERAGE; DEBT SERVICE OBLIGATIONS; LIQUIDITY In connection with the Refinancing, the Company has incurred a significant amount of indebtedness. As of March 28, 1998, after giving pro forma effect to the Refinancing, the Company would have had $134.2 million of consolidated indebtedness, of which $9.2 million would have been Senior Indebtedness. The Company's ability to make scheduled payments of principal of, or to pay the interest, if any, on, or to refinance its indebtedness (including the Notes), or to fund planned capital expenditures or finance acquisitions will depend on its future financial and operating performance, which to a certain extent is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control. Based on the current and anticipated level of operations, management believes that cash flows from operations and available cash, together with available borrowings under the New Credit Facility, will be adequate to meet the Company's anticipated future requirements for working capital, budgeted capital expenditures, acquisition financing and scheduled payments of principal and interest on its indebtedness, including the Notes, for the foreseeable future. The Company, however, may need to refinance all or a portion of the principal of the Notes on or prior to maturity. There can be no assurance that the Company's business will generate sufficient cash flows from operations or that future borrowings will be available under the New Credit Facility in an amount sufficient to enable the Company to service its indebtedness, including the Notes, or make anticipated capital expenditures and to fund future acquisitions. In addition, there can be no assurance that the Company will be able to effect any refinancing on commercially reasonable terms, or at all. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Capital Resources and Liquidity." The degree to which the Company will be leveraged could have important consequences to holders of the Notes, including the following: (i) the Company's ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired; (ii) a substantial portion of the Company's cash flow from operations will be required to be dedicated to the payment of interest on the Notes and the Company's other existing indebtedness, thereby reducing the funds available to the Company for other purposes; (iii) the agreements governing the Company's long-term indebtedness will contain certain restrictive financial and operating covenants; (iv) certain indebtedness under the New Credit Facility will be at variable rates of interest, which will cause the Company to be vulnerable to increases in interest rates; (v) all of the indebtedness outstanding under the New Credit Facility will be secured by substantially all of the assets of the Company and will become due prior to the time the principal on the Notes will become due; (vi) the Company will be substantially more leveraged than certain of its competitors, which might place the Company at a competitive disadvantage; and (vii) the Company's substantial degree of leverage could make it more vulnerable in the event of a downturn in general economic conditions or in its business. In addition, the degree to which the Company is leveraged could prevent it from repurchasing all of the Notes tendered to it upon the occurrence of a Change of Control. See "Description of the Exchange Notes -- Change of Control" and "Description of Other Indebtedness -- New Credit Facility." SUBORDINATION; ASSET ENCUMBRANCE The Notes will be general unsecured obligations of the Company that will be subordinated to all Senior Indebtedness of the Company. The Guarantees will be general unsecured obligations of the Subsidiary 13 21 Guarantors that will be subordinated to all Guarantor Senior Indebtedness of the Subsidiary Guarantors. At March 28, 1998, after giving pro forma effect to the Refinancing, (i) the outstanding Senior Indebtedness of the Company, including the Subsidiary Guarantors, would have been $9.2 million, all of which would have been Secured Indebtedness, (ii) the Company, including the Subsidiary Guarantors, would have had no Subordinated Obligation outstanding and no Senior Subordinated Indebtedness other than the Notes, (iii) the outstanding Guarantor Senior Indebtedness of the Subsidiary Guarantors would have been $6.7 million, all of which would have been Secured Indebtedness, and (iv) the Subsidiary Guarantors would have had no Guarantor Senior Subordinated Indebtedness and no Guarantor Subordinated Obligation. Although the Indenture contains limitations on the amount of additional indebtedness which the Company and the Subsidiary Guarantors may incur under certain circumstances, the amount of such Indebtedness could be substantial and such Indebtedness may be Senior Indebtedness. See "Description of the Exchange Notes." The Indenture will provide that the Company and the Restricted Subsidiaries may not incur or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Indebtedness and senior in any respect in right of payment to the Notes. The Company may not pay principal of, or premium or interest on, the Notes, make any deposit pursuant to defeasance provisions or repurchase or redeem or otherwise retire any Notes (i) if any Designated Senior Indebtedness (as defined) is not paid when due or any other default on Designated Senior Indebtedness occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms or (ii) if any other default on Designated Senior Indebtedness occurs that permits the holders of such Designated Senior Indebtedness to accelerate the maturity of such Senior Indebtedness in accordance with its terms and the Trustee received notice of such default, unless, in either case, the default has been cured or waived, any such acceleration has been rescinded or such Senior Indebtedness has been paid in full or, in the case of any non-payment default, 179 days have passed since the default notice was given. Upon any payment or distribution to creditors of the Company in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, the holders of Senior Indebtedness will be entitled to receive payment in full in cash or Cash Equivalents (as defined) before the holders of the Notes will be entitled to receive any payment (other than in the form of Permitted Junior Securities (as defined)). See "Description of the Exchange Notes -- Ranking and Subordination." Substantially similar provisions are applicable to the Guarantees. The Notes and the Guarantees are also unsecured and thus, in effect, will rank junior to any Secured Debt of the Company or the Subsidiary Guarantors. The indebtedness outstanding under the New Credit Facility will be secured by liens on substantially all of the assets of the Company. In addition, under certain circumstances, the Guarantee provided by any Subsidiary Guarantor could be set aside under fraudulent conveyance or other laws and rules affecting creditors' rights. See "-- Fraudulent Conveyance; Preferential Transfer." In any such case, the Notes would be effectively subordinated to all liabilities of such Subsidiary Guarantor, including trade debt. RESTRICTIVE COVENANTS The New Credit Facility and the Indenture include certain covenants that, among other things, restrict: (i) the making of investments, loans and advances and the paying of dividends and other restricted payments; (ii) the incurrence of additional indebtedness; (iii) the granting of liens, other than liens created pursuant to the New Credit Facility and certain permitted liens; (iv) mergers, consolidations and sales of all or a substantial part of the Company's business or property; (v) the sale of assets; and (vi) the making of capital expenditures. The New Credit Facility will also require the Company to maintain certain financial ratios, including interest coverage and leverage ratios. All of these restrictive covenants may restrict the Company's ability to expand or to pursue its business strategies. The ability of the Company to comply with these and other provisions of the New Credit Facility may be affected by changes in economic or business conditions, results of operations or other events beyond the Company's control. The breach of any of these covenants could result in a default under the New Credit Facility, in which case, depending on the actions taken by the lenders thereunder or their successors or assignees, such lenders could elect to declare all amounts borrowed under the New Credit Facility, together with accrued interest, to be due and payable, and the Company could be prohibited from making payments with respect to the Notes until the default is cured or all Senior 14 22 Indebtedness is paid or satisfied in full. If the Company were unable to repay such borrowings, such lenders could proceed against their collateral. If the indebtedness under the New Credit Facility were to be accelerated, there can be no assurance that the assets of the Company would be sufficient to repay in full such indebtedness and the other indebtedness of the Company, including the Notes. See "Description of Other Indebtedness -- New Credit Facility" and "Description of the Exchange Notes -- Ranking and Subordination." OPERATION THROUGH SUBSIDIARIES The Company is a holding company and conducts substantially all of its operations through its subsidiaries. As a result, the Company is required to rely upon repayment from its subsidiaries for the funds necessary to meet its obligations, including the payment of interest on and principal of the Notes. The ability of the subsidiaries to make such payments will be subject to, among other things, applicable state laws. Claims of creditors of the Company's subsidiaries will generally have priority as to the assets of such subsidiaries over claims of the Company. Although the Guarantees provide the holders of the Notes with a direct claim against the assets of the Subsidiary Guarantors, enforcement of the Guarantees against any Subsidiary Guarantor may be subject to legal challenge in a bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of such Subsidiary Guarantor and would be subject to certain defenses available to guarantors generally. See "-- Fraudulent Conveyance; Preferential Transfer." Although the Indenture contains waivers of most guarantor defenses, certain of those waivers may not be enforced by a court in a particular case. To the extent that the Guarantees are not enforceable, the Notes would be effectively subordinated to all liabilities of the Subsidiary Guarantors, including trade payables of such Subsidiary Guarantors, whether or not such liabilities constitute Senior Indebtedness under the Indenture. In addition, the payment of dividends to the Company by its subsidiaries is contingent upon the earnings of those subsidiaries and subject to various business considerations and, for certain subsidiaries, the Indenture will permit restrictive loan covenants to be contained in the instruments governing the indebtedness of such subsidiaries, including the covenants which restrict in certain circumstances the payment of dividends and distributions and the transfer of assets to the Company. See "Description of Other Indebtedness -- New Credit Facility" and "Description of the Exchange Notes -- Certain Covenants -- Limitation on Restricted Payments." RISKS ASSOCIATED WITH ACQUISITION STRATEGY The Company continues to look for opportunities to acquire companies that fit within its acquisition strategy. To that end, the Company has had, and continues to have, numerous discussions with potential acquisition candidates. As of the date of this Prospectus, the Company has made a number of oral and written acquisitions proposals to certain of such candidates, but has not entered into any binding agreements. While the Company believes that it is likely to enter into one or more agreements in the near future with respect to such potential acquisitions, no assurance can be given that such agreements will be reached or that any of such potential acquisitions will be consummated. The Company's ability to accomplish its strategy will depend upon a number of factors including, among other things, the Company's ability to identify acceptable acquisition candidates, to consummate such acquisitions on terms favorable to the Company and to promptly and profitably integrate the acquired operations into the Company's operations. See "Business -- Business Strategy." Acquiring additional businesses may require additional capital and the consent of the Company's lenders and may have a significant impact on the Company's financial position and results of operations. Any such acquisitions may involve the issuance of additional debt or the issuance of one or more classes or series of the Company's equity securities, which could have a dilutive effect on the then outstanding Common Stock of the Company. Acquisitions could result in substantial amortization charges to the Company from the accumulation of goodwill and other intangible assets which could reduce reported earnings. There can be no assurance that the Company will be successful in accomplishing its acquisition strategy or that any acquired operations will be profitable or will be successfully integrated into the Company or that any such future acquisitions will not materially and adversely affect the Company's financial condition or results of operations. Opportunities 15 23 for growth through acquisitions, future operating results and the success of acquisitions may be subject to the effects of, and changes in, United States and foreign trade and monetary policies, laws and regulations, political and economic developments, inflation rates, and the effect of taxes and operating conditions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Capital Resources and Liquidity." As a result of the Tamor and Seymour acquisitions, the Company has experienced significant growth and will seek to continue to expand its operations through acquisitions. The management of the Company's growth, if any, will require continued expansion and refinement of the Company's control systems and a significant increase in the Company's development, manufacturing, quality control, marketing, logistics and service capabilities, all of which could place a significant strain on the Company's resources. There is no assurance that the Company will adequately anticipate all of the demands that its growth, if any, will impose on such control systems. If the Company's management is unable to manage growth effectively, then the quality of the Company's products, its ability to retain and hire key personnel and its financial condition and results of operations could be materially and adversely affected. Failure to integrate new personnel on a timely basis could also have an adverse effect on the Company. CUSTOMER CONCENTRATION; CONSOLIDATING CUSTOMER BASE During fiscal 1997, on a pro forma basis, Wal-Mart, Kmart and Target accounted for approximately 17.5%, 12.5% and 5.9%, respectively, of the Company's gross sales. During fiscal 1997, no other customer represented 5% or more of the net sales (approximately $222.3 million on a pro forma basis) of the Company. Although the Company believes that its relationships with Wal-Mart, Kmart, Target and its other large customers are good, it does not have long-term purchase agreements or other contractual assurances as to future sales to these customers. If any significant customer substantially reduces its level of purchases from the Company, the Company's financial position and results of operations would be adversely affected. Moreover, continued consolidation within the retail industry may result in an increasingly concentrated customer base. To the extent such consolidation continues to occur, the Company's revenues and profitability may be increasingly sensitive to a significant deterioration in the financial condition of, or other adverse developments in its relationships with, one or more customers. From time to time, the Company has experienced credit losses due to customers seeking protection under bankruptcy or similar laws. Although such credit losses have not had a material adverse effect on the Company to date, there can be no assurance that future credit losses will not have a material adverse effect on the Company. See "Business -- Marketing and Sales" and "-- Customers and Distribution." COMPETITION The market for the Company's products is highly competitive. The Company competes with a significant number of companies, some of which have greater name-brand recognition, larger customer bases and/or significantly greater financial resources than the Company, such as Rubbermaid Inc. There are no substantial regulatory or other barriers to entry of new competitors into the Company's industries. There can be no assurance that the Company will be able to compete successfully against current and future sources of competition or that the current and future competitive pressures faced by the Company will not adversely affect its profitability or financial performance. See "Business -- Competition." A number of the Company's products are similar in design and/or function to competitors' products. There can be no assurance that third parties will not assert infringement or misappropriation claims against the Company in the future with respect to current or future products. Any such claims or litigation, whether with or without merit, could be costly and could have a material adverse effect on the Company's financial position and results of operations. See "Business -- Patents, Trademarks and Licenses" and "Business -- Legal Proceedings." 16 24 AVAILABILITY AND PRICING OF RAW MATERIALS The primary raw materials used in plastic injection molding are various plastic resins -- primarily polypropylene and its derivatives. The plastic resins used by the Company are produced from petrochemical intermediates which, in turn, are derived from natural gas liquids. Plastic resin prices may fluctuate as a result of changes in natural gas and crude oil prices and capacity and changes in supply and demand for resin and petrochemical intermediates from which they are produced. The automotive and housing industries are significant users of plastic resin. As a result, significant changes in the demand for automobiles or housing construction may cause significant fluctuations in the price of plastic resin. See "Business -- Manufacturing, Raw Materials and Suppliers." The Company purchases plastic resin from various suppliers. The Company has no long-term supply contracts for the purchase of resin, although the Company generally maintains a 60-day supply of resin. For fiscal 1997, the cost of resin on a pro forma basis accounted for approximately 18% of the Company's total cost of goods sold and 13% of the Company's net sales. In the past, the Company has had limited ability to increase product pricing in response to plastic resin price increases. Any future increases in the price of plastic resins could have a material adverse effect on the Company's financial position and results of operations. The Company generally attempts to reduce its resin costs by purchasing off-prime grades of material primarily through brokers in secondary markets thereby enabling the Company to buy resin at a discount. There is no assurance that the Company will continue to have available necessary quantities of resin at reasonable prices. See "Business -- Manufacturing, Raw Materials and Suppliers." The Company also purchases steel and greige fabric used in the manufacturing and production of ironing boards and covers and pads from various suppliers. Any price increases because of the unavailability of steel could have a material adverse effect. RETAIL INDUSTRY; ECONOMIC CONDITIONS The Company sells its products through retailers, including mass merchandisers, supermarkets, hardware stores, specialty stores and other retail channels. See "Business -- Customers and Distribution." Retail sales depend, in part, on general economic conditions. A significant decline in such conditions could have a negative impact on sales by retailers of products sold by the Company and consequently could have an adverse effect on the Company's sales, profitability and cash flows. Retail environments which are poor or perceived to be poor, whether due to economic or other conditions, may lead houseware manufacturers and marketers, including the Company, to increase their discounting and promotional activities. Such activities could have an adverse effect on the Company's profit margins and, consequently, its results of operations. The Company may also not be able to fully offset the impact of inflation through price increases due to an unfavorable retail environment. RECENT LOSSES; SELFIX RESTRUCTURING The Company has incurred operating losses in two of the last five fiscal years. The Company's operating losses were $4.5 million in 1994 and $4.1 million in 1995. Beginning in 1994, management of the Company restructured the Company's operations to improve its profitability by, among other things, eliminating unprofitable product lines, reducing overhead, upgrading financial controls and increasing international distribution capabilities. See "Business -- Company History." After implementing the restructuring, the Company had operating profits of $1.4 million in fiscal 1996 and $12.7 million in fiscal 1997. Although the Company has restructured its operations and returned to profitability, there is no assurance that the Company will be able to maintain profitability. DEPENDENCE ON KEY PERSONNEL The Company's success depends, in large part, upon the efforts and abilities of its senior management team, particularly James R. Tennant, the Company's Chief Executive Officer. The loss of the services of Mr. Tennant or one or more of the Company's other key employees could have a material adverse effect on the Company's business. Certain of the Company's senior management, including Mr. Tennant, have entered into employment agreements with the Company, containing certain non-competition provisions. The Com- 17 25 pany does not carry key man life insurance on Mr. Tennant or any of its senior management team. See "Management -- Employment Agreements." LABOR RELATIONS As of December 30, 1997, the Company employed 1,240 persons in the United States. Approximately 90 are hourly employees at its Leominster, Massachusetts facility, covered by a collective bargaining agreement which expires in March, 1999; and approximately 150 are hourly employees at its Chicago, Illinois facilities, covered by a collective bargaining agreement which expires in January 2001. The Company also employs approximately 200 hourly employees at its Reynosa, Mexico facility, who are covered by a collective bargaining agreement which expires in December 1999. The Company utilizes the services of approximately 350 temporary workers in its injection molding operations, for assembly and in certain warehouses. Although the Company believes its relationship with its employees is good, there can be no assurance that the Company will successfully renegotiate the labor contracts when they expire without work stoppages. However, the Company does not anticipate having problems renegotiating any contracts that would materially affect its results of operations. See "Business -- Employees." YEAR 2000 COMPLIANCE The Company is aware of the issues associated with the programming code in existing computer and software systems as the millennium ("Year 2000") approaches. The Year 2000 problem is pervasive and complex, as virtually every computer operator could be affected in some way by the rollover of the two-digit year value to "00." The issue is whether systems will properly recognize date sensitive information when the year changes to 2000. Systems that do not properly recognize such information could generate erroneous data or cause complete system failures. The costs to date have not been material; however, no assurance can be given that additional amounts will not be required to be expended or that the Company's computer system will be totally Year 2000 compliant. The inability to be totally Year 2000 compliant may have an adverse effect on the Company. The Company also plans to communicate with customers, vendors and others to ensure that their systems are Year 2000 compliant. However, there can be no assurance that the systems of other companies on which the Company's systems rely will be timely converted, or that a failure to convert by another company, or a conversion that is incompatible with the Company's systems, would not have a material effect on the Company. RISKS ASSOCIATED WITH DEVELOPING NEW PRODUCTS In order to remain competitive, the Company is developing and introducing new products and product modifications and intends to continue to develop and introduce other new products in the future. The development, production and marketing of new products could require significant investment of financial resources. Although management intends to introduce and develop new products which are complementary to the Company's existing products, the Company may encounter production and marketing obstacles which would have a material adverse effect on the sales of these new products and the Company's results of operations. See "Business -- Business Strategy." LEGAL PROCEEDINGS Due to the nature of the Company's products, the Company is subject to product liability claims involving personal injuries allegedly related to the Company's products. The Company believes that such legal proceedings and claims, individually and in the aggregate, are either without merit or that the Company's insurance is generally adequate to cover such claims. Nevertheless, currently pending claims and any future claims are subject to the uncertainties related to litigation and the ultimate outcome of any such proceedings or claims cannot be predicted. There is also no assurance that the product liability insurance of the Company is or will be adequate to cover such claims. Furthermore, there can be no assurance that insurance will remain available or, if available, that it will not be prohibitively expensive. The loss of insurance coverage could have a material adverse effect on the Company's results of operations and financial condition. See "Business -- Legal Proceedings." 18 26 ENVIRONMENTAL REGULATION The Company's operations are subject to a wide variety of federal, state and local laws and regulations governing, among other things, emissions to air, discharge to waters, the generation, handling, storage, transportation, treatment and disposal of hazardous substances and other materials, and employee health and safety matters. Also, as an owner and/or operator of real property or a generator of hazardous substances, the Company may be subject to environmental cleanup liability, regardless of fault, pursuant to the Comprehensive Environmental Response Compensation and Liability Act or analogous state laws. An environmental report obtained in connection with the acquisition of Tamor indicated that certain remedial work relating to ground contamination of Tamor's Leominster, Massachusetts facility was required. The former shareholders of Tamor escrowed $1.1 million to pay for, among other things, any required remediation at the Leominster, Massachusetts facility. The Company has completed certain remediation projects at the Leominster, Massachusetts facility. The Company believes that the cost of the remediation already completed, plus the cost of any additional remediation that may be required in the future, will be less than the amount of the escrow. Except as described above, the Company believes that its properties and facilities are in compliance, in all material respects, with applicable federal, state and local laws, ordinances and regulations concerning the presence of hazardous substances and that continued compliance with such laws, ordinances and regulations will not have a material effect on the Company's capital expenditures, earnings or competitive position. However, no assurances can be given that (i) future laws, ordinances or regulations will not require or impose any material expenditures or liabilities in connection with any environmental conditions on the Company's facilities, (ii) the current environmental condition of the Company's properties will not be affected by the condition of properties in the vicinity of the Company's facilities or by third parties unrelated to the Company and (iii) prior owners of any of the Company's properties and facilities did not create environmental problems of which the Company is not aware. See "Business -- Environmental Matters." LIMITATION ON ABILITY TO REPURCHASE NOTES UPON A CHANGE OF CONTROL Upon the occurrence of a Change of Control each holder of Notes would have the right to require the Company to repurchase all or a portion of such holder's Notes at a price equal to 101% of the aggregate principal amount of the Notes, together with accrued and unpaid interest to the date of repurchase. However, the New Credit Facility will prohibit the purchase of the Notes by the Company in the event of a Change of Control, unless and until such time as the indebtedness under the New Credit Facility is repaid in full. The Company's failure to purchase the Notes would result in a default under the Indenture and the New Credit Facility, which, in turn, could result in amounts outstanding under the New Credit Facility being declared due and payable. Any such declaration could have adverse consequences to the Company and the holders of the Notes. In the event of a Change of Control, there can be no assurance that the Company would have sufficient assets to satisfy all of its obligations under the New Credit Facility and the Notes. See "Description of Other Indebtedness -- New Credit Facility" and "Description of the Exchange Notes -- Change of Control." FRAUDULENT CONVEYANCE; PREFERENTIAL TRANSFER If the court in a lawsuit brought by an unpaid creditor or representative of creditors, such as a trustee in bankruptcy, were to find under relevant federal and state fraudulent conveyance statutes that the Company or any Subsidiary Guarantor did not receive fair consideration or reasonably equivalent value for incurring the indebtedness represented by the Notes or the Guarantees, and that, at the time of such incurrence, the Company or such Subsidiary Guarantor (i) was insolvent, (ii) was rendered insolvent by reason of such incurrence, (iii) was engaged in a business or transaction for which the assets remaining with the Company or such Subsidiary Guarantor constituted unreasonably small capital or (iv) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured, or to find that the Company acted with actual intent to defraud, such court, subject to applicable statutes of limitation, could (i) void the Company's obligations under the Notes or the Subsidiary Guarantor's obligations under the Guarantees, (ii) subordinate the Notes or the Guarantees to other indebtedness of the Company or the Subsidiary Guarantors or (iii) take other action detrimental to the holders of the Notes. 19 27 The measure of insolvency for these purposes will vary depending upon the law of the jurisdiction being applied. Generally, however, a company will be considered insolvent for these purposes if the sum of that company's debts is greater than all of that company's assets at a fair valuation, or if the present fair salable value of that company's assets is less than the amount that will be required to pay its probable liability on its existing debts as they become absolute and matured or if it is unable to pay its debts as they become due. Moreover, regardless of solvency, a court could avoid an incurrence of indebtedness, including the Notes, if it determined that such transaction was made with intent to hinder, delay or defraud creditors, or a court could subordinate the indebtedness, including the Notes, to the claims of all existing and future creditors on similar grounds. Based upon financial and other information currently available to it, management believes the Company is solvent and will continue to be solvent after the consummation of the Refinancing. However, there can be no assurance as to what standard a court would apply in order to determine whether the Company or the Subsidiary Guarantors were "insolvent" upon consummation of the sale of the Notes and the Guarantees. Additionally, under federal bankruptcy or applicable state insolvency law, if certain bankruptcy or insolvency proceedings were initiated by or against the Company or any Subsidiary Guarantor within at least 90 days after any payment by the Company or any Subsidiary Guarantor with respect to the Notes or the Guarantees or the incurrence of any future Guarantee, all or a portion of such payment or such future Guarantee could be voided as a preferential transfer and the recipient of such payment could be required to return such payment if certain other factors necessary to establish a valid preference action are present. ABSENCE OF PUBLIC MARKET The Original Notes were issued to, and the Company believes are currently owned by, a relatively small number of beneficial owners. Prior to the Exchange Offer, there has not been any public market for the Original Notes. The Original 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 by holders who are entitled to participate in the Exchange Offer. The market for Original Notes not tendered for exchange in the Exchange Offer is likely to be more limited than the existing market for Original Notes. The holders of Original Notes (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who are not eligible to participate in the Exchange Offer are entitled to certain registration rights, and the Company is required to file a Shelf Registration Statement with respect to such Original Notes. See "The Exchange Offer -- Purpose and Effect of the Exchange Offer." The Exchange Notes are new securities for which there currently is no market. Although the Initial Purchasers have informed the Company that they currently intend to make a market in the Exchange Notes, they are not obligated to do so and any such market making may be discontinued at any time without notice. In addition, such market making activity may be limited during the effectiveness of the Shelf Registration Statement (if filed). Accordingly, there can be no assurance as to the development or liquidity of any market for the Exchange Notes. The Original Notes have been designated for trading in the PORTAL market. The Company does not intend to apply for listing of the Exchange Notes on any securities exchange or for their quotation through an automated dealer quotation system. The liquidity of, and trading market for, the Exchange 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. FAILURE TO EXCHANGE ORIGINAL NOTES FOR EXCHANGE NOTES Exchange Notes will be issued in exchange for Original Notes only after timely receipt by the Exchange Agent of such Original Notes, a properly completed and duly executed Letter of Transmittal and all other required documentation. See "The Exchange Offer -- Procedures for Tendering." Therefore, holders of Original Notes desiring to tender such Original Notes in exchange for Exchange Notes should allow sufficient time to ensure timely delivery. Neither the Exchange Agent nor the Company is under any duty to give notification of defects or irregularities with respect to tenders of Original Notes for exchange. Original Notes 20 28 that are not tendered or are tendered but not accepted will, following consummation of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof and, upon consummation of the Exchange Offer, certain registration rights under the Exchange and Registration Rights Agreement will terminate. In addition, any holder of Original Notes who tenders in the Exchange Offer for the purpose of participating in the distribution of the Exchange Notes may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirement of the Securities Act in connection with any resale transaction. Each broker-dealer that receives Exchange Notes for its own account in exchange for Original Notes, where such Original Notes were acquired by such activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. To the extent that Original Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Original Notes could be adversely affected due to the limited amount, or "float," of the Original Notes that are expected to remain outstanding following the Exchange Offer. Generally, a lower "float" of a security could result in less demand to purchase such security and could, therefore, result in lower prices for such security. For the same reason, to the extent that a large amount of Original Notes are not tendered or are tendered and not accepted in the Exchange Offer, the trading market for the Exchange Notes could be adversely affected. See "Plan of Distribution" and "The Exchange Offer." 21 29 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER The Original Notes were sold by the Company on May 14, 1998, to the Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers subsequently resold the Original Notes to qualified institutional buyers (as defined in Rule 144A) ("QIBs") in reliance on Rule 144A. As a condition to the Purchase Agreement, the Company and the Initial Purchasers entered into the Exchange and Registration Rights Agreement on the date of the Initial Offering (the "Issue Date"). The following description of the Exchange and Registration Rights Agreement is a summary only, does not purport to be complete and is qualified in its entirety by reference to all provisions of the Exchange and Registration Rights Agreement, a copy of which has been filed as an exhibit to the Exchange Offer Registration Statement (as defined below). See "Available Information." Pursuant to the Exchange and Registration Rights Agreement, the Company agreed to (i) file with the Commission on or prior to 60 days after the Issue Date a registration statement (the "Exchange Offer Registration Statement") relating to the Exchange Offer and (ii) use its reasonable best efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act within 150 days after the Issue Date. As soon as practicable after the effectiveness of the Exchange Offer Registration Statement, the Company will offer to the holders of Transfer Restricted Securities (as defined) who are not prohibited by any law or policy of the Commission from participating in the Exchange Offer the opportunity to exchange their Transfer Restricted Securities for the Exchange Notes. The Company will keep the Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date notice of the Exchange Offer is mailed to the holders of the Original Notes. If a change in law or applicable interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer or do not permit any holder of the Original Notes (including the Initial Purchaser) to participate in the Exchange Offer, the Company will use its reasonable best efforts to file with the Commission a shelf registration statement (the "Shelf Registration Statement") to cover resales of Transfer Restricted Securities by such holders who satisfy certain conditions relating to the provision of information in connection with the Shelf Registration Statement. For purposes of the foregoing, "Transfer Restricted Securities" means each Original Note until (i) the date on which such Original Note has been exchanged for a freely transferable Exchange Note in the Exchange Offer; (ii) the date on which such Original Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement; or (iii) the date on which such Original Note is distributed to the public in accordance with Rule 144 under the Securities Act or is salable pursuant to Rule 144(k) under the Securities Act. The Company will use its reasonable best efforts to have the Exchange Offer Registration Statement or, if applicable, the Shelf Registration Statement (each, a "Registration Statement") declared effective by the Commission as promptly as practicable after the filing thereof. Unless the Exchange Offer would not be permitted by a policy of the Commission, the Company will commence the Exchange Offer and will use its reasonable best efforts to consummate the Exchange Offer as promptly as practicable, but in any event prior to 180 days after the Issue Date. If applicable, the Company will use its best efforts to keep the Shelf Registration Statement effective for a period of two years after the Issue Date, or such shorter period as may be required to permit holders to sell the Original Notes in accordance with Rule 144 under the Securities Act. If (i) either an Exchange Offer Registration Statement or Shelf Registration Statement is not filed with the Commission on or prior to 60 days after the Issue Date; (ii) either an Exchange Offer Registration Statement or a Shelf Registration Statement is not declared effective within 150 days after the Issue Date; or (iii) the Exchange Offer is not consummated on or prior to 180 days after the Issue Date in respect of tendered Original Notes and a Shelf Registration Statement has not been declared effective or a Shelf Registration Statement is filed and declared effective within 150 days after the Issue Date but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 60 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iii), a "Registration Default"), the Company will pay liquidated damages ("Liquidated Damages") to each holder of Transfer Restricted Securities, during the period of one 22 30 or more such Registration Defaults, in an amount equal to $0.192 per week per $1,000 principal amount of the Original Notes constituting Transfer Restricted Securities held by such holder until a Registration Statement is filed, an Exchange Offer Registration Statement or Shelf Registration Statement is declared effective or the Exchange Offer is consummated or the Shelf Registration Statement is declared effective or again becomes effective, as the case may be. All accrued Liquidated Damages shall be paid to holders in the same manner as interest payments on the Original Notes on semi-annual payment dates which correspond to interest payment dates for the Original Notes. Following the cure of all Registration Defaults, the accrual of Liquidated Damages will cease. The Exchange and Registration Rights Agreement also provides that the Company (i) shall make available for a period of 180 days after the consummation of the Exchange Offer a prospectus meeting the requirements of the Securities Act to any broker-dealer for use in connection with any resale of any such Exchange Notes and (ii) shall pay all expenses incident to the Exchange Offer (including the expense of one counsel to the holders of the Original Notes) and will indemnify certain holders of the Original Notes (including any broker-dealer) against certain liabilities, including liabilities under the Securities Act. 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 Original Notes where such Original Notes were acquired by such broker-dealer as a result of market making activities or other trading activities (other than Original Notes acquired directly from the Company). A broker-dealer which delivers such a prospectus to purchasers in connection with such resales will be subject to certain of the civil liability provisions under the Securities Act and will be bound by the provisions of the Exchange and Registration Rights Agreement (including certain indemnification rights and obligations). Each holder of Original Notes who wishes to exchange such Original Notes for Exchange Notes in the Exchange Offer will be required to make certain representations, including representations that (i) any Exchange Notes to be received by it will be acquired in the ordinary course of its business; (ii) it has no arrangement or understanding with any person to participate in the distribution of the Exchange Notes; and (iii) it is not an affiliate of the Company or an Exchanging Dealer (as defined) not complying with the requirements of the next paragraph, or if it is an affiliate, that it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. If the holder is not a broker-dealer, it will be required to represent that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Notes. Each broker-dealer that receives Exchange Notes for its own account in exchange for Original Notes, where such Original Notes were acquired by such broker-dealer as a result of market making activities or other trading activities (an "Exchanging Dealer"), must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution." Holders of the Original Notes will be required to make certain representations to the Company (as described above) in order to participate in the Exchange Offer and will be required to deliver information to be used in connection with the Shelf Registration Statement in order to have their Original Notes included in the Shelf Registration Statement and benefit from the provisions regarding Liquidated Damages set forth in the preceding paragraphs. A holder who sells Original Notes pursuant to the 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 Exchange and Registration Rights Agreement which are applicable to such a holder (including certain indemnification obligations). Following the consummation of the Exchange Offer, holders of the Original Notes who were eligible to participate in the Exchange Offer but who did not tender their Original Notes will not have any further registration rights and such Original Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Original Notes could be adversely affected. See "Risk Factors -- Absence of Public Market." 23 31 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 Original 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 Original Notes accepted in the Exchange Offer. Holders may tender some or all of their Original Notes pursuant to the Exchange Offer. However, Original 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 Original Notes except that (i) the issuance of the Exchange Notes will have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof, and (ii) the holders of the Exchange Notes will not be entitled to certain rights under the Exchange and Registration Rights Agreement, including the provisions providing for an increase in the interest rate on the Original Notes in certain circumstances relating to the timing of the Exchange Offer, all of which rights terminate upon consummation of the Exchange Offer. The Exchange Notes will evidence the same debt as the Original 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 Original Notes are outstanding. The Company has fixed the close of business on , 1998 as the record date for the Exchange Offer for purposes of determining the persons to whom this Prospectus and the Letter of Transmittal will be mailed initially. Holders of Original 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 Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission thereunder. The Company shall be deemed to have accepted validly tendered Original 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 Exchange Notes from the Company. If any tendered Original 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 Original Notes will be returned, without expense, to the tendering holder thereof as promptly as practicable after the Expiration Date. Holders who tender Original Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Original Notes pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than 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 written notice and will mail to the registered holders of Original Notes 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, in its sole discretion, (i) to delay accepting any Original 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 24 32 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. INTEREST ON THE EXCHANGE NOTES Interest on the Exchange Notes issued pursuant to the Exchange Offer will accrue from the last interest payment date on which interest was paid on the Original Notes surrendered in exchange therefor or, if no interest has been paid on the Original Notes, from the Issue Date. Holders whose Original Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Original Notes. Interest on the Exchange Notes is payable semi-annually in arrears on each May 15 and November 15, commencing on November 15, 1998. PROCEDURES FOR TENDERING Only a holder of Original Notes may tender such Original Notes in the Exchange Offer. For a holder to validly tender Original Notes pursuant to the Exchange Offer, a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantee, or (in the case of a book-entry transfer) an Agent's Message in lieu of the Letter of Transmittal, and any other required documents must be received by the Exchange Agent at the address set forth under "Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration Date. In addition, prior to 5:00 p.m., New York City time, on the Expiration Date, either (a) certificates for tendered Original Notes must be received by the Exchange Agent at such address or (b) such Original Notes must be transferred pursuant to the procedures for book-entry transfer described below (and a confirmation of such tender received by the Exchange Agent, including an Agent's Message if the tendering holder has not delivered a Letter of Transmittal). The term "Agent's Message" means a message transmitted by the book-entry transfer facility, The Depository Trust Company (the "Book-Entry Transfer Facility"), to and received by the Exchange Agent and forming a part of a book-entry confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant that such participant has received and agrees to be bound by the Letter of Transmittal and that the Company may enforce such Letter of Transmittal against such participant. By executing the Letter of Transmittal (or transmitting an Agent's Message in lieu thereof), each holder will make to the Company the representations set forth above under the heading "-- Purpose and Effect of the Exchange Offer." The tender of Original Notes by a holder and the acceptance thereof by the Company will constitute agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. THE METHOD OF DELIVERY OF ORIGINAL NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR ORIGINAL NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. Any beneficial owner whose Original Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. See "Instructions to Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner" included with the Letter of Transmittal. Signatures on a Letter of Transmittal or a notice of withdrawal described below (see "-- Withdrawal of Tenders"), as the case may be, must be guaranteed by an Eligible Institution (as defined below) unless the 25 33 Original Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be made by a 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, which is a member of one of the recognized signature guarantee programs identified in the Letter of Transmittal (an "Eligible Institution"). If the Letter of Transmittal is signed by a person other than the registered holder of any Original Notes listed therein, such Original Notes must be endorsed or accompanied by a properly completed bond power, signed by such registered holder as such registered holder's name appears on such Original Notes with the signature thereon guaranteed by an Eligible Institution. If the Letter of Transmittal or any Original Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and evidence satisfactory to the Company or their authority to so act must be submitted with the Letter of Transmittal. The Company understands that the Exchange Agent will make a request promptly after the date of this Prospectus to establish accounts with respect to the Original Notes at the Book-Entry Transfer Facility for the purpose of facilitating the Exchange Offer, and subject to the establishment thereof, any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Original Notes by causing such Book-Entry Transfer Facility to transfer such Original Notes into the Exchange Agent's account with respect to the Original Notes in accordance with the Book-Entry Transfer Facility's procedures for such transfer. Although delivery of the Original Notes may be effected through book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of Transmittal properly completed and duly executed with any required signature guarantee (or, in the case of book-entry transfer, an Agent's Message in lieu thereof) and all other required documents must in each case be transmitted to and received or confirmed by the Exchange Agent at its address set forth below on or prior to the Expiration Date, or, if the guaranteed delivery procedures described below are complied with, within the time period provided under such procedures. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. All questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered Original Notes and withdrawal of tendered Original Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Original Notes not properly tendered or any Original Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right in its sole discretion to waive any defects, irregularities or conditions of tender as to particular Original 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 on all parties. Unless waived, any defects or irregularities in connection with tenders of Original Notes must be cured prior to the Expiration Date. Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Original Notes, nor shall any of them incur any liability for failure to give any such notice. Tenders of Original Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Original Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Original Notes and (i) whose Original Notes are not immediately available, (ii) who cannot deliver their Original Notes, the Letter of Transmittal (or, in the case of book-entry 26 34 transfer, an Agent's Message) or any other required documents to the Exchange Agent, or (iii) who cannot complete the procedures for book-entry transfer (including delivery of an Agent's Message), prior to the Expiration Date, may effect a tender if: (a) the tender is made through an Eligible Institution; (b) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution (i) an Agent's Message with respect to guaranteed delivery that is accepted by the Company, or (ii) 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 Original Notes and the principal amount of Original Notes tendered, stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or facsimile thereof) together with the certificate(s) representing the Original Notes (or a confirmation of book-entry transfer of such Original 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 (or, in the case of book-entry transfer, an Agent's Message), as well as the certificate(s) representing all tendered Original Notes in proper form for transfer (or a confirmation of book-entry transfer of such Original 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 within three New York Stock Exchange 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 Original Notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Original Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To withdraw a tender of Original Notes in the Exchange Offer, a telegram, telex, letter or facsimile transmission notice of withdrawal must be 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 Original Notes to be withdrawn (the "Depositor"), (ii) identify the Original Notes to be withdrawn (including the certificate number(s) and principal amount of such Original Notes, or, in the case of Original 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 Original Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the Original Notes register the transfer of such Original Notes into the name of the person withdrawing the tender, and (iv) specify the name in which any such Original 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 Original 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 Original Notes so withdrawn are validly retendered. Any Original Notes which have been tendered but which are not accepted for exchange will be retendered 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 Original Notes may be retendered by following one of the procedures described above under "-- Procedures for Tendering" at any time prior to the Expiration Date. 27 35 CONDITIONS Notwithstanding any other term of the Exchange Offer, the Company shall not be required to accept for exchange, or exchange Exchange Notes for, any Original Notes, and may terminate or amend the Exchange Offer as provided herein before the acceptance of such Original 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 sole judgment of the Company, might 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 its subsidiaries; (b) any law, statute, rule, regulation or interpretation by the staff of the Commission is proposed, adopted or enacted, which, in the sole judgment of the Company, might 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 sole discretion, deem necessary for the consummation of the Exchange Offer as contemplated hereby. If the Company determines in its sole discretion that any of the conditions are not satisfied, the Company may (i) refuse to accept any Original Notes and return all tendered Original Notes to the tendering holders, (ii) extend the Exchange Offer and retain all Original Notes tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of holders to withdraw such Original Notes (see "-- Withdrawal of Tenders"), or (iii) waive such unsatisfied conditions with respect to the Exchange Offer and accept all properly tendered Original Notes which have not been withdrawn. The Company is not aware of any federal or state consents that must be obtained, other than obtaining the effectiveness of the Exchange Offer Registration Statement, prior to consummation of the Exchange Offer. EXCHANGE AGENT LaSalle National Bank has been appointed as Exchange Agent (the "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 Notices of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows:
BY OVERNIGHT DELIVERY: BY MAIL: BY HAND: - ---------------------------- ---------------------------- ---------------------------- LaSalle National Bank LaSalle National Bank LaSalle National Bank 135 South LaSalle Street 135 South LaSalle Street 135 South LaSalle Street Room 1825 Room 1825 Room 1825 Chicago, Illinois 60603 Chicago, Illinois 60603 Chicago, Illinois 60603 Attn: Sarah Webb Attn: Sarah Webb Attn: Sarah Webb
FACSIMILE TRANSMISSION NUMBER: (312) 904-2236 CONFIRM BY TELEPHONE: (312) 904-2444 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, 28 36 however, 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 Original Notes, which is face value, less the original issue discount (net of amortization) 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. Certain expenses of the Exchange Offer will be expensed over the term of the Exchange Notes. CONSEQUENCES OF FAILURE TO EXCHANGE The Original Notes that are not exchanged for Exchange Notes pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Original Notes may be resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so long as the Original Notes are eligible for resale pursuant 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 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, whether or not such person is the holder (other than a person who is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who receives Exchange Notes in exchange for Original Notes in the ordinary course of business and who is not participating, does not intend to participate, and has no arrangement or understanding with any 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 acquired 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 Exchanging Dealer that receives Exchange Notes for its own account in exchange for Original Notes, where such Original Notes were acquired by such Exchanging 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. See "Plan of Distribution." As contemplated by these no-action letters and the Exchange and 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 29 37 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 Exchanging Dealer that receives an Exchange Note for its own account in exchange for Original 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 Exchanging Dealers, see "Plan of Distribution." USE OF PROCEEDS This Exchange Offer is intended to satisfy certain of the Company's obligations under the Purchase Agreement and the Exchange and Registration Rights Agreement. The Company will not receive any proceeds from the issuance of the Exchange Notes offered hereby. In consideration for issuing the Exchange Notes contemplated in this Prospectus, the Company will receive Original Notes in like principal amount, the form and terms of which are the same as the form and terms of the Exchange Notes (which replace the Original Notes), except as otherwise described herein. The Original Notes surrendered in exchange for Exchange Notes will be retired and canceled and cannot be reissued. Accordingly, issuance of the Exchange Notes will not result in any increase or decrease in the indebtedness of the Company. As such, no effect has been given to the Exchange Offer in the pro forma statements or capitalization tables. The $125 million of gross proceeds from the Initial Offering (before deductions of underwriting discounts and other expenses of the Initial Offering), together with borrowings under the New Credit Facility of approximately $2.8 million, were used to pay (i) all amounts outstanding under the Company's previously outstanding credit facility with General Electric Capital Corporation, together with certain fees, prepayment penalties and expenses related to such repayment, in an aggregate amount of approximately $122 million, (ii) other fees and expenses of approximately $1.3 million incurred in connection with the Refinancing and (iii) for working capital and general corporate purposes. See "Description of Other Indebtedness -- New Credit Facility." 30 38 CAPITALIZATION The following table sets forth the pro forma capitalization of the Company after giving effect to the Seymour Acquisition and the Refinancing. See "Use of Proceeds." This table should be read in conjunction with the Consolidated Financial Statements and notes thereto included elsewhere in this Prospectus.
MARCH 28, 1998 ----------------------- ACTUAL AS ADJUSTED -------- ----------- (DOLLARS IN THOUSANDS) Cash........................................................ $ 4,163 $ 4,163 ======== ======== Short-term debt: Current maturities of Existing Credit Facility............ $ 5,600 $ -- Current maturities of industrial development revenue bonds and capital lease obligations.......................... 991 991 -------- -------- Total short-term debt............................. 6,591 991 -------- -------- Long-term debt: Existing Credit Facility.................................. 114,400 -- New Credit Facility....................................... -- 2,500 Industrial development revenue bonds and capital lease obligations............................................ 5,675 5,675 Notes offered hereby...................................... -- 125,000 -------- -------- 120,075 133,175 -------- -------- Stockholders' equity: Common stock and other equity............................. 47,939 47,939 Retained earnings......................................... 8,125 4,826 -------- -------- Total stockholders' equity........................ 56,064 52,765 -------- -------- Total capitalization.............................. $182,730 $186,931 ======== ========
31 39 SELECTED HISTORICAL FINANCIAL DATA HOME PRODUCTS INTERNATIONAL, INC. The following table sets forth selected historical financial data of HPI as of and for each of the five fiscal years in the period ended December 27, 1997 and for the thirteen week periods ended March 29, 1997 and March 28, 1998. The statement of operations data for the five fiscal years in the period ended December 27, 1997 were derived from HPI's audited historical financial statements included elsewhere in this Prospectus. The unaudited statement of operations data for the thirteen week periods ended March 29, 1997 and March 28, 1998 were derived from the unaudited financial statements of HPI. "Other Data" below, not directly derived from the HPI historical financial statements, have been presented to provide additional analysis. In the opinion of management, the unaudited data includes all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the data for such periods. Interim results for the thirteen week period ended March 28, 1998, are not necessarily indicative of results that can be expected in future periods. The summary historical financial data below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical consolidated financial statements and notes thereto included elsewhere in this Prospectus.
THIRTEEN WEEKS YEAR ENDED ENDED ---------------------------------------------------- --------------------- DEC. 25, DEC. 31, DEC. 30, DEC. 28, DEC. 27, MARCH 29, MARCH 28, 1993 1994 1995 1996 1997 1997 1998 -------- -------- -------- -------- -------- --------- --------- (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Net sales.............................. $39,711 $40,985 $41,039 $38,200 $129,324 $31,738 $52,408 Gross profit(a)........................ 17,207 15,398 15,361 15,208 40,436 9,128 15,953 Operating profit (loss)................ 2,993 (4,488) (4,075) 1,365 12,748 2,526 5,092 Interest expense....................... (1,066) (999) (896) (707) (5,152) (1,532) (3,006) Extraordinary item, net of tax......... -- -- -- -- -- -- (1,737) Net earnings (loss).................... 1,515 (6,003) (4,010) 806 7,320 1,032 (491) OTHER DATA: Gross profit margin(a)................. 43.3% 37.6% 37.4% 39.8% 31.3% 28.8% 30.4% Capital expenditures................... $ 3,131 $ 2,326 $ 1,334 $ 1,734 $ 8,568 $ 597 $ 4,092 Ratio of earnings to fixed charges(b)........................... 2.8x -- -- 2.0x 2.4x 1.7x 1.7x
- --------------- (a) Gross profit is defined as net sales less cost of goods sold. Gross profit margin is computed as gross profit as a percentage of net sales. (b) For the purposes of computing this ratio, earnings consist of earnings (loss) before income taxes, extraordinary item and fixed charges. Fixed charges consist of interest expense, amortization of debt financing costs, and the estimated interest factor in rental expense. The 1994 and 1995 coverage deficiencies were $5.8 million and $4.3 million, respectively. SEYMOUR SALES CORPORATION AND SUBSIDIARIES The following table sets forth selected financial data of Seymour as of and for each of the three fiscal years in the period ended June 30, 1997 and for the six month periods ended December 28, 1996 and December 27, 1997. The statement of operations and balance sheet data for the three years in the period ended June 30, 1997 have been derived from Seymour's audited historical consolidated financial statements. The unaudited statement of operations data for the six month periods ended December 28, 1996 and December 27, 1997 have been derived from the unaudited financial statements of Seymour. The historical Seymour statements of operations reflect certain reclassifications to conform with HPI presentation. "Other Data" below, not directly derived from the Seymour historical financial statements, have been presented to provide additional analysis. The Selected Historical Financial Data below should be read in conjunction with 32 40 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical consolidated financial statements and notes thereto included elsewhere in this Prospectus.
SIX MONTHS ENDED YEAR ENDED JUNE 30, -------------------- -------------------------------- DEC. 28, DEC. 27, 1995 1996 1997 1996 1997 -------- -------- -------- -------- -------- (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Net sales........................... $ 92,554 $105,532 $ 98,274 $45,248 $43,096 Gross profit(a)..................... 25,266 25,687 29,518 12,583 10,233 Operating profit (loss)............. 3,737 (684) 6,220 1,188 (3,171) Interest expense, net............... (7,394) (8,384) (7,923) (4,047) (3,708) Net loss............................ (2,410) (11,888) (2,019) (2,883) (7,487) OTHER DATA: Gross profit margin(a).............. 27.3% 24.3% 30.0% 27.8% 23.7% Capital expenditures................ $ 1,124 $ 2,595 $ 1,161 $ 321 $ 1,376 BALANCE SHEET DATA: Working capital(b).................. $ 26,453 $ 21,604 $ 16,070 $16,360 $ 9,627 Total assets........................ 124,580 111,323 103,188 99,906 93,810 Total debt, including capital lease obligations...................... 83,779 83,772 76,301 76,884 70,003 Total stockholders' equity.......... 22,829 10,850 8,765 7,923 1,238
- --------------- (a) Gross profit is defined as net sales less cost of goods sold. Gross profit margin is computed as gross profit as a percentage of net sales. (b) Working capital is computed as current assets less current liabilities. 33 41 UNAUDITED PRO FORMA COMBINED FINANCIAL DATA The following Unaudited Pro Forma Combined Financial Data of the Company are based on, and should be read in conjunction with, the Consolidated Financial Statements of HPI and Seymour and the notes thereto included elsewhere in this Prospectus, and have been adjusted to give pro forma effect to the Seymour Acquisition and related financing and the Refinancing. An effective tax rate of 40% has been assumed for all periods; however, the year ended December 27, 1997 includes a $3.1 million income tax benefit due to the reduction of a valuation allowance. The historical Seymour statements of operations reflect certain reclassifications to conform with HPI presentation. The Unaudited Pro Forma Combined Statement of Operations for the year ended December 27, 1997 has been prepared by combining the Consolidated Statement of Operations of HPI for the year ended December 27, 1997 with the Unaudited Consolidated Statement of Operations of Seymour for the year ended December 27, 1997, as if the Seymour Acquisition and related financing and the Refinancing had occurred on December 29, 1996. The Unaudited Pro Forma Combined Statement of Operations of the Company for the thirteen week period ended March 28, 1998 gives pro forma effect to the Refinancing as if it had occurred on December 28, 1997. The Unaudited Pro Forma Combined Statement of Operations for the thirteen week period ended March 29, 1997 gives pro forma effect to the Seymour Acquisition and related financing and the Refinancing as if each of the transactions had occurred on December 29, 1996. The Unaudited Pro Forma Combined Statement of Operations for the thirteen week period ended March 29, 1997 has been prepared by combining the Unaudited Consolidated Statement of Operations of HPI for the thirteen week period ended March 29, 1997 with the Unaudited Consolidated Statement of Operations of Seymour for the thirteen week period ended March 29, 1997. The pro forma adjustments are based upon available information and certain assumptions that HPI believes are reasonable. Other data included on the pro forma statements of operations have been presented to provide additional analysis. The Seymour Acquisition has been accounted for using the purchase method of accounting. Allocations of the purchase price have been determined based upon preliminary information and estimates of fair value and are subject to change. Differences between the amounts included herein and the final allocations are not expected to have a material effect on the Unaudited Pro Forma Combined Financial Data. The Unaudited Pro Forma Combined Financial Data do not purport to represent what the Company's results of operations would have been if such events had occurred at the dates indicated, nor do such statements purport to project the results of the Company's operations for any future period. 34 42 HOME PRODUCTS INTERNATIONAL, INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 27, 1997
PRO FORMA ADJUSTMENTS ---------------------------- SEYMOUR PRO FORMA HPI SEYMOUR ACQUISITION REFINANCING COMBINED --------- ------- ----------- ----------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales.................... $ 129,324 $92,963 $ -- $ -- $ 222,287 Cost of goods sold........... 88,888 69,121 (221)(b) -- 157,788 --------- ------- --------- ----- --------- Gross profit............... 40,436 23,842 221 -- 64,499 Operating expenses........... 27,688 21,916 (a) (1,300)(c) (17)(g) 49,150 875 (d) (12)(b) --------- ------- --------- ----- Operating profit........... 12,748 1,926 658 17 15,349 Interest (expense)........... (5,152) (7,701) (1,871)(e) (813)(f) (15,537) Other income (expense)....... 70 (635)(a) -- (167)(l) (732) --------- ------- --------- ----- --------- Earnings (loss) before income taxes and extraordinary item...... 7,666 (6,410) (1,213) (963) (920) Income tax (expense) benefit before change in valuation allowance.................. (3,489) (260) 3,732 (h) 385 (h) 368 Change in income tax valuation allowance........ 3,143(i) -- -- -- 3,143 --------- ------- --------- ----- --------- Total income tax (expense) benefit.................... (346) (260) 3,732 385 3,511 --------- ------- --------- ----- --------- Earnings (loss) before extraordinary item...... $ 7,320 $(6,670) $ 2,519 $(578) $ 2,591 ========= ======= ========= ===== ========= Earnings before extraordinary item per share -- basic.... $ 0.38 ========= Earnings before extraordinary item per share --diluted... $ 0.37 ========= Weighted average common shares outstanding -- basic....... 5,436,002 1,320,700(j) 6,756,702 Weighted average common shares outstanding -- diluted..... 5,682,415 1,320,700(j) 7,003,115 OTHER DATA: EBITDA(k).................. $ 32,335 EBITDA margin(k)........... 14.5% Capital expenditures....... $ 11,031
See Notes to Unaudited Pro Forma Combined Financial Data 35 43 HOME PRODUCTS INTERNATIONAL, INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS THIRTEEN WEEKS ENDED MARCH 29, 1997
PRO FORMA ADJUSTMENTS -------------------------- SEYMOUR PRO FORMA HPI SEYMOUR ACQUISITION REFINANCING COMBINED --------- ------- ----------- ----------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales.......................... $ 31,738 $23,544 $ -- $ -- $ 55,282 Cost of goods sold................. 22,610 16,992 -- -- 39,602 --------- ------- --------- ----- --------- Gross profit..................... 9,128 6,552 -- -- 15,680 Operating expenses................. 6,602 5,076 218 (d) (2)(g) 11,658 (236)(c) Operating profit................. 2,526 1,476 18 2 4,022 Interest (expense)................. (1,532) (1,951) (468)(e) (92)(f) (4,043) Other income (expense)............. 155 19 -- (31)(l) 143 --------- ------- --------- ----- --------- Earnings (loss) before income tax and extraordinary item........ 1,149 (456) (450) (121) 122 Income tax (expense) benefit....... (117) (119) 139 (h) 48 (h) (49) --------- ------- --------- ----- --------- Earnings (loss) before extraordinary item............ $ 1,032 $ (575) $ (311) $ (73) $ 73 ========= ======= ========= ===== ========= Earnings (loss) before extraordinary item per share -- basic................... $ 0.01 ========= Earnings (loss) before extraordinary item per share -- diluted................. $ 0.01 ========= Weighted average common shares outstanding -- basic............. 4,298,779 1,320,700 (j) 5,619,479 Weighted average common shares outstanding -- diluted........... 4,513,683 1,320,700 (j) 5,834,383 OTHER DATA: EBITDA(k)........................ $ 8,099 EBITDA margin(k)................. 14.7% Capital expenditures............. $ 1,038
See Notes to Unaudited Pro Forma Combined Financial Data 36 44 HOME PRODUCTS INTERNATIONAL, INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS THIRTEEN WEEKS ENDED MARCH 28, 1998
PRO FORMA PRO REFINANCING FORMA HPI ADJUSTMENTS COMBINED -------- ------------ --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales................................................. $52,408 $ -- $52,408 Cost of goods sold........................................ 36,455 -- 36,455 ------- ------ ------- Gross profit............................................ 15,953 -- 15,953 Operating expenses........................................ 10,861 (2)(g) 10,859 ------- ------ ------- Operating profit........................................ 5,092 2 5,094 Interest (expense)........................................ (3,006) (476)(f) (3,482) Other income (expense).................................... 58 (45)(l) 13 ------- ------ ------- Earnings (loss) before income taxes and extraordinary item................................................. 2,144 (519) 1,625 Income tax (expense) benefit.............................. (898) 248 (h) (650) ------- ------ ------- Earnings (loss) before extraordinary item............... $ 1,246 $ (271) $ 975 ======= ====== ======= Earnings before extraordinary item per share -- basic..... $0.12 ======= Earnings before extraordinary item per share -- diluted... $0.12 ======= Weighted average common shares outstanding -- basic....... 7,928,668 7,928,668 Weighted average common shares outstanding -- diluted..... 8,316,182 8,316,182 OTHER DATA: EBITDA(k)............................................... $ 8,036 EBITDA margin(k)........................................ 15.3% Capital expenditures.................................... $ 4,092
See Notes to Unaudited Pro Forma Combined Financial Data 37 45 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA (DOLLARS IN THOUSANDS) (a) Other income (expense) includes a $550 write-off of a prepaid asset that was eliminated in connection with the termination of Seymour's defined benefit pension plan. Operating expenses includes $2,600 of expense estimated to be incurred in connection with the consolidation and disposition of certain Seymour manufacturing operations. (b) Reflects an adjustment of Seymour depreciation expense to conform with HPI's half-year convention depreciation policy. Cost of goods sold is reduced by $221 and operating expenses is reduced by $12. (c) Reflects cost savings relating to the consolidation of Seymour's sales, marketing and R&D functions with those of existing HPI companies. The estimated cost savings primarily represents wages and benefits associated with redundant Seymour personnel. (d) Reflects the additional amortization expense resulting from the recording of goodwill associated with the Seymour Acquisition. Goodwill is amortized over 40 years. (e) Reflects the interest expense on additional debt of $21,043 for the Seymour Acquisition at the 1997 effective Existing Credit Facility at an assumed weighted average interest rate of 8.89%. (f) Reflects the estimated net change in interest expense as if the Refinancing had occurred as of the beginning of the applicable years. An interest rate of 9.625% has been used for the Refinancing. The pro forma adjustment to interest expense is comprised of the following:
THIRTEEN THIRTEEN YEAR WEEKS WEEKS ENDED ENDED ENDED DEC. 27, MARCH 27, MARCH 28, 1997 1997 1998 -------- --------- --------- Elimination of debt discount created from issuance of Warrants to General Electric Capital Corporation.......... $ 400 $171 $ -- Increased effective interest rate resulting from the Initial Offering as compared to historical rates.................. (166) (53) (194) Interest expense on $5,000 of additional debt resulting from the Initial Offering as compared to historical debt levels.................................................... (481) (120) (120) Interest expense on assumed borrowings under the New Credit Facility.................................................. (241) (60) (60) Unused revolver fees on the New Credit Facility............. (453) (113) (110) Incremental change in amortization of deferred financing fees...................................................... 123 80 (55) Other....................................................... 5 3 63 ----- ---- ----- Total............................................. $(813) $(92) $(476) ===== ==== =====
(g) Reflects the elimination of the annual fees associated with the Existing Credit Facility. (h) Reflects an adjustment to income tax (expense) benefit by applying an effective tax rate of 40% to the historical results of HPI and Seymour, as well as to the Seymour Acquisition and Refinancing pro forma adjustments. (i) The change in the income tax valuation allowance of $3,143 results from management's determination that it is more likely than not that the Company will realize its deferred tax assets. (j) Reflects the increase in weighted average common shares outstanding as a result of the Seymour Acquisition. (k) EBITDA is defined as the sum of (i) earnings before income taxes and extraordinary items, (ii) interest expense, (iii) interest income, (iv) depreciation and amortization, (v) one-time charges in the third and fourth quarter of 1997 of $2,600 relating to the consolidation and disposition of certain Seymour manufacturing operations, (vi) a $550 one-time write off in the third quarter of 1997 of an asset eliminated in connection with the termination of Seymour's defined benefit pension plan and (vii) certain other one-time items totaling $293 during the third and fourth quarters of 1997. Management believes 38 46 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA -- (CONTINUED) that the consolidation of the Seymour manufacturing operations should enable it to generate an additional $1,800 in annual cost savings following the completion of the consolidation. However, no assurance can be given that such savings will be realized. Management believes that EBITDA is a measure commonly used by analysts and investors to determine a company's ability to service and incur debt. Accordingly, this information has been presented to permit a more complete analysis. EBITDA should not be considered a substitute for net income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. EBITDA margin is computed as EBITDA as a percentage of net sales. (l) Reflects the estimated change in interest income as if the Initial Offering had occurred as of the beginning of the applicable years. 39 47 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the "Selected Historical Financial Data," "Unaudited Pro Forma Combined Financial Data" and the Consolidated Financial Statements of the Company and the notes thereto included elsewhere in this Prospectus. This Prospectus contains, in addition to historical information, forward-looking statements that are subject to risks and other uncertainties. The Company's actual results may differ materially from those anticipated in these forward-looking statements. The Company reports on a 52-53 week year ending on the last Saturday of December. References to the fiscal years 1997, 1996 and 1995 are for the fifty-two weeks ended December 27, 1997, December 28, 1996, and December 30, 1995, respectively. THIRTEEN WEEKS ENDED MARCH 28, 1998 ("FIRST QUARTER 1998") COMPARED TO THIRTEEN WEEKS ENDED MARCH 27, 1997 ("FIRST QUARTER 1997") (PRO FORMA TO INCLUDE SEYMOUR) The following discussion and analysis compares the pro forma results for the first quarter 1998 to the pro forma results for the first quarter 1997. Management believes that such comparison is necessary to meaningfully analyze the changes occurring in such periods. The pro forma financial results give effect to the Seymour Acquisition and related financing and the Refinancing as if they had occurred on December 29, 1996. The pro forma operating expenses reflect additional amortization expense resulting from the recording of goodwill associated with the Seymour Acquisition. The pro forma interest expense reflects the estimated net increase in interest expense as if the Seymour Acquisition and the Refinancing had occurred on December 29, 1996. Income tax expense assumes a pro forma rate of 40% for the period presented. The pro forma number of weighted shares assumes the 1,320,700 shares issued as a result of the Seymour Acquisition were outstanding as of December 29, 1996. As such, in the discussion that follows, all comparisons are made on a pro forma basis with reference to the following:
THIRTEEN WEEKS ENDED ------------------------------------------------ MARCH 28, 1998 MARCH 27, 1997 -------------------- -------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales....................................... $52,408 100.0% $55,282 100.0% Cost of goods sold.............................. 36,455 69.6 39,602 71.6 ------- ----- ------- ----- Gross profit.................................. 15,953 30.4 15,680 28.4 Operating expenses.............................. 10,859 20.7 11,658 21.1 ------- ----- ------- ----- Operating profit.............................. 5,094 9.7 4,022 7.3 Interest (expense).............................. (3,482) (6.6) (4,043) (7.3) Other income.................................... 13 -- 143 0.2 ------- ----- ------- ----- Earnings before income taxes.................. 1,625 3.1 122 0.2 Income tax (expense)............................ (650) (1.2) (49) (0.1) ------- ----- ------- ----- Earnings before extraordinary item.............. $ 975 1.9% $ 73 0.1% ======= ===== ======= ===== Earnings before extraordinary item per share -- basic................................ $ 0.12 $ 0.01 ======= ======= Earnings before extraordinary item per share -- diluted.............................. $ 0.12 $ 0.01 ======= =======
Net sales. Net sales of $52.4 million in the first quarter of 1998 decreased $2.9 million, or 5.2%, from net sales of $55.3 million in the first quarter of 1997. Net sales were down as a result of the Company's continuing effort to cutback or eliminate the sales of certain underperforming products. In addition, sales as compared to the prior period were negatively impacted by the bankruptcy of several retailers during the fourth quarter of 1997 and first quarter of 1998. Sales to such customers for the first quarter of 1997 totaled $2.1 million as compared to $0.4 million in the first quarter of 1998. 40 48 Gross profit. Gross profit increased from $15.7 million in the first quarter of 1997 to $16.0 million in the first quarter of 1998 in spite of a sales decline of $2.9 million. Gross profit margins increased from 28.4% in 1997 to 30.4% in 1998 due to a decrease in the cost of plastic resin. The Company experienced a price decrease resulting in margin savings of 2.8% as compared to a year ago. The discontinuance of certain underperforming products also helped to improve margins. Partially offsetting the margin improvements were product mix shifts, manufacturing inefficiencies related to new product start ups and unabsorbed overhead on reduced manufacturing production. Operating expenses. Operating expenses of $10.9 million in the first quarter of 1998 were down $0.8 million as compared to the first quarter of 1997. As a percent of net sales, operating expenses were 20.7% in 1998 as compared to 21.1% in 1997. Selling expenses declined $0.4 million in 1998 but remained at 12.3% of sales for both years. Commissions and freight decreased $0.4 million as a result of the decline in sales. Administrative expenses increased from 6.0% of net sales in 1997 to 6.7% of net sales in 1998 as a result of the decrease in net sales. Amortization of intangibles decreased $0.6 million from the first quarter of 1997 to the first quarter of 1998. This is a result of certain intangibles that were fully amortized in 1997 as well as a write-down of a non-compete agreement in the fourth quarter of 1997. Interest expense. Interest expense of $3.5 million in the first quarter of 1998 was down $0.5 million from $4.0 million in 1997. Both periods reflect interest and financing fees related to the Refinancing. The decrease is due to a public stock offering of 3,780,000 shares in the third quarter of 1997, of which 1,500,000 shares were sold by selling stockholders. Proceeds from the stock offering to the Company, $20.9 million, were used to repay a subordinated note of $7.0 million, term notes of $13.6 million, and accrued interest of $0.3 million. Income taxes. Income taxes increased to $0.7 million in the first quarter of 1998 from $0.1 million in the first quarter of 1997 as a result of higher earnings. Earnings before extraordinary item. Earnings before extraordinary item increased to $1.0 million in the first quarter of 1998 from first quarter earnings in 1997 of $0.1 million. Diluted earnings per share increased to $0.12 in the first quarter of 1998 from $0.01 in the first quarter of 1997 based on 8,316,182 and 5,834,383 weighted shares outstanding for 1998 and 1997, respectively. FISCAL YEAR 1997 (ACTUAL) COMPARED TO FISCAL YEAR 1996 (PRO FORMA TO INCLUDE TAMOR) The following discussion and analysis compares the actual results of 1997 to the pro forma results for 1996. Management believes that such a comparison (pro forma 1996 results for Tamor) is necessary to meaningfully analyze the changes occurring in such years. The pro forma financial results give effect to the Tamor Acquisition, and related financing, as if each of the transactions had occurred on January 1, 1996. The pro forma operating expenses reflect (i) additional amortization expense resulting from the recording of goodwill associated with the Tamor Acquisition, (ii) net estimated cost savings as a result of the Tamor Acquisition, including a net reduction in discretionary distributions paid to and on behalf of related parties of Tamor and (iii) additional costs associated with the Company's 401(k) and profit sharing plans and certain other fees. The pro forma interest expense reflects the estimated net increase in interest expense as if the Tamor Acquisition and related financing had occurred on January 1, 1996. The pro forma number of weighted average shares assumes the 480,000 shares issued as a result of the Tamor Acquisition and a warrant issued in connection with the acquisition financing were outstanding as of January 1, 1996. 41 49 As such, in the discussion that follows, all comparisons are made on a pro forma basis with reference to the following:
FIFTY-TWO WEEKS ENDED -------------------------------------------------- PRO FORMA DECEMBER 27, 1997 DECEMBER 28, 1996 ----------------------- ----------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales............................................. $129,324 100.0% $113,914 100.0% Cost of goods sold.................................... 88,888 68.7 80,810 70.9 -------- ----- -------- ----- Gross profit........................................ 40,436 31.3 33,104 29.1 Operating expenses.................................... 27,688 21.5 24,864 21.8 -------- ----- -------- ----- Operating profit.................................... 12,748 9.8 8,240 7.3 Interest (expense).................................... (5,152) (4.0) (6,328) (5.6) Other income.......................................... 70 0.1 847 0.7 -------- ----- -------- ----- Earnings before income taxes........................ 7,666 5.9 2,759 2.4 Income tax (expense).................................. (346) (0.2) (160) (0.1) -------- ----- -------- ----- Net earnings.......................................... $ 7,320 5.7% $ 2,599 2.3% ======== ===== ======== ===== Net earnings per share -- basic....................... $ 1.35 $ 0.60 ======== ======== Net earnings per share -- diluted..................... $ 1.29 $ 0.59 ======== ========
Net sales. Net sales of $129.3 million were up $15.4 million from the prior year. The sales increase was primarily driven by new product introductions within Tamor's storage container line. The introduction of the flat lid 20, 30, and 48 gallon storage totes contributed $12.2 million of new product sales. Growth in the storage category was driven by continuing consumer trends toward larger, more durable products for storage of seasonal and other items. Sales of plastic hangers increased $3.5 million from 1996 as a result of aggressive pricing action taken in response to competitive pressures. 1997 also saw an increase in the bath and shower category with the introduction of Selfix's Suction Lock bath line. This increase offset declines in less profitable juvenile and home organization products. Home improvement products experienced a decrease of $0.9 million due to postponed remodeling projects by end users. Gross profit. Gross profit margins in 1997 were 31.3% of net sales, up significantly from 1996 margins of 29.1%. The margin improvement was a direct result of a decline in the cost of plastic resin. The average cost of plastic resin dropped from $0.37 per pound in 1996 to $0.33 in 1997. The decrease in the cost of plastic resin resulted in savings of approximately $2.6 million as compared to 1996. This savings represents 2% of 1997 net sales. Declines in resin costs were a reflection of plastic resin market factors and not as a result of any change in the Company's buying practices. In addition to the decrease in cost of plastic resin, margins also benefited from improved usage of existing capacity. Tamor was able to shift some of its excess molding capacity ($2.1 million) to Selfix and Shutters, allowing all three entities to run nearly at full capacity. Fixed costs were absorbed over an expanded manufacturing volume thus reducing unit costs as a percent of net sales. Operating expenses. Operating expenses, including selling, administrative, and amortization of intangibles, decreased slightly as a percentage of sales from 1996 to 1997. Selling expenses decreased from 14.9% in 1996 to 14.2% in 1997. The slight decrease as a percentage of net sales is attributable to the Company's continuous efforts to effectively manage costs. Administrative expenses increased from 6.2% of net sales in 1996 to 6.5% in 1997. The minor increase is due to the 1997 implementation of two separate incentive bonus plans, as well as an increase in the reserve for bad debts. Amortization of intangibles increased slightly, but as a percentage of net sales remained constant at 0.7%. Interest expense. Interest expense of $5.2 million in 1997 decreased $1.1 million from $6.3 million in 1996 due to a public stock offering of 3,780,000 shares in the third quarter, of which 1,500,000 were sold by selling stockholders. Proceeds from the offering to the Company, $20.9 million, were used to repay a subordinated note of $7.0 million, term notes of $13.6 million and accrued interest of $0.3 million. 42 50 Other income. Other income of $0.1 million in 1997 decreased from $0.8 million in 1996. In 1996, the Company realized interest income on excess cash flow as well as the proceeds of a life insurance policy. Income taxes. The Company was able to use federal net operating loss carryforwards and use the elimination of its valuation allowance to reduce the 1997 federal tax liability to zero. The valuation allowance was eliminated as a result of the Company's determination that it was more likely than not that the benefit of the deferred tax assets recorded would be realized. The Company recorded a provision for state income taxes in the amount of $0.3 million, as a result of the inability to use tax loss carryforwards in Massachusetts, Tamor's primary state of business. The pro forma 1996 results also reflect zero federal tax expense, and the state provision recorded reflects the actual state taxes paid by Tamor. Net earnings. Net earnings in 1997 were $7.3 million, or $1.29 per common share -- diluted, based on 5.7 million weighted average common shares outstanding. This compares to net earnings of $2.6 million in 1996, or $0.59 per common share -- diluted, based on 4.4 million weighted average common shares outstanding. The $4.7 million increase in profitability is due to a 13.5% increase in net sales combined with a 2.2% increase in gross margin. The increase in weighted average common shares outstanding is the result of the secondary public stock offering in July, 1997, the exercise of stock options throughout 1997, and stock issued in connection with the Company's Employee Stock Purchase Plan. FISCAL 1996 COMPARED TO FISCAL 1995 The following discussion and analysis compares the actual historical results of 1996 and 1995 without consideration for the Tamor Acquisition, which would affect, among other items, raw materials prices:
FIFTY-TWO WEEKS ENDED ------------------------------------------------ DECEMBER 28, 1996 DECEMBER 30, 1995 -------------------- -------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales....................................... $38,200 100.0% $41,039 100.0% Cost of goods sold.............................. 22,992 60.2 25,678 62.6 ------- ----- ------- ----- Gross profit.................................. 15,208 39.8 15,361 37.4 Operating expenses.............................. 13,843 36.2 17,385 42.3 Restructuring charge............................ -- -- 2,051 5.0 ------- ----- ------- ----- Operating profit (loss)....................... 1,365 3.6 (4,075) (9.9) Interest expense................................ (707) (1.9) (896) (2.2) Other income (expense).......................... 148 0.4 688 1.7 ------- ----- ------- ----- Earnings (loss) before income taxes........... 806 2.1 (4,283) (10.4) Income tax benefit.............................. -- -- 273 0.6 ------- ----- ------- ----- Net earnings (loss)............................. $ 806 2.1% $(4,010) (9.8)% ======= ===== ======= ===== Net earnings (loss) per share -- basic.......... $ 0.21 $ (1.11) ======= ======= Net earnings (loss) per share -- diluted........ $ 0.21 $ (1.11) ======= =======
General. Fiscal 1996 results began to reflect the positive benefits of the restructuring actions taken during fiscal years 1994 and 1995. The Company's net earnings in fiscal 1996 of $0.8 million reflect reduced operating expenses, improved manufacturing efficiencies and increased gross profit margins. Overhead reductions and operating initiatives which were implemented in 1994 and 1995 directly benefited 1996 results as follows: (i) a 24% reduction in the workforce; (ii) the elimination of unprofitable product lines; (iii) the closing of three facilities; (iv) a reduction in outside warehousing costs; (v) a 29% reduction of gross inventory; and (vi) the reduction of operating expenses below amounts spent in fiscal 1993. Net sales. Net sales of $38.2 million in 1996 decreased $2.8 million, or 6.9%, from net sales in 1995 of $41.0 million. The reduction in sales was a direct result of decisions made in 1995 to discontinue the sale of certain underperforming housewares products. Discontinued products, accounting for $3.3 million of 1995 net 43 51 sales, were across all of the housewares product lines but were greatest in the hooks and home helpers and home organization product lines. Home bathwares sales increased 3.0% from 1995 as a result of an expanded line of shower organizers. Juvenile products sales increased 10.0% as the Company had a full year in which to sell the child safety product line acquired in October 1995. Home improvement products increased 5.0% as a result of increased placement with remodeling distributors. Gross profit. Gross profit margins in 1996 were 39.8% of net sales, an increase from margins in 1995 of 37.4% of net sales. Increased gross profit margins were attributable to a slight decrease in the cost of plastic resin but more significantly to the impact of decisions made in 1995 and the selling of fewer lower margin products. Plastic resin costs declined about 9.0% during 1996 to an average cost of $0.48 per pound from an average cost of $0.53 per pound for plastic resin during 1995. Selfix used approximately seven million pounds of plastic resin resulting in a cost savings of $0.3 million as compared to 1995 cost levels. The declines in resin costs were a reflection of plastic resin market factors and not as a result of any change in the Company's buying practices. Operating expenses. Selling expenses decreased from 25.5% of net sales in 1995 to 23.7% of net sales in 1996. Warehousing and customer service costs were reduced by the first quarter closing of the Company's Canadian facility. All Canadian business is now serviced from the Company's manufacturing and distribution facilities in Chicago. The closing resulted in personnel reductions and reduced warehousing costs. In addition, management decided that the Company was better served by outsourcing certain product design services. This resulted in further personnel related savings. Administrative expenses also decreased as a percent of net sales. Administrative expenses were 12.0% of net sales in 1996 as compared to 15.7% in 1995. Management efforts to evaluate and reduce spending successfully reduced personnel costs, professional fees and nearly all other administrative items. Costs related to the search and evaluation of acquisition targets were significantly decreased in 1996. Management devoted the majority of its attention to cost reduction efforts, manufacturing efficiencies, and managing the impact of selling a reduced number of product lines. Fourth quarter costs in 1996 of approximately $0.2 million related to the Tamor Acquisition were capitalized. In addition, 1995 included an increase in the allowance for doubtful accounts of $0.4 million to address the uncertain financial condition of several retailers. Further, management decided in 1995 to outsource its management information department and incurred $0.4 million of charges for related severance payments and equipment write-offs. Amortization of intangibles decreased from 1.2% of net sales in 1995 to 0.5% in 1996. The decrease in amortization is the result of 1995 write-offs of previously capitalized patents and trademarks related to discontinued product lines. Restructuring charge. Restructuring charges totaling $2.1 million were recorded in 1995 related to discontinuing certain unprofitable product lines, closing the Company's Canadian facility and moving the Canadian operations to Chicago. Such charges included severance benefits, the write-off of Canadian fixed assets, early lease termination charges on the Canadian building lease and the write-off of inventory and intangibles related to discontinued product lines. The charges for the closing and relocation of the Canadian operation totaled $1.0 million, including severance benefits of $0.2 million covering all of the Canadian employees. The relocation of the Canadian operation was completed in the first half of 1996. The remaining $1.1 million of restructuring charges related to product lines the Company decided to discontinue and the write-off of related product molds, inventory and patents. The after tax and per share impact of the write-off of depreciable assets in connection with the 1995 restructuring charge was $1.0 million and $0.27, respectively. Interest expense. In December 1995, the Company used excess cash to pay down a $1.5 million note payable to a bank. In addition, $0.8 million of installment payments on variable rate demand bonds were made. As a result of these payments, Selfix's 1996 interest expense was reduced $0.2 million as compared to 1995. Changes in interest rates had no significant impact on interest expense between years. Other income. In 1996, other income of $0.1 million was significantly less than the $0.7 million of other income in 1995. Other income in 1995 was positively impacted by the favorable settlement of a non-compete 44 52 and consulting agreement. The favorable settlement allowed $0.3 million of related accruals to be reversed into 1995 earnings. In addition, 1995 other income included gains on sales of fixed assets and a franchise tax refund. Income taxes. The Company was able to use tax losses from prior years to reduce current year tax provisions to zero. In 1995 and 1994, however, the Company was unable to record a significant tax benefit on pre-tax losses because of the unavailability of tax loss carrybacks. An income tax benefit of $0.3 million was recorded in 1995 through the utilization of alternative minimum tax carrybacks. The Company has about $6.5 million of book tax losses to shelter future reported pre-tax earnings. Net earnings (loss). Net earnings in 1996 were $0.8 million or $0.21 per common share--diluted, based on 3.9 million weighted average common shares outstanding. This compares to a net loss of $4.0 million in 1995 or $1.11 loss per common share--diluted, based on 3.6 million weighted average common shares outstanding. The $4.8 million turnaround in profitability was due to the operating improvements achieved over the prior few years and the $2.1 million decrease in restructuring charges. The increase in common shares and common share equivalents was the result of stock issued in connection with the Company's Stock Purchase Plan and the dilutive impact of stock options. The increase in the Company's year end stock price from $5.625 to $8.625 caused several previously issued stock option grants to be treated as dilutive for purposes of the common share equivalent determination. OPERATING RESULTS BY INDUSTRY SEGMENT The Company operates in two industry segments: (i) houseware products and (ii) home improvement products. Houseware Products The housewares segment significantly improved its profitability in 1997. Operating profits of $12.3 million were achieved compared to pro forma (for the Tamor Acquisition) operating profits in 1996 of $7.7 million. The improvement resulted primarily from a 13.5% increase in net sales and a drop in the cost of plastic resin of $0.03 per pound or $2.4 million as compared to 1996. Other factors adding to the improvement were better utilization of existing capacity, allowing for the reduction in outside molding, and holding selling and marketing expenses steady in spite of the increase in sales. Historical operating profits of $0.9 million in 1996 were up $5.8 million as compared to a loss in 1995, of $4.9 million. The improvement resulted from higher gross profit margins and reduced operating expenses. The majority of the operating initiatives and cost cutting measures of the prior two years benefited the housewares segment. The Selfix line of products was significantly streamlined from nearly 2,000 SKUs in 1994 to under 700 SKUs as of the end of 1996. The reduction in SKUs has allowed management to concentrate on selling more profitable products, allocate capital resources accordingly and cutback personnel. Additionally, 1995 results included a $2.1 million restructuring charge, whereas 1996 did not. Home Improvement Products Operating profits of the home improvement segment remained flat from 1996 to 1997 at $0.5 million. Sales for 1997 decreased $1.1 million as a result of postponed remodeling projects by end users. Offsetting the effects of a decline in sales were higher gross profit margins. The cost of plastic resin decreased $0.06 per pound in 1997 or $0.2 million as compared to 1996. Shutters was able to operate at nearly full capacity in 1997 by molding for the housewares segment, allowing them to absorb their fixed costs over an expanded manufacturing volume, thus reducing unit costs as a percentage of net sales. In response to the sales shortfall, operating expenses were significantly reduced in 1997. Operating profits in 1996 of $0.5 million declined from $0.8 million in 1995. The decline in profitability occurred primarily in the first quarter when sales were significantly constrained by weather conditions in the midwest and northeast. Late winter storms deferred the start of the building season. This resulted in missed sales and significant unabsorbed fixed manufacturing costs. Although sales caught up later in the year, the unabsorbed manufacturing costs could not be recovered. In addition, operating expenses increased 8.0% to 45 53 support new product introductions and to pursue new trade channel opportunities. During the fourth quarter, management initiated a series of changes to permanently reduce manufacturing costs and operating expenses. This resulted in a fourth quarter profit as compared to historical fourth quarter losses. Further, these changes positioned the home improvement segment for improved profitability in 1997. SEYMOUR ACQUISITION Effective December 30, 1997 (within the Company's 1998 fiscal year), the Company acquired Seymour, a privately held company founded in 1942. Seymour is a leading designer, manufacturer and marketer of consumer laundry care products. Seymour manufactures and markets a full line of ironing boards, covers and pads and numerous laundry related accessories. Seymour was acquired for a total purchase price of $100.7 million, consisting of $16.4 million in cash, $14.3 million in common stock (1,320,700 shares) and the assumption of $70.0 million of debt. The necessary funds to complete the acquisition were obtained from the Existing Credit Facility. The Existing Credit Facility consists of a $20.0 million revolving credit facility, two term loans totaling $110.0 million and a $10.0 million senior subordinated term loan. The revolving credit facility, the term loans and the senior subordinated term loan provided a total of $140.0 million of available financing. The Existing Credit Facility is secured by a pledge of all of the assets of the subsidiaries of the Company and all of the shares of capital stock of such subsidiaries. Interest on the revolving credit facility and term notes is initially charged at floating rates of 100-150 basis points over the lender's prime rate or 250-300 basis points over LIBOR, at the option of the Company. The senior subordinated term loan of $10.0 million bears interest at a floating rate of 300 basis points over the lender's prime rate, but in no event less than 11%. If the Seymour Acquisition had occurred on January 1, 1997, the Company's 1997 net sales of $129.3 million would have increased by $93.0 million to $222.3 million and operating profits of $12.7 million would have increased by $2.6 million to $15.3 million. The pro forma operating profit of $15.3 million includes a charge of $2.6 million related to management's plans to consolidate and dispose of certain manufacturing operations of Seymour. SEYMOUR FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
YEAR ENDED JUNE 30 ------------------------------------------- 1997 1996 ------------------- -------------------- (DOLLARS IN THOUSANDS) Net sales.............................................. $98,274 100.0% $105,532 100.0% Cost of goods sold..................................... 68,756 70.0 79,845 75.7 ------- ----- -------- ----- Gross profit......................................... 29,518 30.0 25,687 24.3 Operating expenses..................................... 23,298 23.7 26,371 25.0 ------- ----- -------- ----- Operating profit (loss).............................. 6,220 6.3 (684) (0.7) Interest (expense)..................................... (7,923) (8.0) (8,384) (7.9) Other expense.......................................... (57) -- (223) (0.2) ------- ----- -------- ----- Loss before income taxes............................. (1,760) (1.8) (9,291) (8.8) Income tax (expense)................................... (259) (0.3) (2,597) (2.5) ------- ----- -------- ----- Net loss............................................... $(2,019) (2.1)% $(11,888) (11.3)% ======= ===== ======== =====
Net sales. Net sales of $98.3 million for 1997 decreased $7.3 million, or 6.9%, from net sales of $105.5 million for 1996. The sales decline was primarily concentrated at one particular customer where sales were down $7.1 million. At the beginning of fiscal year 1997, this customer was significantly overstocked on boards, covers and pads, with an excess of four to five months of supply on hand, and throughout the year lowered its inventory to a more appropriate level. For all other customers, sales of covers and pads were up while sales of ironing boards and indoor dryers were down slightly. 46 54 Gross profit. Gross profit margins for 1997 were 30.0% of net sales, up significantly from margins of 24.3% for 1996. The improvements were due to reductions in inventory obsolescence, inventory shrinkage and costs of direct labor, material and overhead. In late 1996 Seymour implemented various material planning processes and inventory control measures that resulted in improved plant efficiencies, reductions in material and overtime costs and reductions in slow-moving and obsolete inventory. Operating expenses. Operating expenses for 1997 decreased $3.1 million, or 11.7%, from 1996. As a percentage of sales, operating costs decreased from 25.0% of net sales in 1996 to 23.7% of net sales in 1997. The decline in operating expenses was primarily due to a reduction in bad debt expense for 1997. There were a number of bankruptcy filings in 1996 that negatively impacted Seymour's reserves. Headcount reductions and management's continued efforts to control operating costs further led to reduced operating expenses in 1997. Interest expense. Interest expense decreased $0.5 million from $8.4 million in 1996 to $7.9 million in 1997. The decrease in interest was attributable to improved earnings and subsequent additional cash flows that enabled Seymour to reduce borrowings under its revolving line of credit agreement from $13.4 million in 1996 to $6.4 million in 1997. Income taxes. Income taxes decreased from $2.6 million in 1996 to $0.3 million in 1997. This decrease was attributable to the recognition in 1996 of a full reserve against deferred tax assets, which resulted in a deferred tax provision of $2.4 million. SEYMOUR FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995
YEAR ENDED JUNE 30 ------------------------------------- 1996 1995 ----------------- ---------------- (DOLLARS IN THOUSANDS) Net sales.............................................. $105,532 100.0% $92,554 100.0% Cost of goods sold..................................... 79,845 75.7 67,288 72.7 -------- ----- ------- ----- Gross profit......................................... 25,687 24.3 25,266 27.3 Operating expenses..................................... 26,371 25.0 21,529 23.3 -------- ----- ------- ----- Operating income (loss).............................. (684) (0.7) 3,737 4.0 Interest (expense)..................................... (8,384) (7.9) (7,394) (7.9) Other income (expense)................................. (223) (0.2) 125 0.1 -------- ----- ------- ----- Loss before income taxes............................. (9,291) (8.8) (3,532) (3.8) Income tax (expense) benefit........................... (2,597) (2.5) 1,122 1.2 -------- ----- ------- ----- Net loss............................................... $(11,888) (11.3)% $(2,410) (2.6)% ======== ===== ======= =====
Net sales. Net sales of $105.5 million for fiscal 1996 increased $13.0 million, or 14.0%, from net sales of $92.6 million for fiscal 1995. This increase was due to the inclusion of net sales derived from the business of Magla Products which was acquired in December 1994. Gross profit. Gross profit margins in 1996 were 24.3% of net sales as compared to 27.3% of net sales in 1995. The decline was primarily due to one-time manufacturing inefficiencies resulting from the initial integration of Magla Products, the closing of Seymour's Arkansas facility and the relocation of these operations to other existing Seymour facilities. Operating expenses. Operating expenses of $26.4 million, or 25.0%, of 1996 net sales increased $4.9 million from $21.5 million or 23.3% of 1995 net sales. The primary contributors to the increase as a percentage of net sales were allowances for bad debts as a result of several customers filing for bankruptcy in 1996, coupled with an increase in employee procurement costs associated with several key management changes. Further contributing to the 1996 increase in operating expenses was additional amortization related to the acquisition of Magla Products. Interest expense. Interest expense of $8.4 million for fiscal 1996 represented an increase of $1.0 million from 1995 interest expense of $7.4 million. The increase resulted from interest expense incurred to finance the 47 55 acquisition of Magla Products and an increase in the outstanding borrowings on Seymour's revolving line of credit. Income taxes. The provision for income taxes increased to $2.6 million in 1996 from a tax benefit of $1.1 million in 1995. This increase was attributable to the recognition of a full reserve against deferred tax assets, which resulted in a deferred tax provision of $2.4 million. SEYMOUR SIX MONTH PERIOD ENDED DECEMBER 27, 1997 COMPARED TO SIX MONTH PERIOD ENDED DECEMBER 31, 1996
6 MONTHS ENDED 6 MONTHS ENDED DECEMBER 27, 1997 DECEMBER 31, 1996 ------------------ ------------------ (DOLLARS IN THOUSANDS) Net sales............................................. $43,096 100.0% $45,248 100.0% Cost of goods sold.................................... 32,863 76.3 32,665 72.2 ------- ----- ------- ----- -- -- -- -- Gross profit........................................ 10,233 23.7 12,583 27.8 Operating expense..................................... 13,404 31.1 11,395 25.2 ------- ----- ------- ----- Operating profit (loss)............................. (3,171) (7.4) 1,188 2.6 Interest expense...................................... (3,708) (8.6) (4,047) (9.0) Other income (expense)................................ (550) (1.3) 32 0.1 ------- ----- ------- ----- Loss before income taxes............................ (7,429) (17.3) (2,827) (6.3) Income tax (expense).................................. (58) (0.1) (56) (0.1) ------- ----- ------- ----- Net loss.............................................. $(7,487) (17.4)% $(2,883) (6.4)% ======= ===== ======= =====
Net sales. Net sales for the six month 1997 period of $43.1 million decreased $2.1 million, or 4.6%, from net sales of $45.2 million for 1996. The sales decrease is primarily due to a decline in the sales of safety gates. Safety gate sales declined due to decisions by some of the Company's customers to reduce the number of suppliers within the juvenile products category. All other product categories were essentially unchanged between the periods. Gross profit. Gross profit margin for the six month 1997 period was 23.7% of net sales, down from 27.8% for 1996. The primary reason for the decline in gross margin was a reduction in pricing in response to competitive pressures. In addition, margins were impacted by lower production volume in an effort to keep inventories in line. The reduction in production volume resulted in unabsorbed overhead costs. Operating expenses. Operating expenses increased from $11.4 million, or 25.2% of net sales for the six month 1996 period to $13.4 million, or 31.1% of net sales for 1997. Included in operating expenses for the period are one-time costs of $2.6 million associated with the consolidation and disposition of certain manufacturing operations. If the costs associated with plant consolidations were excluded, operating expenses for the period would have been 25.2% of net sales and down $0.6 million as compared to the prior period. Interest expense. Interest expense decreased $0.3 million to $3.7 million for the six month 1997 period from $4.0 million for 1996. This decrease was attributable to improved cash flow which enabled Seymour to reduce its average borrowings under its revolving line of credit from $11.9 million for the six month period ended December 31, 1996 to $1.7 million for the six month period ended December 27, 1997. Other income (expense). Other expense for the six month 1997 period includes a $0.6 million write-off of a prepaid asset that was eliminated in connection with the termination of Seymour's defined benefit pension plan. Income taxes. The provision for income taxes in both periods relate to state taxes payable in states where net operating loss carryforwards were unavailable. 48 56 CAPITAL RESOURCES AND LIQUIDITY Cash and cash equivalents at December 27, 1997 were $0.6 million as compared to $2.9 million at December 28, 1996. The decrease in cash is the result of daily sweeps against the Company's revolving line of credit that was established in February 1997 in connection with the Tamor Acquisition. Capital spending of $8.6 million was used to acquire molds to support new product introductions, additional injection molding machines and to fund an expansion of the Company's Missouri warehouse facility. Since the Tamor Acquisition, working capital has increased $4.3 million. In July 1997, the Company completed a stock offering of 3,780,000 shares of Common Stock, of which 1,500,000 shares were sold by selling stockholders. Net proceeds to the Company of $20.9 million were used to repay a subordinated note of $7.0 million, term notes of $13.6 million and accrued interest of $0.3 million. The Company's capital spending needs in 1998 are expected to be between $10.0 million and $12.0 million. Most of the spending relates to new injection molding presses to expand existing capacity and to replace old, inefficient machines. The replacement machines are expected to reduce manufacturing cycle times and ongoing maintenance costs. In addition, the Company exercised an option in the first quarter of 1998 to purchase the leased manufacturing and warehouse facility in Missouri at an approximate cost of $1.4 million. Where possible, management will pursue alternative means of financing such as capital leases and other purchase money transactions. In addition, operating leases will be pursued to the extent they represent attractive economic alternatives. Management intends to continue to pursue its consolidation strategy within the housewares industry. The ability to successfully fund future acquisitions will depend on the financial situation of the target company, possible renegotiation or refinancing of existing credit terms or the possibility of obtaining an alternative credit facility, and the ability to use stock in lieu of cash. Upon consummation of the Refinancing, interest payments on the Notes and interest payments under the New Credit Facility will represent significant cash requirements for the Company. After the consummation of the Refinancing, the Company will have outstanding approximately $134.2 million of consolidated indebtedness, consisting of $125.0 million principal amount of the Notes, approximately $2.5 million drawn under the New Credit Facility, $4.4 million of industrial development revenue bonds (see "Description of Other Indebtedness") and $2.3 million of capital lease obligations. The Company will have $89.0 million of availability under the New Credit Facility after giving effect to the $2.5 million drawn upon the consummation of the Refinancing and approximately $8.5 million reserved for letters of credit. See "Description of Other Indebtedness -- New Credit Facility." As a result of the Refinancing the Company expects to incur extraordinary charges in the second quarter of 1998 totaling $3.3 million, net of tax, related to the write-off of deferred financing fees and prepayment penalties. The Company believes its financing facilities together with its cash flow from operations will provide sufficient capital to fund operations, make the required debt repayments and meet the anticipated capital spending needs. YEAR 2000 The Company is aware of the issues associated with the programming code in existing computer and software systems as the Year 2000 approaches. The Year 2000 problem is pervasive and complex, as virtually every computer operator could be affected in some way by the rollover of the two-digit year value to "00." The issue is whether systems will properly recognize date sensitive information when the year changes to 2000. Systems that do not properly recognize such information could generate erroneous data or cause complete system failures. The Company believes that its costs associated with the rollover of the two-digit value to "00" will not be material. The Company also plans to communicate with customers, vendors and others to ensure that their systems are Year 2000 compliant. See "Risk Factors -- Year 2000 Compliance." 49 57 BUSINESS OVERVIEW The Company, based in Chicago, Illinois, is a leading designer, manufacturer and marketer of a broad range of value-priced, quality consumer houseware products in the United States. The Company's significant product lines include (i) ironing boards, covers and pads, (ii) home/closet organization products, (iii) plastic storage containers and totes, (iv) laundry accessories, (v) bath and shower organization products, (vi) juvenile products and (vii) home improvement products. HPI's ability to provide a substantial array of up-to-date, quality products on a timely basis, combined with its commitment to provide additional support services to its customers (such as just-in-time delivery, product planograms and point-of-purchase advertising) has enabled the Company to become a preferred supplier to the large, national retailers carrying its products and to establish a leading market position in several product lines. The Company's strong relationships with its base of retailers (including Wal-Mart, Target and Kmart) provide a large and efficient distribution channel for its products. These relationships enable the Company to work with retailers to develop products that are well-received by both the retailer and the end-user. On a pro forma basis, the Company's combined net sales and EBITDA for the twelve month period ended March 28, 1998, would have been $219.4 million and $32.3 million, respectively. The Company has actively pursued a strategy of selectively acquiring and integrating complementary houseware manufacturers. This has enabled the Company to become one of the leading suppliers and cost-effective manufacturers of houseware products in the United States. The Company believes it has demonstrated its ability to identify, purchase and integrate companies which offer complementary product lines and to derive significant manufacturing and operating efficiencies from such acquisitions. For example, the acquisitions of Tamor in January, 1997 and Seymour in December, 1997 strengthened the Company's ability to offer "one-stop shopping" for a wide range of houseware products to its retail customers. These acquisitions, combined with internal growth, have increased the Company's net sales from approximately $35.2 million in fiscal year 1992 to approximately $222.3 million in fiscal year 1997 (on a pro forma basis), while EBITDA margins have increased from 7.4% to 14.5% (on a pro forma basis) during the same period. The additional product offerings resulting from both strategic acquisitions and an active product development program have strengthened the Company's relationships with its existing customer base of national retailers, enabling the Company to obtain increased dedicated retail shelf space for its expanding product lines. Management believes that the Company has established a platform to continue this consolidation and product development strategy within the highly fragmented houseware products industry and that such strategy will further position the Company for continued growth in the retail distribution channel. The Company continues to look for opportunities to acquire companies that fit within its acquisition strategy. To that end, the Company has had, and continues to have, numerous discussions with potential acquisition candidates. As of the date of this Prospectus, the Company has made a number of oral and written acquisitions proposals to certain of such candidates, but has not entered into any binding agreements. While the Company believes that it is likely to enter into one or more agreements in the near future with respect to such potential acquisitions, no assurance can be given that such agreements will be reached or that any of such potential acquisitions will be consummated. Industry sources estimate that the total housewares industry in the United States is approximately $54 billion in size. Within the housewares industry, HPI currently offers products in the home organization, laundry management and home improvement segments. Management estimates that the current market size in the United States for these segments is between $5 billion and $8 billion. This market is served by a highly fragmented manufacturer base. The Company currently operates in several categories including (i) ironing boards, covers and pads, (ii) home/closet organization products, (iii) plastic storage containers and totes, (iv) laundry accessories, (v) bath and shower organization products, (vi) juvenile products and (vii) home improvement products. In the opinion of management, the housewares industry is driven by (i) retailers committing an increasing amount of shelf space to storage products, (ii) retailers consolidating the number of their suppliers, (iii) new household and home office formations, (iv) a movement away from generic products towards items designed to perform specific functions and (v) overall retailer consolidation. 50 58 COMPANY HISTORY The Company was founded in 1952 under the name Selfix, Inc. and became a public company in 1988. In 1994, the Company began a restructuring program which included replacing the senior management team, implementing a focused sales and marketing program, expanding distribution, decreasing the number of product SKUs, reducing overhead and upgrading financial and systems controls. Effective January 1, 1997, the Company acquired Tamor, which designs, manufactures and markets storage totes, hangers and juvenile organization products and its affiliated product distribution company, Houseware Sales, Inc. In February 1997, a holding company was established with HPI as the holding company entity. The Company completed a common stock offering in June 1997 of 3,780,000 shares, of which 1,500,000 shares were sold by selling stockholders at $9.75 per share. With a view to expanding into new related product categories, the Company acquired Seymour in December 1997. The principal executive offices of the Company are located at 4501 West 47th Street, Chicago, Illinois 60632, and the Company's telephone number is (773) 890-1010. COMPETITIVE STRENGTHS Management believes that the following competitive strengths contribute to the Company's position as a leading manufacturer and marketer of popular houseware products and serve as a foundation for the Company's business strategy. - LEADING MARKET POSITION. Management believes that the Company has a leading market position in each of the product categories in which its products compete. In particular, management believes that the Company is the leading ironing board, cover and pad manufacturer in the United States and is the nation's leading supplier of plastic clothes hangers. The Company's home organization products, including plastic clothes hangers, are marketed under the Selfix and Tamor brand names, which are widely recognized in the industry. Management believes the Company's broad product offerings in the home organization products category provides it with a competitive advantage over other manufacturers. In the bath and shower products segment, management believes the Company is a leading producer of plastic bath and shower accessories commanding the second largest market share in the United States. In the storage container market, management believes the Company ranks third in market share in the United States. Through both acquisitions and internal product development, the Company seeks to enhance its position as a leading supplier of housewares in a highly fragmented industry. - ESTABLISHED DISTRIBUTION NETWORK. The Company has established a broad distribution network serving both domestic and international markets. The Company's houseware products are sold through national and regional retailers, hardware and homecenter stores, food and drug stores, juvenile stores, specialty stores, and to hotels. Management believes that its distribution network allows it to successfully launch new products and broaden existing product lines with greater consumer acceptance. The Company's distribution network also provides marketing and distribution synergies for its acquired businesses, which generally are suppliers of houseware products marketed through many of the same retail distribution channels. - STRONG, COLLABORATIVE RELATIONSHIPS WITH RETAILERS. The Company maintains close and interactive relationships with a diverse customer base of retailers by focusing on new product development and creative marketing and packaging ideas. The Company has also strengthened its relationships with major customers through acquisitions which have enabled it to supply its customers with a broader selection of houseware product lines, resulting in increased retail shelf space devoted to the Company's products. HPI offers customer-specific merchandising programs which management believes enable retailers and distributors to achieve a higher gross margin on the Company's products than with the products of a number of its nationally known competitors. For instance, the Company provides its customers with a variety of retail support services, including customized merchandise planogramming, small shipping packs, point-of-purchase displays, EDI, and just-in-time product delivery. The Company also utilizes its customers' POS information to allow the Company to better monitor product sales. 51 59 Management believes that its prompt and reliable product delivery of value-priced, high-volume products enables its customers to maintain minimal inventories. - INNOVATIVE, CONSUMER-DRIVEN PRODUCT LINE EXTENSIONS. The Company develops and introduces innovative products with features and benefits that are designed to meet the needs and demands of consumers. New products or product line extensions are frequently developed or acquired after consultation with the Company's major retail customers. This enables the Company to leverage its existing customer base to expand its product offerings and to assess the potential viability of products prior to development. Typically, the Company's new product introductions are developed by making incremental modifications to its market-proven products. During 1997, approximately 60 new products and product improvements were launched by the Company, with each of the Company's business units introducing at least one new product line. - FLEXIBLE, LOW-COST MANUFACTURER. The Company operates a network of efficient manufacturing facilities that result in favorable per unit product costs. Recent acquisitions have enabled the Company to broaden its product base, expand its sales and distribution capabilities and increase manufacturing and distribution synergies, while achieving significant scale in manufacturing. For instance, management estimates that the Company is the largest United States manufacturer of full-size ironing boards, building approximately 14,200 units per day. This volume enables the Company to purchase rolled steel in bulk and achieve economies of scale. Similarly, it is a large processor of various grades of plastic resin, utilizing approximately 85 injection molding machines to process approximately 85 million pounds of plastic resin per year. The Company is able to achieve cost advantages through the use of off-prime grades of resin that are typically bought through brokers in the secondary market. The Company also processes approximately seven million yards of fabric annually, utilizing its domestic operations, as well as its Reynosa, Mexico facility for those aspects of production that are more labor intensive. The Company seeks to maximize its operating efficiency by ensuring that each plant has flexible manufacturing capabilities as well as utilizing its Mexico operation and Asian outsourcing opportunities to lower production costs. In addition, the Company is able to utilize excess capacity in its plants to meet peak demand and optimize production planning. - EXPERIENCED MANAGEMENT TEAM. The Company's senior management team has a wide range of experience in the production, development and marketing of housewares and related products. Leading the Company's senior management team is Mr. James R. Tennant, the Company's Chairman and Chief Executive Officer, who has 20 years of corporate management experience in marketing-oriented capacities. Mr. Tennant has been with HPI since 1994. Mr. Stephen R. Brian, the President and Chief Operating Officer of the Company, has 29 years experience in management and production capacities with major consumer product companies, including General Electric Corporation and Sunbeam. Mr. James E. Winslow, Executive Vice President and Chief Financial Officer of the Company, has 16 years of financial management experience in the consumer products industry, including 11 years with Wilson Sporting Goods. Mr. Winslow has been with HPI since 1994. Furthermore, the Company's operations are managed by experienced consumer product and manufacturing professionals. BUSINESS STRATEGY The Company intends to continue to take advantage of consolidation opportunities in the housewares industry and to continue to grow by expanding its product offerings through strategic acquisitions and by capitalizing on established distribution channels to increase sales. The Company's strategy for achieving that objective includes the following key elements: - LEVERAGE MARKET SHARE POSITION. The Company intends to maintain a leading market position in the United States in each of the product segments in which it operates and intends to leverage its market strength to introduce new products in all of its product categories. Through acquisitions of companies with complementary product lines and through an internal product development program, the Company expects to continue to increase sales and to become a leading supplier of new product categories as well as additional products in its existing product categories. Management believes that such growth will 52 60 enable the Company to expand its merchandising relationships with its existing key customers, and to increase its presence in these customers' stores, which in turn would give the Company additional leverage to support further growth. - CONTINUE BUILDING STRATEGIC SUPPLIER RELATIONSHIPS. Management believes that national retailers are increasingly interested in establishing "one-stop shopping" supplier relationships for their store chains to enhance their margins and operating efficiencies. In addition, these mass merchandisers have come to expect value-added services (such as merchandise planogramming and EDI) that are primarily offered by large suppliers. Management believes that the breadth of the Company's product offerings, combined with the value-added services it provides, will enable the Company to continue to build close and interactive relationships with its retailers, capture larger market share and garner incremental shelf space for its products. - LAUNCH PRODUCT LINE IMPROVEMENTS AND NEW PRODUCTS. The Company has successfully launched product line improvements and new products and intends to continue to do so by capitalizing on its strong relationships with its retailers. In 1997, the Company introduced approximately 60 new products and product improvements, which accounted for approximately 13% of the Company's 1997 revenues (excluding sales generated from laundry management products). Through these product introductions, the Company's products are kept up-to-date and appealing for both the retailer and end-user. The Company is also able to manage its research and development expenditures at levels below those of its competitors as most of these product innovations and improvements require only minimal feature enhancements and relatively limited technological input. Management believes that continued product introductions will further enhance revenue growth, profitability and market share. - INCREASE MARKET PENETRATION. The Company expects that strategic acquisitions, as well as internally developed new product lines, will result in increased penetration of its existing markets and enable it to develop and extend its customer base both in the United States and internationally. The Company also plans to expand its export sales team and leverage established contacts with key distributors to continue to increase its sales internationally. - PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES. Management anticipates that the fragmented nature of the housewares industry will continue to provide significant opportunities for growth through strategic acquisitions of complementary businesses. Management intends to continue to acquire businesses at attractive multiples of cash flow and achieve operational and distribution efficiencies through integration of complementary businesses. The Company's acquisition strategy focuses on businesses with product offerings which (i) offer product expansion into related categories, (ii) focus on products which can be marketed through the Company's existing distribution channels and (iii) enhance manufacturing efficiencies by increasing throughput and lowering per unit production costs, thereby increasing the Company's marketing and distribution efficiencies. Management will also consider strategic joint ventures which would provide access to new products, technologies or markets. The Company continues to look for opportunities to acquire companies that fit within its acquisition strategy. To that end, the Company has had, and continues to have, numerous discussions with potential acquisition candidates. As of the date of this Prospectus, the Company has made a number of oral and written acquisitions proposals to certain of such candidates, but has not entered into any binding agreements. While the Company believes that it is likely to enter into one or more agreements in the near future with respect to such potential acquisitions, no assurance can be given that such agreements will be reached or that any of such potential acquisitions will be consummated. PRODUCTS The Company's significant product lines include (i) ironing boards, covers and pads, (ii) home/closet organization products, (iii) plastic storage containers and totes, (iv) laundry accessories, (v) bath and shower organization products, (vi) juvenile products and (vii) home improvement products. 53 61 PRO FORMA GROSS SALES BY PRODUCT CATEGORY FISCAL YEAR ENDED DECEMBER 27, 1997 (DOLLARS IN MILLIONS)
PLASTIC BATH AND IRONING BOARDS, HOME/CLOSET STORAGE SHOWER HOME COVERS ORGANIZATION CONTAINERS LAUNDRY ORGANIZATION JUVENILE IMPROVEMENT AND PADS PRODUCTS AND TOTES ACCESSORIES PRODUCTS PRODUCTS PRODUCTS --------------- ------------ ---------- ----------- ------------ -------- ----------- Gross sales.......... $75.4 $55.9 $47.3 $17.6 $16.6 $16.6 $8.4 % Sales.............. 32% 23% 20% 7% 7% 7% 4%
Ironing Boards, Covers and Pads. The Company offers a significant variety of ironing boards under the Seymour brand name (approximately 185 individual SKU's). Key products in this category include the EasyBoard (perforated board), SureFoot (vented, four leg board), ReadyPress (over-the-door) and WorkWizard (vented, four-leg with hanger rack). Management believes the Company is also the leading manufacturer of ironing board covers and pads. The Company offers eight different types of covers and pads in over 85 different designs that fit not only its own ironing boards, but all regular size boards. The Company is the only company that sells ironing board covers with 3M Scotchguard protection. Home/Closet Organization Products. The Company offers a variety of products for general home organization, under both the Selfix and Tamor brand names. This category is primarily comprised of plastic clothes hangers, which represented 33% of this category's gross dollar sales in 1997. Due to the commodity nature of the hanger segment, margins in this category are inherently lower, while unit volumes are substantially higher. Management believes that HPI has a leading market share in the sale of plastic clothes hangers in the United States, and that its broad product offering gives it a competitive advantage over other hanger manufacturers. In addition to plastic hangers, the Company markets a complete line of over 150 hooks, primarily made of plastic, under the brand name Selfix. The original product marketed by the Company was a plastic hook, unique in that it employed a proprietary no-tools mounting system. The Company has expanded its offering of these patented, self-adhesive hooks, and now believes it offers a complete line in the opening price-point segment. Also included in this category are other plastic organizers, closet and clothing care products, recycling containers, plastic kitchen organizers (including vinyl coated wire kitchen organizers) and miscellaneous housewares products. Plastic Storage Containers and Totes. The Company offers a variety of plastic home storage containers under the Tamor brand name. The Company's home storage containers range in size from shoe boxes to jumbo (48 gallon) totes, and include specialty containers sold during holiday seasons. These products range in retail price from $2 to $20 and contain a variety of product attributes, including removable wheels and domed-top lids, which increase storage capacity. Management believes these features are key to obtaining shelf space and competing in the market. Laundry Accessories. Management believes the Company is the leading producer of laundry accessories in the United States. Key products within this category include drying racks, laundry bags, hampers and sorters, clotheslines, and clothes pins. Bath and Shower Organization Products. The Company markets a broad line of value-priced plastic bath accessories and organizers, primarily under the brand name Selfix. These products include shower organizers, towel bars, soap dishes, shelves, portable shower sprays, and fog-free shower mirrors. In January 1997, the Company launched a major line extension in the bath and shower organization category, Suction-LockT Organizers. The Company believes it is a leading producer of opening price-point plastic bath accessories in the United States. Juvenile Products. The Company markets a line of quality children's organization products, under the brand names Tidy KidsT, KidtivityT, and Lil' HelpersE. These products include closet extenders, hook racks, storage cubes, clothes hangers, under-the-bed storage trolleys, and safety gates and are sold in the juvenile or housewares departments of its core customers, and also through specialty juvenile retailers like Toys 'R Us and 54 62 Babies 'R Us. Management believes the Company created a market niche of children's organization products in the development and successful sales of its Tidy KidsT and Lil' HelpersEproducts, and that it offers the premier children's organization program in the industry. Home Improvement Products. Through the Shutters brand name, the Company markets a unique line of plastic exterior shutters to the construction trades and to consumers through retailers and home improvement catalogs. Because of a patented design, the shutters are assembled from components, rather than formed in a single piece, which allows the shutters to be configured in a variety of sizes and colors. The Company markets the shutters in component form to remodeling distributors and in finished form to home center retailers. In both cases, the key competitive advantage is customization of size and color, and quick turnaround service. MARKETING AND SALES The Company's primary marketing strategy is to design innovative products with consumer features and benefits, and focus on marketing these products to its retail customers. Management believes that one of its competitive advantages is prompt and reliable product delivery of value-priced, high-volume products, allowing customers to maintain minimal inventories. The Company believes that the customer-specific merchandising programs it offers enable retailers to achieve a higher margin on the Company's products than the products of some of its competitors. To that end, the Company provides its customers a variety of retail support services, including customized merchandise planogramming, small shipping packs, point-of-purchase displays, EDI, and just-in-time product delivery designed to continue their growth with volume retailers. The Company's marketing efforts also include advertising, promotional and differentiated packaging programs. Promotions include cooperative advertising, customer rebates targeted at the Company's value-added feature products and point-of-purchase displays. CUSTOMERS AND DISTRIBUTION The Company's houseware products are sold through national and regional discounters, hardware/home center, food/drug stores, juvenile stores, specialty stores, and to hotels. The Company sells directly to major retail customers through the Company's internal sales management team. The Company also sells to approximately 3,000 other customers through a network of approximately 50 independent manufacturers' representatives. The Company's key distribution channels include the following: (i) Wal-Mart, which accounted for approximately 17.5% of the Company's fiscal 1997 pro forma gross sales; (ii) Kmart, which accounted for approximately 12.5% of the Company's fiscal 1997 pro forma gross sales; and (iii) Target, which accounted for approximately 5.9% of the Company's fiscal 1997 pro forma gross sales. Management believes that one of its greatest opportunities is to fully leverage the Company's long-standing relationships with these customers in order to gain additional market share in its core products lines and to successfully introduce new and enhanced products lines. COMPETITION The houseware products industry is highly fragmented and management believes that no single supplier accounts for more than 5% of total market sales. The Company competes with a significant number of companies, some of which have greater name-brand recognition, larger customer bases and/or significantly greater financial resources than the Company. The Company's key competitors include Rubbermaid and Sterilite. There are no substantial regulatory or other barriers to entry of new competitors into the Company's markets. To provide complete product lines, suppliers of houseware products have begun to consolidate. Accordingly, the Company believes that it is well-positioned to pursue its strategy of growth through acquisitions. The Company believes that large national retailers are continuing to reduce the number of suppliers of storage and other housewares products with which they do business in order to improve margins and operating efficiencies. These retailers are forming key relationships with suppliers that can provide complete product 55 63 lines within product categories, profitable fast-turning products, timely delivery and merchandising support. With its numerous product lines and strong relationships with these retailers, the Company believes it is well-positioned to continue to meet their needs. MANUFACTURING, RAW MATERIALS AND SUPPLIERS The Company manufactures the majority of its plastic resin products at its five manufacturing facilities using injection molding and extrusion processes. The primary raw material used in the Company's injection molding operations is plastic resin, primarily polypropylene. Plastic resin is a spot commodity with pricing parameters tied to supply and demand characteristics beyond the Company's control. In total, the Company used 84.8 million pounds of plastic resin in 1997 representing approximately 32% of the Company's total cost of goods sold and 22% of the Company's net sales. Because of the large amount of plastic resin used and the relative inability to pass cost increases along to its retail customers, the Company is highly susceptible to changes in plastic resin pricing. After giving effect to the Seymour Acquisition, the Company's usage of plastic resin in 1997 dropped to 13% of net sales and 18% of total cost of goods sold. Due to the nature of its products, the Company is able to use off-prime grades of resin which allows the Company to buy plastic resin through brokers in a secondary market at a discount. Buying off-prime material at a discount gives the Company a cost advantage but does not alleviate the pricing risks inherent in buying a commodity raw material. Plastic resin is utilized by a number of different industries, many of which have quite different demand cycles than the Company's primary housewares business. For example, the automobile and housing industries are very large users of plastic resin. Demand changes in the automobile industry or the number of new housing starts can impact plastic resin pricing. Plastic resin prices can vary widely from year to year and are very difficult to predict beyond a few months. Tamor's plastic resin cost history is illustrative of the swings that can occur in resin pricing. Tamor, which uses about 90% of the Company's resin requirements, experienced a 26% average price increase from 1993 to 1994, another 25% increase from 1994 to 1995, a 16% price decrease from 1995 to 1996 and a further 10% price decrease from 1996 to 1997. There is no futures market for plastic resin and, as a result, the Company cannot lock in its costs without purchasing significant quantities beyond its immediate manufacturing needs. The Company has no long-term supply contracts for the purchase of plastic resin. However, the Company generally maintains a 60-day supply of resin. See "Risk Factors -- Availability and Pricing of Raw Materials." The Company manufactures the majority of its rolled steel products at its facilities in Seymour, Indiana. Approximately 14,200 full size ironing boards are manufactured daily with three shifts. The Company's total capacity is approximately 3.6 million units per year (24 hour day/250 days). The Company diversifies its purchases for rolled steel primarily from three different rolled steel companies. The Company makes it a practice to purchase steel from the lowest cost reliable supplier. The Company purchases approximately seven million yards of fabric annually for the manufacture of ironing board covers and pads. In addition, the Company outsources the manufacturing of wire caddies to general Asian suppliers. MANAGEMENT SYSTEMS The Company's network information system allows it to communicate online with any customer or internal or external salesperson. The Company's largest customers, Kmart, Wal-Mart, Target and Toys R Us, are on electronic mail and transmit all orders via EDI. With Kmart and Wal-Mart, the Company's POS information systems allow it to access daily sales activity directly from retail cash registers at the customers' points of sale. Internally, the manufacturing process is guided by a manufacturing resource planning system. This computerized planning infrastructure allows the Company to plan its manufacturing, purchasing and labor resources and make revisions on a daily basis in reaction to ever-changing sales activity. By the end of fiscal 1998, the Company expects that most of its systems will be Year 2000 compliant and that all of its systems will be compliant by the end of fiscal 1999; although there can be no assurance that the 56 64 Company will not experience difficulties in the integration of its systems which could have a material adverse effect on the Company. See "Risk Factors--Year 2000 Compliance." PROPERTIES At March 28, 1998, the Company maintained facilities with an aggregate of 1,924,000 square feet of space. The Company considers all of its facilities to be in good operating condition. Currently, all of the Company's manufacturing facilities are operating at or near full capacity. The following table summarizes the principal physical properties, both owned and leased, used by the Company in its operations:
SIZE OWNED/ FACILITY USE (SQUARE FEET) LEASED - -------- ---------------------------------- ------------- ------ SELFIX Chicago, IL Manufacturing/Distribution 186,000 Leased Chicago, IL Storage/Distribution 83,500 Leased SEYMOUR Mooresville, NC Manufacturing/Distribution 270,000 Owned McAllen, Texas Administration/Distribution 5,000 Leased Reynosa, Mexico Manufacturing 30,000 Owned Seymour, IN Corporate Corporate administration 10,000 Owned East Plant Manufacturing 70,000 Owned South Plant Manufacturing/Distribution 105,000 Owned Skaggs Facility Storage 40,000 Leased West Plant Manufacturing/Storage/Distribution 132,000 Owned Logistics Center Storage/Distribution 100,000 Leased SHUTTERS Hebron, IL Manufacturing/Distribution 62,500 Owned TAMOR Fitchburg, MA Distribution 220,000 Leased Leominster, MA Manufacturing 100,000 Owned Leominster, MA Sales Office 5,000 Leased Leominster, MA Storage 120,000 Leased Louisiana, MO Manufacturing/Distribution 340,000 Owned Thomasville, GA Manufacturing Distribution 45,000 Owned
PATENTS, TRADEMARKS AND LICENSES Selfix, Tamor, Shutters, and Seymour collectively own a number of trademarks and approximately 150 mechanical and design patents in the United States relating to various products and manufacturing processes. The Company believes that, in the aggregate, its patents enhance its business by discouraging competitors from adopting patented features of its products; however, no single patent, trademark or license is material to the business of the Company. EMPLOYEES As of December 30, 1997, the Company employed 1,240 persons in the United States. Approximately 90 are hourly employees at its Leominster, Massachusetts facility, covered by a collective bargaining agreement which expires in March 1999; and approximately 150 are hourly employees at its Chicago, Illinois facilities, covered by a collective bargaining agreement which expires in January 2001. The Company also employs approximately 200 hourly employees at its Reynosa, Mexico facility, who are covered by a collective bargaining agreement which expires in December 1999. The Company utilizes the services of approximately 57 65 350 temporary workers in its injection molding operations, for assembly and in certain warehouses. Management believes that employee relations are good. See "Risk Factors -- Labor Relations." ENVIRONMENTAL MATTERS An environmental report obtained in connection with the Tamor Acquisition indicated that certain remedial work relating to ground contamination of Tamor's Leominster, Massachusetts facility was required. The former shareholders of Tamor placed $1.1 million in escrow to pay for, among other things, any required remediation at the Leominster, Massachusetts facility. The Company has completed certain remediation projects at the Leominster, Massachusetts facility. The Company believes that the cost of remediation already completed, plus the cost of any additional remediation that may be required in the future, can be completed for an amount which will not exceed the amount in escrow. Except as described above, the Company believes that its properties and facilities are in compliance, in all material respects, with applicable federal, state and local laws, ordinances and regulations concerning the presence of hazardous substances, and that continued compliance with such laws, ordinances and regulations will not have a material effect on the Company's capital expenditures, earnings or competitive position. See "Risk Factors -- Environmental Regulation." LEGAL PROCEEDINGS A subsidiary of the Company was notified in early 1997, that it has been named co-defendants, along with an unrelated third party, in a product liability/personal injury suit. The suit seeks $7.0 million in total damages, one-half from each defendant. The Company and its subsidiary have adequate levels of insurance coverage, and its defense is being handled by its insurance carrier's attorneys. Although management of the Company cannot predict the ultimate outcome of this matter with certainty, it believes that the ultimate resolution to this matter will not have a material effect on the Company's financial condition taken as a whole. See "Risk Factors -- Legal Proceedings". 58 66 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The directors and executive officers of the Company and their respective ages and principal positions, as of March 28, 1998, are as follows:
NAME AGE POSITION ---- --- -------- James R. Tennant................................... 45 Chairman of the Board and Chief Executive Officer Stephen R. Brian................................... 49 President and Chief Operating Officer James E. Winslow................................... 43 Executive Vice President, Chief Financial Officer and Secretary Charles R. Campbell................................ 58 Director Joseph Gantz....................................... 50 Director Stephen P. Murray.................................. 35 Director Marshall Ragir..................................... 53 Director Jeffrey C. Rubenstein.............................. 56 Director Daniel B. Shure.................................... 40 Director Joel D. Spungin.................................... 60 Director
James R. Tennant, Chairman of the Board and Chief Executive Officer joined the Company as Chairman of the Board and Chief Executive Officer in April 1994. Mr. Tennant was elected a Director of the Company in December 1992, and was a member of the Company's Compensation Committee until April 1994. From 1982 to 1994, Mr. Tennant was Division President of True North Communications, an international marketing services company. Mr. Tennant is a member of the Nominating Committee. Stephen R. Brian, President and Chief Operating Officer joined the Company as President and Chief Operating Officer in January 1998. From June 1996 to January 1998, Mr. Brian was President and Chief Executive Officer of Seymour Housewares Corporation. From April 1994 to June 1996, Mr. Brian was Executive Vice President Manufacturing and Technology for Sunbeam. Prior to April 1994, Mr. Brian was employed by Hamilton Beach/Proctor Silex with his final position being Executive Vice President of Operations. James E. Winslow, Executive Vice President, Chief Financial Officer and Secretary was named Executive Vice President in October 1996. Mr. Winslow joined the Company as Chief Financial Officer and Senior Vice President in November 1994. From 1983 to 1994, Mr. Winslow was employed by Wilson Sporting Goods Co. in various capacities, his final position being Vice President and Chief Financial Officer. Charles R. Campbell has been a Director of the Company since September 1994. Since 1996, Mr. Campbell has been a principal with the Everest Group, a management consulting firm. From 1995 to 1996, Mr. Campbell was President of C.R. Campbell & Associates, a management consulting firm. From 1985 to 1995, Mr. Campbell was Senior Vice President, Chief Financial and Administrative Officer of Federal Signal Corporation, a diversified manufacturer of capital goods. From 1982 to 1985, he was Vice President and Chief Financial Officer of the Masonite Corporation, a manufacturer of building products. Mr. Campbell is a member of the Audit Committee. Joseph Gantz was appointed to the Board of Directors in January 1998 in connection with the Company's acquisition of Seymour on December 30, 1997. Mr. Gantz joined Seymour Housewares, Inc., as Chairman of the Board in 1996. From 1994 to 1996, Mr. Gantz was President and General Manager of Rubbermaid Cleaning & Maintenance Products ("RCMP"), a manufacturer and marketer of brooms, brushes and mops. RCMP, formerly, Empire Brushes, Inc., was a $1 billion division of Rubbermaid. From 1974 to 1994, Mr. Gantz held various positions at Empire Brushes, Inc., a manufacturer and marketer of brooms, brushes and mops, with his final position being President. Mr. Gantz is a member of the Nominating Committee. 59 67 Stephen P. Murray was appointed to the Board of Directors in January 1998 in connection with the Company's acquisition of Seymour on December 30, 1997. Mr. Murray is a general partner of Chase Capital Partners, an affiliate of Chase Manhattan Bank and Chase Securities Inc. Prior to joining Chase Capital Partners, Mr. Murray was a Vice President with the Middle Market Lending Division of Manufacturers Hanover. Mr. Murray is a member of the Audit Committee. Mr. Murray is a director of several privately held companies. Marshall Ragir has been a Director of the Company since July 1995. Since 1991, Mr. Ragir has been President and Chief Executive Officer of Know Business Inc., a venture capital and investment company. Mr. Ragir is a member of the Compensation Committee. Mr. Ragir is a director of several charitable foundations and non-profit agencies. Jeffrey C. Rubenstein has been a Director of the Company since September 1986. Since 1991, Mr. Rubenstein has been a principal with the law firm of Much Shelist Freed Denenberg Ament Bell & Rubenstein, P.C., an Illinois professional corporation, which is counsel to the Company. From January 1989 until June 1991, Mr. Rubenstein was of counsel to the law firm of Sachnoff & Weaver, Ltd., an Illinois professional corporation, of which he had been a principal prior to July 1988. From March 1988 until January 1989, Mr. Rubenstein was President of Medical Management of America, Inc., ("MMA"), a management services company for health care providers. Mr. Rubenstein is a member of the Audit and Compensation Committees. Mr. Rubenstein is a director of Miller Building Systems, Inc., Vita Food Products, Inc. and a number of privately held companies. Daniel B. Shure has been a Director of the Company since December 1994. Since 1988, Mr. Shure has been President and Chief Executive Officer of Strombecker Corporation, an international toy manufacturer and distributor. From 1987 to 1988, he was Vice President of Giftco, Inc., a wholesaler and distributor of non-durable products. From 1986 to 1987, Mr. Shure was Executive Vice President of North American Bear Company, a toy manufacturer. Mr. Shure is a member of the Nominating Committee. He is also a director of a number of privately held companies. Joel D. Spungin has been a Director of the Company since September 1996. Mr. Spungin is managing Partner of DMS Enterprises, L.P., a consulting and management advisory partnership. Mr. Spungin was formerly Chairman and Chief Executive Officer of United Stationers and since 1994, he has been Chairman Emeritus of United Stationers, Inc. From 1981 to 1995, Mr. Spungin was employed by United Stationers, Inc. in various capacities with his final position being Chairman of the Board and Chief Executive Officer. Mr. Spungin is a member of the Compensation Committee. Mr. Spungin is also a director of AAR Corporation and a number of privately held companies. EMPLOYMENT AGREEMENTS Messrs. James R. Tennant, Chairman of the Board and Chief Executive Officer, and Stephen R. Brian, President and Chief Operating Officer, have entered into employment agreements with the Company as of January 1, 1997 and January 5, 1998, respectively. The terms of these agreements are for a period of three years subject to automatic one year renewals unless earlier terminated. Mr. Tennant's employment agreement provides for an annual base salary of $275,000 and Mr. Brian's employment agreement provides for an annual base salary of $250,000. In October 1997, the Board of Directors increased Mr. Tennant's base salary to $350,000. In January 1998, the Board of Directors increased Mr. Brian's salary to $265,000. Mr. Tennant is entitled to receive a discretionary bonus, based on the Company's financial performance, as well as incentive bonuses subject to the terms of the Executive Incentive Plan and the Management Incentive Plan. Mr. Brian is eligible to participate in the Company's senior management bonus program, as such bonus program may be amended by the Board of Directors from time to time. If the Company does not renew Mr. Tennant's employment agreement for any renewal year after December 31, 1999, Mr. Tennant will be entitled to receive a severance payment of $250,000, payable in twelve monthly installments, and may exercise options which have vested prior to such date. If Mr. Tennant's employment is terminated after a Change In Control (as defined therein) of the Company, Mr. Tennant is entitled to receive a $500,000 severance payment and all of his stock options will immediately vest. In the event the Company is sold for a price of $5.50 per share or more 60 68 in a stock sale or asset sale and Mr. Tennant is employed by the Company on the closing of any such event, Mr. Tennant will be entitled, at his option, to (i) receive a $1,000,000 payment from the Company or (ii) exercise all stock options he holds as if they were then available and vested. In the event the Company terminates Mr. Brian's employment Without Cause (as defined therein), Mr. Brian is entitled to receive a severance payment equal to 100% of his yearly base salary then in effect, plus all compensation that he would otherwise be entitled to through the initial three-year term. In addition, Mr. Brian will have the right to exercise stock options which have vested prior to the date of termination. Upon a Change of Control (as defined therein) if (i) Mr. Brian voluntarily terminates his employment within 180 days thereafter, Mr. Brian is entitled to receive an amount equal to 100% of his base salary then in effect or (ii) the Company causes Mr. Brian's termination within 180 days of a Change of Control, Mr. Brian shall be entitled to receive 100% of his base salary then in effect plus all compensation that he otherwise would be entitled to through the initial three-year term. In addition, upon a Change In Control, Mr. Brian's stock options become immediately vested and exercisable. All amounts payable to Mr. Brian upon a Change of Control shall be payable in 12 monthly installments. Mr. Tennant's employment agreement provides for the granting of 350,000 options to purchase Common Stock, (100,000 options at $6.00 per share; 175,000 options at $7.00 per share; and 75,000 at $8.00 per share). The 350,000 options vest one-third each year beginning on January 1, 1997, and expire on December 31, 1999. The expiration of these options can be extended for a period of five years if the trading price of the Common Stock exceeds $10.00 per share for the entire month of December 1999. Mr. Tennant was granted additional stock options for 200,000 shares at a price of $5.00 per share, which vest in equal increments over a three year period. These options may be extended until April 30, 2005, under the same conditions as the other options. The principal terms of Mr. Tennant's employment agreement, including the grant of additional stock options at an exercise price of $5.00 per share, were included in an agreement between the Company and Mr. Tennant dated September 19, 1996. Mr. Brian was granted 100,000 options to purchase the Company's Common Stock at a price per share equal to $11.375. Mr. Brian is also eligible for additional options each year as are approved by the Board of Directors. 61 69 PRINCIPAL STOCKHOLDERS The following table sets forth certain information as of March 25, 1998 (as of the dates indicated in the table below with respect to Warburg Pincus Asset Management, Inc.; SAFECO Asset Management Co.; Putnam Investments, Inc.,; Putnam Investment Management, Inc.; The Putnam Advisory Company, Inc.; Marsh & McLennan Companies, Inc.; T. Rowe Price Associates, Inc.; and T. Rowe Price Small Cap Value Fund, Inc.) with respect to the beneficial ownership of the Company's issued and outstanding Common Stock by (i) each stockholder known by the Company to be the beneficial owner of more than 5% of its Common Stock, (ii) each director, (iii) each executive officer named in the Directors and Executive Officers Table and (iv) all of the directors and executive officers of the Company as a group. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission ("SEC") which generally attribute beneficial ownership of securities to persons who possess sole or shared voting power and/or investment power with respect to those securities. Unless otherwise indicated, the persons or entities identified in the table have sole voting and investment power with respect to the shares shown as beneficially owned by them. Percentage ownership calculations are based upon 7,943,680 shares of Common Stock outstanding.
NUMBER OF SHARES PERCENT BENEFICIALLY OF NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) CLASS(2) - ------------------------------------ ------------ -------- Chase Venture Capital Associates, L.P.(3)................... 1,289,760 16.2% Warburg Pincus Asset Management, Inc.(4).................... 868,500 10.9 SAFECO Asset Management Company(5).......................... 489,200 6.2 Putnam Investments, Inc.; Putnam Investment Management, Inc.; The Putnam Advisory Company, Inc.; and Marsh & McLennan Companies, Inc.(6)............................... 438,000 5.5 T. Rowe Price Associates, Inc., and T. Rowe Price Small Cap Value Fund, Inc.(7)....................................... 427,500 5.4 Jeffrey C. Rubenstein(8).................................... 568,858 7.2 James R. Tennant(9)......................................... 389,300 4.9 Charles R. Campbell......................................... 6,000 * Daniel B. Shure............................................. 6,400 * Marshall Ragir(10).......................................... 231,093 2.9 Joel D. Spungin............................................. 7,500 * Stephen P. Murray(11)....................................... 1,289,760 16.2 Joseph Gantz................................................ 8,000 * Stephen R. Brian............................................ 7,200 * James E. Winslow(12)........................................ 31,397 * All directors and executive officers as a group (10 persons)(13).............................................. 2,314,515 29.1%
- --------------- (1) Unless otherwise indicated, the persons or entities have sole voting and investment power with respect to the shares beneficially owned by them. (2) Asterisks indicate less than 1%. (3) According to information provided by Chase Venture Capital Associates, L.P. ("CVCA"), CVCA is a California limited partnership and its general partner is Chase Capital Partners ("CCP"), a New York general partnership. The shares being reported include 319,599 shares of Common Stock which, as of March 25, 1998, were held in escrow pursuant to an escrow agreement entered into in connection with the Company's December 30, 1997 acquisition of Seymour (CVCA was the majority shareholder of Seymour prior to acquisition by the Company). The escrow was created to provide the Company with a means to secure certain indemnification obligations pursuant to the Seymour acquisition agreement. The shares may be transferred by the escrow agent to the Company to satisfy certain indemnification claims. The escrow will terminate on December 30, 1998, and based upon the number of shares of the 62 70 Company's Common Stock remaining in the escrow, CVCA may receive no shares, a currently undeterminable number of the 319,599 shares, or all of the 319,599 shares. CCP and CVCA expressly disclaim that they are, in fact, the beneficial owners of such shares. The address for CVCA and CCP is 380 Madison Avenue, New York, New York 10017. (4) According to information contained in a report on Schedule 13G/A dated January 21, 1998, filed by Warburg Pincus Asset Management, Inc. ("Warburg"), Warburg serves as investment adviser to numerous accounts. The shares being reported on Schedule 13G/A are owned by Warburg's accounts. Warburg and the various accounts to which they are advisers have sole power to vote 361,100 shares of Common Stock (which represent 4.5% of the shares outstanding); have shared power to vote 463,400 shares of Common Stock (which represent 5.8% of the shares outstanding); and have sole power to dispose of 868,500 shares of Common Stock (which represent 10.9% of the shares outstanding). For purposes of the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Warburg is deemed to be a beneficial owner of such shares; however, Warburg expressly disclaims that it is, in fact, the beneficial owner of such shares. Warburg's address is 466 Lexington Avenue, New York, New York 10017. (5) According to information contained in a report on Schedule 13G/A dated February 10, 1998, filed by SAFECO Asset Management Company ("SAMC"), a wholly owned subsidiary of SAFECO Corporation ("SAFECO"), SAMC beneficially owns 489,200 shares of Common Stock (which represent 6.2% of the shares outstanding) as a result of acting as an investment adviser for registered investment companies. SAFECO and the various accounts to which they are advisers have shared power to vote and sole power to dispose of 489,200 shares of Common Stock (which represent 6.2% of the shares outstanding). Such shares include 293,200 shares beneficially owned by SAFECO Common Stock Trust (which represents 3.7% of the shares outstanding). For purposes of the Exchange Act, SAMC and SAFECO are deemed to be beneficial owners of such shares; however, SAMC and SAFECO expressly disclaim that, they are, in fact, the beneficial owners of such shares. SAMC's address is 601 Union Street, Suite 2500, Seattle, Washington 98101 and SAFECO's address is SAFECO Plaza, Seattle, Washington 98185. (6) According to information contained in a report on Schedule 13G dated January 20, 1998, filed by Putnam Investment, Inc. ("PI"), the shares being reported are beneficially owned by Putnam Investment Management, Inc. ("PIM") and the Putnam Advisory Company, Inc. ("PAC"), each a registered investment adviser subsidiary of PI. PI is a wholly owned subsidiary of Marsh & McLennan Companies, Inc. ("M&M"). PI and PAC share voting power with respect to 286,600 shares of Common Stock (which represent 3.6% of the shares outstanding) and PIM and PI share investment power with respect to 133,100 shares of Common Stock (which represent 1.7% of the shares outstanding) and PI and PAC share investment power with respect to 304,900 shares (which represent 3.8% of the shares outstanding). For purposes of the Exchange Act, PI, PIM, PAC and M&M are deemed to be beneficial owners of such shares; however, PI, PIM, PAC and M&M expressly disclaim that they are, in fact, the beneficial owners of such shares. The address for PI, PIM, and PAC is One Post Office Square, Boston, Massachusetts 02109 and the address for M&M is 116 Avenue of the Americas, New York, New York 10036. (7) According to information contained in a report on Schedule 13G/A dated February 9, 1998, and correspondence to the Company from T. Rowe Price Associates, Inc. ("Price Associates"), the shares of Common Stock being reported are owned by various individual and institutional investors, including T. Rowe Price Small Cap Value Fund, Inc. ("Price Fund") (which owned 402,500 shares and represents 5.1% of the shares outstanding), which Price Associates serves as an investment adviser. Price Associates has sole voting power with respect to 25,000 shares and sole investment power with respect to 427,500 shares (which represent 5.4% of the shares outstanding). Price Fund has sole voting power with respect to 402,500 shares and does not have investment power with respect to any shares. For purposes of the reporting requirements of the Exchange Act, Price Associates is deemed to be a beneficial owner of such shares; however, Price Associates and Price Fund expressly disclaim that they are, in fact, the beneficial owners of such shares. The address for Price Associates and Price Fund is 100 East Pratt Street, Baltimore, Maryland 21202. 63 71 (8) Jeffrey C. Rubenstein is the executor of the Norma L. Ragir Estate and in such capacity exercises voting and investment power with respect to the shares of Common Stock beneficially owned by the Norma L. Ragir Estate (248,251 shares). Mr. Rubenstein is a director of the Meyer and Norma Ragir Foundation (the "Ragir Foundation") and in such capacity exercises shared voting and investment power with respect to the shares of Common Stock beneficially owned by the Ragir Foundation (164,000 shares). Mr. Rubenstein is co-trustee of five separate trusts and, in such capacities exercises shared voting and investment power with respect to the shares of Common Stock beneficially owned by the five separate Ragir trusts. The five Ragir trusts, and the respective number of shares held by each is as follows: MJR/NLR Gift Trust -- Judith Ragir Separate Trust (15,189 shares); MJR/NLR Gift Trust -- Robert Ragir Separate Trust (13,985 shares); MJR/NLR Gift Trust -- Marshall Ragir Separate Trust (15,190 shares) (collectively, the "Ragir Gift Trusts"); Meyer J. Ragir Family Irrevocable Trust -- Judith Ragir (24,750 shares); and the Meyer J. Ragir Family Irrevocable Trust -- Marshall Ragir Separate Trust (66,993 shares) (collectively, the "Ragir Family Trusts"). All five Ragir trusts are collectively referred to herein as the "Ragir Trusts". None of the Ragir Trusts individually owns more than 1% of the Common Stock of the Company. The shares of Common Stock beneficially owned by the Norma L. Ragir Estate, the Ragir Foundation and the Ragir Trusts are deemed to be beneficially owned by Mr. Rubenstein pursuant to the Exchange Act. Mr. Rubenstein, as executor of the Norma L. Ragir Estate and a director of the Ragir Foundation and co-trustee of the Ragir Trusts, exercises either sole or shared voting and investment power with respect to 548,358 shares of Common Stock (which represent 6.9% of the outstanding shares). Mr. Rubenstein expressly disclaims that he is, in fact, the beneficial owner of such shares. The address for Mr. Rubenstein is 200 North LaSalle Street, Suite 2100, Chicago, Illinois 60601. (9) Includes 371,668 shares of Common Stock subject to stock options exercisable within 60 days of March 25, 1998. (10) Includes 164,000 shares of Common Stock beneficially owned by the Ragir Foundation with respect to which Mr. Ragir, in his capacity as a director, exercises shared voting and investment power. These shares are deemed to be beneficially owned by Mr. Ragir pursuant to the Exchange Act. Mr. Ragir expressly disclaims that he is, in fact, the beneficial owner of such shares. The number of shares reported in the table also includes 66,993 shares of Common Stock beneficially owned by the Meyer J. Ragir Family Irrevocable Trust -- Marshall Ragir Separate Trust with respect to which Mr. Ragir, in his capacity as a co-trustee, exercises shared voting and investment power. Does not include 15,190 shares of Common Stock beneficially owned by the MJR/NLR Gift Trust -- Marshall Ragir Separate Trust with respect to which Mr. Ragir does not exercise sole or shared voting or investment power. (11) Mr. Murray is a general partner of Chase Capital Partners, which is the general partner of CVCA, and in such capacity exercises shared voting and investment power with respect to the shares beneficially owned by CVCA (1,289,760 shares which represent 16.2% of the shares outstanding). These shares are deemed to be beneficially owned by Mr. Murray pursuant to the Exchange Act. Mr. Murray expressly disclaims that he is, in fact, the beneficial owner of such shares. (12) Includes 20,035 shares of Common Stock subject to stock options exercisable within 60 days of March 25, 1998. (13) Includes 391,703 shares of Common Stock subject to stock options exercisable within 60 days of March 25, 1998. 64 72 CERTAIN TRANSACTIONS The Company leases its principal office and the Selfix manufacturing and distribution facility in Chicago, Illinois from the Ragir Gift Trusts. Marshall Ragir is a director of the Company and is the brother of Judith Ragir and Robert Ragir. The Company made aggregate payments to the Ragir Gift Trusts under the lease of $519,687 during fiscal 1997 and $467,139 during fiscal 1996. Rent payments are subject to adjustment every three years to reflect increases in the Consumer Price Index. The lease expires in July 2010. The Company believes that the rent paid to the Ragir Gift Trusts under the lease represents fair market value and that the other terms and conditions are commercially reasonable. The Company entered into three exclusive patent licensing agreements with Meyer J. Ragir, two in 1971 and one in 1981, relating to patented manufacturing processes used to produce wood insert molded products and the patented design of certain suction lock and shower organizer products, which in each case were developed by Mr. Ragir. The licensing agreements also cover any improvements which Mr. Ragir developed with respect to such patents. The licensing agreements provide for payment of royalties based upon unit sales of licensed products subject to annual minimum royalties in the aggregate amount of $8,500. Pursuant to the licensing agreements, the Company accrued approximately $28,500 for fiscal 1997 payable to Mr. Ragir's estate (the "Meyer J. Ragir Estate") and paid $25,909 to the Meyer J. Ragir Estate for fiscal 1996. Jeffrey C. Rubenstein, a director of the Company, is executor of the Meyer J. Ragir Estate. Jeffrey C. Rubenstein, a director of the Company is a principal with the law firm Much Shelist Freed Denenberg Ament Bell & Rubenstein, P.C., which serves as general counsel to the Company. The Company made aggregate payments to Much Shelist Freed Denenberg Ament Bell & Rubenstein, P.C. during fiscal 1997 in the amount of $730,000. Mr. Rubenstein, as executor of the Meyer J. Ragir Estate, executor of the Norma L. Ragir Estate, a director of the Ragir Foundation, and co-trustee of the Ragir Trusts, exercises either sole or shared voting and investment power with respect to 548,358 shares of the Company's Common Stock, or 6.9% of the outstanding shares of Common Stock as of March 25, 1998. The Company's principal office and the Selfix manufacturing facility in Chicago, Illinois is owned by the Ragir Gift Trust, of which Mr. Rubenstein serves as co-trustee. In fiscal 1997, the Company engaged the services of the Everest Group, a management consulting firm to assist it with the preparation of a long-term strategic plan. Charles R. Campbell, a director of the Company and member of the Compensation Committee, was a principal with the Everest Group. The Company made aggregate payments to the Everest Group during fiscal 1997 in the amount of $99,400. Management believes this transaction was conducted on an arm's length basis at competitive prices. Chase Securities Inc. ("CSI"), one of the Initial Purchasers, is an affiliate of The Chase Manhattan Bank ("Chase") which will be agent bank and a lender to the Company under the New Credit Facility. Chase Venture Capital Associates, L.P. ("CVCA"), an affiliate of CSI and Chase, owns approximately 16.2% of the Company's outstanding Common Stock, including shares of Common Stock that are held in escrow pursuant to an escrow agreement entered into in connection with the Company's December 30, 1997 acquisition of Seymour. See "Principal Stockholders." Stephen P. Murray, a director of the Company, is a General Partner of Chase Capital Partners which is an affiliate of CSI, Chase and CVCA. In addition, CSI, Chase and their affiliates perform various investment banking and commercial banking services on a regular basis for affiliates of the Company. 65 73 DESCRIPTION OF OTHER INDEBTEDNESS NEW CREDIT FACILITY General. On May 14, 1998, the Company entered into the New Credit Facility with The Chase Manhattan Bank, as administrative agent, and the several lenders parties thereto. The New Credit Facility consists of a senior secured revolving facility in a the maximum aggregate principal amount of $100.0 million. The following is a summary description of the principal terms of the New Credit Facility and is subject to, and qualified in its entirety by, reference to the definitive agreement. All obligations of the Company under the New Credit Facility are unconditionally and irrevocably guaranteed jointly and severally by each of the Company's Subsidiary Guarantors. Indebtedness under the New Credit Facility is secured by a first priority security interest in (i) all of the capital stock of each of the Company's domestic subsidiaries and certain foreign subsidiaries provided that the granting of such security interest will not create an adverse tax consequence and (ii) all tangible and intangible assets of the Company and the Subsidiary Guarantors, with exceptions to be negotiated. Revolving Loans. The Company is entitled to draw amounts under the New Credit Facility for general corporate purposes and working capital requirements for it and its subsidiaries and for financing permitted acquisitions. The Revolving Facility includes sub-limits of up to $15 million for letters of credit and up to $5 million for swing line loans available on same-day notice. The New Credit Facility will mature on the fifth anniversary of the Closing Date. Availability. The availability of the New Credit Facility is subject to various conditions precedent typical of bank facilities of this type including, among other things, the absence of any material adverse change in the business, property, assets, condition (financial or otherwise/or prospect) of the Company and its subsidiaries taken as a whole and the consummation of the Refinancing. The New Credit Facility may be borrowed, repaid and reborrowed during the term thereof. Interest Rates. Borrowings under the New Credit Facility bear interest at a rate per annum (at the Company's option) equal to: (i) the alternate base rate plus the applicable margin; or (ii) LIBOR plus the applicable margin. Mandatory Commitment Reductions. Mandatory commitment reductions must be made from the net proceeds of an issuance or incurrence of certain indebtedness and from the proceeds of certain sales or dispositions of certain assets, subject in each case to certain exceptions. Optional Prepayments. Loans may be prepaid and commitments may be reduced at the Company's option in minimum amounts to be agreed upon. Fees. The Company is required to pay a commitment fee, on a quarterly basis, ranging from 0.375% to 0.5%, based on the average daily unused portion of the revolving commitments and certain fees in respect of letters of credit issued under the New Credit Facility. Covenants. The New Credit Facility contains certain covenants applicable to, and other requirements of, the Company and its subsidiaries. The affirmative covenants provide for, among other things, mandatory reporting by the Company of financial and other information and notice by the Company upon the occurrence of certain events. The New Credit Facility also contains certain negative covenants and restrictions on actions by the Company including, without limitation, restrictions on indebtedness, liens, guaranteed obligations, mergers, asset dispositions, investments, loans, advances, acquisitions, dividends and other restricted payments, transactions with affiliates, change in business and prepayment of subordinated indebtedness. The New Credit Facility requires the Company to meet certain financial covenants including interest coverage and maximum leverage ratios. Events of Default. The New Credit Facility contains certain customary events of default including, without limitation, non-payment of principal, interest or fees, violation of covenants, material inaccuracy of representations and warranties, cross default to certain other indebtedness, bankruptcy and insolvency events, material undischarged judgments, ERISA violations and change of control. 66 74 INDUSTRIAL DEVELOPMENT REVENUE BONDS The Company, through two of its subsidiaries, Shutters (the "Shutters Project") and Selfix (the "Selfix Project") has two variable rate demand Industrial Development Revenue Bonds outstanding. The Shutters Project bond has a principal balance of $2.0 million, was issued in December 1989 and matures on November 1, 2002. The Selfix Project bond has a principal balance of $2.4 million, was issued in September 1990 and matures on September 1, 2005. Interest on both bonds is based on a variable rate payable monthly and principal payments are due annually on December 1. 67 75 DESCRIPTION OF THE EXCHANGE NOTES The Original Notes were, and the Exchange Notes will be, issued under an Indenture (the "Indenture"), dated as of May 14, 1998, among the Company, the Subsidiary Guarantors and LaSalle National Bank, as trustee (the "Trustee"). The form and terms of the Exchange Notes are the same as the form and terms of the Original Notes (which they replace) except that (i) the Exchange Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof, and (ii) the holders of Exchange Notes will not be entitled to certain rights under the Exchange and Registration Rights Agreement, including the provisions providing for an increase in the interest rate on the Original Notes in certain circumstances relating to the timing of the Exchange Offer, which rights will terminate when the Exchange Offer is consummated. The Original Notes issued in the Initial Offering and the Exchange Notes offered hereby are referred to collectively as the "Notes." The following summary of certain provisions of the Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and to all of the provisions of the Indenture, including the definitions of certain terms therein and those terms made a part of the Indenture by reference to the Trust Indenture Act, as in effect on the date of the Indenture. The definitions of certain capitalized terms used in the following summary are set forth below under "Certain Definitions." References in this "Description of the Exchange Notes" section and the "Registration Rights," "Book-Entry; Delivery and Form" and "Plan of Distribution" sections to "the Company" mean only Home Products International, Inc. and not any of its subsidiaries. GENERAL The Notes are unsecured senior subordinated obligations of the Company, limited to $125 million aggregate principal amount, and will mature on May 15, 2008. The Original Notes were and the Exchange Notes will be, issued only in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. Pursuant to the Indenture, the Trustee, initially, will serve as registrar and paying agent. No service charge will be made for any registration of transfer or exchange of the Notes, except for any tax or other governmental charge that may be imposed in connection therewith. Each Note will bear interest at the rate of 9 5/8% per annum from the date of issuance, or from the most recent date to which interest has been paid or provided for, payable semi-annually on May 15 and November 15 of each year commencing on November 15, 1998 to holders of record at the close of business on the May 1 or November 1 immediately preceding the interest payment date. Interest will be computed on the basis of a 360 day year comprised of twelve 30 day months. 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 will be the corporate trust office of the 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. 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. The Notes will be issued in fully registered form without interest coupons, in denominations of $1,000 and any integral multiple of $1,000. The Notes will be represented by one or more registered notes in global form and in certain circumstances may be represented by Notes in definitive form. See "Book-Entry; Delivery and Form." The Notes have been designated for trading in the PORTAL market. OPTIONAL REDEMPTION Except as set forth below, the Notes will not be redeemable at the option of the Company prior to May 15, 2003. 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 68 76 holder's registered address, at the following redemption prices (expressed in percentages of principal amount), 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) if redeemed during the 12-month period commencing on May 15 of the years set forth below:
PERIOD REDEMPTION PRICE ------ ---------------- 2003................................................. 104.813% 2004................................................. 103.208% 2005................................................. 101.604% 2006 and thereafter.................................. 100.000%
In addition, at any time and from time to time prior to May 15, 2001, the Company may redeem in the aggregate up to 35% of the original principal amount of the Notes with the proceeds of one or more Equity Offerings received by, or invested in, the Company so long as there is a Public Market at the time of such redemption, at a redemption price (expressed as a percentage of principal amount) of 109.625% plus accrued and unpaid interest, if any, 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); provided, however, that at least 65% of the original aggregate principal amount of the Notes must remain outstanding after each such redemption, provided, further, that each such redemption occurs within 90 days after the closing of each Equity Offering. In the case of any partial redemption, selection of the Notes for redemption will be made by the Trustee on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion will deem to be fair and appropriate, although no Note of $1,000 in original principal amount or less will be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note will 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. RANKING AND SUBORDINATION The payment of the principal of, premium, if any, and interest on the Notes and other obligations with respect to the Notes is subordinated in right of payment, as set forth in the Indenture, to the prior payment in full in cash or Cash Equivalents when due of all Senior Indebtedness of the Company. However, payment from the money or the proceeds of U.S. Government Obligations held in any defeasance trust described under "Defeasance" below is not subordinate to any Senior Indebtedness or subject to the restrictions described herein. As of March 28, 1998, on a pro forma basis after giving effect to the Refinancing, the outstanding Senior Indebtedness of the Company, including the Subsidiary Guarantors, would have been $9.2 million (exclusive of unused commitments). Although the Indenture contains limitations on the amount of additional Indebtedness that the Company may incur, under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Senior Indebtedness. See "Certain Covenants -- Limitation on Indebtedness." "Senior Indebtedness" is defined, whether outstanding on the Issue Date or thereafter issued, created, incurred or assumed, as the Bank Indebtedness and all other Indebtedness of the Company, including accrued and unpaid interest thereon (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company at the rate specified in the documentation with respect thereto whether or not a claim for post filing interest is allowed in such proceeding) and fees relating thereto, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that the obligations in respect of such Indebtedness are not superior in right of, or are subordinate to, payment to the Notes; provided, however, that Senior Indebtedness will not include (i) any obligation of the Company to any Subsidiary, (ii) any liability for Federal, state, foreign, local or other taxes owed or owing by the Company, (iii) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities), (iv) any Indebtedness, Guarantee or obligation of the Company that is expressly subordinate or junior in right of payment to any other Indebtedness, Guarantee or obligation of the Company, including any Senior Subordinated Indebtedness and any Subordinated Obligations or (v) any obligations in respect of Capital Stock. 69 77 Only Indebtedness of the Company that is Senior Indebtedness will rank senior to the Notes in accordance with the provisions of the Indenture. The Notes will in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Company. The Company has agreed in the Indenture that it will not incur, directly or indirectly, any Indebtedness that is subordinate or junior in ranking in any respect to Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not deemed to be subordinate or junior to Secured Indebtedness merely because it is unsecured. The Company may not pay principal of, premium, if any, or interest on, the Notes or make any deposit pursuant to the provisions described under "Defeasance" below and may not otherwise purchase, redeem or retire any Notes (collectively, "pay the Notes") if (i) any Senior Indebtedness is not paid when due in cash or Cash Equivalents or (ii) any other default on Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such Senior Indebtedness has been paid in full in cash or Cash Equivalents. However, the Company may pay the Notes without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of the Senior Indebtedness with respect to which either of the events set forth in clause (i) or (ii) of the immediately preceding sentence has occurred and is continuing. During the continuance of any default (other than a default described in clause (i) or (ii) of the second preceding sentence) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Notes for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to the Company) of written notice (a "Blockage Notice") of such default from the Representative of the holders of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (ii) because the default giving rise to such Blockage Notice is no longer continuing or (iii) because such Designated Senior Indebtedness has been repaid in full). Notwithstanding the provisions described in the immediately preceding sentence, unless the holders of such Designated Senior Indebtedness or the Representative of such holders have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Notes after the end of such Payment Blockage Period. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. Upon any payment or distribution of the assets or securities of the Company upon a total or partial liquidation, dissolution, reorganization or bankruptcy of or similar proceeding relating to the Company or its property, the holders of Senior Indebtedness will be entitled to receive payment in full in cash or Cash Equivalents of the Senior Indebtedness (including interest accruing after, or which would accrue but for, the commencement of any proceeding at the rate specified in the applicable Senior Indebtedness, whether or not a claim for such interest would be allowed) before the holders of the Notes are entitled to receive any payment or distribution, and until the Senior Indebtedness is paid in full in cash or Cash Equivalents, any payment or distribution to which holders of the Notes would be entitled but for the subordination provisions of the Indenture will be made to holders of the Senior Indebtedness as their interests may appear. If a payment or distribution is made to holders of the Notes that, due to the subordination provisions, should not have been made to them, such holders are required to hold it in trust for the holders of Senior Indebtedness and pay it over to them as their interests may appear. If payment of the Notes is accelerated because of an Event of Default, the Company or the Trustee will promptly notify the holders of the Designated Senior Indebtedness or the Representative of such holders of the acceleration. The Company may not pay the Notes until five Business Days after such holders or the Representative of the Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Notes only if the subordination provisions of the Indenture otherwise permit payment at that time. 70 78 By reason of such subordination provisions contained in the Indenture, in the event of insolvency, creditors of the Company who are holders of Senior Indebtedness may recover more, ratably, than the Noteholders. SUBSIDIARY GUARANTEES Each Subsidiary Guarantor will unconditionally guarantee, jointly and severally, to each holder and the Trustee, on a senior subordinated basis, the full and prompt payment of principal of, premium, if any, and interest on the Notes, and of all other obligations of the Company under the Indenture. The Indebtedness evidenced by each Subsidiary Guarantee (including the payment of principal of, premium, if any, and interest on the Notes and other obligations with respect to the Notes) will be subordinated to all Guarantor Senior Indebtedness of such Subsidiary Guarantor on the same basis as the Notes are subordinated to Senior Indebtedness of the Company. Each Subsidiary Guarantee will in all respects rank pari passu with all other Senior Subordinated Indebtedness of such Subsidiary Guarantor. In addition, a Subsidiary Guarantor may not incur any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Guarantor Senior Indebtedness of such Subsidiary Guarantor unless such Indebtedness is Guarantor Senior Subordinated Indebtedness of such Subsidiary Guarantor or is expressly subordinated in right of payment to Guarantor Senior Subordinated Indebtedness of such Subsidiary Guarantor. As of March 28, 1998, on a pro forma basis after giving effect to the Refinancing, there would have been approximately $6.7 million of Guarantor Senior Indebtedness of Subsidiary Guarantors. See "Description of Other Indebtedness." Although the Indenture contains limitations on the amount of additional Indebtedness that the Company's Restricted Subsidiaries may incur, under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Guarantor Senior Indebtedness. See "Certain Covenants -- Limitation on Indebtedness" and "-- Ranking and Subordination". The obligations of each Subsidiary Guarantor will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor (including, without limitation, any guarantees in respect of Indebtedness under the Senior Credit Agreement) 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 Subsidiary Guarantee or pursuant to its contribution obligations under the Indenture, result in the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Subsidiary Guarantor may consolidate with or merge into or sell its assets to the Company or another Subsidiary Guarantor without limitation. Each Subsidiary Guarantor may 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) except that if the surviving corporation of any such merger or consolidation is a Subsidiary of the Company, such Subsidiary may not be a Foreign Subsidiary. Upon the sale or disposition of a Subsidiary Guarantor (by merger, consolidation, the sale of its Capital Stock or the sale of 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 will be deemed released from all its obligations under the Indenture and its Subsidiary Guarantee and such Subsidiary Guarantee will terminate; provided, however, that any such termination will occur only to the extent that all obligations in respect of Indebtedness of such Subsidiary Guarantor under the Senior Credit Agreement 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 will also terminate upon such release, sale or transfer. CHANGE OF CONTROL Upon the occurrence of any of the following events (each a "Change of Control"), unless the Company shall have exercised its right to redeem the Notes as described under "-- Optional Redemption", each holder will have the right to require the Company to repurchase all or any part of such holder's Notes at a purchase 71 79 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) (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 40% of the total voting power of the Voting Stock of the Company (or its successor by merger, consolidation or purchase of all or substantially all of its assets); and (B) the Permitted Holders "beneficially own" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company (or its successor by merger, consolidation or purchase of all or substantially all of its assets) than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of the Company or such successor; or (ii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of at least a majority of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved or is a designee of the Permitted Holders or was nominated or elected by such Permitted Holders or any of their designees) cease for any reason to constitute a majority of the Board of Directors of the Company then in office; or (iii) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted Holder; or (iv) the adoption by the stockholders of a plan for the liquidation or dissolution of the Company. Within 30 days following any Change of Control, unless the Company has previously mailed a redemption notice with respect to all the outstanding Notes as described under "-- Optional Redemption", the Company will mail a notice to each holder with a copy to the Trustee stating: (i) 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); (ii) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (iii) 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 will not be deemed to have breached its obligations described in the Indenture by virtue thereof. The occurrence of certain of the events that would constitute a Change of Control would constitute a default under the Senior Credit Agreement. Future Senior Indebtedness of the Company and its Subsidiaries may also 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 72 80 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. Even if sufficient funds were otherwise available, the terms of the Senior Credit Agreement will (and other Senior Indebtedness may) prohibit the Company's prepayment of Notes prior to their scheduled maturity. Consequently, if the Company is not able to prepay the Bank Indebtedness and any other Senior Indebtedness containing similar restrictions or obtain requisite consents, as described above, the Company will be unable to fulfill its repurchase obligations if holders of Notes exercise their repurchase rights following a Change of Control, thereby resulting in a default under the Indenture. The Change of Control provisions described above may deter certain mergers, tender offers and other takeover attempts involving the Company by increasing the capital required to effectuate such transactions. The definition of "Change of Control" includes a disposition of all or substantially all of the property and assets of the Company and its Restricted 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 is the choice of law under 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. CERTAIN COVENANTS The Indenture contains certain covenants including, among others, the following: Limitation on Indebtedness. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, Incur any Indebtedness; provided, however, that the Company may Incur Indebtedness if on the date thereof the Consolidated Coverage Ratio for the Company and its Restricted Subsidiaries is at least (i) 2.00 to 1.00, if such Indebtedness is Incurred on or prior to the second anniversary of the Issue Date and (ii) 2.25 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)(A) Indebtedness Incurred pursuant to the Senior Credit Agreement in an aggregate principal amount not to exceed the greater of (1) $100 million less the amount of all mandatory reductions of the revolving credit commitments thereunder and (2) the Borrowing Base and (B) Indebtedness Incurred under any other senior credit facility or facilities, providing for revolving loans; provided, that the aggregate principal amount of all such additional revolving Indebtedness under such other senior credit facility or facilities after giving effect to such Incurrence, does not exceed (1) the Borrowing Base, less (2) the maximum aggregate commitments under the Senior Credit Agreement; (ii) the Subsidiary Guarantees and Guarantees of, or Liens in respect of, Indebtedness Incurred pursuant to paragraph (a) above or clause (i) of this paragraph (b); (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 another Wholly-Owned Subsidiary) will be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof; (iv) Indebtedness represented by (A) the Notes, (B) any Indebtedness (other than the Indebtedness described in clauses (i), (ii) and (iii)) outstanding on the Issue Date and (C) any Refinancing Indebtedness Incurred in respect of any Indebtedness described in this clause (iv), clause (v) or clause (vii) or Incurred pursuant to paragraph (a) above; (v) 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 (A) to provide all or any portion of the funds 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 or (B) otherwise in connection with, or in contemplation of, such acquisition); provided, however, that at the time such Restricted Subsidiary is acquired by the Company, the Company would have 73 81 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); (vi) Indebtedness under Currency Agreements and Interest Rate Agreements and certain raw material hedging transactions; 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 or senior management 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 and in the case of raw material hedging transactions, such are entered into with respect to the purchase of raw materials and are entered in the ordinary course of business for bona fide hedging purposes; (vii) Purchase Money Indebtedness and Capitalized Lease Obligations Incurred on or after the Issue Date; provided, however, that the aggregate principal amount of such Indebtedness Incurred on or after the Issue Date and outstanding at any time pursuant to this clause (vii) shall not exceed $15 million, and such Indebtedness as originally Incurred shall not constitute more than 100% of the cost (determined in accordance with GAAP) of the property so purchased or leased; and (viii) Indebtedness (other than Indebtedness described in clauses (i)-(vii)) in a principal amount which, when taken together with the principal amount of all other Indebtedness Incurred pursuant to this clause (viii) and then outstanding, will not exceed $10 million. (c) Neither the Company nor any Restricted Subsidiary will 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 will be subordinated to the Notes to at least the same extent as such Subordinated Obligations. No Subsidiary Guarantor will incur any Indebtedness under paragraph (b) above if the proceeds thereof are used, directly or indirectly to refinance any Guarantor Subordinated Obligations of such Subsidiary Guarantor unless such Indebtedness will be subordinated to the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee to at least the same extent as such Guarantor Subordinated Obligations. (d) In addition, the Company will not Incur any Secured Indebtedness which is not Senior Indebtedness unless contemporaneously therewith effective provision is made to secure the Notes equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. No Subsidiary Guarantor will Incur any Secured Indebtedness which is not Guarantor Senior Indebtedness of such Subsidiary Guarantor unless contemporaneously therewith effective provision is made to secure such Subsidiary Guarantor's obligations under its Subsidiary Guarantee equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. (e) For purposes of determining compliance with, and the outstanding principal amount of any particular Indebtedness incurred pursuant to and in compliance with, this covenant, (i) in the event that Indebtedness meets the criteria of more than one of the types of Indebtedness described in paragraph (b) above, the Company, in its sole discretion, will classify, or later reclassify, such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses; and (ii) the amount of Indebtedness issued at a price that is less than the principal amount thereof will be equal to the amount of the liability in respect thereof determined in accordance with GAAP. Limitation on Layering. The Company will not Incur any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is contractually subordinated in right of payment to Senior Subordinated Indebtedness. No Subsidiary Guarantor will Incur any Indebtedness if such Indebtedness is contractually subordinate or junior in ranking in any respect to any Guarantor Senior Indebtedness of such Subsidiary Guarantor unless such Indebtedness is Guarantor Senior Subordinated Indebtedness of such Subsidiary Guarantor or is contractually subordinated in right of payment to Guarantor Senior Subordinated Indebtedness of such Subsidiary Guarantor. 74 82 Limitation on Restricted Payments. (a) The Company will not, and will 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 (and if such Restricted Subsidiary is not a Wholly-Owned Subsidiary, to its other holders of Capital Stock or other equity interests, as applicable, 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 Restricted Subsidiary of the Company or any Capital Stock of a Restricted Subsidiary of the Company held by any Affiliate of the Company, other than another Restricted 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 (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition) or (iv) make any Investment (other than a Permitted Investment) in any Unrestricted Subsidiary or any other Person (any such dividend, distribution, purchase, redemption, repurchase, defeasance, other acquisition, retirement or Investment being herein referred to in clauses (i) through (iv) as a "Restricted Payment"), if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (A) a Default shall have occurred and be continuing (or would result therefrom); or (B) the Company is not able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) under "Limitation on Indebtedness"; or (C) the aggregate amount of such Restricted Payment and all other Restricted Payments declared or made (without double counting) subsequent to the Issue Date would exceed the sum of: (1) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from 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 (or, in case such Consolidated Net Income is a deficit, minus 100% of such deficit); (2) the aggregate Net Cash 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 a Subsidiary of the Company or an employee stock ownership plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust is financed by loans from or guaranteed by the Company or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination); (3) 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 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 (4) the amount equal to the net reduction in Investments made by the Company or any of its Restricted Subsidiaries in any Person resulting from (x) 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 (including by way of dividend or distribution) by such Person to the Company or any Restricted Subsidiary of the Company or (y) 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 made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount was included in the calculation of the amount of Restricted Payments; provided, however, that no amount will be included under this clause (4) to the extent it is already included in Consolidated Net Income. (b) The provisions of paragraph (a) will 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 of the Company issued or sold to a Subsidiary or an employee stock ownership plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust is financed by loans from or guaranteed by the Company or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination); provided, however, that (A) such purchase or redemption will be excluded in 75 83 subsequent calculations of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale will be excluded from clause (C) (2) 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; provided, however, that such purchase or redemption will be excluded in subsequent calculations of the amount of Restricted Payments; (iii) 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, however, that such purchase or redemption will be excluded in subsequent calculations of the amount of Restricted Payments; (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 dividends will be included in subsequent calculations of the amount of Restricted Payments; (v) repurchases of Capital Stock deemed to occur upon the exercise of stock options if such Capital Stock represents a portion of the exercise price hereof; provided, however, that such repurchases will be excluded from the calculation of the amount of Restricted Payments; and (vi) any repurchase, retirement or other acquisition or retirement for value of Capital Stock of the Company held by any future, present or former employee of the Company or any Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement; provided, however, that the aggregate Restricted Payment made under this clause (vi) does not exceed in any calendar year $2 million; provided further that such amount in any calendar year may be increased by any unused amounts from any of the three years prior to such calendar year. Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness or other obligations 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 date of the Indenture (including, without limitation, the Senior Credit Agreement); (B) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by a Restricted Subsidiary on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company) and outstanding on such date; (C) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement effecting a refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (A) or (B) of this covenant or this clause (C) or contained in any amendment to an agreement referred to in clause (A) or (B) of this covenant or this clause (C); provided, however, that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such agreement or amendment are no less favorable to the Holders of the Notes than encumbrances and restrictions contained in such agreements; (D) in the case of clause (iii) above, any encumbrance or restriction (1) that restricts in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, or the assignment or transfer of any such lease, license or other contract, (2) 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, (3) contained in mortgages, pledges or other security agreements securing Indebtedness of a Restricted Subsidiary to the extent such encumbrance or restrictions restrict the transfer of the property subject to such mortgages, pledges or other security agreements or (4) pursuant to customary provisions restricting dispositions of real property interests set forth in any reciprocal easement agreements of the Company or any Restricted Subsidiary; (E) any restriction with respect to a Restricted Subsidiary (or any of its property or assets) imposed pursuant to an agreement entered into for the direct or indirect sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary (or the property or assets that are subject to such restriction) pending the closing of such sale or disposition; and (F) encumbrances or restrictions arising or existing by reason of applicable law. 76 84 Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, make any Asset Disposition unless (i) the Company or such Restricted Subsidiary receives consideration (including by way of relief from, or by any other Person assuming sole responsibility for, any liabilities, contingent or otherwise) at the time of such Asset Disposition at least equal to the fair market value, as determined in good faith by the 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, as the case may be, elects (or is required by the terms of any Senior Indebtedness or Indebtedness (other than Preferred Stock) of a Wholly-Owned Subsidiary), to prepay, repay or purchase Senior Indebtedness or Indebtedness (other than any Preferred Stock) of a Wholly-Owned Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) within 180 days from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) second, to the extent of the balance of such Net Available Cash after application in accordance with clause (A), at the Company's election to invest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary) within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (C) third, to the extent of the balance of such Net Available Cash after application and in accordance with clauses (A) and (B) (the "Excess Proceeds"), to make an offer to purchase the Notes and other Senior Subordinated Indebtedness outstanding with similar provisions requiring the Company to make an offer to purchase such Indebtedness with the proceeds from any Asset Disposition ("Pari Passu Notes") at 100% of the principal amount thereof (or 100% of the accreted value of such Pari Passu Notes so tendered if such Pari Passu Notes were issued at a discount) plus accrued and unpaid interest, if any, to the date of purchase; and (D) fourth, to the extent of the balance of the Excess Proceeds, after application in accordance with clause (C), to fund other corporate purposes not prohibited by the Indenture; provided, however, that, in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) above, the Company or such Restricted Subsidiary will retire such Indebtedness and will 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, (i) the Company and its Restricted Subsidiaries will 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 exceed $5 million and (ii) in addition, the Company and its Restricted Subsidiaries may make in the aggregate $1 million in Asset Dispositions each year which are not subject to the provisions of this covenant. For the purposes of this covenant, the following will be deemed to be cash: (i) the assumption by the transferee of Senior Indebtedness of the Company or 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 or Indebtedness in connection with such Asset Disposition (in which case the Company will, without further action, be deemed to have applied such assumed Indebtedness in accordance with clause (iii) (A) of the preceding paragraph) and (ii) securities received by the Company or any Restricted Subsidiary of the Company from the transferee that are promptly 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 (iii)(C) of paragraph (a), the Company will be required to apply such Excess Proceeds to the repayment of the Notes and any Pari Passu Notes as follows: (i) the Company will make an offer to purchase (an "Offer") within ten days of such time from all holders of the Notes in accordance with the procedures set forth in the Indenture in the maximum principal amount (expressed as a multiple of $1,000) of Notes that may be purchased out of an amount (the "Note Amount") equal to the product of such Excess Proceeds multiplied by a fraction, the numerator of which is the outstanding principal amount of the Notes and the denominator of which is the sum of the outstanding principal amount of the Notes and the outstanding principal amount (or accreted value, as the case may be) of the Pari Passu Notes at a purchase price of 100% of the principal amount thereof plus 77 85 accrued and unpaid interest, if any, to the date of purchase and (ii) the Company will make an offer to purchase any Pari Passu Notes (a "Pari Passu Offer") in an amount equal to the excess of the Excess Proceeds over the Note Amount at a purchase price of 100% of the principal amount (or accreted value, as the case may be) thereof plus accrued and unpaid interest, if any, to the date of purchase in accordance with the procedures (including prorating in the event of oversubscription) set forth in the documentation governing such Pari Passu Notes with respect to the Pari Passu Offer. If the aggregate purchase price of the Notes and Pari Passu Notes tendered pursuant to the Offer and the Pari Passu Offer is less than the Excess Proceeds, the remaining Excess Proceeds will be available to the Company for use in accordance with clause (iii)(D) of paragraph (a) above. The Company will not be required to make an Offer for Notes pursuant to this covenant if the Excess Proceeds available therefor are less than $10 million (which lesser amounts will be carried forward for purposes of determining whether an Offer is required with respect to the Excess Proceeds from any subsequent Asset Disposition). (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 (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless: (i) the terms of such Affiliate Transaction are no less favorable to the Company or such 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 $5 million, the terms of such transaction have been approved by a majority of the members of the Board of Directors of the Company having no personal stake in such transaction, if any (and such majority 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 $10 million, the Company has received a written opinion from an independent investment banking firm of nationally recognized standing that such Affiliate Transaction is not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate. (b) The foregoing paragraph (a) will 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 bonuses (whether or not pursuant to an employment agreement), stock options and stock ownership plans 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, (iv) the payment of reasonable fees to directors of the Company and its Restricted Subsidiaries who are not employees of the Issuer or its Restricted Subsidiaries, (v) any payments to the Company by the Restricted Subsidiaries pursuant to a tax sharing agreement, (vi) transactions in the ordinary course of business between the Company or any Restricted Subsidiary with Selfix Europe L.L.C. or its successors and (vii) any transaction between the Company and a Wholly-Owned Subsidiary or between Wholly-Owned Subsidiaries. Limitation on Capital Stock of Restricted Subsidiaries. The Company will not sell any shares of Capital Stock of a Restricted Subsidiary, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell any shares of its Capital Stock except: (i) to the Company or a Wholly-Owned Subsidiary; or (ii) (A) in compliance with the covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock" if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would continue to be a Restricted Subsidiary or (B) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer be a Restricted Subsidiary, and, in each case, the Investment of the Company in such Person after giving effect to such issuance or sale would have been permitted to be made under the "Limitation on Restricted Payments" covenant as if made on the date of such issuance or sale. 78 86 Notwithstanding the foregoing, the Company may sell all the Capital Stock of a Subsidiary as long as the Company is in compliance with the terms of the covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock". Limitation on the Sale or Issuance of Preferred Stock of Restricted Subsidiaries. The Company will not sell any shares of Preferred Stock of a Restricted Subsidiary and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell any shares of its Preferred Stock to any Person (other than to the Company or a Wholly-Owned Subsidiary). SEC Reports. Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, to the extent permitted by the Exchange Act, the Company will file with the Commission, and provide, within 15 days after the Company is required to file the same with the Commission, the Trustee and the holders of the Notes with the annual reports and 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) that are specified in Sections 13 and 15(d) of the Exchange Act. In the event that the Company is not permitted to file such reports, documents and information with the Commission pursuant to the Exchange Act, the Company will nevertheless provide such Exchange Act information to the Trustee and the holders of the Notes as if the Company were subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act. Merger and Consolidation. The Company will not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person, unless: (i) the resulting, surviving or transferee Person (the "Successor Company") will 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) will expressly assume, by supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the 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 Restricted 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 would be able to Incur at least an additional $1.00 of Indebtedness pursuant to paragraph (a) of "Limitation on Indebtedness"; and (iv) the Company has delivered to the 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. 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), (i) any Restricted Subsidiary of the Company may consolidate with, merge into or transfer all or part of its properties and assets to the Company and (ii) the Company may merge with an Affiliate incorporated solely for the purpose of reincorporating the Company in another jurisdiction to realize tax or other benefits. Future Subsidiary Guarantors. After the Issue Date, the Company will cause each Restricted Subsidiary other than a Foreign Subsidiary created or acquired by the Company which Guarantees the Bank Indebtedness or Incurs Indebtedness under paragraph (a) of "Limitation on Indebtedness" to execute and deliver to the Trustee a Subsidiary Guarantee pursuant to which such Subsidiary Guarantor will unconditionally Guarantee, on a joint and several basis, the full and prompt payment of the principal of, premium, if any and interest on the Notes on a senior subordinated basis. The obligations of each Subsidiary Guarantor will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor (including, without limitation, any guarantees under the Senior Credit Agreement) 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 79 87 Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to its contribution obligations under the Indenture, result in the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Subsidiary Guarantor will be permitted to consolidate with or merge into or sell its assets to the Company or another Subsidiary Guarantor without limitation. Each Subsidiary Guarantor will be permitted to 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 except that if the surviving corporation of any such merger or consolidation is a Subsidiary of the Company, such Subsidiary may not be a Foreign Subsidiary. Upon the sale or disposition of a Subsidiary Guarantor (by merger, consolidation, the sale of its Capital Stock or the sale of 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 will be deemed released from all its obligations under the Indenture and its Subsidiary Guarantee and such Subsidiary Guarantee will terminate; provided, however, that any such termination will occur only to the extent that all obligations of such Subsidiary Guarantor under the Senior Credit Agreement 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 will also terminate upon such release, sale or transfer. Limitation on Lines of Business. The Company will not, and will not permit any Restricted Subsidiary to, engage in any business other than a Related Business. Notwithstanding the foregoing, the Company may acquire and operate any business which is primarily engaged in a Related Business at the time of acquisition. 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, whether or not such payment is prohibited by the provisions described under "-- Ranking and Subordination" above, (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, whether or not such payment is prohibited by the provisions described under "-- Ranking and Subordination" above, (iii) the failure by the Company to comply with its obligations under "-- Certain Covenants -- Merger and Consolidation" 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 the covenants described under "-- Certain Covenants" above (in each case, other than a failure to purchase Notes which will constitute an Event of Default under clause (ii) above), (v) the failure by the Company 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 $5 million (the "cross acceleration provision"), (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 $5 million is rendered against the Company or a Significant Subsidiary and such judgment or decree remains undischarged or unstayed for a period of 60 days after such judgment becomes final and non-appealable (the "judgment default provision") or (ix) any Subsidiary Guarantee ceases to be in full force and effect (except as contemplated by the terms of the Indenture) or any Subsidiary Guarantor denies or disaffirms its obligations under the Indenture or its Subsidiary Guarantee. However, a default under clauses (iv) and (v) will not constitute an Event of Default until the Trustee or the holders 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 clauses (iv) and (v) hereof after receipt of such notice. If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the outstanding Notes by notice to the Company and the Trustee 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 will be due and payable immediately. If an Event of Default relating 80 88 to certain events of bankruptcy, insolvency or reorganization of the Company occurs and is continuing, 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 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 Trustee, if an Event of Default occurs and is continuing, the 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 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 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 Trustee to pursue the remedy, (iii) such holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense, (iv) the 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 Trustee a direction that, in the opinion of the 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 Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee will 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 Trustee, the 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 Trustee may withhold notice if and so long as a committee of its trust officers in good faith determines that withholding notice is in the interests of the Noteholders. In addition, the Company is required to deliver to the Trustee, within 120 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 Trustee, within 30 days after the occurrence thereof, written notice of any events which would constitute certain Defaults, their status and what action the Company is taking or proposes to take in respect thereof. 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 (including consents obtained in connection with a tender offer or exchange offer for the Notes) 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, (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 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 81 89 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. However, no amendment may be made to the subordination provisions of the Indenture that adversely affects the rights of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. 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. If the Company exercises its legal defeasance option, the Subsidiary Guarantees in effect at such time will terminate. 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 Subsidiary 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 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 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). CONCERNING THE TRUSTEE LaSalle National Bank is the Trustee under the Indenture and has been appointed by the Company as Registrar and Paying Agent with regard to the Notes. 82 90 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) to be used by the Company or a Restricted Subsidiary in a Related 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; or (iii) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary of the Company; provided, however, that, in the case of clauses (ii) and (iii), such Restricted Subsidiary is primarily engaged in a Related Business. "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 a Restricted Subsidiary (other than directors' qualifying shares), 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) the sale of Cash Equivalents in the ordinary course of business, (iii) a disposition of inventory in the ordinary course of business, (iv) 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, (v) the sale, discount or factoring (with or without recourse on commercially reasonable terms) of accounts receivable arising in the ordinary course of business, (vi) transactions permitted under "-- Certain Covenants -- Merger and Consolidation" above and (vii) for purposes of the covenant described in "-- Certain Covenants Limitation on Sales of Assets and Subsidiary Stock" only, a disposition that constitutes a Restricted Payment permitted by the covenant described under "-- Certain Covenants -- Limitation on Restricted Payments". "Attributable Indebtedness" in respect of a sale/leaseback transaction means, as of the time of determination, the present value (discounted at the interest rate assumed in making calculations in accordance with GAAP) 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 or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Indebtedness or Preferred Stock multiplied by the amount of such payment by (ii) the sum of all such payments. "Bank Indebtedness" means any and all amounts, whether outstanding on the Issue Date or thereafter incurred, payable by the Company or any Subsidiary under or in respect of the Senior Credit Agreement and any related notes, collateral documents, letters of credit and guarantees or any Interest Rate Agreement entered into with a Lender (as defined in the Senior Credit Agreement) in connection with the Senior Credit Agreement, including principal, premium, if any, interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company at the rate specified therein whether 83 91 or not a claim for post filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means, as to any Person, the board of directors of such Person or any duly authorized committee thereof. "Borrowing Base" means, as of any date, an amount equal to the sum of (i) 40% of the aggregate book value of inventory and (ii) 75% of the aggregate book value of all accounts receivable of the Company and its Restricted Subsidiaries on a consolidated basis, as determined in accordance with GAAP consistently applied. To the extent that information is not available as to the amount of inventory or accounts receivable as of a specific date, the Company shall use the most recent available information for purposes of calculating the Borrowing Base. "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 will be the capitalized amount of such obligation determined in accordance with GAAP, and the Stated Maturity thereof will 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. "Cash Equivalents" means (i) securities issued or directly and fully guaranteed or insured by the United States Government or any agency or instrumentality thereof, having maturities of not more than one year from the date of acquisition; (ii) marketable general obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition thereof, having a credit rating of "A" or better from either Standard & Poor's Ratings Group or Moody's Investors Service, Inc.; (iii) certificates of deposit, time deposits, eurodollar time deposits, overnight bank deposits or bankers' acceptances having maturities of not more than one year from the date of acquisition thereof issued by any commercial bank the long-term debt of which is rated at the time of acquisition thereof at least "A" or the equivalent thereof by Standard & Poor's Rating Group, or "A" or the equivalent thereof by Moody's Investors Service, Inc., and having capital and surplus in excess of $250 million (or foreign currency equivalent thereof); (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (i), (ii) and (iii) entered into with any bank meeting the qualifications specified in clause (iii) above; (v) commercial paper rated at the time of acquisition thereof at least "A-2" or the equivalent thereof by Standard & Poor's Rating Group or "P-2" or the equivalent thereof by Moody's Investors Service, Inc., or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of investments, and in either case maturing within 270 days after the date of acquisition thereof; and (vi) interests in any investment company which invests solely in instruments of the type specified in clauses (i) through (v) above. "Code" means the Internal Revenue Code of 1986, as amended. "Consolidated Coverage Ratio" as of any date of determination means, with respect to any Person, the ratio of (i) the aggregate amount of Consolidated EBITDA of such Person for the period of the most recent four consecutive fiscal quarters for which financial statements are available ending prior to the date of such determination to (ii) Consolidated Interest Expense for such four fiscal quarters; provided, however, that (A) If the Company or any Restricted Subsidiary (1) has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, Consolidated EBITDA and Consolidated Interest Expense for such period will be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period (except that in making such computation, the amount of Indebtedness under any revolving credit facility outstanding on the date of such calculation will be computed based on (a) the average daily balance of such Indebtedness during 84 92 such four fiscal quarters or such shorter period for which such facility was outstanding or (b) if such facility was created after the end of such four fiscal quarters, the average daily balance of such Indebtedness during the period from the date of creation of such facility to the date of such calculation) and 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, or (2) has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of the period that is no longer outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio involves a discharge of Indebtedness (in each case other than Indebtedness incurred under any revolving credit facility unless such Indebtedness has been permanently repaid), Consolidated EBITDA and Consolidated Interest Expense for such period will be calculated after giving effect on a pro forma basis to such discharge of such Indebtedness, including 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 the Company or any Restricted Subsidiary will have made any Asset Disposition or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Asset Disposition, the Consolidated EBITDA for such period will be reduced by an amount equal to the Consolidated EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period or increased by an amount equal to the Consolidated EBITDA (if negative) directly attributable thereto for such period and Consolidated Interest Expense for such period will be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary 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 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), (C) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) will have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurrin g 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 EBITDA and Consolidated Interest Expense for such period will 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 (D) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) will have made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (B) or (C) above if made by the Company or a Restricted Subsidiary during such period, Consolidated EBITDA and Consolidated Interest Expense for such period will be calculated after giving pro forma effect thereto as if such Asset Disposition or 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 will 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 Consolidated Interest Expense on such Indebtedness will be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (any Interest Rate Agreement applicable to such Indebtedness for a period (not in excess of 12 months) corresponding to the remaining term of such Interest Rate Agreement as of the date of determination). "Consolidated EBITDA" 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 of intangibles and (v) other non-cash charges reducing Consolidated Net Income (excluding any such non-cash charge to the extent it represents an accrual of or reserve for cash charges in any future period or amortization of a prepaid cash expense that was paid in a prior period not included in the calculation). Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the interest, depreciation and amortization of, a 85 93 Restricted Subsidiary of a Person will be added to Consolidated Net Income to compute Consolidated EBITDA of such Person only to the extent (and in the same proportion) that the net income of such Subsidiary was included in calculating the Consolidated Net Income of such Person. "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its Consolidated Subsidiaries, plus, to the extent not included in such interest expense, (i) interest expense attributable to Capitalized Lease Obligations and the interest portion of rent expense associated with Attributable Indebtedness in respect of the relevant lease giving rise thereto, determined as if such lease were a capitalized lease in accordance with GAAP, (ii) amortization of debt discount and debt issuance cost (other than costs incurred in connection with the Refinancing), (iii) capitalized interest and accrued interest, (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 Subsidiary under any Guarantee of Indebtedness or other obligation of any other Person, (vii) net costs associated with Hedging Obligations (including amortization of fees), (viii) dividends in respect of all Disqualified Stock of the Company and all Preferred Stock of Subsidiaries, in each case, held by Persons other than the Company or a Wholly-Owned Subsidiary and (ix) 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; provided, however, that there will be excluded therefrom any such interest expense of any Unrestricted Subsidiary to the extent the related Indebtedness is not Guaranteed or paid by the Company or any Restricted Subsidiary. For purposes of the foregoing, total interest expense will be determined after giving effect to any net payments made or received by the Company and its Subsidiaries with respect to Interest Rate Agreements. Notwithstanding the foregoing, the Consolidated Interest Expense with respect to any Restricted Subsidiary of the Company that was not a Wholly-Owned Subsidiary will 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 net income (loss) of the Company and its Consolidated Subsidiaries; provided, however, that there will not be included in such Consolidated Net Income: (i) any net income (loss) of any Person if such Person is not a Restricted Subsidiary, except that (A) subject to the limitations contained in (iv) below, the Company's equity in the net income of any such Person for such period will be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (iii) below) and (B) the Company's equity in a net loss of any such Person (other than an Unrestricted Subsidiary) for such period will be included in determining such Consolidated Net Income to the extent such loss has been funded with cash from the Company or a Restricted Subsidiary; (ii) any net income (loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (iii) any net income (loss) of any Restricted Subsidiary if such 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, except that (A) subject to the limitations contained in (iv) below the Company's equity in the net income of any such Restricted Subsidiary for such period will be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution that could have been made to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period will be included in determining such Consolidated Net Income; (iv) any gain (loss) realized upon the sale or other disposition of any property, plant, equipment or other asset of the Company or its consolidated Subsidiaries which is not sold or otherwise disposed of in the ordinary course of business and any gain (loss) realized upon the sale or other disposition of any Capital Stock of any Person; (v) any extraordinary gain or loss and (vi) the cumulative effect of a change in accounting principles. 86 94 "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. "Designated Senior Indebtedness" means (i) the Bank Indebtedness in the case of the Company and (ii) any other Senior Indebtedness which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $25 million and is specifically designated in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture. "Disqualified Stock" means, with respect to any Person, any Capital Stock of such Person 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 (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or Disqualified Stock (excluding capital stock which is convertible or exchangeable solely at the option of the Company or a Restricted Subsidiary) or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to the Stated Maturity of the Notes, provided, that only the portion of Capital Stock which so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such Stated Maturity will be deemed to be Disqualified Stock. "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. "Fiscal Year" means a 52 or 53 week period ending on the last Saturday in December. "Foreign Subsidiary" means any Subsidiary that is not organized under the laws of the United States of America or any state thereof or the District of Columbia. "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 will be computed in conformity with GAAP. "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 agreements 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" will 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 Senior Indebtedness" means, with respect to a Subsidiary Guarantor, the following obligations, whether outstanding on the date of the Indenture or thereafter issued, without duplication: (i) any Subsidiary Guarantee of the Bank Indebtedness by such Subsidiary Guarantor and all other Subsidiary Guarantees by such Subsidiary Guarantor of Senior Indebtedness of the Company or Guarantor Senior Indebtedness for any other Subsidiary Guarantor; and (ii) all obligations consisting of the principal of and premium, if any, and accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Subsidiary Guarantor regardless of whether post filing interest is allowed in such proceeding) on, and fees and other amounts owing in respect of, all other Indebtedness of the Subsidiary Guarantor, unless, in the instrument creating or evidencing the same or 87 95 pursuant to which the same is outstanding, it is expressly provided that the obligations in respect of such Indebtedness are not senior in right of payment to the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee; provided, however, that Guarantor Senior Indebtedness will not include (A) any obligations of such Subsidiary Guarantor to another Subsidiary Guarantor or any other Subsidiary of the Subsidiary Guarantor, (B) any liability for Federal, state, local, foreign or other taxes owed or owing by such Subsidiary Guarantor, (C) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities), (D) any Indebtedness of such Subsidiary Guarantor that is expressly subordinate in right of payment to any of the Indebtedness of such Subsidiary Guarantor, including any Guarantor Senior Subordinated Indebtedness and Guarantor Subordinated Obligations of such Subsidiary Guarantor or (E) any obligation with respect to Capital Stock. "Guarantor Senior Subordinated Indebtedness" means with respect to a Subsidiary Guarantor, the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee and any other Indebtedness of such Subsidiary Guarantor (whether outstanding on the Issue Date or thereafter Incurred) that specifically provides that such Indebtedness is to rank pari passu in right of payment with the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee and is not expressly subordinated by its terms in right of payment to any Indebtedness of such Subsidiary Guarantor which is not Guarantor Senior Indebtedness of such Subsidiary Guarantor. "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 in right of payment to the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee pursuant to a written agreement. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency 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) will 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); (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except trade payables), 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) 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 Subsidiary, any Preferred Stock (but excluding, in each case, any accrued dividends); (vii) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of such Indebtedness will be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness of such other Persons; (viii) all Indebtedness of other Persons to the extent Guaranteed by such Person; and (ix) to the extent not otherwise included in this definition, net obligations of such Person under Currency Agreements and Interest Rate Agreements (the amount of any such obligations to be equal at any time to the net termination value of such agreement or arrangement giving rise to such obligation that would be payable by such Person at such time). The amount of Indebtedness of any Person at any date will be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. 88 96 "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) 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" will 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 will be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to (A) the Company's "Investment" in such Subsidiary at the time of such redesignation less (B) 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 re-designated a Restricted Subsidiary; and (ii) any property transferred to or from an Unrestricted Subsidiary will 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 of the Company. "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). "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 that are the subject of such Asset Disposition or received in any other noncash form) therefrom, in each case net of (i) all legal, accounting, investment banking, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition, (ii) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon, or other security agreement of any kind with respect to, such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition, (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition and (iv) 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 and retained by the Company or any Restricted Subsidiary after such Asset Disposition. "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. "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. 89 97 "Permitted Holders" means (i) directors and officers of the Company on the Issue Date and (ii) Chase Venture Capital Associates, L.P. and any Affiliate thereof. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in (i) a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Related Business; (ii) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that such Person's primary business is a Related Business; (iii) cash and Cash Equivalents; (iv) receivables owing to the Company or any Restricted Subsidiary created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (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 or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary; (vii) any Investment in an entity conducting a Related Business that is not a Restricted Subsidiary; provided that the aggregate fair market value of all Investments made pursuant to this clause (vii) (valued on the date each such Investment was made and without giving effect to subsequent changes in value) may not at any one time exceed $5 million; (viii) Investments in Selfix Europe, L.L.C. or its Successors; provided that the aggregate fair market value of all Investments made pursuant to this clause (viii) (valued on the date each such Investment was made and without giving effect to subsequent changes in value) may not at any one time exceed $3 million; (ix) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; (x) any Investment in securities or other assets received in connection with Asset Dispositions made in accordance with the provisions of the covenant described under "Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock"; and (xi) Currency Agreements, Interest Rate Agreements and related Hedging Obligations entered into in compliance with the covenant described under "Certain Covenants -- Limitation on Indebtedness" and hedging arrangements with respect to the purchase of raw materials entered into in the ordinary course of business on customary terms for bona fide hedging purposes. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof 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 (i) the common stock of the Company is then registered with the 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 (ii) at least 15% of the total issued and outstanding common stock of the Company has been distributed prior to such time by means of an effective registration statement under the Securities Act. "Purchase Money Indebtedness" of any Person means any Indebtedness of such person to any seller or other person incurred to finance the acquisition or construction of any asset (or, in each case, any interest therein) acquired or constructed after the Issue Date which is related to a Related Business of the Company and which is incurred concurrently with, or within 180 days of, such acquisition or the completion of such construction and, if secured, is secured only by the assets so financed. "Refinancing Indebtedness" means Indebtedness that is Incurred to refund, refinance, replace, renew, repay, redeem, retire or extend (including pursuant to any defeasance or discharge mechanism) (collectively, "refinance", "refinances," and "refinanced" shall have a correlative meaning) any Indebtedness existing on 90 98 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 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 Average Life of the Indebtedness being refinanced, and (iii) such Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the sum of the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding (plus fees and expenses, including any premium and defeasance costs) of the Indebtedness being refinanced. "Related 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. "Representative" means any trustee, agent or representative (if any) of an issue of Senior Indebtedness. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. "Senior Credit Agreement" means (i) the Senior Secured Credit Agreement entered into among the Company, The Chase Manhattan Bank, as Administrative Agent, and the lenders parties thereto from time to time, as the same may be amended, supplemented or otherwise modified from time to time and any guarantees issued thereunder and (ii) any renewal, extension, refunding, restructuring, replacement or refinancing thereof (whether with the original Administrative Agent and lenders or another administrative agent or agents or other lenders and whether provided under the original Senior Credit Agreement or any other credit or other agreement or indenture). "Senior Subordinated Indebtedness" means the Notes and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Notes in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "Significant Subsidiary" means any 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 final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Subordinated Obligation" means any Indebtedness of the Company (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Notes pursuant to a written agreement. "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 will refer to a Subsidiary of the Company. "Subsidiary Guarantee" means, individually, any Guarantee of payment of the Notes by a Subsidiary Guarantor pursuant to the terms of the Indenture, and, collectively, all such Guarantees. Each such Subsidiary Guarantee will be in the form prescribed in the Indenture. 91 99 "Subsidiary Guarantor" means each Subsidiary of the Company in existence on the Issue Date and any Restricted Subsidiary created or acquired by the Company after the Issue Date (other than a Foreign Subsidiary) which Guarantees the Bank Indebtedness or Incurs Indebtedness under paragraph (a) of the covenant described under "Certain Covenants--Limitation on Indebtedness". "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 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 "--Certain Covenants--Limitation on Restricted Payments." The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (i) the Company could Incur $1.00 of additional Indebtedness pursuant to paragraph (a) under "--Certain Covenants--Limitation on Indebtedness" and (ii) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "Voting Stock" of a corporation means all classes of Capital Stock of such corporation then outstanding and normally entitled to vote in the election of directors. "Wholly-Owned Subsidiary" means a Restricted Subsidiary of the Company, all of the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or one or more Wholly-Owned Subsidiaries. 92 100 BOOK-ENTRY; DELIVERY AND FORM Except as described in the next paragraph, the Notes initially will be represented by one or more permanent global certificates in definitive, duly registered form (the "Global Notes"). The Global Notes will be deposited on the Issue Date with, or on behalf of, The Depository Trust Company, New York, New York ("DTC"), and registered in the name of a nominee of DTC. THE GLOBAL NOTES The Company expects that pursuant to procedures established by DTC (i) upon the issuance of the Global Notes, DTC or its custodian will credit, on its internal system, an interest in such Global Notes to the respective accounts of persons who have accounts with DTC and (ii) ownership of beneficial interests in the Global Notes will be shown on, and the transfer of such ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants). Such accounts initially will be designated by or on behalf of the Initial Purchasers and ownership of beneficial interests in the Global Notes will be limited to persons who have accounts with DTC ("participants") or persons who hold interests through participants. QIBs and institutional Accredited Investors who are not QIBs may hold their interests in the Global Notes directly through DTC if they are participants in such system, or indirectly through organizations which are participants in such system. So long as DTC, or its nominee, is the registered owner or holder of the Notes, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Global Notes for all purposes under the Indenture. No beneficial owner of an interest in the Global Notes will be able to transfer that interest except in accordance with DTC's procedures, in addition to those provided for under the Indenture with respect to the Notes. Payments of the principal of, premium, if any, and interest on the Global Notes will be made to DTC or its nominee, as the case may be, as the registered owner thereof. None of the Company, the Trustee or any Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interest. The Company expects that DTC or its nominee, upon receipt of any payment of principal, premium, if any, and interest on the Global Notes, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the Global Notes as shown on the records of DTC or its nominee. The Company also expects that payments by participants to owners of beneficial interests in the Global Notes held through such participants will be governed by standing instructions and customary practice, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants. Transfers between participants in DTC will be effected in the ordinary way through DTC's same-day funds system in accordance with DTC rules and will be settled in same-day funds. If a holder requires physical delivery of a Certificated Security for any reason, including to sell Notes to persons in states that require physical delivery of the Notes, or to pledge such securities, such holder must transfer its interest in a Global Note in accordance with the normal procedures of DTC and with the procedures set forth in the Indenture. DTC has advised the Company that it will take any action permitted to be taken by a Holder of Notes (including the presentation of Notes for exchange as described below) only at the direction of one or more participants to whose account the DTC interests in the Global Notes are credited and only in respect of such portion of the aggregate principal amount of Notes as to which such participant or participants has or have given such direction. However, if there is an Event of Default under the Indenture, DTC will exchange the Global Notes for Certificated Securities, which it will distribute to its participants. DTC has advised the Company as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the 93 101 meaning of the Uniform Commercial Code and a "Clearing Agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and certain other organizations. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants"). Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Note among participants of DTC, it is under no obligation to perform such procedures, and such procedures may be discontinued at any time. Neither the Company nor the Trustee will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. CERTIFICATED SECURITIES If DTC is at any time unwilling or unable to continue as a depositary for the Global Note and a successor depositary is not appointed by the Issuer within 90 days, Certificated Securities will be issued in exchange for the Global Notes. PLAN OF DISTRIBUTION 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. 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 Original Notes where such Original Notes were acquired 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, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until [ ], 1998, all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. 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 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 at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer 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 on any such resale of Exchange Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holders of the Original Notes), other than commissions or concessions of any broker-dealers and will indemnify the holders of the Original Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. The Company will be indemnified by the holders of Original Notes, severally, against certain liabilities, including liabilities under the Securities Act. 94 102 This Prospectus has been prepared for use in connection with the Exchange Offer and may be used by CSI in connection with offers and sales related to market making transactions in the Notes. CSI may act as principal or agent in such transactions. Such sales will be made at prices related to prevailing market prices at the time of sale. The Company will not receive any of the proceeds of such sales. CSI has no obligation to make a market in the Notes and may discontinue its market making activities at any time without notice, at its sole discretion. The Company has agreed to indemnify CSI against certain liabilities, including liabilities under the Securities Act of 1933, and to contribute to payments which CSI might be required to make in respect thereof. For a description of certain relationships between the Company and CSI and its affiliates, see "Certain Transactions." CERTAIN FEDERAL INCOME TAX CONSEQUENCES Set forth below is a general description of certain of the material anticipated federal income tax consequences of the ownership, exchange and disposition of the Exchange Notes to Holders that receive the Exchange Notes in exchange for Original Notes pursuant to the Exchange Offer. This discussion does not purport to deal with all aspects of federal income taxation that may be relevant to Holders in light of their personal investment circumstances, nor to certain types of Holders subject to special treatment under the federal income tax laws, such as dealers in securities or currencies, financial institutions, tax-exempt entities, life insurance companies, persons holding Notes as a part of a hedging, conversion or constructive sale transaction or a straddle or holders of Notes whose "functional currency" is not the U.S. dollar, and is generally limited to investors who will hold the Notes as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). In addition, this description does not consider the effect of any applicable foreign, state or local tax laws. Prospective investors are urged to consult their own tax advisors as to the precise federal, state, local, foreign and other tax consequences of the purchase, ownership and disposition of the Notes. This discussion is based on current provisions of the Code, existing and proposed Treasury Regulations promulgated thereunder, rulings of the Internal Revenue Service (the "Service") and judicial decisions now in effect, all of which are subject to change, possibly retroactively. No ruling will be sought from the Service with respect to the transactions contemplated hereby, and there can be no assurance that the Service will not assert positions contrary to the views expressed herein, or that any such contrary position would not be sustained. THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MIGHT BE RELEVANT TO AN INVESTOR'S DECISION TO ACQUIRE THE NOTES. EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR CONCERNING THE APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO ACQUIRE THE NOTES. TAX CONSIDERATIONS FOR U.S. HOLDERS For purposes of this summary, a "U.S. Holder" is any person who is (i) a citizen or resident of the United States; (ii) a corporation or partnership created under the laws of the United States or any political subdivision thereof; (iii) an estate, the income of which is subject to United States federal income taxation without regard to the source of income; or (iv) a trust if a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust. A "Non-U.S. Holder" is any holder who is not a U.S. Holder. Exchange Pursuant to Exercise of Registration Rights Neither an exchange of Original Notes for Exchange Notes nor the filing of a registration statement with respect to the resale of the Notes should be a taxable event to Holders of Notes, and Holders should not 95 103 recognize any taxable gain or loss or any interest income as a result of such an exchange or such a filing. Further, the holding period of the Exchange Notes will include the holding period of the Original Notes, and the basis of the Exchange Notes will be the same as the basis of the Original Notes immediately before the exchange. Taxation of Stated Interest The Original Notes were issued at their stated principal amount and accordingly were not issued with "original issue discount" within the meaning of Section 1273 of the Code. Thus, stated interest on a Note will be includible in the gross income of a U.S. Holder as ordinary income when received or accrued by such U.S. Holder in accordance with its method of tax accounting. Gain or Loss on Disposition of the Notes If a Note is sold, exchanged or otherwise disposed of, the U.S. Holder generally will recognize gain or loss in an amount equal to the difference between the amount realized on the sale, exchange or other disposition and such U.S. Holder's adjusted basis in the Note. The adjusted basis of the Note generally will equal the U.S. Holder's cost. Any such gain or loss will generally be capital gain or loss. Recently enacted legislation provides that for individual U.S. Holders, the maximum rate of United States federal income taxation generally is 28% if the Note disposed of was held for more than one year but not more than eighteen months, and that the maximum rate generally is 20% if the Note disposed of was held for more than eighteen months. Backup Withholding and Information Reporting A U.S. Holder may be subject to backup withholding at the rate of 31%, with respect to interest paid on a Note, unless such U.S. Holder (a) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact, or (b) provides a correct taxpayer identification number, certifies as to the U.S. Holder's exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A U.S. Holder who does not provide the Company or the U.S. Holder's broker with such U.S. Holder's correct taxpayer identification number may be subject to penalties imposed by the Service. Any amount paid as backup withholding will be credited against the U.S. Holder's income tax liability. The Company will report to the U.S. Holders and the Service the amount of any "reportable payments" for each calendar year and the amount of tax withheld, if any, with respect to payments made with respect to the Notes. TAX CONSIDERATIONS FOR NON-U.S. HOLDERS Under present United States federal income and estate tax law and subject to the discussion of backup withholding below: (a) payments of interest on the Notes to a Non-U.S. Holder will not be subject to federal withholding tax, provided that (1) 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, (2) the Non-U.S. Holder is not (i) a bank receiving interest pursuant to a loan agreement entered into in the ordinary course of its trade or business or (ii) a controlled foreign corporation that is related to the Company through stock ownership and (3) either (i) the Non-U.S. Holder certifies to the Company or its agent, under penalties of perjury, that it is not a United States person and provides its name and address or (ii) a securities clearing organization, bank or other financial institution which holds the Notes and customers' Notes in the ordinary course of its trade or business (a "financial institution") certifies to the Company or its agent under penalties of perjury that such statement has been received by it from the Non-U.S. Holder (or by a financial institution between it and the Non-U.S. Holder) and furnishes the payor with a copy thereof; (b) a Non-U.S. Holder will not be subject to federal income tax on gain realized on the sale, redemption or other disposition of a Note, unless (1) such Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year and certain requirements are 96 104 met or (2) the gain is effectively connected with a United States trade or business of the Non-U.S. Holder; and (c) a Note held by an individual Non-U.S. Holder who at the time of death is not a citizen or resident of the United States for federal estate tax purposes will not be subject to federal estate tax as a result of such individual's death unless (1) the income from the Note is effectively connected with a United States trade or business of the Non-U.S. Holder or (2) the individual actually or constructively owns 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote. If a Non-U.S. Holder cannot satisfy the requirements of the "portfolio interest" exception described in (a) above, payments of premium, if any, and interest made to such Non-U.S. Holder will be subject to a 30% withholding tax unless the beneficial owner of the Note provides the Company or its paying agent, as the case may be, with a properly executed (1) IRS Form 1001 (or successor form) claiming an exemption from withholding under the benefit of a tax treaty or (2) IRS Form 4224 (or successor form) stating that interest paid on the Note is not subject to withholding tax because it is effectively connected with the beneficial owner's conduct of a trade or business in the United States. If a Non-U.S. Holder is engaged in a trade or business in the United States and premium, if any, or interest on the Note is effectively connected with the conduct of such trade or business, the Non-U.S. Holder, although exempt from the withholding tax discussed above, will be subject to United States federal income tax on such interest on a net income basis in the same manner as if it were a U.S. Holder. In addition, if such holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits for the taxable year, subject to adjustments. For this purpose, such premium, if any, and interest on a Note will be included in such foreign corporation's earnings and profits. No information reporting or backup withholding will be required with respect to payments made by the Company or any paying agent to Non-U.S. Holders if a statement described in (a)(3) above has been received and the payor does not have actual knowledge that the beneficial owner is a U.S. person. Payment of the proceeds from the sale, redemption or other disposition of a Note to or through a United States office of a broker, received by a Non-U.S. Holder will not be subject to information reporting and backup withholding if the payor has received the appropriate certification statement. Appropriate certification procedures require that the Non-U.S. Holder certify as to its status as a Non-U.S. Holder and provide its name and address. In addition, payments of the proceeds from the sale, redemption or other disposition of a Note to or through a foreign office of a broker or the foreign office of a custodian, nominee or other agent acting on behalf of the beneficial owner of a Note will not be subject to information reporting or backup withholding; however, if the broker, custodian, nominee or other agent is a U.S. person, a controlled foreign corporation for federal income tax purposes, or a foreign person 50% or more of whose gross income over a specified three-year period is from a United States trade or business, information reporting may be required with respect to such payments. Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder would be allowed as a refund or a credit against such Non-U.S. Holder's federal income tax liability, provided that the required information is furnished to the IRS. Recently finalized Treasury Regulations would modify the application of information reporting requirements and the backup withholding tax to Non-U.S. Holders effective January 1, 1999. LEGAL MATTERS The validity of the Exchange Notes offered hereby will be passed upon for the Company by Sonnenschein Nath & Rosenthal, Chicago, Illinois. EXPERTS The consolidated financial statements of Home Products International, Inc. and subsidiaries as of December 27, 1997 and December 28, 1996 and for the fifty-two week periods then ended, included in this Prospectus have been audited by Arthur Andersen LLP, independent public accountants, as stated in their 97 105 report appearing herein. The consolidated statements of operations, stockholders' equity and cash flows for the 52-week period ended December 30, 1995, of Home Products International, Inc. and subsidiaries included in this Prospectus have been audited by Grant Thornton LLP, independent certified public accountants, as stated in their report appearing herein. The consolidated balance sheets of Seymour Sales Corporation and subsidiaries as of June 30, 1997 and 1996, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years then ended, have been audited by Ernst & Young LLP, independent auditors, as stated in their report appearing herein. AVAILABLE INFORMATION The Company has filed with the Commission a Registration Statement on Form S-4 (the "Exchange Offer Registration Statement," which term shall encompass all amendments, exhibits, annexes and schedules thereto) pursuant to the Securities Act, covering the Exchange Notes offered hereby. This Prospectus does not contain all the information set forth in the Exchange Offer Registration Statement. For further information with respect to the Company and the Exchange Offer, reference is made to the Exchange Offer Registration Statement. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to such contract, agreement or other document filed as an exhibit to the Exchange Offer Registration Statement, reference is made to the exhibit for a more complete description of the document or matter involved, and each such statement shall be deemed qualified in its entirety by such reference. While any Original Notes remain outstanding the Company will make available, upon request, to any holder and any prospective purchaser of Notes the information required pursuant to Rule 144A(d)(4) under the Securities Act during any period in which the Company is not subject to Section 13 or 15(d) of the Exchange Act. Any such request should be directed to James E. Winslow, Executive Vice President, Chief Financial Officer and Secretary, Home Products International, Inc., 4501 West 47th Street, Chicago, Illinois 60632, (773) 890-1010. The Company is subject to the information requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith, files reports, proxy statements and other information with 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, and at the Commission's Regional Offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be obtained by mail from the Public Reference Section of the Commission at 450 West Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The reports, proxy statements and other information may also be obtained from the Web site that the Commission maintains at http://www.sec.gov. The Company's Common Stock is listed on The Nasdaq Stock Market under the symbol "HPII," and such material may be inspected at the offices of Nasdaq, National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20549. The Indenture provides that the Company will furnish copies of the periodic reports required to be filed with the Commission under the Exchange Act to the holders of the Notes. If the Company is not subject to the periodic reporting and informational requirements of the Exchange Act, it will, to the extent such filings are accepted by the Commission, and whether or not the Company has a class of securities registered under the Exchange Act, file with the Commission, and provide the Trustee and the holders of the Notes within 15 days after such filings with, annual reports containing the information required to be contained in Form 10-K promulgated under the Exchange Act, quarterly reports containing the information required to be contained in Form 10-Q promulgated under the Exchange Act, and from time to time such other information as is required to be contained in Form 8-K promulgated under the Exchange Act. If filing such reports with the Commission is not accepted by the Commission or prohibited by the Exchange Act, the Company will also provide copies of such reports, at its cost, to prospective purchasers of the Notes and participants in the Exchange Offer promptly upon written request. 98 106 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents, which have been filed by the Company with the Commission, are incorporated herein by reference: 1. Annual Report on Form 10-K for the fiscal year ended December 27, 1997. 2. Quarterly Report on Form 10-Q for the fiscal quarter ended March 28, 1998. 3. Reports on Form 8-K, dated December 30, 1997 (including the amendment thereto on Form 8-K/A-1) and April 7, 1998. 4. Definitive Proxy Statement with respect to the Company's Annual Meeting of Stockholders held on May 20, 1998. All documents filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of (i) the Exchange Offer and (ii) any resales by CSI of Exchange Notes acquired pursuant to the Registration Statement of which this Prospectus is a part, including resales of Exchange Notes acquired by it pursuant to market making activities, hereby shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom this Prospectus is delivered, upon the written or oral request of such person, a copy of any or all of the documents which have been or may be incorporated by reference in this Prospectus, other than exhibits to such documents not specifically described above. Requests for such documents should be directed to James E. Winslow, Executive Vice President, Chief Financial Officer and Secretary, 4501 West 47th Street, Chicago, Illinois 60632, (773) 890-1010. 99 107 INDEX TO FINANCIAL STATEMENTS
PAGE ---- HOME PRODUCTS INTERNATIONAL, INC. Report of Arthur Andersen LLP............................... F-2 Report of Grant Thornton LLP................................ F-3 Consolidated Balance Sheets at December 27, 1997 and December 28, 1996......................................... F-4 Consolidated Statements of Operations for the fiscal years 1997, 1996 and 1995....................................... F-5 Consolidated Statements of Stockholders' Equity for the fiscal years 1997, 1996 and 1995.......................... F-6 Consolidated Statements of Cash Flows for the fiscal years 1997, 1996 and 1995....................................... F-7 Notes to Consolidated Financial Statements.................. F-8 Unaudited Quarterly Financial Information................... F-23 Report of Arthur Andersen LLP on Schedule II................ F-24 Report of Grant Thornton LLP on Schedule II................. F-25 Schedule of Valuation and Qualifying Accounts............... F-26 Condensed Consolidated Balance Sheets at March 28, 1998 (unaudited) and December 27, 1997......................... F-27 Condensed Consolidated Statements of Operations and Retained Earnings for the thirteen week periods ended March 28, 1998 (unaudited) and March 29, 1997 (unaudited)........... F-28 Condensed Consolidated Statements of Cash Flows for the thirteen week periods ended March 28, 1998 (unaudited) and March 29, 1997 (unaudited)................................ F-29 Notes to Condensed Consolidated Financial Statements (unaudited)............................................... F-30 SEYMOUR SALES CORPORATION AND SUBSIDIARIES Report of Ernst & Young LLP................................. F-32 Consolidated Balance Sheets as of June 30, 1997 and 1996.... F-33 Consolidated Statements of Operations for the fiscal years 1997, 1996 and 1995....................................... F-34 Consolidated Statements of Changes in Stockholders' Equity for the fiscal years 1997, 1996 and 1995.................. F-35 Consolidated Statements of Cash Flows for the fiscal years 1997, 1996 and 1995....................................... F-36 Notes to Consolidated Financial Statements.................. F-37 Condensed Consolidated Balance Sheet at December 27, 1997 (unaudited)............................................... F-47 Condensed Consolidated Statement of Operations for the Six Months Ended December 27, 1997 and December 28, 1996 (unaudited)............................................... F-48 Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 27, 1997 and December 28, 1996 (unaudited)............................................... F-49 Notes to Unaudited Interim Financial Statements............. F-50
F-1 108 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS Board of Directors Home Products International, Inc. We have audited the accompanying consolidated balance sheets of Home Products International, Inc. (formerly Selfix, Inc.) (a Delaware corporation) and subsidiaries as of December 27, 1997 and December 28, 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for the fifty-two week periods 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 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 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 Home Products International, Inc. and subsidiaries as of December 27, 1997 and December 28, 1996, and the results of its operations and its cash flows for the fifty-two week periods then ended in conformity with generally accepted accounting principles. Arthur Andersen LLP Chicago, Illinois February 6, 1998 F-2 109 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Home Products International, Inc. (formerly Selfix, Inc.) We have audited the accompanying consolidated statements of operations, stockholders' equity and cash flows for the 52-week period ended December 30, 1995 of Home Products International, Inc., (formerly Selfix, Inc.). 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 consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated 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 consolidated results of their operations and their consolidated cash flows for the 52-week period ended December 30, 1995 of Home Products International, Inc. and Subsidiaries, in conformity with generally accepted accounting principles. GRANT THORNTON LLP Chicago, Illinois February 9, 1996 F-3 110 HOME PRODUCTS INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS
AS OF FISCAL YEAR END --------------------- 1997 1996 --------- --------- (IN THOUSANDS, EXCEPT SHARE AMOUNTS) ASSETS Current assets: Cash and cash equivalents................................. $ 583 $ 2,878 Accounts receivable, net of allowance for doubtful accounts of $1,716 at December 27, 1997 and $901 at December 28, 1996...................................... 20,802 6,476 Notes and other receivables............................... 80 119 Inventories, net.......................................... 12,797 4,391 Prepaid expenses and other current assets................. 428 100 -------- -------- Total current assets.............................. 34,690 13,964 -------- -------- Property, plant and equipment -- at cost.................... 47,634 22,515 Less accumulated depreciation and amortization.............. (19,254) (14,581) -------- -------- Property, plant and equipment, net.......................... 28,380 7,934 -------- -------- Deferred income taxes....................................... 3,466 -- Intangible and other assets................................. 32,807 2,807 -------- -------- Total assets................................................ $ 99,343 $ 24,705 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term obligations............... $ 3,850 $ 838 Accounts payable.......................................... 9,664 1,956 Accrued liabilities....................................... 12,913 4,018 -------- -------- Total current liabilities......................... 26,427 6,812 -------- -------- Long-term obligations -- net of current maturities.......... 30,700 6,184 Stockholders' equity: Preferred stock -- authorized, 500,000 shares, $.01 par value; none issued..................................... -- -- Common stock -- authorized 15,000,000 shares, $.01 par value; 6,674,271 shares issued at December 27, 1997 and 3,881,423 shares issued at December 28, 1996........... 67 39 Additional paid-in capital................................ 33,956 10,839 Retained earnings......................................... 8,616 1,296 Common stock held in treasury -- at cost (58,762 shares)................................................ (264) (264) Currency translation adjustments.......................... (159) (201) -------- -------- Total stockholders' equity........................ 42,216 11,709 -------- -------- Total liabilities and stockholders' equity.................. $ 99,343 $ 24,705 ======== ========
The accompanying notes are an integral part of the financial statements. F-4 111 HOME PRODUCTS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
FISCAL YEAR ----------------------------------------- 1997 1996 1995 ----------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales.................................................. $129,324 $38,200 $41,039 Cost of goods sold......................................... 88,888 22,992 25,678 -------- ------- ------- Gross profit............................................. 40,436 15,208 15,361 Operating expenses Selling.................................................. 18,332 9,042 10,474 Administrative........................................... 8,474 4,600 6,433 Amortization of intangible assets........................ 882 201 478 Restructuring charge..................................... -- -- 2,051 -------- ------- ------- 27,688 13,843 19,436 -------- ------- ------- Operating profit (loss).................................. 12,748 1,365 (4,075) -------- ------- ------- Other income (expense) Interest income.......................................... 50 80 230 Interest (expense)....................................... (5,152) (707) (896) Other income............................................. 20 68 458 -------- ------- ------- (5,082) (559) (208) -------- ------- ------- Earnings (loss) before income taxes........................ 7,666 806 (4,283) Income tax (expense) benefit............................... (346) -- 273 -------- ------- ------- Net earnings (loss)........................................ $ 7,320 $ 806 $(4,010) ======== ======= ======= Net earnings (loss) per common share -- Basic.............. $ 1.35 $ 0.21 $ (1.11) ======== ======= ======= Net earnings (loss) per common share -- Diluted............ $ 1.29 $ 0.21 $ (1.11) ======== ======= =======
The accompanying notes are an integral part of the financial statements. F-5 112 HOME PRODUCTS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON ADDITIONAL CURRENCY STOCK HELD PREFERRED COMMON PAID-IN RETAINED TRANSLATION OTHER, IN TREASURY STOCK STOCK CAPITAL EARNINGS ADJUSTMENTS NET AT COST TOTAL --------- ------ ---------- -------- ----------- ------ ----------- ------- (IN THOUSANDS, EXCEPT SHARE AMOUNTS) BALANCE AT DECEMBER 31, 1994....... $ -- $36 $ 9,360 $ 4,500 $(222) $(51) $ -- $13,623 Net loss........................... -- -- -- (4,010) -- -- -- (4,010) Issuance of 250,000 shares of common stock in connection with the acquisition of Mericon Child Safety Products.................. -- 3 1,372 -- -- -- -- 1,375 Issuance of 8,147 shares of common stock in connection with exercise of stock options................. -- -- 33 -- -- -- -- 33 Purchase of 58,762 common share held in treasury at cost......... -- -- -- -- -- -- (264) (264) Other.............................. -- -- -- -- -- 60 -- 60 Translation adjustments............ -- -- -- -- 30 -- -- 30 ------ --- ------- ------- ----- ---- ----- ------- BALANCE AT DECEMBER 30, 1995....... -- 39 10,765 490 (192) 9 (264) 10,847 Net earnings....................... -- -- -- 806 -- -- -- 806 Issuance of 19,639 shares of common stock in connection with employee stock purchase plan.............. -- -- 74 -- -- -- -- 74 Other.............................. -- -- -- -- -- (9) -- (9) Translation adjustments............ -- -- -- -- (9) -- -- (9) ------ --- ------- ------- ----- ---- ----- ------- BALANCE AT DECEMBER 28, 1996....... -- 39 10,839 1,296 (201) -- (264) 11,709 Net earnings....................... -- -- -- 7,320 -- -- -- 7,320 Issuance of 19,560 shares in connection with employee stock purchase plan.................... -- -- 107 -- -- -- -- 107 Issuance or 480,000 shares of common stock in connection with Tamor Acquisition................ -- 5 2,395 -- -- -- -- 2,400 Issuance of 2,280,000 shares of common stock in connection with secondary public offering........ -- 23 20,148 -- -- -- -- 20,171 Issuance of warrant................ -- -- 400 -- -- -- -- 400 Issuance of 13,288 shares of common stock in connection with the exercise of stock options........ -- -- 67 -- -- -- -- 67 Translation adjustments............ -- -- -- -- 42 -- -- 42 ------ --- ------- ------- ----- ---- ----- ------- BALANCE AT DECEMBER 27, 1997....... $ -- $67 $33,956 $ 8,616 $(159) $ -- $(264) $42,216 ====== === ======= ======= ===== ==== ===== =======
The accompanying notes are an integral part of the financial statements. F-6 113 HOME PRODUCTS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEAR ------------------------------ 1997 1996 1995 -------- ------- ------- (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss)....................................... $ 7,320 $ 806 $(4,010) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization.......................... 5,687 2,214 3,337 Provision for restructuring charge..................... -- -- 2,051 Changes in assets and liabilities: (Increase) decrease in accounts receivable............. (5,428) (1,786) 494 (Increase) decrease in inventories..................... (2,280) 760 105 Decrease in refundable income taxes.................... -- 222 159 Increase in net deferred tax asset..................... (3,466) -- -- (Increase) decrease in notes and other receivables..... -- (35) 1,691 Increase (decrease) in accounts payable................ (4,695) 622 (681) Increase (decrease) in accrued liabilities............. 5,060 (793) (603) Other operating activities, net........................ (1,320) (187) 32 -------- ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES................... 878 1,823 2,575 -------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Tamor Acquisition, net of cash acquired................... (27,876) -- -- Proceeds from sale or maturity of marketable securities... -- 515 408 Capital expenditures, net................................. (8,382) (1,624) (1,215) Restricted cash -- Industrial Revenue Bond................ -- -- 5 Mericon Child Safety Products Acquisition, net of cash acquired............................................... -- -- (921) -------- ------- ------- NET CASH USED FOR INVESTING ACTIVITIES...................... (36,258) (1,109) (1,723) -------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on borrowings.................................... (34,609) (860) (2,471) Proceeds from borrowings and warrants..................... 44,158 -- -- Net proceeds from borrowings under revolving line of credit................................................. 3,355 -- -- Net proceeds from secondary stock offering................ 20,171 -- -- Payment of capital lease obligation....................... (164) (32) (27) Purchase of treasury stock................................ -- -- (264) Exercise of common stock options and issuance of common stock under stock purchase plan........................ 174 74 33 -------- ------- ------- NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES........ 33,085 (818) (2,729) -------- ------- ------- Net decrease in cash and cash equivalents................. (2,295) (104) (1,877) Cash and cash equivalents at beginning of year............ 2,878 2,982 4,859 -------- ------- ------- Cash and cash equivalents at end of year.................. $ 583 $ 2,878 $ 2,982 ======== ======= ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid (received) during the year for: Interest.................................................. $ 3,568 $ 599 $ 822 -------- ------- ------- Income taxes, net......................................... 1,255 (314) (457) -------- ------- -------
The accompanying notes are an integral part of the financial statements. F-7 114 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995 (IN THOUSANDS, EXCEPT SHARE AMOUNTS) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Home Products International, Inc. (the "Company") and its subsidiary companies design, manufacture and market products in two industry segments: housewares products and home improvement products. Housewares products are marketed principally through mass market trade channels throughout the United States and internationally. Home improvement products are sold principally through wholesalers that service the residential construction, repair, and remodeling industry throughout the United States. Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its subsidiary companies. All significant intercompany transactions and balances have been eliminated. The accompanying statements do not include the accounts of Seymour Sales Corporation or its wholly owned subsidiary, Seymour Housewares Corporation, (collectively, "Seymour"), as the Company did not complete the acquisition until after the end of fiscal 1997. See Note 16 for more information regarding the acquisition of Seymour. 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, 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. Fair Value of Financial Instruments and Credit Risk. The carrying value of cash, cash equivalents, investments and long-term obligations approximate their fair values based upon quoted market rates. As of December 27, 1997, and December 28, 1996, the Company had no significant concentrations of credit risk related to cash equivalents. Inventories. Inventories are stated at the lower of cost or net realizable value with cost determined on a first in, first out (FIFO) basis. Property, Plant and Equipment. Property, plant and equipment are stated at cost. Depreciation is charged against results of operations over the estimated service lives of the related assets. Improvements to leased property are amortized over the life of the lease or the life of the improvement, whichever is shorter. For financial reporting purposes, the Company uses the straight-line method of depreciation. For tax purposes, the Company uses accelerated methods where permitted. F-8 115 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The estimated service lives of the fixed assets are as follows: Buildings................................................... 30 years Land and building under capital lease....................... lease term Machinery, equipment and vehicles........................... 3-8 years Tools, dies and molds....................................... 5 years Furniture, fixtures and office equipment.................... 2-8 years Leasehold improvements...................................... lease term
Revenue Recognition. The Company recognizes revenue as products are shipped to customers. Intangible Assets. Goodwill, which represents the excess of the purchase price over the fair value of net assets acquired, is amortized over forty years. Covenants not to compete are amortized on a straight-line basis over the terms of the respective agreements. Patents, royalty rights, trademarks acquired and licensing agreements are amortized over their estimated useful lives ranging from five to ten years. Long-Lived Assets. In fiscal 1996, the Company adopted Statement of Financial Accounting Standard No. 121, ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of". The statement requires entities to review long-lived assets and certain intangible assets in certain circumstances, and if the value of the asset is impaired, an impairment loss shall be recognized. The adoption of this policy had no material effect on the Company's financial position or results of operations. Income Taxes. Deferred tax assets and liabilities are determined at the end of each period, based on differences between the financial statement bases of assets and liabilities and the tax bases of those same assets and liabilities, using the currently enacted statutory tax rates. Net Earnings (Loss) Per Common Share. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"), which established new standards for the computation and presentation of earning per share information. As required, the Company has adopted the provisions of SFAS 128 for its year end 1997 financial statements, and has restated all prior year earnings per share information. Net earnings (loss) per common share -- basic, was calculated by dividing net earnings (loss) applicable to common shares by the weighted average number of common shares outstanding during each year. Net earnings (loss) per common share -- diluted, reflects the potential dilution that could occur assuming exercise of all outstanding "in-the-money" stock options. A reconciliation of the net earnings F-9 116 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (loss) and the number of shares used in computing basic and diluted earnings per share was as follows (in thousands, except per share amounts):
1997 1996 1995 ------ ------ ------- Net earnings (loss) per common share -- Basic: Net earnings (loss) applicable to common shares........... $7,320 $ 806 $(4,010) ====== ====== ======= Weighted average common shares outstanding for the year... 5,436 3,820 3,617 ====== ====== ======= Net earnings (loss) per common share -- Basic............. $ 1.35 $ 0.21 $ (1.11) ====== ====== ======= Net earnings (loss) per common share -- Diluted: Net earnings (loss) applicable to common shares........... $7,320 $ 806 $(4,010) ====== ====== ======= Weighted average common shares outstanding for the year... 5,436 3,820 3,617 Increase in shares which would result from exercise of "in-the-money" stock options........................... 246 34 -- ------ ------ ------- Weighted average common shares assuming conversion of the above securities....................................... 5,682 3,854 3,617 ====== ====== ======= Net earnings (loss) per common share -- Diluted........... $ 1.29 $ 0.21 $ (1.11) ====== ====== =======
Benefit Plans. The Company provides a profit sharing and savings plan (including a 401(k) plan) to which both the Company and eligible employees may contribute. Company contributions to the profit sharing and savings plan are voluntary and at the discretion of the Board of Directors. The Company matches the employee 401(k) plan contributions with certain limitations. The total Company contributions to both plans are limited to the maximum deductible amount under the Federal income tax law. The Company provides retirement plans for its employees covered under collective bargaining agreements. The amount of the Company contribution is determined by the respective collective bargaining agreement. The contributions to all the profit sharing, savings, and retirement plans for 1997, 1996 and 1995, were $414, $248, and $259, respectively. Cash and Cash Equivalents. The Company considers all highly liquid, short-term investments with an original maturity of three months or less, to be cash equivalents. Fiscal Year. The Company's fiscal year ends on the last Saturday in December. References to the fiscal years 1997, 1996 and 1995 are for the fifty-two weeks ended December 27, 1997, December 28, 1996 and December 30, 1995. Related Parties. A director of the Company is the executor and co-trustee of certain estates and trusts which lease facilities to the Company as discussed in Note 9. In addition, the director is a partner in a law firm which is the Company's general counsel. Total fees paid to this law firm in fiscal 1997 were $730. F-10 117 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In fiscal 1997 the Company engaged the services of a management consulting firm in which a director of the Company is a partner. Total fees paid to this management consulting firm in 1997 were $99. In fiscal 1997, Tamor purchased raw materials and packaging from vendors whose ownership was related to certain officers of Tamor. Such transactions were as follows: (i) raw materials totaling $9,835, and packaging totaling $1,700. Management believes the transactions were conducted on an arm's length basis at competitive prices. NOTE 2. ACQUISITION OF TAMOR PLASTICS CORPORATION AND HOUSEWARE SALES, INC. Pursuant to an agreement dated October 29, 1996, the Company, as of January 1, 1997, took operating and financial control of Tamor Plastics Corporation, and its affiliated product distribution company, Houseware Sales, Inc., (collectively, "Tamor"), assumed substantially all of the liabilities of Tamor and retained substantially all of the earnings from Tamor's operations (the "Tamor Acquisition"). Actual results are combined since the date of effective control although the purchase did not close until February 28, 1997. Tamor, founded in 1947, designs, manufactures, and markets quality plastic houseware products, including storage totes, hangers, and juvenile organization products. The Tamor Acquisition was completed by the Company for a total purchase price of $41,900 consisting of $27,800 in cash, $2,400 of Common Stock (480,000 shares), and the assumption of $11,700 of short and long-term debt. The funds used for the Tamor Acquisition were obtained from a credit agreement entered into with General Electric Capital Corporation, ("GECC"), on February 27, 1997, (the "Credit Agreement"). See Note 9 for additional information on the Credit Agreement. The Tamor Acquisition was accounted for as a purchase, and the operating results of Tamor have been included in the accompanying financial statements from January 1, 1997, the effective date of the acquisition. The excess of the purchase price over the fair value of the assets acquired (goodwill) approximated $27,599 and is being amortized over a period of forty years. The unaudited pro forma consolidated results of operations as of December 28, 1996 would have been as follows, if the Tamor Acquisition had occurred on January 1, 1996: Net sales................................................... $113,914 Gross profit................................................ 33,104 Operating Income............................................ 8,240 Net earnings................................................ 2,599 Net earnings per common share -- Basic...................... $ 0.60 Net earnings per common share -- Diluted.................... $ 0.59
Adjustments made in arriving at the pro forma combined results include increased interest expense and amortization of debt issuance costs on acquisition debt, amortization of goodwill, and certain operating expense reductions. No effect has been given in operating expenses to the fair value of the assets acquired, depreciable values or lives, or synergistic benefits which may be realized from the acquisition. The pro forma consolidated results do not purport to be indicative of results that would have occurred had the Tamor Acquisition been in effect as of January 1, 1996 nor do they purport to be indicative of the results that will be obtained in the future. NOTE 3. ACQUISITION OF MERICON CHILD SAFETY PRODUCTS On October 24, 1995, the Company acquired 100% of the common stock of Mericon Child Safety Products for a total purchase price of $2,421 consisting of 250,000 shares of the Company's common stock. The acquisition was accounted for as a purchase, and accordingly, the results of operations are included in the F-11 118 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) consolidated financial results from the date of acquisition. The purchase price in excess of the fair value of net assets acquired (goodwill) of approximately $1,796 is being amortized over a period of forty years. NOTE 4. PUBLIC STOCK OFFERING On June 30, 1997, the Company completed a secondary public offering of 2,000,000 new shares of its common stock. Net proceeds in the amount of $18,300 were used to repay the subordinated note of $7,000, term notes of $11,100, and accrued interest of $200. On July 16, 1997, an additional 280,000 shares were sold pursuant to an underwriter's over-allotment provision. Net proceeds of $2,600 were used to repay term notes of $2,500 and accrued interest of $100. See Note 9 for additional information regarding the repayment of debt. NOTE 5. INVENTORIES The components of the Company's inventory were as follows:
1997 1996 ------- ------- Finished goods........................................... $ 7,335 $ 2,604 Work-in-process.......................................... 2,225 1,003 Raw materials............................................ 3,237 784 ------- ------- $12,797 $ 4,391 ======= =======
NOTE 6. PROPERTY, PLANT AND EQUIPMENT The components of property, plant and equipment were as follows:
1997 1996 -------- -------- Buildings and land..................................... $ 5,588 $ 2,176 Land and building under capital lease.................. 2,535 2,535 Machinery, equipment and vehicles...................... 17,936 7,092 Tools and dies......................................... 16,303 6,704 Furniture, fixtures and office equipment............... 3,339 2,679 Leasehold improvements................................. 1,933 1,329 -------- -------- 47,634 22,515 Less accumulated depreciation and amortization......... (19,254) (14,581) -------- -------- $ 28,380 $ 7,934 ======== ========
F-12 119 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 7. INTANGIBLES AND OTHER ASSETS Intangibles and other assets consist of the following:
1997 1996 ------- ------ Goodwill, net of accumulated amortization of $993 on December 27, 1997, and $223 on December 28, 1996.......... $28,892 $1,978 Covenants not to compete, net of accumulated amortization of $13 on December 27, 1997, and $7 on December 28, 1996..... 77 23 Industrial Revenue Bond fees, net of accumulated amortization of $230 on December 27, 1997, and $202 on December 28, 1996......................................... 173 201 Patents, net of accumulated amortization of $1,384 on December 27, 1997, and $1,327 on December 28, 1996........ 96 153 Licensing agreement, net of accumulated amortization of $42 on December 27, 1997, and $23 on December 28, 1996........ 153 172 Deferred financing fees, net of accumulated amortization of $439 on December 27, 1997, and $20 on December 28, 1996... 3,320 77 Other assets................................................ 96 203 ------- ------ $32,807 $2,807 ======= ======
NOTE 8. ACCRUED LIABILITIES Accrued liabilities consist of the following:
1997 1996 ------- ------ Compensation and other benefits........................... $ 3,012 $1,540 Sales incentives and commissions.......................... 2,721 814 Income taxes payable...................................... 3,551 92 Other..................................................... 3,629 1,572 ------- ------ $12,913 $4,018 ======= ======
NOTE 9. LONG-TERM OBLIGATIONS Long-term obligations consist of the following:
1997 1996 ------- ------ Revolving credit facility, variable rate, due August 28, 2002...................................................... $ 3,355 $ -- Term Loan A, variable rate, due July 1, 2002................ 11,783 -- Term Loan B, variable rate, due July 1, 2004................ 12,938 -- Illinois Development Finance Authority (IDFA) variable rate demand Industrial Development Revenue bonds (Shutters Project) Series 1989, due November 1, 2002................ 2,000 2,400 Illinois Development Finance Authority (IDFA) variable rate demand Industrial Development Revenue Bonds (Selfix, Inc. Project) Series 1990, due September 1, 2005............... 2,400 2,800 Capital lease obligations................................... 2,074 1,822 ------- ------ 34,550 7,022 Less current maturities..................................... (3,850) (838) ------- ------ $30,700 $6,184 ======= ======
F-13 120 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In connection with the Tamor Acquisition, (as more fully described in Note 2), the Company entered into a credit agreement dated February 27, 1997 (the "Credit Agreement"), with GECC which provided (i) a $20,000 revolving credit facility, (ii) a twenty-two quarter $20,000 term loan, and (iii) a thirty quarter $20,000 term loan. In addition, the Company obtained a $7,000 subordinated equity bridge note (the "Subordinated Note") through GECC. However, as more fully described in Note 16, effective December 30, 1997 the Company terminated the February 27, 1997, Credit Agreement, and entered into a $130,000 credit agreement dated December 30, 1997 (the "12/30/97 Credit Agreement") with GECC. In addition to the 12/30/97 Credit Agreement, the Company obtained a $10,000 senior subordinated note, also through GECC. In connection with the Subordinated Note, the Company issued a warrant (the "Warrant") to purchase 79,204 shares of common stock, exercisable at 50% of the Market price ($5.80 per share), as defined in the Warrant. The exercise period commenced on August 1, 1997, and terminates on February 27, 2007. The Warrant was recorded by the Company at its estimated fair value of $400. As of December 27, 1997 the Warrant had not been exercised. As discussed in Note 4, on June 24, 1997, the Company completed a secondary public offering of 2,000,000 shares of its common stock. Net proceeds in the amount of $18,300 were used to fully repay the Subordinated Note of $7,000, term notes of $11,100, and accrued interest of $200. On July 16, 1997, an additional 280,000 shares were sold pursuant to an underwriter's over-allotment provision. Net proceeds of $2,600 were used to repay term notes of $2,500 and accrued interest of $100. The IDFA variable rate demand Industrial Development Bonds (Shutters Project) Series 1989, were issued in December 1989, and mature on November 1, 2002. Interest is calculated based upon a weekly variable rate, and is paid monthly. Principal is payable in annual installments, due on December 1. The variable rate at December 27, 1997, and December 28, 1996, was 4.6%. The IDFA variable rate demand Industrial Development Bonds (Selfix Project) Series 1990, were issued in September 1990, and mature on September 1, 2005. Interest is calculated based upon a weekly variable rate, and is paid monthly. Principal is payable in annual installments, due on December 1. The variable rate at December 27, 1997, and December 28, 1996, was 4.6%. Capital lease obligations include; (i) a lease agreement between Selfix and two related trusts for Selfix's principal factory and corporate office; and (ii) starting in fiscal 1997, various equipment lease agreements. Lease payments to the trusts were $519, $467 and $491, in 1997, 1996 and 1995, respectively, and lease payments for machinery and equipment in 1997 were $140. The following schedule shows future minimum lease payments together with the present value of the payments for capital lease obligations. Years ending: 1998........................................................ $ 430 1999........................................................ 422 2000........................................................ 417 2001........................................................ 404 2002........................................................ 367 Thereafter.................................................. 2,604 ------- 4,644 Less amount representing interest........................... (2,570) ------- Present value of minimum lease payments..................... $ 2,074 ======= Long-term portion........................................... $ 1,974 Current portion............................................. 100 ------- $ 2,074 =======
F-14 121 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 10. COMMITMENTS AND CONTINGENCIES The Company leases certain manufacturing, distribution, and office facilities under noncancellable operating leases, expiring at various dates through 1999. Future minimum lease payments amount to $1,046, and $1,020 for fiscal years 1998 and 1999, respectively. Rent expense under operating leases for 1997, 1996, and 1995, was $1,184, $354, and $381, respectively. NOTE 11. INCOME TAXES The components of earnings (loss) before income taxes are as follows:
1997 1996 1995 ------ ------ ------- Domestic................................................ $7,602 $1,122 $(3,262) Foreign................................................. 64 (316) (1,021) ------ ------ ------- $7,666 $ 806 $(4,283) ====== ====== =======
Significant components of the Company's deferred tax items as of December 27, 1997 and December 28, 1996 are as follows:
1997 1996 ------ ------- DEFERRED TAX ASSETS Inventory reserves and overhead capitalized for tax purposes............................................... $1,166 $ 414 Employee benefit expenses and other accruals.............. 341 450 Accounts receivable reserve............................... 423 241 Capitalized lease treated as operating lease for tax purposes............................................... 378 430 Accrued advertising, volume rebates and reserves for returns................................................ 890 109 Other accrued liabilities................................. 235 344 Net operating loss carryforward........................... -- 612 Other..................................................... 936 889 ------ ------- Gross deferred tax assets................................... 4,369 3,489 ------ ------- DEFERRED TAX LIABILITIES Depreciation.............................................. 628 301 Other..................................................... 275 45 ------ ------- Gross deferred tax liabilities.............................. 903 346 ------ ------- Deferred tax assets net of deferred liabilities............. 3,466 3,143 Valuation allowance......................................... -- (3,143) ------ ------- Net deferred tax asset...................................... $3,466 $ -- ====== =======
In fiscal 1997, the Company received a refund of approximately $330 relating to federal income taxes paid in prior years. Through the claim for refund filed, and the level of fiscal 1997 taxable income, the Company utilized all federal net operating loss carryforwards in fiscal 1997. The Company has research and development credit carryforwards of approximately $11, expiring through the year 2010, state investment tax credit carryforwards of approximately $86 expiring through 2000 and foreign net operating loss carryforwards of $1,082 expiring in 2002. The Company eliminated the valuation allowance as of December 27, 1997 based upon the determination that it is more likely than not that the Company will realize the benefits generated from the deferred tax assets recorded. F-15 122 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Income tax expense (benefit) is as follows:
1997 1996 1995 ------- ----- ----- Current U.S. federal.............................................. $ 1,721 $ 0 $(247) Foreign................................................... -- (10) 22 State..................................................... 346 0 (48) ------- ----- ----- 2,067 (10) (273) ------- ----- ----- Deferred U.S. federal.............................................. 1,422 266 (463) Increase (decrease) in valuation allowance................ (3,143) (256) 463 ------- ----- ----- (1,721) 10 -- ------- ----- ----- Total income tax expense (benefit).......................... $ 346 $ -- $(273) ======= ===== =====
Income tax expense (benefit) differs from amounts computed based on the U.S. federal statutory tax rate applied to earnings (loss) before tax as follows:
1997 1996 1995 ------- ----- ------- Computed at statutory U.S. federal income tax rate.......... $ 2,683 $ 282 $(1,456) State income taxes, net of U.S. federal tax benefit......... 383 (39) (32) Foreign tax rate difference and foreign loss carryforwards............................................. -- -- 460 Tax exempt interest......................................... -- (12) (25) Exercise of Stock Options................................... (34) -- -- Non deductible goodwill..................................... 62 -- -- Other....................................................... 395 25 317 Change in valuation allowance............................... (3,143) (256) 463 ------- ----- ------- $ 346 $ -- $ (273) ======= ===== =======
NOTE 12. STOCK OPTIONS Under the 1987, 1991 and 1994 stock option plans as amended, (collectively, the "Stock Option Plan") key employees and certain key nonemployees were granted options to purchase shares of the Company's common stock. All stock option grants are authorized by the Compensation Committee of the Board of Directors, which is comprised of outside directors. Options granted may or may not be "incentive stock options" as defined by the Internal Revenue Code of 1986. The exercise price is determined by the Company's Board of Directors at the time of grant but may not be less than 100% of the market price at the time of grant for incentive stock options. Options may not be granted for a term greater than ten years. All options granted, with the exception of those granted to the Chief Executive Officer, vest within a five year period. The options granted to the Chief Executive Officer vest on an accelerated schedule in accordance with his employment contract. In 1997, the shareholders of the Company voted to increase the maximum number of shares of common stock which may be granted under the Stock Option Plan by 450,000 shares to a maximum available of 1,475,000. A total of 120,820 shares of common stock have been issued as of December 27, 1997 from the Stock Option Plan, and 1,354,180 shares remain in reserve. F-16 123 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company applies APB Opinion 25 "Accounting for Stock Based Compensation" and related interpretations in accounting for stock option awards under the Stock Option Plan. Accordingly, no compensation cost has been recognized in the Company's financial statements. As required by SFAS 123, the Company has computed, for pro forma disclosure purposes, the value of options granted during fiscal years 1997 and 1996 using an option pricing model. The weighted average assumptions used for stock option grants for 1997 and 1996 were a dividend yield of 0%, expected volatility of the market price of the Company's common stock of 43% for 1997, and 41% for 1996, a weighted-average expected life of the options of approximately five years, and weighted average risk free interest rates of 6.3% for fiscal 1997 and 6.5% for fiscal 1996. Option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because changes in the subjective input assumptions can materially affect the fair value estimates, in management's opinion, the existing model does not necessarily provide a reliable single measure of the fair value of its employee stock based compensation plan. Had compensation cost for the Company's 1997 and 1996 grants been determined using the above fair values and considering the applicable vesting periods, the Company's reported results would have been impacted as follows:
1997 1996 1995 ------ ----- ------- Net earnings (loss) As reported............................................ $7,320 $ 806 $(4,010) Pro forma.............................................. 6,720 564 (4,092) Net earnings (loss) per common share -- Basic As reported............................................ $ 1.35 $0.21 $ (1.11) Pro forma.............................................. $ 1.24 $0.15 $ (1.13) Net earnings (loss) per common share -- Diluted As reported............................................ $ 1.29 $0.21 $ (1.11) Pro forma.............................................. $ 1.18 $0.15 $ (1.13)
A summary of the transactions in the option plans is as follows:
1997 1996 1995 ------------------- ----------------- ------------------ SHARES PRICE* SHARES PRICE* SHARES PRICE* --------- ------ ------- ------ -------- ------ Options outstanding at beginning of year...... 781,987 $ 6.21 598,527 $6.74 557,842 $8.65 Granted.................. 497,900 10.17 248,900 4.95 626,700 7.22 Exercised................ (13,288) 4.58 -- -- (8,147) 4.15 Canceled................. (45,100) 10.38 (65,440) 6.20 (577,868) 9.14 --------- ------- -------- Unexercised options outstanding at end of year................... 1,221,499 7.70 781,987 6.21 598,527 6.74 ========= ======= ======== Options exercisable at end of year............ 199,734 6.75 16,754 4.89 15,784 4.69 ========= ======= ======== Available for grant...... 132,681 1,934 195,394 ========= ======= ========
- --------------- * Weighted average F-17 124 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1997 1996 1995 -------------- ------------- -------------- Price range of options Granted........ $4.38 - $14.00 $4.25 - $6.00 $4.13 - $12.00 Exercised............................. $4.23 - $ 5.00 $ -- - $ -- $4.00 - $ 4.23 Canceled.............................. $4.25 - $10.38 $4.13 - $8.00 $3.13 - $12.00 Outstanding........................... $4.13 - $14.00 $4.13 - $8.00 $4.13 - $ 8.00
The above stock options have the following characteristics as of December 27, 1997:
REMAINING SHARES LIFE SHARES GRANT YEAR OUTSTANDING PRICE* (IN YEARS)* EXERCISABLE ---------- ----------- ------ ----------- ----------- Pre-1995................................... 16,399 $ 5.09 5.5 16,399 1995....................................... 512,200 6.88 7.5 116,668 1996....................................... 238,000 4.96 8.8 66,667 1997....................................... 454,900 10.15 9.8 -- --------- ------- 1,221,499 199,734 ========= =======
- --------------- * Weighted average NOTE 13. EMPLOYEE STOCK PURCHASE PLAN The 1995 Employee Stock Purchase Plan allows eligible employees to purchase up to 200,000 shares of the Company's stock. The purchase price shall be the lesser of 85% of the fair market value of a common share on the first day of each purchase period or the fair market value of a common share on the last day of such purchase period, adjusted to the nearest 1/8 point. As of December 27, 1997, and December 28, 1996, 19,560, and 19,639 shares respectively had been purchased under the plan. NOTE 14. STATEMENT OF OPERATIONS AND RESTRUCTURING CHARGES In the fourth quarter of 1995, the Company announced its intent to consolidate facilities and exit additional product lines. The 1995 charge is a result of the Company's decision to exit certain unprofitable product lines, close the Company's Canadian facility and move the Canadian operations to the Chicago manufacturing and distribution facilities. The restructuring charges for these initiatives totaled $2,051. The charges for the closing and relocation of the Canadian operation totaled $951 including severance benefits of $184 covering all of the Canadian employees. The relocation of the Canadian operation was completed in the first half of 1996. The remaining $1,100 of restructuring charges pertains to product lines the Company has decided to exit and the related write-off of product molds, inventory and patents. Approximately $66 of inventory reserves, $74 of accrued legal and accrued severance and $140 of accrued facility closing costs remained on the Company's books at December 28, 1996. As of December 27, 1997, no balances remained in these accounts. In 1995, the Company received approximately $1,400, net of a contingent liability, as its share of the net proceeds from a patent suit settlement. The Company recorded approximately $500 as its share of the proceeds in other income in 1994. NOTE 15. SEGMENT AND GEOGRAPHIC INFORMATION The Company operates in two industry segments, the housewares segment and the home improvement products segment. The housewares segment provided approximately 94% of the Company's gross sales in 1997 and the home improvement products segment provided approximately 6% of the Company's gross sales in 1997. Sales to customers outside the United States in 1997 accounted for approximately 6% of total net sales F-18 125 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) with Canada accounting for approximately 2% of total net sales. Information about the Company's operations in these segments is as follows:
1997 1996 1995 -------- ------- ------- Gross sales: Housewares......................................... $129,745 $31,375 $34,543 Home improvement products.......................... 8,385 9,457 8,993 -------- ------- ------- Consolidated.................................... $138,130 $40,832 $43,536 ======== ======= ======= Operating profit (loss): Housewares......................................... $ 12,277 $ 904 $(4,892) Home improvement products.......................... 471 461 817 -------- ------- ------- Consolidated....................................... $ 12,748 $ 1,365 $(4,075) ======== ======= ======= Identifiable assets: Housewares......................................... $ 93,898 $19,615 $19,676 Home improvement products.......................... 5,445 5,090 5,300 -------- ------- ------- Consolidated.................................... $ 99,343 $24,705 $24,976 ======== ======= ======= Depreciation and amortization: Housewares......................................... $ 5,274 $ 1,532 $ 2,684 Home improvement products.......................... 413 682 653 -------- ------- ------- Consolidated.................................... $ 5,687 $ 2,214 $ 3,337 ======== ======= ======= Capital expenditures, net: Housewares......................................... $ 8,062 $ 982 $ 880 Home improvement products.......................... 320 642 335 -------- ------- ------- Consolidated.................................... $ 8,382 $ 1,624 $ 1,215 ======== ======= =======
Information about the Company's operations by geographic area is as follows:
1997 1996 1995 -------- ------- ------- Gross sales: United States........................................ $136,407 $38,855 $40,283 Foreign.............................................. 1,723 1,977 3,253 -------- ------- ------- Consolidated...................................... $138,130 $40,832 $43,536 ======== ======= ======= Operating profit (loss): United States........................................ $ 12,689 $ 1,386 $(2,975) Foreign.............................................. 59 (21) (1,100) -------- ------- ------- Consolidated...................................... $ 12,748 $ 1,365 $(4,075) ======== ======= ======= Identifiable assets: United States........................................ $ 99,018 $24,170 $23,699 Foreign.............................................. 325 535 1,277 -------- ------- ------- Consolidated...................................... $ 99,343 $24,705 $24,976 ======== ======= =======
As a percentage of gross sales, a single customer represented 23% in 1997, and 12% in each of 1996 and 1995. A second customer represented 10% of 1997 gross sales, and less than 10% of gross sales in each of 1996 and 1995. F-19 126 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 16. SUBSEQUENT EVENTS Effective December 30, 1997, (within the Company's fiscal 1998), the Company completed the acquisition of Seymour Sales Corporation and its wholly owned subsidiary, Seymour Housewares Corporation, (collectively, "Seymour"). Seymour, headquartered in Seymour, Indiana, is an industry leading manufacturer and marketer of consumer laundry care products, including a full line of ironing boards, ironing board covers and pads, and numerous laundry related accessories. The acquisition will be accounted for as a purchase. As such, the excess of the purchase price over the estimated fair value of the acquired net assets, which approximates, $35,000, will be recorded as goodwill and amortized over forty years. The purchase price allocation will be determined in 1998 when additional information becomes available. Accordingly, the final allocation may have a material effect on the pro forma information presented below. Total consideration for the acquisition was $100,700, consisting of approximately $16,400 in cash, $14,300 in common stock (1,320,700 shares) and the assumption of $70,000 of debt. The following unaudited pro forma information for the fifty-two weeks ended December 27, 1997 presents the combined results of operations as if the acquisition had been completed at the beginning of 1997, and may not be indicative of what would have occurred had the acquisition actually been made as of such date, or results which may occur in the future. Had the Seymour Acquisition occurred on January 1, 1997, pro forma net sales would have been $222,287, and operating profit would have been $15,332. Pro forma net income before extraordinary item would have been $3,972 or $0.59 per common share -- basic and $0.57 per common share -- diluted. Pro forma net earnings, after a $1,800 net of tax extraordinary item for the write-off of deferred financing fees related to a prior credit agreement would have been $2,172 or $0.32 per common share -- basic and $0.31 per common share -- diluted. Adjustments made in arriving at the pro forma unaudited combined results include increased interest expense, amortization of debt issuance costs on acquisition debt, amortization of goodwill, certain operating expense reductions and income tax expense recorded at an estimated combined statutory rate of 40%, prior to adjustment to the valuation allowance. No effect has been given in operating expenses to the fair value of assets acquired, depreciable values or lives, transition and restructuring costs or synergistic benefits which may be realized from the acquisition. The source of funds for the acquisition included the proceeds of a $130,000 Credit Agreement, dated December 30, 1997, (the "12/30/97 Credit Agreement"), among the Company, Selfix, Shutters, Tamor, and Seymour, the lenders which are parties thereto and General Electric Capital Corporation ("GECC") as agent, and a $10,000 senior subordinated note (the "12/30/97 Senior Subordinated Note"), dated December 30, 1997. The 12/30/97 Credit Agreement consists of a $20,000 revolving credit facility (the "12/30/97 Revolver") and $110,000 in senior term loans. All loans under the 12/30/97 Credit Agreement are secured by substantially all of the assets of the subsidiaries of the Company (including Seymour) and a pledge by the Company of all the outstanding shares of capital stock of such subsidiaries. The provisions of the 12/30/97 Credit Agreement include restrictions on additional indebtedness, asset sales, acquisitions or mergers, capital expenditures and dividend payments, among other things. As defined in the 12/30/97 Credit Agreement, the Company is also required to meet certain financial tests which include, but are not limited to, those relating to a minimum net worth test and a minimum interest coverage ratio. The 12/30/97 Revolver provides up to $20,000 (including a letter of credit facility of up to $15,000) subject to the availability of sufficient qualifying collateral. Interest is charged, at the Company's option, at either (i) the 1, 2 or 3 month reserve adjusted LIBOR rate plus a margin of 2.5%; or (ii) a floating rate equal to the prime rate plus a margin of 1.0%. Interest is paid monthly for borrowings which bear interest based on F-20 127 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the prime rate and is paid at the end of the applicable LIBOR period for borrowings which bear interest based on a LIBOR rate. An unused facility fee of .5% per annum is charged on the average unused daily balance. As of December 30, 1997, there were no borrowings outstanding on the 12/30/97 Revolver and unused availability was $13,400. Availability was reduced by several letters of credit outstanding as of December 30, 1997, which totaled $6,600. The 12/30/97 Revolver terminates on December 30, 2002. The 12/30/97 Credit Agreement also includes two senior term loans, (i) consisting of a $50,000 twenty-four quarter senior term loan ("Senior Term Loan A") and (ii) a $60,000 thirty-two quarter senior term loan ("Senior Term Loan B"). Both term loans are immediately due and payable in full if the 12/30/97 Revolver is terminated. Senior Term Loan A is required to be repaid in quarterly principal installments commencing in April 1998. Aggregate principal repayments for the Senior Term Loan A are as follows:
YEARS ENDING ------------ 1998............................................... $ 3,750 1999............................................... 6,500 2000............................................... 7,750 2001............................................... 9,500 2002............................................... 10,000 Thereafter......................................... 12,500
Interest is charged, at the Company's option at either: (i) the 1, 2 or 3 month reserve adjusted LIBOR plus a margin of 2.5%; or (ii) a floating rate equal to the prime rate plus a margin of 1.0%. Interest is paid monthly for borrowings which bear interest based on the prime rate and is paid at the end of the applicable LIBOR period for borrowings which bear interest based on a LIBOR rate. Senior Term Loan B is required to be repaid in quarterly principal installments commencing in April of 1998. Aggregate principal repayments for the Senior Term Loan B are as follows:
YEARS ENDING ------------ 1998............................................... $ 450 1999............................................... 600 2000............................................... 600 2001............................................... 600 2002............................................... 600 Thereafter......................................... 57,150
Interest is charged, at the Company's option, at either: (i) the 1, 2 or 3 month reserve adjusted LIBOR plus a margin of 3.0%; or (ii) a floating rate equal to the prime rate plus a margin of 1.5%. Interest is paid monthly for borrowings which bear interest based on the prime rate and is paid at the end of the applicable LIBOR period for borrowings which bear interest based on a LIBOR rate. The interest rates applicable to the obligations outstanding under the 12/30/97 Credit Agreement are subject to adjustment (up or down) based on the Company's year to date 1998 consolidated financial performance. The 12/30/97 Senior Subordinated Note matures on December 30, 2006, and is secured by a second lien on substantially all of the assets of the Company's subsidiaries. As such, the 12/30/97 Senior Subordinated Note is subordinated in right of payment from the proceeds of such collateral to the 12/30/97 Revolver and to the Senior Term Loans A and B. If all outstanding obligations under the 12/30/97 Credit Agreement have been paid and the commitment under the 12/30/97 Revolver has been terminated, the Company must prepay F-21 128 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the 12/30/97 Senior Subordinated Note in full. Interest is payable monthly, and is charged at a rate of prime plus a margin of 3%, but in no event less than 11% per annum. The 12/30/97 Senior Subordinated Note is due and payable in a single installment on December 30, 2006. The 12/30/97 Senior Subordinated Note contains a fee which is due and payable to GECC upon repayment of the principal. If the 12/30/97 Senior Subordinated Note is repaid in full on or prior to December 30, 1999, the required fee is $500; if repaid in full after December 30, 1999, but prior to December 30, 2000, the fee is $750; if repaid in full after December 30, 2000, but prior to December 30, 2001, the fee is $1,200; if repaid in full after December 30, 2001, but prior to December 30, 2002, the fee is $1,600; and if repaid on or after December 30, 2002, the fee is $2,000. The 12/30/97 Credit Agreement provides for mandatory prepayments of obligations under the 12/30/97 Credit Agreement and the 12/30/97 Senior Subordinated Note from proceeds received in certain transactions outside the normal scope of the Company's business, such as the sale of fixed assets, or the receipt of insurance proceeds. Additionally, the Company is subject to an annual mandatory prepayment out of "excess cash", as defined in the 12/30/97 Credit Agreement. The Company will be subject to a prepayment premium, as defined in the 12/30/97 Credit Agreement, until December 30, 1999, if the revolving credit facility is terminated or the Company prepays all or any portion of the Senior Term Loans A or B other than as a result of the mandatory prepayments discussed above. F-22 129 HOME PRODUCTS INTERNATIONAL, INC. UNAUDITED QUARTERLY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THIRTEEN THIRTEEN THIRTEEN THIRTEEN WEEKS WEEKS WEEKS WEEKS ENDED ENDED ENDED ENDED MARCH 29 JUNE 28 SEPTEMBER 27 DECEMBER 27 1997 -------- -------- ------------ ----------- Net sales........................................ $31,738 $33,023 $32,875 $31,688 Gross profit..................................... 9,128 10,124 10,377 10,807 Net earnings..................................... 1,032 1,789 2,421 2,078 Net earnings per common share -- Basic........... $ 0.24 $ 0.41 $ 0.37 $ 0.31 Net earnings per common share -- Diluted......... $ 0.23 $ 0.40 $ 0.36 $ 0.30
THIRTEEN THIRTEEN THIRTEEN THIRTEEN WEEKS WEEKS WEEKS WEEKS ENDED ENDED ENDED ENDED MARCH 30 JUNE 29 SEPTEMBER 28 DECEMBER 28 1996 -------- -------- ------------ ----------- Net sales........................................ $ 8,625 $10,155 $10,728 $ 8,692 Gross profit..................................... 2,858 4,311 4,388 3,651 Net earnings (loss).............................. (1,116) 709 764 449 Net earnings (loss) per common share -- Basic.... $ (0.29) $ 0.19 $ 0.20 $ 0.11 Net earnings (loss) per common share -- Diluted............................... $ (0.29) $ 0.19 $ 0.20 $ 0.11
F-23 130 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE II Board of Directors Home Products International Inc. We have audited in accordance with generally accepted auditing standards the consolidated financial statements of Home Products International, Inc. (formerly Selfix, Inc.) as of and for the fifty-two week period ended December 27, 1997 and December 28, 1996 included in this Prospectus, and have issued our report thereon dated February 6, 1998. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The Valuation and Qualifying Accounts on Schedule II is the responsibility of the Company's management. This 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. Arthur Andersen LLP Chicago, Illinois February 6, 1998 F-24 131 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE II Board of Directors Home Products International, Inc. (Formerly Selfix, Inc.) In connection with our audit of the consolidated financial statements of Home Products International, Inc. (formerly Selfix, Inc.) and Subsidiaries referred to in our report dated February 9, 1996, we have also audited Schedule II for the 52-week period ended December 30, 1995. In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therein. GRANT THORNTON LLP Chicago, Illinois February 9, 1996 F-25 132 SCHEDULE II HOME PRODUCTS INTERNATIONAL, INC. VALUATION AND QUALIFYING ACCOUNTS FOR THE FIFTY-TWO WEEKS ENDED DECEMBER 27, 1997, FOR THE FIFTY-TWO WEEKS ENDED DECEMBER 28, 1996, FOR THE FIFTY-TWO WEEKS ENDED DECEMBER 30, 1995
ADDITIONS DEDUCTIONS ---------------------- ----------- BALANCE AT CHARGED TO (NET BALANCE BEGINNING COSTS AND BALANCES WRITE-OFFS/ AT END OF PERIOD EXPENSES ACQUIRED RECOVERIES) OF PERIOD ---------- ---------- -------- ----------- --------- (IN THOUSANDS) ALLOWANCE FOR DOUBTFUL ACCOUNTS December 27, 1997...................... $ 901 $ 499 $659 $ (343) $1,716 December 28, 1996...................... $1,395 $ 211 $ -- $ (705) $ 901 December 30, 1995...................... $1,431 $ 524 $ -- $ (560) $1,395 WARRANTY RESERVES December 27, 1997...................... $ 453 $ -- $ -- $ (181) $ 272 December 28, 1996...................... $ 495 $ -- $ -- $ (42) $ 453 December 30, 1995...................... $ 511 $ -- $ -- $ (16) $ 495 INVENTORY RESERVES December 27, 1997...................... $ 993 $ 698 $300 $ (624) $1,367 December 28, 1996...................... $2,411 $ 678 $ -- $(2,096) $ 993 December 30, 1995...................... $1,560 $1,648 $ -- $ (797) $2,411
F-26 133 HOME PRODUCTS INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 28, DECEMBER 27, 1998 1997 --------- ------------ (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AMOUNTS) ASSETS Current assets: Cash and cash equivalents................................. $ 4,163 $ 583 Accounts receivable, net.................................. 30,460 20,802 Inventories, net.......................................... 24,756 12,797 Prepaid expenses and other current assets................. 1,974 508 -------- ------------ Total current assets.............................. 61,353 34,690 -------- ------------ Property, plant and equipment -- at cost.................... 62,840 47,634 Less accumulated depreciation and amortization.............. (21,121) (19,254) -------- ------------ Property, plant and equipment, net.......................... 41,719 28,380 Intangible and other assets................................. 121,947 36,273 -------- ------------ Total assets...................................... $225,019 $ 99,343 ======== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term obligations............... $ 6,591 $ 3,850 Accounts payable.......................................... 16,293 9,664 Accrued liabilities....................................... 19,784 12,913 -------- ------------ Total current liabilities......................... 42,668 26,427 -------- ------------ Long-term obligations -- net of current maturities.......... 120,075 30,700 Other liabilities........................................... 6,212 -- Stockholders' equity: Preferred Stock -- authorized, 500,000 shares, $.01 par value; none issued..................................... -- -- Common Stock -- authorized 15,000,000 shares, $.01 par value; 8,003,727 shares issued at March 28, 1998 and 6,674,271 shares issued at December 27, 1997........... 80 67 Additional paid-in capital.................................. 48,282 33,956 Retained earnings........................................... 8,125 8,616 Common stock held in treasury -- at cost (58,762 shares).... (264) (264) Currency translation adjustments............................ (159) (159) -------- ------------ Total stockholders' equity........................ 56,064 42,216 -------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $225,019 $ 99,343 ======== ============
The accompanying notes are an integral part of the financial statements. F-27 134 HOME PRODUCTS INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
THIRTEEN WEEKS ENDED ---------------------- MARCH 28, MARCH 29, 1998 1997 --------- --------- (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AMOUNTS) Net sales................................................... $52,408 $31,738 Cost of goods sold.......................................... 36,455 22,610 Gross profit.............................................. 15,953 9,128 Operating expenses Selling................................................... 6,429 4,588 Administrative............................................ 3,504 1,809 Amortization of intangible assets......................... 928 205 ------- ------- 10,861 6,602 ------- ------- Operating profit.......................................... 5,092 2,526 ------- ------- Other income (expense) Interest income........................................... 45 31 Interest (expense)........................................ (3,006) (1,532) Other, net................................................ 13 124 ------- ------- (2,948) (1,377) ------- ------- Earnings before income taxes and extraordinary charge....... 2,144 1,149 Income tax (expense)........................................ (898) (117) ------- ------- Earnings before extraordinary charge........................ 1,246 1,032 Extraordinary charge for early retirement of debt, net of tax benefit of $1,258..................................... (1,737) -- ------- ------- Net earnings (loss)......................................... (491) 1,032 Retained earnings at beginning of period.................... 8,616 1,296 ------- ------- Retaining earnings at end of period......................... $ 8,125 $ 2,328 ======= ======= Net earnings before extraordinary item per common share -- Basic............................................ $ 0.16 $ 0.24 Extraordinary charge for early retirement of debt, net of tax....................................................... (0.22) -- ------- ------- Net earnings (loss) per common share -- Basic............... $ (0.06) $ 0.24 ======= ======= Net earnings before extraordinary item per common share -- Diluted.......................................... $ 0.15 $ 0.23 Extraordinary charge for early retirement of debt, net of tax....................................................... (0.21) -- ------- ------- Net earnings (loss) per common share -- Diluted............. $ (0.06) $ 0.23 ======= =======
The accompanying notes are an integral part of the financial statements. F-28 135 HOME PRODUCTS INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THIRTEEN WEEKS ENDED --------------------- MARCH 28, MARCH 29, 1998 1997 --------- --------- (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AMOUNTS) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss)....................................... $ (491) $ 1,032 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization.......................... 2,929 1,721 Changes in assets and liabilities: Decrease (increase) in accounts receivable........... 2,807 (1,960) (Increase) in inventories............................ (361) (1,086) Increase (decrease) in accounts payable.............. 1,449 (310) (Decrease) increase in accrued liabilities........... (4,290) 697 Other operating activities, net........................ 2,116 160 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES................... 4,159 254 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Seymour acquisition, net of cash acquired................. (14,882) -- Tamor acquisition, net of cash acquired................... -- (27,792) Capital expenditures, net................................. (4,034) (597) -------- -------- NET CASH USED FOR INVESTING ACTIVITIES...................... (18,916) (28,389) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on borrowings.................................... (99,218) (11,744) Net proceeds from borrowings and warrants................. 117,538 43,671 Payment of capital lease obligation....................... (42) (9) Exercise of common stock options and issuance of common stock under stock purchase plan........................ 59 47 -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES................... 18,337 31,965 Net increase in cash and cash equivalents................. 3,580 3,830 Cash and cash equivalents at beginning of period.......... 583 2,879 -------- -------- Cash and cash equivalents at end of period................ $ 4,163 $ 6,709 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest.................................................. $ 2,686 $ 300 -------- -------- Income taxes, net......................................... $ 905 $ -- -------- --------
The accompanying notes are an integral part of the financial statements. F-29 136 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1. Home Products International, Inc. (the "Company") and its subsidiary companies design, manufacture and market products in two industry segments: housewares products and home improvement products. Housewares products are marketed principally through mass market trade channels throughout the United States and internationally. Home improvement products are sold principally through wholesalers that service the residential construction, repair, and remodeling industry throughout the United States. The condensed consolidated financial statements include the accounts of the Company and its subsidiary companies. All significant intercompany transactions and balances have been eliminated. The unaudited condensed financial statements included herein as of and for the thirteen weeks ended March 28, 1998 and for the thirteen weeks ended March 29, 1997 reflect, in the opinion of the Company, all adjustments (which include only normal recurring adjustments) necessary for the fair presentation of the financial position, the results of operations and cash flows. These unaudited financial statements should be read in conjunction with the audited financial statements and related notes thereto included in this Prospectus. The results for the interim periods presented are not necessarily indicative of results to be expected for the full year. NOTE 2. Effective December 30, 1997 (within fiscal 1998) the Company completed the acquisition of Seymour Sales Corporation and its wholly owned subsidiary Seymour Housewares Corporation, (collectively "Seymour"). Seymour, headquartered in Seymour, Indiana is an industry leading manufacturer and marketer of consumer laundry care products, including a full line of ironing boards, ironing board covers and pads and numerous laundry related accessories. On December 30, 1997, in connection with the Company's acquisition of Seymour, the Company refinanced its primary credit facility. As a result, the Company was required to record a extraordinary charge related to the write-off of certain deferred financing fees previously capitalized. The pro forma impact of the acquisition of Seymour and the related financing on the Company's historical results together with a detailed description of the related financing is more fully described in Note 16 to the Consolidated Financial Statements of the Company included in this Prospectus. NOTE 3. Inventories are summarized as follows (in thousands):
MARCH 28, DECEMBER 27, 1998 1997 --------- ------------ Finished goods....................................... $13,059 $ 7,335 Work-in-process...................................... 4,516 2,225 Raw materials........................................ 7,181 3,237 ------- ------- $24,756 $12,797 ======= =======
NOTE 4. During fiscal 1997, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share," which established standards for the computation and presentation of earnings per share information. Prior period net earnings (loss) per share have been restated. Net earnings (loss) per common share-basic, was calculated by dividing net earnings (loss) applicable to common shares by the weighted average number of common shares outstanding during each period. Net earnings (loss) per common share-diluted, reflects the potential dilution that could occur assuming exercise of all outstanding "in-the- F-30 137 HOME PRODUCTS INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) money" stock options. A reconciliation of the net earnings (loss) and the number of shares used in computing basic and diluted earnings per share was as follows (in thousands, except per share amounts):
FOR THE THIRTEEN WEEKS ENDED ---------------------- MARCH 28, MARCH 29, 1998 1997 --------- --------- NET EARNINGS (LOSS) PER COMMON SHARE-BASIC: Net earnings (loss) applicable to common shares............. $ (491) $1,032 ====== ====== Weighted average common shares outstanding for the period... 7,929 4,299 ====== ====== Net earnings (loss) per common share-Basic.................. $(0.06) $ 0.24 ====== ====== Net earnings (loss) per common share-Diluted: Net earnings (loss) applicable to common shares............. $ (491) $1,032 ====== ====== Weighted average common shares outstanding for the period... 7,929 4,299 Increase in shares which would result from exercise of "in-the-money" stock options.............................. 387 215 ------ ------ Weighted average common shares assuming conversion of the above securities.......................................... 8,316 4,514 ====== ====== Net earnings (loss) per common share--Diluted............... $(0.06) $ 0.23 ====== ======
NOTE 5. The provision for income taxes is determined by applying an estimated annual effective tax rate (federal, state and foreign combined) to income before taxes. The estimated annual effective income tax rate is based upon the most recent annualized forecast of pretax income, permanent book/tax differences and tax credits. F-31 138 REPORT OF INDEPENDENT AUDITORS Board of Directors Seymour Sales Corporation and Subsidiaries We have audited the accompanying consolidated balance sheets of Seymour Sales Corporation and subsidiaries as of June 30, 1997 and 1996, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended June 30, 1997. 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Seymour Sales Corporation and subsidiaries at June 30, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 1997, in conformity with generally accepted accounting principles. Indianapolis, Indiana ERNST & YOUNG, LLP August 15, 1997, except for Note 10 as to which the date is August 25, 1997 and Note 11, as to which the date is December 30, 1997 F-32 139 SEYMOUR SALES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
JUNE 30, -------------------------- 1997 1996 ----------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ASSETS Current assets: Cash and cash equivalents................................. $ 1,529 $ 713 Accounts receivable, net (Note 2)......................... 15,897 16,762 Income taxes recoverable.................................. 346 346 Inventories (Note 3)...................................... 14,160 14,747 Prepaid pension cost (Note 6)............................. 448 -- Prepaid expenses and sundry............................... 450 623 -------- -------- Total current assets........................................ 32,830 33,191 Property and equipment (Note 4)............................. 12,512 14,868 Prepaid pension cost (Note 6)............................... -------- 674 Intangible assets, less accumulated amortization (1997 -- $17,701; 1996 -- $13,055): Goodwill.................................................. 48,127 49,554 Non-compete............................................... 6,481 9,086 Other..................................................... 3,238 3,950 -------- -------- 57,846 62,590 -------- -------- Total assets................................................ $103,188 $111,323 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 7,303 $ 5,806 Other liabilities and accrued expenses.................... 4,377 4,558 Current maturity of long-term debt (Note 5)............... 4,488 571 State and local taxes..................................... 434 584 Deferred income taxes (Note 7)............................ 158 68 -------- -------- Total current liabilities................................... 16,760 11,587 Long-term debt (Note 5)..................................... 71,813 83,201 Postretirement benefit plan (Note 6)........................ 2,969 2,640 Deferred income taxes (Note 7).............................. 2,881 3,045 Stockholders' equity (Note 8): Common Stock, $.0001 par value: Authorized shares -- 750,000 Issued shares -- 153,608 in 1997 and 1996.............. -- -- Preferred Stock, $1 par value: Authorized shares -- 24,000 Issued shares -- 19,762 in 1997 and 1996............... 20 20 Common Stock warrants..................................... 400 400 Additional paid-in capital................................ 26,168 26,168 Retained earnings (deficit)............................... (17,615) (15,596) -------- -------- 8,973 10,992 Less shares in treasury, at cost: Common Stock -- 1,132 in 1997 and 819 in 1996 Preferred Stock -- 130 in 1997 and 89 in 1996............. (208) (142) -------- -------- Total stockholders' equity.................................. 8,765 10,850 -------- -------- Total liabilities and stockholders' equity.................. $103,188 $111,323 ======== ========
See accompanying notes. F-33 140 SEYMOUR SALES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, ------------------------------ 1997 1996 1995 ------- -------- ------- (DOLLARS IN THOUSANDS) Sales (Note 1).............................................. $98,274 $105,532 $92,554 Cost of products sold (Note 1).............................. 68,756 79,845 67,288 ------- -------- ------- Gross profit................................................ 29,518 25,687 25,266 Operating expenses: Marketing and selling..................................... 13,326 14,775 12,479 General and administrative................................ 5,312 6,775 4,958 Research and development.................................. 275 407 435 Amortization of intangible assets......................... 4,385 4,414 3,657 ------- -------- ------- 23,298 26,371 21,529 ------- -------- ------- Operating income (loss)..................................... 6,220 (684) 3,737 Other (income) expenses: Interest, net............................................. 7,923 8,384 7,394 Other..................................................... 57 223 (125) ------- -------- ------- 7,980 8,607 7,269 ------- -------- ------- Loss before income taxes.................................... (1,760) (9,291) (3,532) Income taxes (Note 7)....................................... 259 2,597 (1,122) ------- -------- ------- Net loss.................................................... $(2,019) $(11,888) $(2,410) ======= ======== =======
See accompanying notes. F-34 141 SEYMOUR SALES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1997, 1996 AND 1995 ---------------------------------------------------------------------------- COMMON ADDITIONAL RETAINED COMMON PREFERRED STOCK PAID-IN EARNINGS TREASURY STOCK STOCK WARRANTS CAPITAL (DEFICIT) STOCK TOTAL ------ --------- -------- ---------- --------- -------- -------- (DOLLARS IN THOUSANDS) Balance at June 30, 1994.... $-- $ 2 $255 $ 5,963 $ (1,298) $ (12) $ 4,910 Conversion of Junior Subordinated Notes..... -- 18 -- 17,334 -- -- 17,352 Stock issued.............. -- -- 145 2,840 -- -- 2,985 Purchase for treasury..... -- -- -- -- -- (8) (8) Net loss.................. -- -- -- -- (2,410) -- (2,410) --- --- ---- ------- -------- ----- -------- Balance at June 30, 1995.... -- 20 400 26,137 (3,708) (20) 22,829 Stock issued.............. -- -- -- 31 -- -- 31 Purchase for treasury..... -- -- -- -- -- (122) (122) Net loss.................. -- -- -- -- (11,888) -- (11,888) --- --- ---- ------- -------- ----- -------- Balance at June 30, 1996.... -- 20 400 26,168 (15,596) (142) 10,850 Purchase for treasury..... -- -- -- -- -- (66) (66) Net loss.................. -- -- -- -- (2,019) -- (2,019) --- --- ---- ------- -------- ----- -------- Balance at June 30, 1997.... $-- $20 $400 $26,168 $(17,615) $(208) $ 8,765 === === ==== ======= ======== ===== ========
See accompanying notes. F-35 142 SEYMOUR SALES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, ----------------------------- 1997 1996 1995 ------- -------- -------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net loss.................................................. $(2,019) $(11,888) $ (2,410) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation of property and equipment................. 3,517 3,262 2,542 Amortization of intangible assets...................... 4,385 4,414 3,657 Deferred income taxes.................................. (74) 2,422 (885) Benefit applied to reduce goodwill..................... 101 101 60 Non-cash interest expense.............................. 306 357 1,194 Changes in operating assets and liabilities net of effects from purchase of Magla: Accounts receivable.................................. 865 3,052 (5,099) Inventories.......................................... 587 3,216 (5,975) Prepaid expenses and sundry.......................... 173 79 31 Prepaid pension cost................................. 226 114 430 Accounts payable and accrued liabilities............. 1,317 (2,896) 3,380 Other current assets and liabilities................. (150) 512 (626) Postretirement benefit plan.......................... 329 250 203 ------- -------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES...................................... 9,563 2,995 (3,498) INVESTING ACTIVITIES Net cash paid for acquired business....................... -- -- (42,841) Purchases of property and equipment, net.................. (1,161) (2,595) (1,124) Other..................................................... (10) (127) 397 ------- -------- -------- NET CASH USED IN INVESTING ACTIVITIES............. (1,171) (2,722) (43,568) Financing activities Purchase of treasury stock................................ (66) (122) (8) Proceeds from sale of Common and Preferred Stock.......... -- 31 2,611 Principal borrowing (repayment) on revolving credit note, net.................................................... (6,960) 850 10,500 Principal payment on other long-term debt................. (550) (1,000) (838) Proceeds from long-term debt.............................. -- 48 35,827 Debt issuance costs....................................... -- -- (1,022) ------- -------- -------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES...................................... (7,576) (193) 47,070 ------- -------- -------- Increase in cash and cash equivalents....................... 816 80 4 Cash and cash equivalents at beginning of year.............. 713 633 629 ------- -------- -------- Cash and cash equivalents at end of year.................... $ 1,529 $ 713 $ 633 ======= ======== ========
See accompanying notes. F-36 143 SEYMOUR SALES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Business The consolidated financial statements include the accounts of Seymour Sales Corporation (SSC), its wholly owned subsidiary, Seymour Housewares Corporation (SHC), and Seymour, S.A. de C.V., a wholly owned subsidiary of SHC, (collectively referred to as "the Company"). All significant intercompany balances and transactions have been eliminated. SSC is owned by Chase Capital Partners, members of management of the Company and others. The Company designs, manufactures and markets a broad range of ironing boards, ironing board covers and pads, laundry accessories, juvenile gates and tote carts. The Company's customers are principally located throughout North America. Two of the Company's customers accounted for approximately 18% and 14%, respectively, of gross sales for the year ended June 30, 1997. Cash and Cash Equivalents All highly liquid investments with a maturity of three months or less at the date of purchase are considered to be cash equivalents. Financial Instruments The Company's financial instruments generally consist of cash and cash equivalents, trade and other receivables, accounts payable and long-term debt. The fair value of the Company's fixed rate debt was estimated using discounted cash flow analyses based upon the Company's current incremental borrowing rates. The carrying amounts of these financial instruments approximated their fair value at June 30, 1997 and 1996. Inventories Inventories are stated at the lower of cost, determined utilizing the first-in, first-out (FIFO) method, or market. In December 1994, as part of the allocation of the acquisition purchase price (see Note 9), the Company wrote up inventory acquired from original cost to the fair value in accordance with applicable accounting principles. This write up of inventory ($498,000) was charged to cost of goods sold in its entirety during the year ended June 30, 1995. A reserve is maintained for obsolete inventory and shrinkage of inventory. This reserve is reviewed on a periodic basis during the year and at year end and is adjusted, if necessary, based upon historical experience, known problems and management's judgment. Actual write-offs of obsolete products are charged against the reserve as identified. Property and Equipment Property and equipment is stated at cost. Depreciation is calculated by the straight-line, half-year convention method at rates based upon the estimated useful lives of the assets as follows: Buildings................................................... 25 years Building improvements....................................... 10 years Machinery and equipment..................................... 5 years
All costs of major improvements to existing facilities or equipment are capitalized. The cost of repairs and maintenance to an existing asset that does not improve or extend the life of that respective asset is expensed as incurred. F-37 144 SEYMOUR SALES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Intangibles Goodwill is being amortized over 40 years and organization costs are being amortized over 5 years using the straight-line method. Debt issuance costs and noncompete agreements are being amortized over the lives of the agreements (ranging from 5-10 years) using the straight-line method. The carrying amount of goodwill is reviewed if facts and circumstances suggest that it may be impaired. If this review indicates that goodwill will not be recoverable, as determined based on the estimated undiscounted cash flows of the entity acquired over the remaining amortization period, the carrying amount of the goodwill is reduced by the estimated shortfall of cash flows. In addition, the Company assesses long-lived assets for impairment under Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Under those rules, goodwill associated with assets acquired in a purchase business combination is included in impairment evaluations when events or circumstances exist that indicate the carrying amount of those assets may not be recoverable. Sales Sales are presented in the income statement net of allowances for returns, cash discounts and freight out. Gross sales were $101,700,000, $109,609,000 and $96,638,000 for the years ended June 30, 1997, 1996 and 1995 respectively. Advertising The Company expenses the production costs of advertising as incurred except for cooperative advertising where costs are expensed at the same time the related revenue is recognized. For the years ended June 30, 1997, 1996 and 1995, advertising expense totaled $3,042,000, $3,819,000 and $4,000,000, respectively. Income Taxes The Company provides for income taxes in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, ("FAS 109"). FAS 109 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities. These deferred taxes are measured by applying the provisions of tax laws in effect at the balance sheet date. SHC joins with SSC in the filing of a consolidated federal income tax return. Substantially all current and deferred income tax expenses are allocated to SHC and subsidiary as the primary operating entities. Stock Based Compensation The Company accounts for its stock compensation arrangements under requirements prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. In 1997, the Company adopted the disclosure provisions of Financial Accounting Standards Board Statement No. 123, Accounting for Stock Based Compensation. The Company has granted no new stock options or awards after July 1, 1995. Use of Estimates The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. F-38 145 SEYMOUR SALES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Reclassifications Certain amounts in the 1995 financial statements have been reclassified to conform to the 1997 and 1996 presentation. 2. ACCOUNTS RECEIVABLE A summary of accounts receivable at June 30 follows:
1997 1996 ------- ------- (DOLLARS IN THOUSANDS) Trade accounts receivable................................ $19,937 $20,477 Less allowances: Doubtful accounts...................................... (1,059) (1,026) Discounts and returns.................................. (629) (571) Advertising............................................ (2,352) (2,118) ------- ------- $15,897 $16,762 ======= =======
The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral for amounts outstanding. 3. INVENTORIES A summary of inventories at June 30 follows:
1997 1996 ------- ------- (DOLLARS IN THOUSANDS) Raw materials............................................ $ 4,113 $ 5,507 Work-in-process.......................................... 3,308 4,791 Finished goods........................................... 8,370 6,428 ------- ------- 15,791 16,726 Less allowance for obsolescence and shrinkage............ (1,631) (1,979) ------- ------- $14,160 $14,747 ======= =======
4. PROPERTY AND EQUIPMENT A summary of property and equipment at June 30 follows:
1997 1996 ---------- --------- (DOLLARS IN THOUSANDS) Land.................................................... $ 878 $ 878 Buildings and improvements.............................. 6,613 6,551 Machinery and equipment................................. 15,584 15,199 Capital leases.......................................... 358 362 Construction in progress................................ 462 -- -------- ------- 23,895 22,990 Less allowances for depreciation and amortization....... (11,383) (8,122) -------- ------- $ 12,512 $14,868 ======== =======
F-39 146 SEYMOUR SALES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 5. LONG-TERM DEBT Long-term debt at June 30 consisted of the following:
1997 1996 --------- --------- (DOLLARS IN THOUSANDS) Revolving Credit Note....................................... $ 6,390 $13,350 Senior Term Note............................................ 51,000 51,000 Senior Subordinated Note.................................... 19,000 19,000 Capital leases.............................................. 164 234 Other....................................................... -- 480 ------- ------- 76,554 84,064 Less unamortized discount................................... (253) (292) ------- ------- 76,301 83,772 Less current portion........................................ (4,488) (571) ------- ------- $71,813 $83,201 ======= =======
The Company has a Revolving Credit Note with its principal lenders, Jackson National Life Insurance Company, individually and as successor by merger to Jackson National Life Insurance Company of Michigan (collectively referred to as "JNL") which matures December 31, 2002. Under this Note, borrowings can be made once per week up to a maximum outstanding of $14.0 million, further limited to a percentage of eligible receivables and inventory. Interest is based on the lesser of (A) the three-month LIBOR (adjusted for any required reserve percentages) plus 3.0% or (B) a major bank prime lending rate plus 1.5%. Additionally, a commitment fee of .5% is paid on the unused revolver balance along with a 2% guarantee fee for the open letter of credit balance. The interest rate was 8.7% at June 30, 1997. Interest is payable monthly. The Senior Term Note is held by JNL. This Note bears a variable interest rate based on the lower of the following: (A) the three-month LIBOR (adjusted for any required reserve percentages) plus 3.25% or (B) a major bank prime lending rate plus 1.75%. The interest rate was 9.0% at June 30, 1997. Interest is payable monthly. Required principal payments are $4.4 million beginning on June 30, 1998 and every six months thereafter through December 31, 1999. The required payment beginning on June 30, 2000 is $4.9 million every 6 months through December 31, 2001 followed by $6.9 million on June 30, 2002 and December 31, 2002. The Senior Term Note has a provision for optional prepayments and for mandatory excess cash flow prepayment. Certain optional prepayments result in a penalty. There is no mandatory excess cash flow prepayment for the period ended June 30, 1997. The Senior Subordinated Note, held by JNL, has a fixed interest rate of 12% payable semi-annually in June and December. This Note has a maturity of December 31, 2004. The Note may be prepaid, in part or in whole, with penalty after December 31, 1996. The prepayment penalty in 1998 is 9% (unless certain criteria are met in which case the penalty is 4%) of the principal amount prepaid and decreases each year thereafter. JNL also holds warrants to purchase shares of common stock of SSC, as part of the Subordinated Note. The Revolving Credit Note, the Senior Term Note and the Senior Subordinated Note are collateralized by substantially all of SHC's assets and pledged stock of SSC. In addition, the debt agreements require maintenance of certain debt service ratios, limit additional borrowings, and require compliance with various other restrictive covenants. Modifications to certain of these covenants were made with agreements dated as of November 1, 1996. Maturities of long-term debt are as follows: 1998, $4.5 million; 1999, $8.8 million; 2000, $9.3 million; 2001, $9.8 million; and 2002, $11.8 million; and thereafter, $32.4 million. F-40 147 SEYMOUR SALES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company paid interest of $7,732,000, $8,088,000 and $6,200,000, for the years ended June 30, 1997, 1996 and 1995, respectively. 6. EMPLOYEE BENEFIT PLANS Pension Plan SHC has a defined benefit pension plan covering all of its employees working at its facilities in Seymour, Indiana. Plan benefits are based on years of service and earnings. Plan assets consist of equity securities, as well as government, corporate and other fixed-income obligations. SHC's policy is to fund the Plan based on tax funding requirements. The funded status and amounts recognized in the consolidated balance sheets for the Plan at June 30, 1997 and 1996, were as follows:
1997 1996 ------ ------- (DOLLARS IN THOUSANDS) Actuarial present value of benefit obligations: Vested benefits......................................... $7,052 $ 5,424 ====== ======= Accumulated benefit obligation.......................... $7,052 $ 5,588 ====== ======= Projected benefit obligation.............................. $7,052 $ 8,312 Plan assets at fair value................................. 7,052 7,002 ------ ------- Funded status............................................. -- (1,310) Unrecognized net loss..................................... 448 1,984 ------ ------- Prepaid pension costs..................................... $ 448 $ 674 ====== =======
Net pension cost included the following components:
1997 1996 1995 ----- ----- ----- (DOLLARS IN THOUSANDS) Service cost....................................... $ 120 $ 485 $ 386 Interest cost on projected benefit obligation...... 522 557 419 Actual return on plan assets....................... (276) (657) (690) Net amortization and deferral...................... (140) 269 316 ----- ----- ----- Net periodic pension cost.......................... $ 226 $ 654 $ 431 ===== ===== =====
The assumptions used in determining the pension expense and obligations were as follows:
1997 1996 1995 ---- ---- ---- Rate of compensation increase............................... 4.5% 4.5% 4.5% Weighted-average discount rate.............................. 7.0% 7.5% 7.5% Long-term rate of return on assets.......................... 7.0% 7.5% 7.0%
The Pension Plan Administrative Committee on August 7, 1996, resolved that the Pension Plan be frozen (resulting in no additional accumulation of benefits under the plan) effective September 30, 1996, and the Plan was terminated as of November 15, 1996. Accumulated benefits aggregating approximately $7,052,000 were fully vested for the eligible participants and assets of the Plan of $7,052,000 were utilized to purchase investments that earn approximately 6% interest to satisfy the pension obligation. Termination of the Pension Plan was approved by the Internal Revenue Service on July 21, 1997. Distribution of assets is expected to F-41 148 SEYMOUR SALES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) occur by October 1997. Anticipated expense related to the Plan for 1998 is expected to total $448,000, consisting entirely of settlement loss. Retirement Savings Plan SHC has established a 401(k) savings plan named the "Seymour Housewares Corporation Savings Plan" (Savings Plan) effective as of January 7, 1993. All SHC employees who have completed certain minimum service requirements are eligible to participate in the Savings Plan. Participants may defer specified percentages of their compensation which the Company will match based upon a specified formula. The Savings Plan provides for participant elective investment of the deferred amounts in several funds. Company contributions charged to expense were $341,000, $332,000 and $293,000 for the years ended June 30, 1997, 1996 and 1995, respectively. Effective September 29, 1996, the Company amended its Savings Plan to provide an additional discretionary employer profit-sharing contribution equal to 3% of eligible compensation. For the year ended June 30, 1997, profit sharing expense was $347,000. Postretirement Benefit Plan SHC also sponsors a defined benefit plan that provides postretirement medical benefits and life insurance to full-time employees at the Seymour, Indiana facilities who have worked 10 years, attained age 55 while in service with the Company, and participated in the Company's health care plan for at least one year immediately preceding leaving the Company. The Plan is contributory, with retiree contributions adjusted annually, and contains other cost-sharing features such as deductibles and coinsurance. The accounting for the Plan anticipates future cost-sharing changes to the written Plan that are consistent with the Company's expressed intent to increase the retiree contribution annually for the expected general inflation rate for that year. In addition, the Plan provides that the Company's share of benefit costs is limited to 150% of the 1991 benefit cost level. The Company's policy is to fund the cost of medical benefits and life insurance in amounts determined at the discretion of management. The following table presents the Plan's funded status reconciled with amounts recognized in the Company's consolidated statement of financial position.
JUNE 30, ----------------------- 1997 1996 --------- --------- (DOLLARS IN THOUSANDS) Accumulated postretirement benefit obligation: Retirees.................................................... $ 808 $ 983 Fully eligible active plan participants..................... 301 302 Other active plan participants.............................. 1,314 1,456 ------ ------ Accumulated postretirement benefit obligation in excess of plan assets............................................... 2,423 2,741 Unrecognized net gain (loss)................................ 546 (101) ------ ------ Accrued postretirement benefit cost......................... $2,969 $2,640 ====== ======
F-42 149 SEYMOUR SALES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Net periodic postretirement benefit cost includes the following components:
1997 1996 1995 ------ ------ ------ (DOLLARS IN THOUSANDS) Service cost................................................ $164 $133 $116 Interest cost............................................... 203 165 151 ---- ---- ---- Net periodic postretirement benefit cost.................... $367 $298 $267 ==== ==== ====
The weighted-average annual assumed rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rate) is 14 percent, 15 percent and 16 percent for 1997, 1996 and 1995, respectively, and is assumed to decrease gradually (the assumed rate for 1998 is 13 percent) to 4 percent for 2003 and remain at that level thereafter. Increasing the assumed health care cost trend rates by one percentage point each year would not have a material effect on the accumulated postretirement benefit obligation or the aggregate of the service and interest cost components of net periodic postretirement benefit cost. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.5 percent at June 30, 1997, 1996 and 1995. 7. INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of June 30 are as follows:
1997 1996 ---------- ---------- (DOLLARS IN THOUSANDS) Deferred tax liabilities: Intangibles............................................... $ 2,730 $ 2,665 Prepaid pension........................................... 152 229 Depreciation.............................................. 151 151 Other, net................................................ 6 68 ------- ------- Total deferred tax liabilities.................... 3,039 3,113 Deferred tax assets: Net operating loss carryforwards.......................... 3,640 3,111 Alternative minimum tax credit carryforwards.............. 50 50 Depreciation.............................................. 523 317 Health claims incurred but not reported................... 149 203 Postretirement benefit obligation......................... 1,009 896 Vacation pay.............................................. 169 172 Allowances related to receivables......................... 984 1,053 Allowances related to inventories......................... 382 366 Other, net................................................ 399 321 ------- ------- 7,305 6,489 Valuation allowance for deferred tax assets............... (7,305) (6,489) ------- ------- Total deferred tax assets......................... -- -- ------- ------- Net deferred tax liabilities................................ $(3,039) $(3,113) ======= =======
F-43 150 SEYMOUR SALES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At June 30, 1997, the Company has net operating loss carryforwards of $10,706,000 for income tax purposes that expire in 2010, 2011 and 2012, and alternative minimum tax credit carryforwards of $50,000 which may be carried forward indefinitely. Significant components of the provision for income taxes for the years ended June 30 are as follows:
1997 1996 1995 ----- ------- ------- (DOLLARS IN THOUSANDS) Current: Federal................................................. $ -- $ (222) $ (227) State................................................... 102 282 (153) Foreign................................................. 130 14 83 ----- ------- ------- Total current............................................. 232 74 (297) Deferred federal: Change in valuation allowance........................... 816 5,451 70 Other................................................... (890) (3,029) (955) ----- ------- ------- Total deferred federal.................................... (74) 2,422 (885) Benefit applied to reduce goodwill........................ 101 101 60 ----- ------- ------- $ 259 $ 2,597 $(1,122) ===== ======= =======
The effect of state income taxes, the increase in the valuation allowance and the benefit of excess tax-deductible goodwill amortization applied to reduce goodwill are the only significant reconciling differences between income tax expense for the periods and the amount of income tax expense that would result from applying the U.S. statutory rate to pretax income. A deferred tax asset was established as a result of an acquisition in a previous year. For financial reporting purposes, a valuation allowance of $643,000 was recognized as of the acquisition date to offset this deferred tax asset. When realized, the tax benefit for this item will be applied to reduce goodwill related to the acquisition. An income tax refund of approximately $223,000 was received in 1996 while income taxes paid for 1995 were approximately $350,000. 8. STOCKHOLDERS' EQUITY Common stock consists of the following:
SHARES -------------------- CLASS AUTHORIZED ISSUED - ----- ---------- ------- A........................................................ 250,000 142,008 B........................................................ 250,000 -- C........................................................ 250,000 11,600
The three classes of common stock are identical in all respects except voting rights. Holders of Class A Common are entitled to one vote per share on all matters submitted to stockholders for a vote; Class B holders receive one-quarter vote per share, except on certain critical issues (for which they receive one vote per share); and Class C holders have no voting rights. For the most part, any share of common stock may be converted into one share of common stock of either of the other classes of common stock. F-44 151 SEYMOUR SALES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Preferred stock consists of the following:
SHARES ------------------- CLASS AUTHORIZED ISSUED - ----- ---------- ------ A......................................................... 4,000 2,372 B......................................................... 20,000 17,390
The preferred stock has no voting rights and entitles the holder to receive dividends at the rate of 15% (Class A) or 13 1/4% (Class B) of liquidation value ($1,000 per share), payable in cash or additional shares of preferred stock. Dividends are payable only when declared, and any unpaid dividends accumulate and are compounded quarterly. No dividends were declared in the years ended June 30, 1997, 1996 or 1995. Cumulative preferred dividends in arrears were $8,379,000, $4,877,000 and $1,825,000 as of June 30, 1997, 1996 and 1995, respectively. The preferred stock is redeemable at the option of SSC at any time. In connection with the issuance of the Senior Subordinated Note, the lender received warrants to purchase approximately 31,500 shares of Class B common stock of SSC at any time through December 9, 2004 at a price of $.0033 per share. A portion of the proceeds of the Note issuance ($400,000) was assigned to the warrants, representing their estimated fair value at December 9, 1994. In connection with the formation of SSC, options to acquire approximately 7,987 shares of Class A common stock were granted to certain members of management. One-third of the options vest and become exercisable monthly over various periods ending June 30, 1999. Another third of the options vest and become exercisable over a five year period based on achievement of prescribed annual operating cash flow targets. The cash flow target for one of the four periods subsequent to January 7, 1993 was achieved. The final third vests and becomes exercisable if, and when, the cumulative return on investment to SSC's principal shareholder exceeds a specific threshold. As options vest, they become exercisable at $.01 per share. None of the vested options to acquire 4,833 shares of common stock had been exercised at June 30, 1997. Compensation expense attributable to the options that vest over time has been measured by the difference between the fair value of the underlying shares at January 7, 1993 and the exercise price. This expense is being recognized ratably over the various periods ending June 30, 1999. Compensation expense with respect to the other groups of options will be recognized, if earned, in the periods that the related targets are met. The amount recognized as compensation expense for the years ended June 30, 1997, 1996 and 1995 totaled $57,000, $39,000 and $44,000, respectively. 9. ACQUISITION In December 1994, SHC acquired the assets of Magla Products' (Magla) laundry products business and certain of its affiliates. Concurrently, 100% of the stock of Seymour, S.A. de C.V., formerly Magla Productos de Mexico, was acquired. The total purchase price was approximately $45,357,000, which consisted primarily of cash and an earnout provision with guaranteed minimum payments, payable in 1995 through 1998. If payments in excess of the guaranteed minimum are required pursuant to the earnout provision, they will be accounted for as additional goodwill at the time of payment. The Company modified existing long-term debt agreements to obtain funding for this acquisition. Pursuant to this acquisition, certain stockholders of SSC infused capital into the Company through the purchase of additional shares of Common and Preferred Stock. The acquisition has been accounted for using the purchase method of accounting, and the net assets and results of operations are included in the consolidated financial statements from the acquisition date forward. In June 1995, SHC acquired specific assets of Magla Metal Productos de Mexico, S.A. de C.V. of Monterey, Mexico, a manufacturer of ironing boards, for $450,000. The acquisition was financed through the F-45 152 SEYMOUR SALES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company's working capital and was accounted for using the purchase method of accounting, resulting in a cost in excess of net assets acquired of $342,000. 10. SUBSEQUENT EVENT -- CONSOLIDATION (UNAUDITED) Subsequent to year-end, management recommended to the Board of Directors, and announced to the Company's employees, a plan to consolidate certain production operations during the year ended June 30, 1998. If enacted, one-time costs associated with this consolidation are estimated to range from $800,000 to $1,000,000. Management expects that future annual savings from this consolidation will exceed the one-time costs. 11. SUBSEQUENT EVENT -- SALE OF THE COMPANY On December 30, 1997, the stockholders of the Company entered into an agreement with Home Products International, Inc., a Delaware corporation ("HPI"), whereby HPI acquired all of the capital stock of the Company. Total consideration for the acquisition was $100,700,000 consisting of $16,400,000 in cash, $14,300,000 in stock (1,320,700 shares of HPI common stock), and the assumption of $70,000,000 of the Company's debt. HPI's common stock is publicly traded on the NASDAQ National Stock Marketsm, under the ticker symbol HPII. F-46 153 SEYMOUR SALES CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 27, 1997 -------------- (UNAUDITED) (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents................................. $ 1,696 Accounts receivable, net.................................. 12,386 Inventories, net.......................................... 11,598 Prepaid expenses and other current assets................. 333 -------- Total current assets.............................. 26,013 -------- Property, plant and equipment, net.......................... 12,121 Intangible and other assets................................. 55,676 -------- Total assets................................................ $ 93,810 ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term obligations............... $ 87 Accounts payable.......................................... 5,032 Accrued liabilities....................................... 11,267 -------- Total current liabilities......................... 16,386 -------- Long-term obligations -- net of current maturities.......... 69,916 Other long-term obligations................................. 6,270 Stockholders' equity Common Stock.............................................. -- Preferred Stock........................................... 20 Additional paid-in capital................................ 26,568 Retained earnings......................................... (25,102) Common Stock held in treasury -- at cost.................. (248) -------- Total stockholders' equity........................ 1,238 -------- Total liabilities and stockholders' equity.................. $ 93,810 ========
The accompanying notes are an integral part of the financial statements. F-47 154 SEYMOUR SALES CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 27, 1997 AND DECEMBER 28, 1996
SIX MONTHS ENDED --------------------------- DECEMBER 27, DECEMBER 28, 1997 1996 ------------ ------------ (UNAUDITED) (IN THOUSANDS) Net sales................................................... $43,096 $45,248 Cost of goods sold.......................................... 32,863 32,665 ------- ------- Gross profit.............................................. 10,233 12,583 Operating expenses.......................................... 13,404 11,395 ------- ------- Operating profit (loss)................................... (3,171) 1,188 Interest (expense).......................................... (3,708) (4,047) Other income (expense)...................................... (550) 32 ------- ------- Loss before income taxes.................................... (7,429) (2,827) Income tax expense.......................................... (58) (56) ------- ------- Net loss.................................................... $(7,487) $(2,883) ======= =======
The accompanying notes are an integral part of the financial statements. F-48 155 SEYMOUR SALES CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED --------------------------- DECEMBER 27, DECEMBER 28, 1997 1996 ------------ ------------ (UNAUDITED) (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES Net loss.................................................. $(7,487) $(2,883) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization.......................... 4,129 4,089 Changes in assets and liabilities: Decrease in accounts receivable...................... 3,511 4,984 Decrease in inventories.............................. 2,563 2,981 Decrease in prepaids and other assets................ 476 468 Increase (decrease) in accounts payable and accrued liabilities......................................... 4,029 (1,171) Other operating activities, net........................... 841 (298) ------- ------- Net cash provided by operating activities................... 8,062 8,170 ------- ------- Cash flows from investing activities: Capital expenditures, net................................. (1,556) (310) ------- ------- Net cash used for investing activities...................... (1,556) (310) ------- ------- Cash flows from financing activities: Decrease in debt and repurchase of Common Stock........... (6,339) (6,927) ------- ------- Net cash used for financing activities...................... (6,339) (6,927) ------- ------- Net increase in cash and cash equivalents................. 167 933 Cash and cash equivalents at beginning of period.......... 1,529 713 ------- ------- Cash and cash equivalents at end of period................ $ 1,696 $ 1,646 ======= =======
The accompanying notes are an integral part of the financial statements. F-49 156 SEYMOUR SALES CORPORATION AND SUBSIDIARIES NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AMOUNTS) NOTE 1. Unless the context otherwise requires, the reference to the "Company" is to Seymour Sales Corporation, its wholly owned subsidiary, Seymour Housewares Corporation, and Seymour S.A. de C.V., a wholly owned subsidiary of Seymour Housewares Corporation. All significant intercompany balances and transactions have been eliminated. The Company designs, manufactures, and markets a broad range of ironing boards, ironing board covers and pads, laundry accessories, juvenile gates and tote carts. The unaudited condensed consolidated interim financial statements included herein as of December 27, 1997 and for the six months ended December 27, 1997 and December 28, 1996 reflect, in the opinion of the Company, all adjustments (which include only normal recurring adjustments) necessary for the fair presentation of the financial position, the results of operations, and cash flows. The results of the interim periods are not necessarily indicative of results to be expected for the full years. NOTE 2. Inventories are stated at the lower of cost, determined using the first-in, first-out (FIFO) method, or market. A reserve is maintained for obsolete inventory and shrinkage of inventory. This reserve is reviewed on a periodic basis during the year and at year end is adjusted, if necessary, based upon historical experience, known problems and management's judgment. Actual write-offs of obsolete products are charged against the reserve as identified. NOTE 3. Within the six month interim period ended December 27, 1997, in connection with the termination of the Company's defined benefit plan, (the plan was terminated in November 1996, and the termination was approved by the Internal Revenue Service on July 21, 1997), the Company recorded a charge to Other Expense of approximately $550. Distribution of the plan assets to the participants was completed in December 1997. Also included within the six month interim period ended December 27, 1997, the Company recorded a charge to Operating Expenses of approximately $2,600, related to consolidation and disposal of certain manufacturing facilities. NOTE 4. Effective July 1, 1997 the Company changed its method of computing depreciation expense, from a "half-year" convention to a "month placed in service" convention. The effect of this change was to increase 1997 depreciation expense by $233. NOTE 5. Subsequent Event. On December 30, 1997, the stockholders of the Company entered into an agreement with Home Products International, Inc., a Delaware Corporation, ("HPI"), whereby HPI acquired all of the capital stock of the Company. Total consideration for the acquisition was $100,700 consisting of $16,400 in cash, $14,300 in stock (1,320,700 shares of HPI common stock), and the assumption of $70,000 of the Company's debt. HPI's common stock is publicly traded on the NASDAQ National Market(sm), under the ticker symbol, HPII. F-50 157 ============================================================ NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. --------------------- TABLE OF CONTENTS
PAGE ---- Summary..................................... 1 Risk Factors................................ 13 The Exchange Offer.......................... 22 Use of Proceeds............................. 30 Capitalization.............................. 31 Selected Historical Financial Data.......... 32 Unaudited Pro Forma Combined Financial Data...................................... 34 Management's Discussion and Analysis of Financial Condition and Results of Operations................................ 40 Business.................................... 50 Management.................................. 59 Principal Stockholders...................... 62 Certain Transactions........................ 65 Description of Other Indebtedness........... 66 Description of the Exchange Notes........... 68 Book-Entry; Delivery and Form............... 93 Plan of Distribution........................ 94 Certain Federal Income Tax Consequences..... 95 Legal Matters............................... 97 Experts..................................... 97 Available Information....................... 98 Incorporation of Certain Documents by Reference................................. 99 Index to Consolidated Financial Statements................................ F-1
============================================================ ============================================================ $125,000,000 HOME PRODUCTS INTERNATIONAL, INC. OFFER TO EXCHANGE 9 5/8% SENIOR SUBORDINATED NOTES DUE 2008 FOR ALL OUTSTANDING 9 5/8% SENIOR SUBORDINATED NOTES DUE 2008 OF HOME PRODUCTS INTERNATIONAL, INC. -------------------- PROSPECTUS -------------------- , 1998 ============================================================ 158 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Reference is made to the Company's Certificate of Incorporation and to Section 145 of the Delaware General Corporation Law ("DGCL"). Section 145 of the DGCL authorizes a corporation to provide indemnification against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred, in non-derivative actions, suits or proceedings brought by third parties against an officer, director, employee or agent of the corporation, if such party 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 as determined in accordance with the statute. In a derivative action, i.e., one by or in the right of the corporation, indemnification may be made only for expenses actually and reasonably incurred by directors, officers, employees or agents in connection with the defense or settlement of an action or suit, and only with respect to a matter as to which they shall have acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made if such person shall have been adjudged liable to the corporation, unless and only to the extent that the Court in which the action or suit was brought shall determine upon application that the defendant directors, officers, employees or agents are fairly and reasonably entitled to indemnity for such expenses despite such adjudication of liability. The Company's Certificate of Incorporation limits the personal liability of directors to the fullest extent permitted by Delaware law. In addition, the Company's Certificate of Incorporation and By-laws provide that the Company shall to the fullest extent permitted by Delaware law, 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 by reason of the fact that he or she is or was a director, officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any and all expenses, liabilities or other matters referred to or covered by Delaware law, which were reasonably incurred by such person. This indemnification is in addition to any other rights of indemnification to which such persons may be entitled under the Company's Certificate of Incorporation, By-laws, any agreement or notice of shareholders or disinterested directors. The Company's Certificate of Incorporation and By-laws also permit it to secure insurance on behalf of any director, officer, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether Delaware law, the Certificate of Incorporation or By-laws would permit indemnification. The Company maintains officers and directors liability insurance. Reference is also made to Section 102(b)(7) of the DGCL, which enables a corporation in its original certificate of incorporation or an amendment thereto to eliminate or limit the personal liability of a director for violations of the director's fiduciary duty, except (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 a knowing violation of law, (iii) pursuant to Section 174 of the DGCL (providing for liability of directors for unlawful payments of dividends of unlawful stock purchase or redemptions) or (iv) for any transaction from which a director derived an improper personal benefit. The Company's Certificate of Incorporation limits the personal liability of directors to the fullest extent permitted by Delaware law. ITEM 21. EXHIBITS. (a) See Exhibit Index filed herewith, which is incorporated herein by reference. (b) Financial Statement Schedules: None. II-1 159 ITEM 22. UNDERTAKINGS. (a) The undersigned Registrants hereby undertake that insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim of indemnification against such liabilities (other than the payment by the Registrant of expenses incurred by the Registrants in the successful defense of any action, suit paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (b) The undersigned Registrants hereby undertake that, for purposes of determining any liability under the Securities Act, each filing of the Registrants' annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to 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. (c) The undersigned 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 documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (d) The undersigned Registrants hereby 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-2 160 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois on June 9, 1998. HOME PRODUCTS INTERNATIONAL, INC. By /s/ JAMES R. TENNANT ------------------------------------ James R. Tennant Chairman of the Board and Chief Executive Officer POWER OF ATTORNEY Know All Men By These Presents, that each person whose signature appears below constitutes and appoints James R. Tennant and James E. Winslow, and each of them, such person's true and lawful attorneys-in-fact and agents, with full power of substitution and revocation, for such person and in such person's name, place and stead, in any and all amendment (including post-effective amendments to this Registration Statement) and to file the same with all exhibits thereto, and other documents in connection therewith, 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, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ JAMES R. TENNANT Chairman of the Board of Directors June 9, 1998 - ----------------------------------------------------- and Chief Executive Officer James R. Tennant (Principal Executive Officer) /s/ JAMES E. WINSLOW Executive Vice President, Chief June 9, 1998 - ----------------------------------------------------- Financial Officer and Secretary James E. Winslow (Principal Financial and Principal Accounting Officer) Director June 9, 1998 - ----------------------------------------------------- Charles R. Campbell
II-3 161
SIGNATURE TITLE DATE --------- ----- ---- /s/ JOSEPH GANTZ Director June 9, 1998 - ----------------------------------------------------- Joseph Gantz Director June , 1998 - ----------------------------------------------------- Stephen P. Murray /s/ MARSHALL RAGIR Director June 9, 1998 - ----------------------------------------------------- Marshall Ragir Director June , 1998 - ----------------------------------------------------- Jeffrey C. Rubenstein /s/ DANIEL B. SHURE Director June 9, 1998 - ----------------------------------------------------- Daniel B. Shure /s/ JOEL D. SPUNGIN Director June 9, 1998 - ----------------------------------------------------- Joel D. Spungin
II-4 162 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois on June 9, 1998. SELFIX, INC. By /s/ JAMES R. TENNANT ------------------------------------ James R. Tennant Chairman of the Board of Directors POWER OF ATTORNEY Know All Men By These Presents, that each person whose signature appears below constitutes and appoints James R. Tennant and James E. Winslow, and each of them, such person's true and lawful attorneys-in-fact and agents, with full power of substitution and revocation, for such person and in such person's name, place and stead, in any and all amendment (including post-effective amendments to this Registration Statement) and to file the same with all exhibits thereto, and other documents in connection therewith, 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, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ JAMES R. TENNANT Chairman of the Board of Directors June 9, 1998 - ----------------------------------------------------- (Principal Executive Officer) James R. Tennant /s/ JAMES E. WINSLOW Secretary (Principal Financial and June 9, 1998 - ----------------------------------------------------- Principal Accounting Officer) James E. Winslow Director June , 1998 - ----------------------------------------------------- Charles R. Campbell /s/ MARSHALL RAGIR Director June 9, 1998 - ----------------------------------------------------- Marshall Ragir Director June , 1998 - ----------------------------------------------------- Jeffrey C. Rubenstein /s/ DANIEL B. SHURE Director June 9, 1998 - ----------------------------------------------------- Daniel B. Shure /s/ JOEL D. SPUNGIN Director June 9, 1998 - ----------------------------------------------------- Joel D. Spungin
II-5 163 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois on June 9, 1998. SHUTTERS, INC. By /s/ JAMES R. TENNANT ------------------------------------ James R. Tennant President POWER OF ATTORNEY Know All Men By These Presents, that each person whose signature appears below constitutes and appoints James R. Tennant and James E. Winslow, and each of them, such person's true and lawful attorneys-in-fact and agents, with full power of substitution and revocation, for such person and in such person's name, place and stead, in any and all amendment (including post-effective amendments to this Registration Statement) and to file the same with all exhibits thereto, and other documents in connection therewith, 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, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ JAMES R. TENNANT President and Director June 9, 1998 - ----------------------------------------------------- (Principal Executive James R. Tennant Officer) /s/ JAMES E. WINSLOW Secretary and Director June 9, 1998 - ----------------------------------------------------- (Principal Financial and James E. Winslow Principal Accounting Officer)
II-6 164 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois on June 9, 1998. TAMOR CORPORATION, INC. By /s/ JAMES R. TENNANT ------------------------------------ James R. Tennant Chairman of the Board of Directors POWER OF ATTORNEY Know All Men By These Presents, that each person whose signature appears below constitutes and appoints James R. Tennant and James E. Winslow, and each of them, such person's true and lawful attorneys-in-fact and agents, with full power of substitution and revocation, for such person and in such person's name, place and stead, in any and all amendment (including post-effective amendments to this Registration Statement) and to file the same with all exhibits thereto, and other documents in connection therewith, 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, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ JAMES R. TENNANT Chairman of the Board of June 9, 1998 - ----------------------------------------------------- Directors (Principal James R. Tennant Executive Officer) /s/ JAMES E. WINSLOW President, Treasurer and Clerk June 9, 1998 - ----------------------------------------------------- (Principal Financial and James E. Winslow Principal Accounting Officer)
II-7 165 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois on June 9, 1998. SEYMOUR HOUSEWARES CORPORATION By /s/ JAMES R. TENNANT ------------------------------------ James R. Tennant Chairman of the Board of Directors POWER OF ATTORNEY Know All Men By These Presents, that each person whose signature appears below constitutes and appoints James R. Tennant and James E. Winslow, and each of them, such person's true and lawful attorneys-in-fact and agents, with full power of substitution and revocation, for such person and in such person's name, place and stead, in any and all amendment (including post-effective amendments to this Registration Statement) and to file the same with all exhibits thereto, and other documents in connection therewith, 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, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ JAMES R. TENNANT Chairman of the Board of June 9, 1998 - ----------------------------------------------------- Directors (Principal James R. Tennant Executive Officer) /s/ JAMES E. WINSLOW Senior Vice President, Chief June 9, 1998 - ----------------------------------------------------- Financial Officer and James E. Winslow Secretary (Principal Financial and Principal Accounting Officer)
II-8 166 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- ----------- 1.1.1* -- Purchase Agreement between Home Products International, Inc., Selfix, Inc., Seymour Housewares Corporation, Shutters, Inc., Tamor Corporation, Chase Securities Inc. and NationsBanc Montgomery Securities, LLC dated May 7, 1998. 3.1.1 -- Amended and Restated Certificate of Incorporation of Home Products International, Inc. 3.1.2* -- Certificate of Incorporation of Selfix, Inc., as amended. 3.1.3* -- Certificate of Incorporation of Seymour Housewares Corporation, as amended. 3.1.4* -- Articles of Incorporation of Tamor Corporation, as amended. 3.1.5* -- Articles of Incorporation of Shutters, Inc., as amended. 3.2.1 -- By-laws of Home Products International, Inc. 3.2.2* -- By-laws of Selfix, Inc. 3.2.3* -- By-laws of Seymour Housewares Corporation. 3.2.4* -- By-laws of Tamor Corporation. 3.2.5* -- By-laws of Shutters, Inc. 4.1.1* -- Indenture between Home Produces International, Inc., the Subsidiary Guarantors (as defined therein) and LaSalle National Bank dated May 14, 1998. 4.1.2* -- Specimen Certificate of 9 5/8% Senior Subordinated Notes due 2008 ("Original Notes") (included in Exhibit 4.1.1 hereto). 4.1.3* -- Specimen Certificate of 9 5/8% Senior Subordinated Notes due 2008 (the "Exchange Notes") (included in Exhibit 4.1.1 hereto). 4.1.4* -- Exchange and Registration Rights Agreement, by and among Home Products International, Inc., Chase Securities Inc. and NationsBanc Montgomery Securities LLC dated May 14, 1998. 5.1.1* -- Opinion of Sonnenschein Nath & Rosenthal Regarding Legality. 10.1.1* -- Credit Agreement among Home Products International, Inc., the several banks and other financial institutions or entities from time to time parties to the Credit Agreement and the Chase Manhattan Bank, as Administrative Agent, dated May 14, 1998. 12.1.1* -- Statement Regarding Computation of Earnings to Fixed Charges. 21.1.1 -- List of Subsidiaries. 23.1.1* -- Consent of Arthur Andersen LLP. 23.1.2* -- Consent of Grant Thorton LLP. 23.1.3* -- Consent of Ernst & Young LLP. 23.1.4* -- Consent of Sonnenschein Nath & Rosenthal (included in Exhibit 5.1.1 hereto). 24.1.1* -- Power of Attorney (included with the signature page to the Registration Statement). 25.1.1* -- Statement of Eligibility of Trustee. 99.1.1* -- Form of Letter of Transmittal.
- --------------- * Filed herewith EX-1.1.1 2 PURCHASE AGREEMENT 1 Exhibit 1.1.1 HOME PRODUCTS INTERNATIONAL, INC. $125,000,000 9 5/8% Senior Subordinated Notes due 2008 PURCHASE AGREEMENT May 7, 1998 CHASE SECURITIES INC. NATIONSBANC MONTGOMERY SECURITIES LLC c/o Chase Securities Inc. 270 Park Avenue, 4th floor New York, New York 10017 Ladies and Gentlemen: Home Products International, Inc., a Delaware corporation (the "Company"), proposes to issue and sell $125,000,000 aggregate principal amount of its 95/8% Senior Subordinated Notes due 2008 (the "Securities"). The Company's payment obligations under the Securities will be unconditionally guaranteed (the "Guarantees"), jointly and severally, by the Subsidiary Guarantors (as defined in the Indenture). The Securities will be issued pursuant to an Indenture to be dated as of May 14, 1998 (the "Indenture") among the Company, the Subsidiary Guarantors and LaSalle National Bank, as trustee (the "Trustee"). The Company hereby confirms its agreement with Chase Securities Inc. ("CSI") and NationsBanc Montgomery Securities LLC ("NationsBanc", and together with CSI, the "Initial Purchasers") concerning the purchase of the Securities from the Company by the Initial Purchasers. The Securities will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon an exemption therefrom. The Company has prepared a preliminary offering memorandum dated April 27, 1998 (the "Preliminary Offering Memorandum") and will prepare an offering memorandum dated the date hereof (the "Offering Memorandum") setting forth information concerning the Company and the Securities. Copies of the Preliminary Offering Memorandum have been, and copies of the Offering Memorandum will be, delivered by the Company to the Initial Purchasers pursuant to the terms of this Agreement. Any references herein to the Preliminary Offering Memorandum and the Offering Memorandum shall be deemed to include all amendments and supplements thereto, unless otherwise noted. The Company hereby 2 2 confirms that it has authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum in connection with the offering and resale of the Securities by the Initial Purchasers in accordance with Section 2. Holders of the Securities (including the Initial Purchasers and their direct and indirect transferees) will be entitled to the benefits of an Exchange and Registration Rights Agreement, substantially in the form attached hereto as Annex A (the "Exchange and Registration Rights Agreement"), pursuant to which the Company will agree to file with the Securities and Exchange Commission (the "Commission") (i) a registration statement under the Securities Act (the "Exchange Offer Registration Statement") registering an issue of senior subordinated notes of the Company (the "Exchange Securities") which are identical in all material respects to the Securities (except that the Exchange Securities will not contain terms with respect to transfer restrictions) and (ii) under certain circumstances, a shelf registration statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration Statement"). In connection with the offering and sale of the Securities, the Company intends to enter into a $100 million senior secured revolving credit facility (the "Senior Credit Facility"). The proceeds of the initial borrowing under the Senior Credit Facility, together with the proceeds from the offering of the Securities, will be applied by the Company to refinance certain of its existing indebtedness and to obtain additional funds to be used for working capital and general corporate purposes, including permitted acquisitions (collectively, the "Refinancing"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Offering Memorandum. 1. Representations, Warranties and Agreements of the Company. The Company represents and warrants to, and agrees with, the Initial Purchasers on and as of the date hereof and the Closing Date (as defined in Section 3) that: (a) Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date, did not, and on the Closing Date the Offering Memorandum will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty as to information contained in or omitted from the Preliminary Offering Memorandum or the Offering Memorandum in reliance upon and in conformity with written information relating to the Initial Purchasers furnished to the Company by or on behalf of any Initial Purchaser specifically for use therein (collectively, the "Initial Purchasers' Information"). (b) Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date, contains all of the information that, if requested by a prospective purchaser of the Securities, would be required to be provided to such prospective purchaser pursuant to Rule 144A(d)(4) under the Securities Act. 3 3 (c) Assuming the accuracy of the representations and warranties of the Initial Purchasers contained in Section 2 and their compliance with the agreements set forth therein, it is not necessary, in connection with the issuance and sale of the Securities to the Initial Purchasers and the offer, resale and delivery of the Securities by the Initial Purchasers in the manner contemplated by this Agreement and the Offering Memorandum, to register the Securities under the Securities Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). (d) The Company and each of its subsidiaries have been duly incorporated and are validly existing as corporations in good standing under the laws of their respective jurisdictions of incorporation, are duly qualified to do business and are in good standing as foreign corporations in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged, except where the failure to so qualify or have such power or authority would not, singularly or in the aggregate, have a material adverse effect on the condition (financial or otherwise), results of operations, business or prospects of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). (e) The Company has an authorized capitalization as set forth in the Offering Memorandum under the heading "Capitalization"; all of the outstanding shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable; and the capital stock of the Company conforms in all material respects to the description thereof contained in the Offering Memorandum. All of the outstanding shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of any lien, charge, encumbrance, security interest, restriction upon voting or transfer or any other claim of any third party. (f) The Company has full right, power and authority to execute and deliver this Agreement, the Indenture, the Exchange and Registration Rights Agreement, the Securities and the Senior Credit Agreement (collectively, the "Transaction Documents") and to perform its obligations hereunder and thereunder; and all corporate action required to be taken for the due and proper authorization, execution and delivery of each of the Transaction Documents and the consummation of the transactions contemplated thereby have been duly and validly taken. (g) This Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). 4 4 (h) The Exchange and Registration Rights Agreement has been duly authorized by the Company and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Company enforceable against the Company in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (i) The Indenture has been duly authorized by each of the Company and the Subsidiary Guarantors and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Company and the Subsidiary Guarantors enforceable against the Company and the Subsidiary Guarantors in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). On the Closing Date, the Indenture will conform in all material respects to the requirements of the Trust Indenture Act and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder. (j)(i) The Securities have been duly authorized by the Company and, when duly executed, authenticated, issued and delivered as provided in the Indenture and paid for as provided herein, will be duly and validly issued and outstanding and will constitute valid and legally binding obligations of the Company entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (ii) The Guarantees have been duly authorized by each of the Subsidiary Guarantors and, when duly executed, authenticated, issued and delivered as provided in the Indenture and paid for as provided herein, will be duly and validly issued and outstanding and will constitute valid and legally binding obligations of the Subsidiary Guarantors entitled to the benefits of the Indenture and enforceable against the Subsidiary Guarantors in accordance with their terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (k) The Senior Credit Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and legally binding agreement of the Company enforceable against the Company in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting 5 5 creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (l) Each Transaction Document conforms in all material respects to the description thereof contained in the Offering Memorandum. (m) The execution, delivery and performance by the Company of each of the Transaction Documents, the issuance, authentication, sale and delivery of the Securities and compliance by the Company with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets; and no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by the Company of each of the Transaction Documents, the issuance, authentication, sale and delivery of the Securities and compliance by the Company with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents, except for such consents, approvals, authorizations, filings, registrations or qualifications (i) which shall have been obtained or made prior to the Closing Date and (ii) as may be required to be obtained or made under the Securities Act and applicable state securities laws as provided in the Exchange and Registration Rights Agreement. (n) The historical financial statements (including the related notes) contained in the Offering Memorandum comply in all material respects with the requirements applicable to a registration statement on Form S-1 under the Securities Act (except that certain supporting schedules are omitted); such financial statements have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered thereby and fairly present the financial position of the entities purported to be covered thereby at the respective dates indicated and the results of their operations and their cash flows for the respective periods indicated; and the financial information contained in the Offering Memorandum under the headings "Summary--Summary Pro Forma Combined Financial Data", "Capitalization", "Selected Historical Financial Data", "Unaudited Pro Forma Combined Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" are derived from the accounting records of the Company and its subsidiaries and fairly present the information purported to be shown thereby. The pro forma financial information 6 6 contained in the Offering Memorandum has been prepared on a basis consistent with the historical financial statements contained in the Offering Memorandum (except for the pro forma adjustments specified therein), includes all material adjustments to the historical financial information required by Rule 11-02 of Regulation S-X under the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act") to reflect the transactions described in the Offering Memorandum, gives effect to assumptions made on a reasonable basis and fairly presents the historical and proposed transactions contemplated by the Offering Memorandum and the Transaction Documents. The other historical financial and statistical information and data included in the Offering Memorandum are, in all material respects, fairly presented. (o) There are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which, singularly or in the aggregate, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to have a Material Adverse Effect; and to the best knowledge of the Company, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (p) No action has been taken and no statute, rule, regulation or order has been enacted, adopted or issued by any governmental agency or body which prevents the issuance of the Securities or suspends the sale of the Securities in any jurisdiction; no injunction, restraining order or order of any nature by any federal or state court of competent jurisdiction has been issued with respect to the Company or any of its subsidiaries which would prevent or suspend the issuance or sale of the Securities or the use of the Preliminary Offering Memorandum or the Offering Memorandum in any jurisdiction; no action, suit or proceeding is pending against or, to the best knowledge of the Company, threatened against or affecting the Company or any of its subsidiaries before any court or arbitrator or any governmental agency, body or official, domestic or foreign, which could reasonably be expected to interfere with or adversely affect the issuance of the Securities or in any manner draw into question the validity or enforceability of any of the Transaction Documents or any action taken or to be taken pursuant thereto; and the Company has complied with any and all requests by any securities authority in any jurisdiction for additional information to be included in the Preliminary Offering Memorandum and the Offering Memorandum. (q) Neither the Company nor any of its subsidiaries is (i) in violation of its charter or by-laws, (ii) in default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject or (iii) in violation in any material respect of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject, except where such default or violation would not, singularly or in the aggregate, have a Material Adverse Effect. 7 7 (r) The Company and each of its subsidiaries possess all material licenses, certificates, authorizations and permits issued by, and have made all declarations and filings with, the appropriate federal, state or foreign regulatory agencies or bodies which are necessary or desirable for the ownership of their respective properties or the conduct of their respective businesses as described in the Offering Memorandum, except where the failure to possess or make the same would not, singularly or in the aggregate, have a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received notification of any revocation or modification of any such license, certificate, authorization or permit or has any reason to believe that any such license, certificate, authorization or permit will not be renewed in the ordinary course, except where such revocation, modification or nonrenewal would not, singularly or in the aggregate, have a Material Adverse Effect. (s) The Company and each of its subsidiaries have filed all federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof and have paid all taxes due thereon, and no tax deficiency has been determined adversely to the Company or any of its subsidiaries which has had (nor does the Company or any of its subsidiaries have any knowledge of any tax deficiency which, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to have) a Material Adverse Effect. (t) Neither the Company nor any of its subsidiaries is (i) an "investment company" or a company "controlled by" an investment company within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the rules and regulations of the Commission thereunder or (ii) a "holding company" or a "subsidiary company" of a holding company or an "affiliate" thereof within the meaning of the Public Utility Holding Company Act of 1935, as amended. (u) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (v) The Company and each of its subsidiaries have insurance covering their respective properties, operations, personnel and businesses, which insurance is in amounts and insures against such losses and risks as are adequate to protect the Company and its subsidiaries and their respective businesses. Neither the Company nor any of its subsidiaries has received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance. 8 8 (w) The Company and each of its subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses, except where the failure to so own or possess such rights would not, singularly or in the aggregate, have a Material Adverse Effect; and the conduct of their respective businesses will not conflict in any material respect with, and the Company and its subsidiaries have not received any notice of any claim of conflict with, any such rights of others, in either case which would, singularly or in the aggregate, have a Material Adverse Effect. (x) The Company and each of its subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real and personal property which are material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances, claims and defects and imperfections of title except such as (i) do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries or (ii) could not reasonably be expected to have a Material Adverse Effect. (y) No labor disturbance by or dispute with the employees of the Company or any of its subsidiaries exists or, to the best knowledge of the Company, is contemplated or threatened. (z) No "prohibited transaction" (as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the "Code")) or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan of the Company or any of its subsidiaries which could reasonably be expected to have a Material Adverse Effect; each such employee benefit plan is in compliance in all material respects with applicable law, including ERISA and the Code; the Company and each of its subsidiaries have not incurred and do not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from, any pension plan for which the Company or any of its subsidiaries would have any liability, except for any such liability that could not reasonably be expected to have, singularly or in the aggregate, a Material Adverse Effect; and each such pension plan that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which could reasonably be expected to cause the loss of such qualification, except events that could not reasonably be expected to have, singularly or in the aggregate, a Material Adverse Effect. 9 9 (aa) There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission or other release of any kind of toxic or other wastes or other hazardous substances by, due to or caused by the Company or any of its subsidiaries (or, to the best knowledge of the Company, any other entity (including any predecessor) for whose acts or omissions the Company or any of its subsidiaries is or could reasonably be expected to be liable) upon any of the property now or previously owned or leased by the Company or any of its subsidiaries, or upon any other property, in violation of any statute or any ordinance, rule, regulation, order, judgment, decree or permit or which would, under any statute or any ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability, except for any violation or liability could not reasonably be expected to have, singularly or in the aggregate with all such violations and liabilities, a Material Adverse Effect; and there has been no disposal, discharge, emission or other release of any kind onto such property or into the environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which the Company has knowledge, except for any such disposal, discharge, emission or other release of any kind which could not reasonably be expected to have, singularly or in the aggregate with all such discharges and other releases, a Material Adverse Effect. (bb) Neither the Company nor, to the best knowledge of the Company, any director, officer, agent, employee or other person associated with or acting on behalf of the Company has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. (cc) Except as described in the Offering Memorandum, there are no outstanding subscriptions, rights, warrants, calls or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of, any shares of capital stock of or other equity or other ownership interest in the Company or any of its subsidiaries. (dd) None of the proceeds of the sale of the Securities will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Securities to be considered a "purpose credit" within the meanings of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. (ee) Neither the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any person that would give rise to a valid claim against the Company or the Initial Purchasers for a brokerage commission, finder's fee or like payment in connection with the offering and sale of the Securities. 10 10 (ff) The Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act. (gg) None of the Company, any of its affiliates or any person acting on its or their behalf has engaged or will engage in any directed selling efforts (as such term is defined in Regulation S under the Securities Act ("Regulation S")), and all such persons have complied and will comply with the offering restrictions requirement of Regulation S to the extent applicable. (hh) Neither the Company nor any of its affiliates has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as such term is defined in the Securities Act), which is or will be integrated with the sale of the Securities in a manner that would require registration of the Securities under the Securities Act. (ii) None of the Company or any of its affiliates or any other person acting on its or their behalf has engaged, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. (jj) There are no securities of the Company other than the Company's common stock registered under the Exchange Act or listed on a national securities exchange or quoted in a U.S. automated inter-dealer quotation system. (kk) The Company has not taken and will not take, directly or indirectly, any action prohibited by Regulation M under the Exchange Act in connection with the offering of the Securities. (ll) No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Preliminary Offering Memorandum or the Offering Memorandum has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith. (mm) Since the date as of which information is given in the Offering Memorandum, except as otherwise stated therein, (i) there has been no material adverse change or any development involving a prospective material adverse change in the condition, financial or otherwise, or in the earnings, business affairs, management or business prospects of the Company and its subsidiaries taken as a whole, whether or not arising in the ordinary course of business, (ii) the Company has not incurred any material liability or obligation, direct or contingent, other than in the ordinary course of business, (iii) the Company has not entered into any material transaction other than in the ordinary course of business and (iv) there has not been any change in the capital stock or long-term debt of the Company, or any dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock, except as disclosed in the Offering Memorandum. 11 11 2. Purchase and Resale of the Securities. (a) On the basis of the representations, warranties and agreements contained herein, and subject to the terms and conditions set forth herein, the Company agrees to issue and sell to each of the Initial Purchasers, severally and not jointly, and each of the Initial Purchasers, severally and not jointly, agrees to purchase from the Company, the principal amount of Securities set forth opposite the name of such Initial Purchaser on Schedule 1 hereto at a purchase price equal to 97.25% of the principal amount thereof. The Company shall not be obligated to deliver any of the Securities except upon payment for all of the Securities to be purchased as provided herein. (b) The Initial Purchasers have advised the Company that they propose to offer the Securities for resale upon the terms and subject to the conditions set forth herein and in the Offering Memorandum. Each Initial Purchaser, severally and not jointly, represents and warrants to, and agrees with, the Company that (i) it is purchasing the Securities pursuant to a private sale exempt from registration under the Securities Act, (ii) it has not solicited offers for, or offered or sold, and will not solicit offers for, or offer or sell, the Securities by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D under the Securities Act ("Regulation D") or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act and (iii) it has solicited and will solicit offers for the Securities only from, and has offered or sold and will offer, sell or deliver the Securities, as part of its initial offering, only (A) within the United States to persons whom it reasonably believes to be qualified institutional buyers ("Qualified Institutional Buyers"), as defined in Rule 144A under the Securities Act ("Rule 144A"), or if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to it that each such account is a Qualified Institutional Buyer to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A and in each case, in transactions in accordance with Rule 144A and (B) outside the United States to persons other than U.S. persons in reliance on Regulation S under the Securities Act ("Regulation S"). (c) In connection with the offer and sale of Securities in reliance on Regulation S, each Initial Purchaser, severally and not jointly, represents, warrants and agrees that: (i) the Securities have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in transactions not subject to, the registration requirements of the Securities Act. (ii) such Initial Purchaser has offered and sold the Securities, and will offer and sell the Securities, (A) as part of their distribution at any time and (B) otherwise until 40 days after the later of the commencement of the offering of the Securities and the Closing Date, only in accordance with Regulation S or Rule 144A or any other available exemption from registration under the Securities Act. (iii) none of such Initial Purchaser or any of its affiliates or any other person acting on its or their behalf has engaged or will engage in any directed selling efforts with 12 12 respect to the Securities, and all such persons have complied and will comply with the offering restrictions requirement of Regulation S. (iv) at or prior to the confirmation of sale of any Securities sold in reliance on Regulation S, it will have sent to each distributor, dealer or other person receiving a selling concession, fee or other remuneration that purchases Securities from it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering of the Securities and the date of original issuance of the Securities, except in accordance with Regulation S or Rule 144A or any other available exemption from registration under the Securities Act. Terms used above have the meanings given to them by Regulation S." (v) it has not and will not enter into any contractual arrangement with any distributor with respect to the distribution of the Securities, except with its affiliates or with the prior written consent of the Company. Terms used in this Section 2(c) have the meanings given to them by Regulation S. (d) Each Initial Purchaser, severally and not jointly, represents, warrants and agrees that (i) it has not offered or sold and prior to the date six months after the Closing Date will not offer or sell any Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 and the Public Offers of Securities Regulations 1995 with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Securities to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such document may otherwise lawfully be issued or passed on. (e) Each Initial Purchaser, severally and not jointly, agrees that, prior to or simultaneously with the confirmation of sale by such Initial Purchaser to any purchaser of any of the Securities purchased by such Initial Purchaser from the Company pursuant hereto, such Initial Purchaser shall furnish to that purchaser a copy of the Offering Memorandum (and any amendment or supplement thereto that the Company shall have furnished to such Initial Purchaser prior to the date of such confirmation of sale). In addition to the foregoing, each Initial Purchaser acknowledges and agrees that the Company and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Sections 5(d) and (e), counsel for the Company and for the 13 13 Initial Purchasers, respectively, may rely upon the accuracy of the representations and warranties of the Initial Purchasers and their compliance with their agreements contained in this Section 2, and each Initial Purchaser hereby consents to such reliance. (f) The Company acknowledges and agrees that the Initial Purchasers may sell Securities to any affiliate of an Initial Purchaser and that any such affiliate may sell Securities purchased by it to an Initial Purchaser. 3. Delivery of and Payment for the Securities. (a) Delivery of and payment for the Securities shall be made at the offices of Simpson Thacher & Bartlett, New York, New York, or at such other place as shall be agreed upon by the Initial Purchasers and the Company, at 10:00 A.M., New York City time, on May 14, 1998, or at such other time or date, not later than seven full business days thereafter, as shall be agreed upon by the Initial Purchasers and the Company (such date and time of payment and delivery being referred to herein as the "Closing Date"). (b) On the Closing Date, payment of the purchase price for the Securities shall be made to the Company by wire or book-entry transfer of same-day funds to such account or accounts as the Company shall specify prior to the Closing Date or by such other means as the parties hereto shall agree prior to the Closing Date against delivery to the Initial Purchasers of the certificates evidencing the Securities. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligations of the Initial Purchasers hereunder. Upon delivery, the Securities shall be in global form, contain the legends required by the Indenture and be registered in such names and in such denominations as CSI on behalf of the Initial Purchasers shall have requested in writing not less than two full business days prior to the Closing Date. The Company agrees to make one or more global certificates evidencing the Securities available for inspection by CSI on behalf of the Initial Purchasers in New York, New York at least 24 hours prior to the Closing Date. 4. Further Agreements of the Company. The Company agrees with each of the Initial Purchasers: (a) to advise the Initial Purchasers promptly and, if requested, confirm such advice in writing, of the happening of any event which makes any statement of a material fact made in the Offering Memorandum untrue or which requires the making of any additions to or changes in the Offering Memorandum (as amended or supplemented from time to time) in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; to advise the Initial Purchasers promptly of any order preventing or suspending the use of the Preliminary Offering Memorandum or the Offering Memorandum, of any suspension of the qualification of the Securities for offering or sale in any jurisdiction and of the initiation or threatening of any proceeding for any such purpose; and to use its best efforts to prevent the issuance of any such order preventing or suspending the use of the Preliminary Offering Memorandum or the Offering Memorandum or suspending any such qualification and, if any such suspension is issued, to obtain the lifting thereof at the earliest possible time; 14 14 (b) to furnish promptly to each of the Initial Purchasers and counsel for the Initial Purchasers, without charge, as many copies of the Preliminary Offering Memorandum and the Offering Memorandum (and any amendments or supplements thereto) as may be reasonably requested; (c) prior to making any amendment or supplement to the Offering Memorandum, to furnish a copy thereof to each of the Initial Purchasers and counsel for the Initial Purchasers and not to effect any such amendment or supplement to which the Initial Purchasers shall reasonably object by notice to the Company after a reasonable period to review; (d) if, at any time prior to completion of the resale of the Securities by the Initial Purchasers, any event shall occur or condition exist as a result of which it is necessary, in the opinion of counsel for the Initial Purchasers or counsel for the Company, to amend or supplement the Offering Memorandum in order that the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading, or if it is necessary to amend or supplement the Offering Memorandum to comply with applicable law, to promptly prepare such amendment or supplement as may be necessary to correct such untrue statement or omission or so that the Offering Memorandum, as so amended or supplemented, will comply with applicable law; (e) for so long as the Securities are outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, to furnish to holders of the Securities and prospective purchasers of the Securities designated by such holders, upon request of such holders or such prospective purchasers, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to and in compliance with Section 13 or 15(d) of the Exchange Act (the foregoing agreement being for the benefit of the holders from time to time of the Securities and prospective purchasers of the Securities designated by such holders); (f) for so long as the Securities are outstanding, to furnish to the Initial Purchasers copies of any annual reports, quarterly reports and current reports filed by the Company with the Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated by the Commission, and such other documents, reports and information as shall be furnished by the Company to the Trustee or to the holders of the Securities pursuant to the Indenture or the Exchange Act or any rule or regulation of the Commission thereunder; (g) to promptly take from time to time such actions as the Initial Purchasers may reasonably request to qualify the Securities for offering and sale under the securities or Blue Sky laws of such jurisdictions as the Initial Purchasers may designate and to continue such qualifications in effect for so long as required for the resale of the Securities; and to arrange for the determination of the eligibility for investment of the Securities under the laws of such jurisdictions as the Initial Purchasers may reasonably 15 15 request; provided that the Company and its subsidiaries shall not be obligated to qualify as foreign corporations in any jurisdiction in which they are not so qualified or to file a general consent to service of process in any jurisdiction; (h) to assist the Initial Purchasers in arranging for the Securities to be designated Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc. ("NASD") relating to trading in the PORTAL Market and for the Securities to be eligible for clearance and settlement through The Depository Trust Company ("DTC"); (i) not to, and to cause its affiliates not to, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as such term is defined in the Securities Act) which could be integrated with the sale of the Securities in a manner which would require registration of the Securities under the Securities Act; (j) except following the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, not to, and to cause its affiliates not to, and not to authorize or knowingly permit any person acting on their behalf to, solicit any offer to buy or offer to sell the Securities by means of any form of general solicitation or general advertising within the meaning of Regulation D or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; and not to offer, sell, contract to sell or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act to cease to be applicable to the offering and sale of the Securities as contemplated by this Agreement and the Offering Memorandum; (k) for a period of 180 days from the date of the Offering Memorandum, not to offer for sale, sell, contract to sell or otherwise dispose of, directly or indirectly, or file a registration statement for, or announce any offer, sale, contract for sale of or other disposition of any debt securities issued or guaranteed by the Company or any of its subsidiaries (other than the Securities) without the prior written consent of the Initial Purchasers; (l) during the period from the Closing Date until three years after the Closing Date, without the prior written consent of the Initial Purchasers, not to, and not permit any of its subsidiaries to, resell any of the Securities that have been reacquired by them, except for Securities purchased by the Company or any of its subsidiaries and resold in a transaction registered under the Securities Act; (m) in connection with the offering of the Securities, until CSI on behalf of the Initial Purchasers shall have notified the Company of the completion of the resale of the Securities, not to, and to cause its affiliated purchasers (as defined in Regulation M under the Exchange Act) not to, either alone or with one or more other persons, bid for or purchase, for any account in which it or any of its affiliated purchasers has a beneficial 16 16 interest, any Securities, or attempt to induce any person to purchase any Securities; and not to, and to cause its affiliated purchasers not to, make bids or purchase for the purpose of creating actual, or apparent, active trading in or of raising the price of the Securities; (n) in connection with the offering of the Securities, to make its officers, employees, independent accountants and legal counsel reasonably available upon request by the Initial Purchasers; (o) to furnish to each of the Initial Purchasers on the date hereof a copy of the independent accountants' report included in the Offering Memorandum signed by the accountants rendering such report; (p) prior to the Closing Date, not to issue any press release or other communication directly or indirectly or hold any press conference with respect to the Company, its condition, financial or otherwise, or earnings, business affairs or business prospects (except for routine oral marketing communications in the ordinary course of business and consistent with the past practices of the Company and of which the Initial Purchasers are notified), without the prior written consent of the Initial Purchasers, unless in the judgment of the Company and its counsel, and after notification to the Initial Purchasers, such press release or communication is required by law; and (q) to apply the net proceeds from the sale of the Securities as set forth in the Offering Memorandum under the heading "Use of Proceeds". 5. Conditions of Initial Purchasers' Obligations. The respective obligations of the Initial Purchasers hereunder are subject to the accuracy, on and as of the date hereof and the Closing Date, of the representations and warranties of the Company contained herein, to the accuracy of the statements of the Company and its officers made in any certificates delivered pursuant hereto, to the performance by the Company of its obligations hereunder, and to each of the following additional terms and conditions: (a) The Offering Memorandum (and any amendments or supplements thereto) shall have been printed and copies distributed to the Initial Purchasers as promptly as practicable on or following the date of this Agreement or at such other date and time as to which the Initial Purchasers may agree; and no stop order suspending the sale of the Securities in any jurisdiction shall have been issued and no proceeding for that purpose shall have been commenced or shall be pending or threatened. (b) None of the Initial Purchasers shall have discovered and disclosed to the Company on or prior to the Closing Date that the Offering Memorandum or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of counsel for the Initial Purchasers, is material or omits to state any fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading. 17 17 (c) All corporate proceedings and other legal matters incident to the authorization, form and validity of each of the Transaction Documents and the Offering Memorandum, and all other legal matters relating to the Transaction Documents and the transactions contemplated thereby, shall be satisfactory in all material respects to the Initial Purchasers, and the Company shall have furnished to the Initial Purchasers all documents and information that they or their counsel may reasonably request to enable them to pass upon such matters. (d) Sonnenschein, Nath & Rosenthal shall have furnished to the Initial Purchasers their written opinion, as counsel to the Company, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially to the effect set forth in Annex B hereto. (e) The Initial Purchasers shall have received from Simpson Thacher & Bartlett, counsel for the Initial Purchasers, such opinion or opinions, dated the Closing Date, with respect to such matters as the Initial Purchasers may reasonably require, and the Company shall have furnished to such counsel such documents and information as they request for the purpose of enabling them to pass upon such matters. (f) The Company shall have furnished to the Initial Purchasers a letter (the "Initial Letter") of Arthur Andersen LLP, Grant Thornton LLP and Ernst & Young LLP, addressed to the Initial Purchasers and dated the date hereof, in form and substance satisfactory to the Initial Purchasers, substantially to the effect set forth in Annex C hereto. (g) The Company shall have furnished to the Initial Purchasers a letter (the "Bring-Down Letter") of Arthur Andersen LLP, Grant Thornton LLP and Ernst & Young LLP, addressed to the Initial Purchasers and dated the Closing Date (i) confirming that they are independent public accountants with respect to the Company and its subsidiaries within the meaning of Rule 101 of the Code of Professional Conduct of the AICPA and its interpretations and rulings thereunder, (ii) stating, as of the date of the Bring-Down Letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Offering Memorandum, as of a date not more than three business days prior to the date of the Bring-Down Letter), that the conclusions and findings of such accountants with respect to the financial information and other matters covered by the Initial Letter are accurate and (iii) confirming in all material respects the conclusions and findings set forth in the Initial Letter. (h) The Company shall have furnished to the Initial Purchasers a certificate, dated the Closing Date, of its chief executive officer and its chief financial officer stating that (A) such officers have carefully examined the Offering Memorandum, (B) in their opinion, the Offering Memorandum, as of its date, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and since the date of the Offering Memorandum, 18 18 no event has occurred which should have been set forth in a supplement or amendment to the Offering Memorandum so that the Offering Memorandum (as so amended or supplemented) would not include any untrue statement of a material fact and would not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and (C) as of the Closing Date, the representations and warranties of the Company in this Agreement are true and correct, the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder on or prior to the Closing Date, and subsequent to the date of the most recent financial statements contained in the Offering Memorandum, there has been no material adverse change in the financial position or results of operation of the Company and its subsidiaries taken as a whole, or any change, or any development including a prospective change, in or affecting the condition (financial or otherwise), results of operations, business or prospects of the Company and its subsidiaries taken as a whole, except as set forth in the Offering Memorandum. (i) The Initial Purchasers shall have received a counterpart of the Exchange and Registration Rights Agreement which shall have been executed and delivered by a duly authorized officer of the Company. (j) The Indenture shall have been duly executed and delivered by the Company and the Trustee, and the Securities shall have been duly executed and delivered by the Company and duly authenticated by the Trustee. (k) The Securities shall have been approved by the NASD for trading in the PORTAL Market. (l) If any event shall have occurred that requires the Company under Section 4(d) to prepare an amendment or supplement to the Offering Memorandum, such amendment or supplement shall have been prepared, the Initial Purchasers shall have been given a reasonable opportunity to comment thereon, and copies thereof shall have been delivered to the Initial Purchasers reasonably in advance of the Closing Date. (m) There shall not have occurred any invalidation of Rule 144A under the Securities Act by any court or any withdrawal or proposed withdrawal of any rule or regulation under the Securities Act or the Exchange Act by the Commission or any amendment or proposed amendment thereof by the Commission which in the judgment of the Initial Purchasers would materially impair the ability of the Initial Purchasers to purchase, hold or effect resales of the Securities as contemplated hereby. (n) Subsequent to the execution and delivery of this Agreement or, if earlier, the dates as of which information is given in the Offering Memorandum (exclusive of any amendment or supplement thereto), there shall not have been any change in the capital stock or long-term debt or any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), results of operations, business or prospects of the Company and its subsidiaries taken as a whole, the effect of 19 19 which, in any such case described above, is, in the judgment of the Initial Purchasers, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Securities on the terms and in the manner contemplated by this Agreement and the Offering Memorandum (exclusive of any amendment or supplement thereto). (o) No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which would, as of the Closing Date, prevent the issuance or sale of the Securities; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance or sale of the Securities. (p) Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Securities or any of the Company's other debt securities or preferred stock by any "nationally recognized statistical rating organization", as such term is defined by the Commission for purposes of Rule 436(g)(2) of the rules and regulations of the Commission under the Securities Act and (ii) no such organization shall have publicly announced that it has under surveillance or review (other than an announcement with positive implications of a possible upgrading), its rating of the Securities or any of the Company's other debt securities or preferred stock. (q) Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange, the American Stock Exchange or the over-the-counter market shall have been suspended or limited, or minimum prices shall have been established on any such exchange or market by the Commission, by any such exchange or by any other regulatory body or governmental authority having jurisdiction, or trading in any securities of the Company on any exchange or in the over-the-counter market shall have been suspended or (ii) any moratorium on commercial banking activities shall have been declared by federal or New York state authorities or (iii) an outbreak or escalation of hostilities or a declaration by the United States of a national emergency or war or (iv) a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) the effect of which, in the case of this clause (iv), is, in the judgment of the Initial Purchasers, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or the delivery of the Securities on the terms and in the manner contemplated by this Agreement and in the Offering Memorandum (exclusive of any amendment or supplement thereto). (r) The Initial Purchasers shall have received (i) copies of the documentation evidencing the Senior Credit Facility (the "Bank Documents"), in each case certified by the secretary of the Company as being true, complete and correct and (ii) evidence, reasonably satisfactory to them, that the initial funding is occurring under the Bank Documents. 20 20 All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Initial Purchasers. 6. Termination. The obligations of the Initial Purchasers hereunder may be terminated by the Initial Purchasers, in their absolute discretion, by notice given to and received by the Company prior to delivery of and payment for the Securities if, prior to that time, any of the events described in Section 5(m), (n), (o), (p) or (q) shall have occurred and be continuing. 7. Defaulting Initial Purchasers. (a) If, on the Closing Date, any Initial Purchaser defaults in the performance of its obligations under this Agreement, the non-defaulting Initial Purchasers may make arrangements for the purchase of the Securities which such defaulting Initial Purchaser agreed but failed to purchase by other persons satisfactory to the Company and the non-defaulting Initial Purchasers, but if no such arrangements are made within 36 hours after such default, this Agreement shall terminate without liability on the part of the non-defaulting Initial Purchasers or the Company, except that the Company will continue to be liable for the payment of expenses to the extent set forth in Sections 8 and 12 and except that the provisions of Sections 9 and 10 shall not terminate and shall remain in effect. As used in this Agreement, the term "Initial Purchasers" includes, for all purposes of this Agreement unless the context otherwise requires, any party not listed in Schedule 1 hereto that, pursuant to this Section 7, purchases Securities which a defaulting Initial Purchaser agreed but failed to purchase. (b) Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it may have to the Company or any non-defaulting Initial Purchaser for damages caused by its default. If other persons are obligated or agree to purchase the Securities of a defaulting Initial Purchaser, either the non-defaulting Initial Purchasers or the Company may postpone the Closing Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Initial Purchasers may be necessary in the Offering Memorandum or in any other document or arrangement, and the Company agrees to promptly prepare any amendment or supplement to the Offering Memorandum that effects any such changes. 8. Reimbursement of Initial Purchasers' Expenses. If (a) this Agreement shall have been terminated pursuant to Section 6 or 7, (b) the Company shall fail to tender the Securities for delivery to the Initial Purchasers for any reason permitted under this Agreement or (c) the Initial Purchasers shall decline to purchase the Securities for any reason permitted under this Agreement, the Company shall reimburse the Initial Purchasers for such out-of-pocket expenses (including reasonable fees and disbursements of counsel) as shall have been reasonably incurred by the Initial Purchasers in connection with this Agreement and the proposed purchase and resale of the Securities. If this Agreement is terminated pursuant to Section 7 by reason of the default of one or more of the Initial Purchasers, the Company shall not be obligated to reimburse any defaulting Initial Purchaser on account of such expenses. 9. Indemnification. (a) The Company and the Subsidiary Guarantors shall, jointly and severally, indemnify and hold harmless each Initial Purchaser, its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who 21 21 controls any Initial Purchaser within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 9(a) and Section 10 as an Initial Purchaser), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of the Securities), to which that Initial Purchaser may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum or in any amendment or supplement thereto or in any information provided by the Company pursuant to Section 4(e) or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse each Initial Purchaser promptly upon demand for any legal or other expenses reasonably incurred by that Initial Purchaser in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Subsidiary Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Initial Purchasers' Information furnished by such Initial Purchaser; and provided, further, that with respect to any such untrue statement in or omission from the Preliminary Offering Memorandum, the indemnity agreement contained in this Section 9(a) shall not inure to the benefit of any such Initial Purchaser to the extent that the sale to the person asserting any such loss, claim, damage, liability or action was an initial resale by such Initial Purchaser and any such loss, claim, damage, liability or action of or with respect to such Initial Purchaser results from the fact that both (A) to the extent required by applicable law, a copy of the Offering Memorandum was not sent or given to such person at or prior to the written confirmation of the sale of such Securities to such person and (B) the untrue statement in or omission from the Preliminary Offering Memorandum was corrected in the Offering Memorandum unless such failure to deliver the Offering Memorandum was a result of non-compliance by the Company with Section 4(b). (b) Each Initial Purchaser, severally and not jointly, shall indemnify and hold harmless the Company, the Subsidiary Guarantors, their respective affiliates, officers, directors, employees, representatives and agents, and each person, if any, who controls the Company and the Subsidiary Guarantors within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 9(b) and Section 10 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of 22 22 the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Initial Purchasers' Information furnished by such Initial Purchaser, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred. (c) Promptly after receipt by an indemnified party under this Section 9 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 9(a) or 9(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 9 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and, provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 9. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 9 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (i) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (ii) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (iii) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (iv) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 9(a) and 9(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent 23 23 shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. The obligations of the Company and the Initial Purchasers in this Section 9 and in Section 10 are in addition to any other liability that the Company or the Initial Purchasers, as the case may be, may otherwise have, including in respect of any breaches of representations, warranties and agreements made herein by any such party. 10. Contribution. If the indemnification provided for in Section 9 is unavailable or insufficient to hold harmless an indemnified party under Section 9(a) or 9(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the Initial Purchasers on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Initial Purchasers on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Initial Purchasers on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities purchased under this Agreement (before deducting expenses) received by or on behalf of the Company, on the one hand, and the total discounts and commissions received by the Initial Purchasers with respect to the Securities purchased under this Agreement, on the other, bear to the total gross proceeds from the sale of the Securities under this Agreement, in each case as set forth in the table on the cover page of the Offering Memorandum. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Company and its subsidiaries or information supplied by the Company on the one hand or to any Initial Purchasers' Information on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Initial Purchasers agree that it would not be just and equitable if contributions pursuant to this Section 10 were to be determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 10 shall be deemed to include, for purposes of this Section 10, any legal or other expenses reasonably incurred by such indemnified party in 24 24 connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 10, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total discounts and commissions received by such Initial Purchaser with respect to the Securities purchased by it under this Agreement exceeds the amount of any damages which such Initial Purchaser has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations to contribute as provided in this Section 10 are several in proportion to their respective purchase obligations and not joint. 11. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Company and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except as provided in Sections 9 and 10 with respect to affiliates, officers, directors, employees, representatives, agents and controlling persons of the Company, the Subsidiary Guarantors and the Initial Purchasers and in Section 4(e) with respect to holders and prospective purchasers of the Securities. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 11, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 12. Expenses. The Company agrees with the Initial Purchasers to pay (a) the costs incident to the authorization, issuance, sale, preparation and delivery of the Securities and any taxes payable in that connection; (b) the costs incident to the preparation, printing and distribution of the Preliminary Offering Memorandum, the Offering Memorandum and any amendments or supplements thereto; (c) the costs of reproducing and distributing each of the Transaction Documents; (d) the costs incident to the preparation, printing and delivery of the certificates evidencing the Securities, including stamp duties and transfer taxes, if any, payable upon issuance of the Securities; (e) the fees and expenses of the Company's counsel and independent accountants; (f) the fees and expenses of qualifying the Securities under the securities laws of the several jurisdictions as provided in Section 4(g) and of preparing, printing and distributing Blue Sky Memoranda (including related fees and expenses of counsel for the Initial Purchasers); (g) any fees charged by rating agencies for rating the Securities; (h) the fees and expenses of the Trustee and any paying agent (including related fees and expenses of any counsel to such parties); (i) all expenses and application fees incurred in connection with the application for the inclusion of the Securities on the PORTAL Market and the approval of the Securities for book-entry transfer by DTC; and (j) all other costs and expenses incident to the performance of the obligations of the Company under this Agreement which are not otherwise specifically provided for in this Section 12; provided, however, that except as provided in this Section 12 and Section 8, the Initial Purchasers shall pay their own costs and expenses. 13. Survival. The respective indemnities, rights of contribution, representations, warranties and agreements of the Company and the Initial Purchasers contained in this Agreement or made by or on behalf of the Company or the Initial Purchasers pursuant to this 25 25 Agreement or any certificate delivered pursuant hereto shall survive the delivery of and payment for the Securities and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any of them or any of their respective affiliates, officers, directors, employees, representatives, agents or controlling persons. 14. Notices, etc. All statements, requests, notices and agreements hereunder shall be in writing, and: (a) if to the Initial Purchasers, shall be delivered or sent by mail or telecopy transmission to Chase Securities Inc., 270 Park Avenue, New York, New York 10017, Attention: James Neary (telecopier no.: (212) 270-0994); or (b) if to the Company, shall be delivered or sent by mail or telecopy transmission to the address of the Company set forth in the Offering Memorandum, Attention: James Winslow (telecopier no.: (773) 890-0523); provided that any notice to an Initial Purchaser pursuant to Section 9(c) shall also be delivered or sent by mail to such Initial Purchaser at its address set forth on the signature page hereof. Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the Initial Purchasers by CSI. 15. Definition of Terms. For purposes of this Agreement, (a) the term "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the Securities Act and (c) except where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. 16. Initial Purchasers' Information. The parties hereto acknowledge and agree that, for all purposes of this Agreement, the Initial Purchasers' Information consists solely of the following information in the Preliminary Offering Memorandum and the Offering Memorandum: (i) the last paragraph on the front cover page concerning the terms of the offering by the Initial Purchasers; (ii) the legend on the inside front cover page concerning over-allotment and trading activities by the Initial Purchasers; (iii) the statements concerning the Initial Purchasers contained in the fifth paragraph under the heading "Certain Transactions"; and (iv) the statements concerning the Initial Purchasers contained in the first and second sentences of the third paragraph and paragraph twelve under the heading "Plan of Distribution". 17. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 18. Counterparts. This Agreement may be executed in one or more counterparts (which may include counterparts delivered by telecopier) and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 26 26 19. Amendments. No amendment or waiver of any provision of this Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto. 20. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement. 27 27 If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us a counterpart hereof, whereupon this instrument will become a binding agreement among the Company, the Subsidiary Guarantors and the Initial Purchasers in accordance with its terms. Very truly yours, HOME PRODUCTS INTERNATIONAL, INC. By______________________________ Name: Title: SELFIX, INC., as a Subsidiary Guarantor By______________________________ Name: Title: SEYMOUR HOUSEWARES CORPORATION, as a Subsidiary Guarantor By______________________________ Name: Title: SHUTTERS, INC., as a Subsidiary Guarantor By______________________________ Name: Title: TAMOR CORPORATION, as a Subsidiary Guarantor By______________________________ Name: Title: 28 28 Accepted: CHASE SECURITIES INC. By____________________________ Authorized Signatory Address for notices pursuant to Section 9(c): 1 Chase Plaza, 25th floor New York, New York 10081 Attention: Legal Department NATIONSBANC MONTGOMERY SECURITIES LLC By____________________________ Authorized Signatory Address for notices pursuant to Section 9(c): 600 Montgomery Street San Francisco, CA 94111 Attention: Legal Department 29 29 SCHEDULE 1 Senior Subordinated Notes
Principal Amount Initial Purchasers of Securities ------------------------------------- ------------- Chase Securities Inc. $81,250,000 NationsBanc Montgomery Securities LLC $43,750,000 Total $125,000,000
30 A-1 ANNEX A [Form of Exchange and Registration Rights Agreement] 31 B-1 ANNEX B [Form of Opinion of Counsel for the Company] Sonnenschein, Nath & Rosenthal shall have furnished to the Initial Purchasers their written opinion, as counsel to the Company, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially to the effect set forth below: (i) the Company and each of its subsidiaries are validly existing as corporations in good standing under the laws of their respective jurisdictions of incorporation, are duly qualified to do business and are in good standing as foreign corporations in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged (except where the failure to so qualify or have such power or authority would not, singularly or in the aggregate, have a Material Adverse Effect); (ii) the Company has an authorized capitalization as set forth in the Offering Memorandum; (iii) the descriptions in the Offering Memorandum of statutes, legal and governmental proceedings and contracts and other documents are accurate in all material respects; the statements in the Offering Memorandum under the heading "Certain Federal Income Tax Consequences", to the extent that they constitute summaries of matters of law or regulation or legal conclusions, have been reviewed by such counsel and fairly summarize the matters described therein in all material respects; and such counsel does not have actual knowledge of any current or pending legal or governmental actions, suits or proceedings which would be required to be described in the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 which are not described as so required; (iv) the Indenture conforms in all material respects with the requirements of the Trust Indenture Act and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder; (v) the Company has full right, power and authority to execute and deliver each of the Transaction Documents and to perform its obligations thereunder; and all corporate action required to be taken for the due and proper authorization, execution and delivery of each of the Transaction Documents and the consummation of the transactions contemplated thereby have been duly and validly taken; 32 B-2 (vi) each of the Purchase Agreement and the Exchange and Registration Rights Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and legally binding agreement of the Company enforceable against the Company in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and except to the extent that the indemnification provisions thereof may be unenforceable; (vii) the Indenture has been duly authorized, executed and delivered by the Company and the Subsidiary Guarantors and, assuming due authorization, execution and delivery thereof by the Trustee, constitutes a valid and legally binding agreement of the Company and the Subsidiary Guarantors enforceable against the Company and the Subsidiary Guarantors in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); (viii)(a) the Securities have been duly authorized and issued by the Company and, assuming due authentication thereof by the Trustee and upon payment and delivery in accordance with the Purchase Agreement, will constitute valid and legally binding obligations of the Company entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); (b) the Guarantees have been duly authorized and issued by each of the Subsidiary Guarantors and, assuming due authentication of the Securities by the Trustee and upon payment and delivery of the Securities in accordance with the Purchase Agreement, will constitute valid and legally binding obligations of the Subsidiary Guarantors entitled to the benefits of the Indenture and enforceable against the Subsidiary Guarantors in accordance with their terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); (x) each Transaction Document conforms in all material respects to the description thereof contained in the Offering Memorandum; (xi) the execution, delivery and performance by the Company of each of the Transaction Documents, the issuance, authentication, sale and delivery of the Securities and compliance by the Company with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents will not conflict with or result 33 B-3 in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument known to such counsel to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets; and no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by the Company of each of the Transaction Documents, the issuance, authentication, sale and delivery of the Securities and compliance by the Company with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents, except for such consents, approvals, authorizations, filings, registrations or qualifications (i) which have been obtained or made prior to the Closing Date and (ii) as may be required to be obtained or made under the Securities Act and applicable state securities laws as provided in the Exchange and Registration Rights Agreement; (xii) to the knowledge of such counsel, there are no pending actions or suits or judicial, arbitral, rule-making, administrative or other proceedings to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which (A) singularly or in the aggregate, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to have a Material Adverse Effect or (B) questions the validity or enforceability of any of the Transaction Documents or any action taken or to be taken pursuant thereto; and to the best knowledge of such counsel, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; and (xiii) assuming the accuracy of the representations, warranties and agreements of the Company and of the Initial Purchasers contained in the Purchase Agreement, no registration of the Securities under the Securities Act or qualification of the Indenture under the Trust Indenture Act is required in connection with the issuance and sale of the Securities by the Company and the offer, resale and delivery of the Securities by the Initial Purchasers in the manner contemplated by the Purchase Agreement and the Offering. Such counsel shall also state that they have participated in conferences with representatives of the Company, representatives of its independent accountants and counsel and representatives of the Initial Purchasers and their counsel at which conferences the contents of the Preliminary Offering Memorandum and the Offering Memorandum and any amendment and supplement thereto and related matters were discussed and, although such counsel assumes no responsibility for the accuracy, completeness or fairness of the Offering Memorandum or any amendment or supplement thereto (except as expressly provided above), nothing has come to the 34 B-4 attention of such counsel to cause such counsel to believe that the Offering Memorandum or any amendment or supplement thereto (other than the financial statements and other financial and statistical information contained therein, as to which such counsel need express no belief), as of the date thereof and as of the Closing Date, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. In rendering such opinion, such counsel may rely as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of the Company and public officials which are furnished to the Initial Purchasers. 35 C-1 ANNEX C [Form of Initial Comfort Letter] The Company shall have furnished to the Initial Purchasers a letter of Arthur Andersen LLP, Grant Thornton LLP and Ernst & Young LLP, addressed to the Initial Purchasers and dated the date of the Purchase Agreement, in form and substance satisfactory to the Initial Purchasers, substantially to the effect set forth below: (i) they are independent certified public accountants with respect to the Company within the meaning of Rule 101 of the Code of Professional Conduct of the AICPA and its interpretations and rulings; (ii) in their opinion, the audited financial statements included in the Offering Memorandum and reported on by them comply in form in all material respects with the accounting requirements of the Exchange Act and the related published rules and regulations of the Commission thereunder that would apply to the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 under the Securities Act (except that certain supporting schedules are omitted); (iii) based upon a reading of the latest unaudited financial statements made available by the Company, the procedures of the AICPA for a review of interim financial information as described in Statement of Auditing Standards No. 71, reading of minutes and inquiries of certain officials of the Company who have responsibility for financial and accounting matters and certain other limited procedures requested by the Initial Purchasers and described in detail in such letter, nothing has come to their attention that causes them to believe that (A) any unaudited financial statements included in the Offering Memorandum do not comply as to form in all material respects with applicable accounting requirements, (B) any material modifications should be made to the unaudited financial statements included in the Offering Memorandum for them to be in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included in the Offering Memorandum or (C) the information included under the headings "Summary--Summary [Pro Forma] Financial Data", "Capitalization", "Selected Consolidated Historical Financial Data", "Unaudited Pro Forma Condensed Combined Financial Data", "Management's Discussion and Analysis of Results of Operations and Financial Condition" and "Management--Executive Compensation" is not in conformity with the disclosure requirements of Regulation S-K that would apply to the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 under the Securities Act; 36 C-2 (iv) based upon the procedures detailed in such letter with respect to the period subsequent to the date of the last available balance sheet, including reading of minutes and inquiries of certain officials of the Company who have responsibility for financial and accounting matters, nothing has come to their attention that causes them to believe that (A) at a specified date not more than three business days prior to the date of such letter, there was any change in capital stock, increase in long-term debt or decrease in net current assets as compared with the amounts shown in the March 28, 1998 unaudited balance sheet included in the Offering Memorandum or (B) for the period from December 27, 1997 to a specified date not more than three business days prior to the date of such letter, there were any decreases, as compared with the corresponding period in the preceding year, in net sales, income from operations, EBITDA or net income, except in all instances for changes, increases or decreases that the Offering Memorandum discloses have occurred or which are set forth in such letter, in which case the letter shall be accompanied by an explanation by the Company as to the significance thereof unless said explanation is not deemed necessary by the Initial Purchasers; (v) they have performed certain other specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the general accounting records of the Company) set forth in the Offering Memorandum agrees with the accounting records of the Company, excluding any questions of legal interpretation; and (vi) on the basis of a reading of the unaudited pro forma financial information included in the Offering Memorandum, carrying out certain specified procedures, reading of minutes and inquiries of certain officials of the Company who have responsibility for financial and accounting matters and proving the arithmetic accuracy of the application of the pro forma adjustments to the historical amounts in the pro forma financial information, nothing came to their attention which caused them to believe that the pro forma financial information does not comply in form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X or that the pro forma adjustments have not been properly applied to the historical amounts in the compilation of such information. EX-3.1.2 3 CERTIFICATE OF INCORPORATION OF SELFIX 1 Exhibit 3.1.2 CERTIFICATE OF INCORPORATION OF SELFIX, INC. The undersigned, a natural person, for the purposes of organizing a corporation for conducting the business and promoting the purposes hereinafter stated, under the provisions and subject to the requirements of the laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts amendatory thereof and supplemental thereto, and known, identified and referred to as the "Delaware General Corporation Law"), hereby certifies that: FIRST: The name of the corporation (hereinafter called the "Corporation") is: SELFIX, INC. SECOND: The address, including street, number, city and county of the registered office of the Corporation in the State of Delaware is 229 South State Street, City of Dover, County of Kent, and the name of the registered agent of the Corporation in the State of Delaware at such address is United States Corporation Company. THIRD: The nature of the business and of the purposes to be conducted and promoted by the Corporation shall be to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of stock which the Corporation shall have the authority to issue is 5,500,000 shares. Of such authorization, 5,000,000 shares shall be designated as Common Stock and shall have a par value of $0.01 per share and 500,000 shares shall be designated as Preferred Stock and shall have a par value of $0.01 per share. The Preferred Stock may be issued from time to time in one or more series. The number of shares, the stated value and interest rate, if any, of each such series and the preferences and relative, participating and special rights and the qualifications, limitations or restrictions shall be fixed in the case of each series by resolution of the Board of Directors at the time of issuance subject in all cases to the laws of the State of Delaware applicable thereto, and set forth in a certificate of designation filed and recorded with respect to each series in accordance with the laws of the State of Delaware. Any and all such shares issued, and for which the full consideration has been paid or delivered, shall be deemed fully paid stock and the holder of such shares shall not be liable for any further call or assessment or any other payment thereon. 2 FIFTH:The name and the mailing address of the sole incorporator is as follows: Name Mailing Address ---- --------------- Karen J. Gilbert 30 South Wacker Drive Suite 2900 Chicago, Illinois 60606 SIXTH: 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 By-Laws of the Corporation. SEVENTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of Section 179 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation as the case may be, and also on this Corporation. EIGHTH: For the management of the business and for the conduct of the affairs of the Corporation and in further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders, it is further provided: 1. The number of directors of the Corporation shall be as specified in the By-Laws of the Corporation but such number may from time to time be increased or decreased in such manner as may be prescribed by the By-Laws. In no event shall the number of directors be less than the minimum prescribed by law. The election of directors need not be by ballot. Directors need not be stockholders. 2. In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized and empowered to make, - 2 - 3 alter, amend, and repeal By-Laws, subject to the power of the stockholders to alter or repeal By-Laws made by the Board of Directors. 3. Any director or any officer elected or appointed by the stockholders or by the Board of Directors may be removed at any time in such manner as shall be provided in the By-Laws of the Corporation. 4. Stockholders of the Corporation shall have no pre-emptive right to subscribe to any capital stock to be hereafter issued, whether now authorized and unissued or hereafter authorized. 5. In the absence of fraud, no contract or other transaction between the Corporation and any other Corporation and no act of the Corporation, shall in any way be affected or invalidated by the fact that any of the directors of the Corporation are pecuniarily or otherwise interested in, or are directors or officers of, such other Corporation; and in the absence of fraud, any director, individually, or any firm of which any director may be a member, may be a party to, or may be pecuniarily or otherwise interested in, any contract or transaction of the Corporation; provided, in any case, that the fact that he or such firm is so interested shall be disclosed or shall have been known to the Board of Directors or the majority thereof; and any director of the Corporation, who is also a director or officer of any such other Corporation, or who is also interested, may be counted in determining the existence of a quorum at any meeting of the Board of Directors of the Corporation which shall authorize any such contract, act or transaction, and may vote thereat to authorize any such contract, act or transaction, with like force and effect as if he were not such director or officer of such other corporation, or not so interested. 6. To the fullest extent permitted by the Delaware General Corporation Law as it now exists or may hereafter be amended, no director of this Corporation shall be liable to this Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director. NINTH: (a) 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 (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, 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 or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action is an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by and in the manner set forth in the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to - 3 - 4 provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this paragraph shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director of officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. (b) If a claim under paragraph (a) of this Article is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard or conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any - 4 - 5 statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. (d) The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. (e) For the purposes of this Article, references to "the Corporation" include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents, so that any person who is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another 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 with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. For the purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any 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. TENTH: From time to time any of the provisions of this Certificate of Incorporation may be amended, altered or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this Certificate are granted subject to the provisions of this Article TENTH. Executed at Chicago, Illinois on the 15th day of May, 1987. __________________________ Karen J. Gilbert Incorporator - 5 - 6 PLAN AND AGREEMENT OF MERGER by and between Selfix, Inc., an Illinois Corporation and Selfix, Inc., a Delaware Corporation This Plan and Agreement of Merger is made pursuant to Section 11.35 of the Illinois Business Corporation Act of 1983 and Section 252 of the Delaware General Corporation Law by and between Selfix, Inc., an Illinois corporation (the "Terminating Corporation") and Selfix, Inc., a Delaware corporation (the "Surviving Corporation"). RECITALS WHEREAS, A. The Terminating Corporation is authorized to issue 1,000 shares of $100.00 par value Common Stock of which 500 shares are issued and outstanding; and B. The Surviving Corporation, of which the Terminating Corporation is the sole stockholder, is authorized to issue 5,000,000 shares of $0.01 par value Common Stock, of which one share is issued and outstanding, and 500,000 shares of $0.01 par value Preferred Stock, of which no shares have been issued; and C. The respective Boards of Directors of the Terminating Corporation and the Surviving Corporation have determined that it is in the best interests of the parties to merge the Terminating Corporation into the Surviving Corporation (the "Merger") in a transaction intended to qualify as a reorganization under Section 368(a)(1)(F) of the Internal Revenue Code of 1986 on the terms and conditions herein contained in order to create a single entity organized under the laws of the State of Delaware; D. Jeffrey C. Rubenstein of 30 South Wacker Drive, Suite 2900, Chicago, Illinois 60606, is the registered agent of the Terminating Corporation upon whom process against the Terminating Corporation may be served in the State of Illinois; and E. United States Corporation Company of 229 South State Street, Dover, Delaware 19901 is the registered agent of the Surviving Corporation upon whom process against the Surviving Corporation may be served in the State of Delaware; and F. Jeffrey C. Rubenstein of 30 South Wacker Drive, Suite 2900, Chicago, Illinois 60606 will be the registered agent of the Surviving Corporation upon whom process against the Surviving Corporation may be served in the State of Illinois; and G. The Surviving Corporation has not commenced to do business and has no liabilities other than the reasonable costs incurred in conjunction with its incorporation. 7 TERMS AND CONDITIONS NOW, THEREFORE, the parties to this Plan and Agreement of Merger, in consideration of the premises, mutual covenants, agreements and provisions herein contained, do hereby agree to and prescribe the terms and conditions of the Merger and the mode of carrying the same into effect as follows: 1. Merger. The Terminating Corporation shall be merged into the Surviving Corporation. 2. Effective Date. The Merger shall become effective on May 20, 1987 (the "Effective Date"). 3. Surviving Corporation. The Surviving Corporation shall survive the Merger and shall continue to be governed by the laws of the State of Delaware, but the separate corporate existence of the Terminating Corporation shall cease forthwith upon the Effective Date, or as soon thereafter as is reasonably possible. 4. Name of Surviving Corporation. The name of the Surviving Corporation shall be Selfix, Inc. 5. Authorized Capital. The authorized capital stock of the Surviving Corporation following the Effective Date will be 5,000,000 shares of Common Stock, $0.01 par value per share, and 500,000 shares of Preferred Stock, $0.01 par value per share, the same as at present, unless and until such authorized capital shall be changed in accordance with the laws of the State of Delaware. 6. Certificate of Incorporation. The present Certificate of Incorporation of the Surviving Corporation shall continue to be the Surviving Corporation's Certificate of Incorporation following the Effective Date, unless and until the same shall be otherwise amended or repealed in accordance with the provisions thereof and in accordance with the laws of the State of Delaware. 7. By-Laws. The present By-Laws of the Surviving Corporation shall be the By-Laws of the Surviving Corporation following the Effective Date unless and until the same shall be otherwise amended or repealed in accordance with the provisions thereof and of the Surviving Corporation's Certificate of Incorporation and in accordance with the laws of the State of Delaware. 8. Employees. Immediately upon the Effective Date, the employees of the Terminating Corporation shall become the employees of the Surviving Corporation, and shall continue to be entitled to the same rights and benefits they enjoyed as employees of the Terminating Corporation. -7- 8 9. Incentive Stock Option Plan. Immediately upon the Effective Date, the Surviving Corporation will assume and continue as its own the Incentive and Nonstatutory Stock Option Plan (the "Plan") of the Terminating Corporation as it exists on the Effective Date, subject only to (a) the substitution of 2,615 shares of the Surviving Corporation's Common Stock, $0.01 par value per share for each share of Common Stock of the Terminating Corporation subject to such plan, and (b) those adjustments in the exercise price and the number of shares subject to each outstanding option previously granted pursuant to the Plan, as such adjustments are effected pursuant to Article VI of the Plan. 10. Directors and Officers. The Terminating Corporation and the Surviving Corporation hereby agree to cause the election or appointment of the Terminating Corporation's directors and officers as the directors and officers of the Surviving Corporation effective on or prior to the day preceding the Effective Date. All such directors and officers shall continue in office until their successors shall have been duly elected and qualified. 11. Conversion of Outstanding Shares of Terminating Corporation. The manner and basis of converting the outstanding shares of capital stock of the Terminating Corporation into the shares of the Surviving Corporation shall be as follows: a. As of the Effective Date, by virtue of the Merger and without any further action on the part of the Surviving Corporation, the Terminating Corporation or the holders thereof, each share of the Common Stock of the Terminating Corporation which is issued and outstanding immediately prior thereto shall be converted into 2,615 shares of the Surviving Corporation's Common Stock, $0.01 par value, except that the one share of such stock currently owned by the Terminating Corporation shall thereupon be surrendered and cancelled. b. Upon surrender of the certificates of the capital stock of the Terminating Corporation to the Surviving Corporation, said Certificates shall be cancelled by the Surviving Corporation and the Surviving Corporation's Common Stock, $0.01 par value, will be issued to the holders of such certificates of record as of the Effective Date in the appropriate amounts as calculated in accordance with the preceding paragraph. Until so surrendered, each certificate representing the Terminating Corporation's Common Stock shall be deemed for all corporate purposes to evidence the number of shares of the Surviving Corporation's Common Stock into which such shares of the Terminating Corporation's Common Stock have been converted in the Merger. 12. Transfer of Tangible and Intangible Property Interests upon the Effective Date. Immediately upon the Effective Date, without limiting the force and effect of any applicable provisions of the Illinois Business Corporation Act of 1983 and the Delaware General Corporation Law with respect to the legal effect of the Merger, all the real and personal property rights and interests, privileges, franchises, patents, trade secrets, confidential information, trademarks, licenses, registrations and all other legal rights and assets of every kind and description of the Terminating Corporation, whether tangible or intangible, shall be automatically -8- 9 transferred to, vested in and devolve upon the Surviving Corporation without further act or deed; and all property, rights and every other interest of the Surviving Corporation and of the Terminating Corporation shall be as effectively the property of the Surviving Corporation as they theretofore were of the Surviving Corporation and the Terminating Corporation, respectively. The Terminating Corporation, and its directors and officers, hereby agree from time to time as and when requested by the Surviving Corporation or by its successors or assigns, to execute and deliver or cause to be executed and delivered all such deeds and instruments and to take or cause to be taken such further or other actions as the Surviving Corporation may deem necessary or desirable in order to vest in, and confirm to, the Surviving Corporation, title to and possession of any and all property of such Terminating Corporation acquired or to be acquired by reason or as a result of the Merger and otherwise to carry out all of the intents and purposes hereof. The proper officers and directors of the Terminating Corporation and the proper officers and directors of the Surviving Corporation are hereby fully authorized in the name of the Terminating Corporation and the Surviving Corporation, respectively, to take any and all such actions on behalf of the respective corporations. 13. Assumption of Contracts. Immediately upon the Effective Date, without limiting the force and effect of any applicable provisions of the Illinois Business Corporation Act of 1983 and the Delaware General Corporation Law with respect to the legal effect of the Merger, all of contracts and agreements to which the Terminating Corporation is a party shall be automatically assumed by the Surviving Corporation. 14. Representations of the Terminating Corporation and the Surviving Corporation. The Terminating Corporation and the Surviving Corporation each hereby represents and warrants that it is not a party, jointly or severally, to any contract or agreement, the terms of which would be violated or breached by it upon execution and consummation of this Plan and Agreement of Merger, such that this Plan and Agreement of Merger is enforceable against each of the respective corporations in accordance with its terms. 15. Survival of Representations. All representations and warranties of the Terminating Corporation and of the Surviving Corporation contained in this or any other instrument delivered by or on behalf of any of them are true and correct now, will be true and correct on the Effective Date with the same force and effect as if made on and as of said date, and will survive the Effective Date for a period of two (2) years. 16. Entire Agreement. This Plan and Agreement of Merger constitutes the entire agreement by and between the parties hereto with respect to the matters herein contemplated. This Plan and Agreement of Merger supersedes all previous agreements, negotiations and commitments in respect thereto. This Plan and Agreement of Merger shall not be changed or modified in any manner, except by mutual consent in a writing of subsequent date signed by the duly authorized representations of each party hereto. 17. Further Assurances. Following the receipt of all required approvals of this Plan and Agreement of Merger by the respective stockholders of the parties, as applicable, each of -9- 10 the parties hereto shall immediately execute and deliver to the other party hereto and file with appropriate governmental authorities such instruments as may be reasonably required in connection with the consummation of the Merger contemplated hereby. 18. Binding Effect. This Plan and Agreement of Merger shall be binding upon and inure to the benefit of all of the parties hereto and their respective successors in interest. 19. Miscellaneous. Paragraph headings do not form a part of this Plan and Agreement of Merger, but are for convenience of reference only and shall not limit or affect in any way the meaning or interpretation hereof. The failure of either party to enforce any of the provisions hereof shall not waive or limit the right of such party thereafter to strictly enforce such provision, or of the right of such party thereafter to enforce each and every provision hereof. 20. Revocability of Plan and Agreement. Anything herein or elsewhere to the contrary notwithstanding, this Plan and Agreement of Merger may be terminated and abandoned by the Board of Directors of the Terminating Corporation or of the Surviving Corporation at any time prior to the date of filing the required Plan and Agreement of Merger or Certificate of Merger and the required Articles of Merger, respectively, with the Secretaries of State of the States of Delaware and Illinois. 21. Service of Process. The Surviving Corporation hereby agrees that it may be served with process in the States of Delaware and Illinois in any proceeding for the enforcement of any obligation of the Terminating Corporation and in any proceeding for the enforcement of rights of dissenting shareholders, if any, of such corporation. The Surviving Corporation hereby irrevocably appoints the Secretary of State of the State of Illinois as its agent to accept service of process in any such proceeding; hereby designates the following address to which a copy of any such process shall be mailed by such Secretary of State: Jeffrey C. Rubenstein, 30 South Wacker Drive, Suite 2900, Chicago, Illinois 60606; and hereby agrees that it will pay the dissenting shareholders, if any, of the Terminating Corporation the amount, if any, to which they shall be entitled under the provisions of the Illinois Business Corporation Act of 1983 with respect to the rights of dissenting shareholders. IN WITNESS WHEREOF, the parties hereto, pursuant to the approval and authority duly given by resolutions adopted by their respective Boards of Directors, have caused this Plan and -10- 11 Agreement of Merger to be executed by their respective Presidents and attested by their respective Secretaries or Assistant Secretaries this ______ day of __________, 1998. Selfix, Inc., an Illinois corporation Attest: By: --------------------- Meyer J. Ragir, Chief Executive Officer - ---------------------- Jeffrey C. Rubenstein, Asst. Secretary Selfix, Inc., a Delaware corporation Attest: By: --------------------- Meyer J. Ragir, Chief Executive Officer - ---------------------- Jeffrey C. Rubenstein, Asst. Secretary -11- 12 CERTIFICATE I, Jeffrey C. Rubenstein, Assistant Secretary of SELFIX, INC. (the "Corporation"), a corporation organized and existing under the laws of the State of Delaware, hereby certify as such Assistant Secretary, that the Plan and Agreement of Merger to which this certificate is attached, after having been first duly signed on behalf of the Corporation and having been signed on behalf of SELFIX, INC., a corporation of the State of Illinois, has been consented to in writing by all of the stockholders of the Corporation entitled to vote on the Plan and Agreement of Merger. WITNESS my hand on this ______ day of _________________, 1998. ------------------- Assistant Secretary -12- 13 CERTIFICATE I, Jeffrey C. Rubenstein, Assistant Secretary of SELFIX, INC. (the "Corporation"), a corporation organized and existing under the laws of the State of Illinois, hereby certify, as such Assistant Secretary, that the Plan and Agreement of Merger to which this certificate is attached, after having been first duly signed on behalf of the Corporation and having been signed on behalf of SELFIX, INC., a corporation of the State of Delaware, has been consented to in writing by all of the shareholders of the Corporation entitled to vote on the Plan and Agreement of Merger. WITNESS my hand on this ______ day of _________________, 1998. ------------------- Assistant Secretary -13- 14 THE ABOVE PLAN AND AGREEMENT OF MERGER, having been executed on behalf of each corporate party thereto, and having been adopted separately by each corporate party thereto, in accordance with the provisions of the General Corporation Law of the State of Delaware and the Illinois Business Corporation Act of 1983, the President of each corporate party thereto does now hereby execute the said Plan and Agreement of Merger and the Secretary or Assistant Secretary of each corporate party thereto does now hereby attest the said Plan and Agreement of Merger, as the respective act, deed and agreement of each of said corporations, on this ______ day of __________________, 1998. SELFIX, INC., a Delaware corporation Attest: By: --------------------- Meyer J. Ragir, Chief Executive Officer - ---------------------- Jeffrey C. Rubenstein, Asst. Secretary SELFIX, INC., an Illinois corporation Attest: By: --------------------- Meyer J. Ragir, Chief Executive Officer - ---------------------- Jeffrey C. Rubenstein, Asst. Secretary -14- 15 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF SELFIX, INC. It is hereby certified that: 1. The name of the corporation (hereinafter called the "Corporation") is Selfix, Inc. 2. The Certificate of Incorporation of the Corporation is hereby amended as follows: Amendment of Article NINTH to be restated in its entirety as follows: NINTH: (a) 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 (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, 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 or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by and in the manner set forth in the Delaware General Corporation Law, as the same exists, against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except at provided in paragraph (b) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this paragraph shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of 16 its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. (b) If a claim under paragraph (a) of this Article is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim, and if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard or conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. 17 (d) The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. (e) For the purposes of this Article, references to "the Corporation" include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents, so that any person who 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 with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. For the purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fine" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and reference 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. 18 3. The Amendment of the Certificate of Incorporation herein certified has been duly adopted in accordance with the provisions of Sections 228 and 242 of the General Corporation Law of the State of Delaware. Signed and attested to on June 30, 1987. __________________________________________ President ATTEST: __________________________ Asst. Secretary 19 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF SELFIX, INC. Selfix, 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: FIRST: That at a meeting of the Board of Directors of the Corporation resolutions were duly adopted setting forth a proposed amendment to the Corporation's Certificate of Incorporation, declaring said amendment to be advisable and calling a meeting of the stockholders of the Corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows: RESOLVED, that the Corporation's Certificate of Incorporation be amended by changing ARTICLE FOURTH thereof so that, as amended, said ARTICLE FOURTH shall be and read as follows: FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is Eight Million (8,000,000) shares. Of such authorization, Seven Million Five Hundred Thousand (7,500,000) are designated as Common Stock, $0.01 par value per share, and Five Hundred Thousand (500,000) are designated as Preferred Stock, $0.01 par value per share. The Preferred Stock may be issued from time to time in one or more series. The number of shares, the stated value and interest rate, if any, of each such series and the preferences and relative, participating and special rights and the qualifications, limitations or restrictions shall be fixed in the case of each series by resolution of the Board of Directors at the time of issuance subject in all cases to the laws of the State of Delaware applicable thereto, and set forth in a certificate of designation filed and recorded with respect to each series in accordance with the laws of the State of Delaware. Any and all such shares issued, and for which the full consideration has been paid or delivered, shall be deemed fully paid stock and the holder of such shares shall not be liable for any further call or assessment or any other payment thereon. SECOND: That thereafter, pursuant to resolution of its Board of Directors, an annual meeting of the stockholders of the Corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. 20 THIRD; That said 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, said Selfix, Inc. has caused this Certificate to be signed by James E. Winslow, its Senior Vice President, this 6th day of June, 1995. SELFIX, INC. By:________________________________________ James E. Winslow, Senior Vice President 21 CERTIFICATE OF OWNERSHIP AND MERGER OF SAFETY SOURCE, INC. (AN ILLINOIS CORPORATION) INTO SELFIX, INC. (A DELAWARE CORPORATION) IT IS HEREBY CERTIFIED THAT: FIRST: Selfix, Inc. (hereinafter sometimes referred to as the "Corporation") is a business corporation of the State of Delaware. SECOND: The Corporation is the owner of all of the issued and outstanding shares of stock of Safety Source, Inc., which is a business corporation of the State of Illinois. THIRD: The laws of the jurisdiction of organization of Safety Source, Inc. permit the merger of a business corporation of that jurisdiction with a business corporation of another jurisdiction. FOURTH: The Corporation hereby merges Safety Source, Inc. into the Corporation effective at 12:00:01 a.m. on February 18, 1997. FIFTH: The following is a copy of certain resolutions adopted on February 13, 1997, by the Board of Directors of the Corporation to merge said Safety Source, Inc. into the Corporation: RESOLVED, that Safety Source, Inc. be merged into this Corporation, and that all of the estate, property, rights, privileges, powers, and franchises of Safety Source, Inc. be vested in and held and enjoyed by this Corporation as fully and entirely and without change or diminution as the same were before held and enjoyed by Safety Source, Inc. in its name. RESOLVED, that this Corporation assume all of the obligations of Safety Source, Inc. RESOLVED, that this Corporation shall cause to be executed and filed and/or recorded. RESOLVED, that the Chairman of the Board and Secretary of the Corporation are hereby authorized, empowered and directed to execute and deliver, in the name and on behalf of this 22 Corporation, the documents prescribed by the laws of the State of Delaware and by the laws of the State of Illinois, and will cause to be performed all necessary acts within the jurisdiction of organization of Safety Source, Inc. and of this Corporation, and to take such actions, execute and deliver such certificates and such additional documents and effectuate such filings as are necessary, appropriate or expedient to implement the terms and provisions of the foregoing resolutions, the making of any such modifications, the execution and delivery of any such other documents and the taking of such other action to conclusively evidence their having so deemed. Executed on this 14th day of February, 1997. SELFIX, INC. By: _______________________________________ James R. Tennant, Chairman of the Board 23 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF SELFIX, INC. It is hereby certified that: 1. The name of the corporation (hereinafter called the "Corporation") is Selfix, Inc. 2. The Certificate of Incorporation of the Corporation is hereby amended as follows: Amendment of Article NINTH to be restated in its entirety as follows: NINTH: (a) 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 (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, 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 or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by and in the manner set forth in the Delaware General Corporation Law, as the same exists, against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except at provided in paragraph (b) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this paragraph shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of 24 its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. (b) If a claim under paragraph (a) of this Article is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim, and if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard or conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. 25 (d) The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. (e) For the purposes of this Article, references to "the Corporation" include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents, so that any person who 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 with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. For the purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fine" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and reference 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. 26 3. The Amendment of the Certificate of Incorporation herein certified has been duly adopted in accordance with the provisions of Sections 228 and 242 of the General Corporation Law of the State of Delaware. Signed and attested to on September 26, 1988. ___________________________________ President ATTEST: __________________________ Secretary 27 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of ____________ , 1998, is by and among SELFIX, INC., a Delaware Corporation ("Selfix"), HPI MERGER, INC., a Delaware corporation ("Merger Sub"), and HOME PRODUCTS INTERNATIONAL, INC., a Delaware corporation ("Home Products"). PRELIMINARY STATEMENTS Selfix has an authorized capitalization consisting of (i) 7,500,000 shares of Common Stock, $0.01 par value per share ("Selfix Common Stock") of which 3,891,714 shares are issued and outstanding, and (ii) 500,000 shares of Preferred Stock, $0.01 par value per share, of which no shares are issued and outstanding. Home Products has an authorized capitalization consisting of (i) 7,500,000 shares of Common Stock, $0.01 par value per share ("Home Products Common Stock") of which 1,000 shares are issued and outstanding and owned by Selfix, and (ii) 500,000 shares of Preferred Stock, $0.01 par value per share, of which no shares are issued and outstanding. Merger Sub has an authorized capitalization consisting of 1,000 shares of Common Stock, $0.01 par value per share ("Merger Sub Common Stock"), all of which are issued and outstanding and are owned by Home Products. The Board of Directors of each of Selfix, Home Products and Merger Sub has heretofore approved the Merger ("Merger") of Merger Sub with and into Selfix in accordance with the General Corporation Law of the State of Delaware ("DGCL") and upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Selfix, Home Products and Merger Sub hereby agree as follows: ARTICLE I THE MERGER Section 1.01. The Merger. Upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DGCL, Merger Sub shall be merged with and into Selfix at the Effective Time (as hereinafter defined). Following the Effective Time, the separate corporate existence of Merger Sub shall cease and Selfix shall continue as the surviving corporation (in such capacity, the "Surviving Corporation") and shall succeed to and assume all the rights and obligations of Merger Sub in accordance with the DGCL. 28 Section 1.02. Effective Time. Subject to the provisions of this Agreement, as soon as practicable on or after the date hereof, Selfix shall file a copy of this Agreement with the Secretary of State of the State of Delaware and the Merger shall become effective at the later to occur of (i) the time of such filing and (ii) 12:01 a.m. on February 18, 1997 ("Effective Time"). Section 1.03. Effects of the Merger. The Merger shall have the effects as set forth in Section 259 of the DGCL. Section 1.04. Certificate Of Incorporation and Bylaws. (a) At the Effective Time, the Certificate of Incorporation of Selfix, as amended and in effect immediately prior to the Effective Time, shall be amended as set forth and as so amended shall thereafter continue in full force and effect as the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein and by the DGCL. Article FOURTH shall be amended to read in its entirety as follows: FOURTH. The total number of shares of all classes of stock which the Corporation shall have authority to issue is One Thousand (1,000) shares of Common Stock, $0.01 par value per share. Any and all such shares issued, and for which the full consideration has been paid or delivered, shall be deemed fully paid stock and the holder of such shares shall not be liable for any further call or assessment or any other payment thereon. Article ELEVENTH shall be added and will read as follows: Any act or transaction by or involving the Corporation that requires for its adoption under the Delaware General Corporation Law ("DGCL") or the Corporation's Certificate of Incorporation the approval of the stockholders of the Corporation shall, in accordance with Section 251(g) of the DGCL, require, in addition, the approval of the stockholders of Home Products International, Inc. ("Home Products") (or any successor by merger), by the same vote as is required by the DGCL and/or by the Corporation's Certificate of Incorporation. (b) At the Effective Time, the By-laws of Merger Sub in effect on the date thereof, shall be the By-laws of the Surviving Corporation after the Effective Time until thereafter changed or amended as provided therein or by the DGCL. 29 Section 1.05. Directors. The directors of Selfix immediately prior to the Effective Time shall be the directors of the Surviving Corporation and shall serve until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. Section 1.06. Officers. The officers of Selfix immediately prior to the Effective Time shall be the officers of the Surviving Corporation and shall serve until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. Section 1.07. Treasury Stock. Selfix will, immediately prior to the Effective Time of the Merger, contribute to the capital of Home Products all of the shares of Selfix Common Stock then held by Selfix in its treasury. ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS AND ASSUMPTION OF CERTAIN OBLIGATIONS Section 2.01. Effect on Capital Stock. (a) At the Effective Time, by virtue of the Merger and without any action on the part of Selfix, Merger Sub or Home Products or any holder of capital stock of Selfix, Merger Sub or Home Products, the following events shall occur: (i) each issued and outstanding share of Selfix Common Stock shall, without further act or deed by Selfix or its stockholders, be converted into one share of Home Products Common Stock, and shall have the same designations, rights and powers and preferences, and the qualifications, limitations and restrictions thereof, as the Selfix Common Stock being converted. Each certificate representing shares of Selfix Common Stock immediately prior to the Effective Time shall be deemed without the need for any exchange or transfer to represent the same number of shares of Home Products Common Stock; (ii) each share of Selfix Common Stock then held by Home Products in its treasury immediately prior to the Effective Time shall be converted into and thereafter represent one duly issued, fully paid and nonassessable share of Home Products Common Stock held by Home Products in its treasury immediately after the Effective Time of the Merger; (iii) each issued and outstanding share of Merger Sub Common Stock shall be converted into one share of the common stock, $0.01 par value per share, of the Surviving Corporation; and 30 (iv) each issued and outstanding share of Home Products Common Stock shall be canceled without any consideration being paid therefor. (b) From and after the Effective Time, holders of certificates formerly evidencing Selfix Common Stock shall cease to have any rights as stockholders of Selfix, except as provided by law; provided, however, that such holders shall have the rights set forth in Section 2.03 herein. Section 2.02. Assumption of Selfix' Obligations to Issue Capital Stock. Immediately prior to the Effective Time, Selfix was a party to or subject to certain agreements and arrangements, including stock options, and compensation plans and agreements, pursuant to which parties thereto or beneficiaries thereof acquired, or acquired certain rights to acquire, shares of Selfix Common Stock, including but not limited to: (i) Selfix, Inc. 1988 Stock Option Plan, (ii) Selfix, Inc. 1991 Stock Option Plan, (iii) Selfix, Inc. 1994 Stock Option Plan, and (iv) Selfix, Inc. 1995 Employee Stock Purchase Plan (all such stock options, and compensation plans and agreements being referred to herein individually as a "Plan"). At the Effective Time, Home Products shall adopt, assume, and agree to be bound by each and every Plan, and any right to acquire a share of capital stock of Selfix under any such Plan shall, without further act or deed by Selfix or its stockholders, be converted into a right to acquire a share of capital stock of Home Products pursuant to such Plan. Section 2.03. Option to Exchange Selfix Certificate. Each holder of a certificate formerly representing shares of Selfix Common Stock (a "Selfix Certificate"), shall have the option, upon surrender of such Selfix Certificate to Home Product's transfer agent ("Transfer Agent"), to receive a certificate or certificates of Home Products representing the number of shares of Home Products Common Stock into which the shares of Selfix Common Stock previously represented by such Selfix Certificate have been converted pursuant to this Agreement. The Transfer Agent shall accept such Selfix Certificates upon compliance with such reasonable terms and conditions as the Transfer Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. Until surrendered and exchanged in accordance with this Section 2.03 or in the ordinary course, each Selfix Certificate shall be deemed and treated for all corporate purposes at any time after the Effective Time to evidence the ownership of the number of shares of Home Products Commons Stock into which such shares of Selfix Common Stock were converted pursuant to Section 2.01(a). Section 2.04 Successor Issuer. It is the intent of the parties hereto that Home Products, as of the Effective Time, be deemed a "successor issuer" for all purposes under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. 31 ARTICLE III AMENDMENT AND TERMINATION Section 3.01 Amendments and Waiver. No amendment, modification, restatement or supplement of this Agreement shall be valid unless the same is in writing and signed by the parties hereto. No waiver of any provision of this Agreement shall be valid unless in writing and signed by the party against whom that waiver is sought to be enforced. No failure or delay on the part of any party hereto in exercising any right, power or privilege hereunder and no course of dealing between or among any of the parties shall operate as a waiver of any right, power or privilege hereunder. No single or partial exercise thereof or the exercise of any other right, power or privilege hereunder. No notice to or demand on any party hereto in any case shall entitle such party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of any party hereto to any other or further action in any circumstances without notice or demand. Section 3.02 Termination. At any time prior to the Effective Time, this Agreement may be terminated and abandoned by the parties. In the event of any termination of this Agreement, this Agreement shall forthwith become void and there shall be no liability on the part of any of the parties hereto or their respective officers or directors. ARTICLE IV MISCELLANEOUS Section 4.01 Tax Free Reorganization. The Merger is intended to constitute a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and this Agreement is intended to constitute a plan of reorganization. Section 4.02 Benefit and Burden. This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective successors and permitted assigns. Section 4.03 No Third Party Rights. Nothing in this Agreement shall be deemed to create any right in any creditor or other person or entity, and this Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any third party. Section 4.04 Assignments. Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any of the parties hereto and any attempt to do so shall be null and void. Section 4.05 Counterparts. This Agreement may be executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed an original and all of which taken together shall constitute one and the same agreement. 32 It shall not be necessary in making proof of this Agreement to produce or account for more than one counterpart signed by the party to be charged thereby. Section 4.06 Severability. Should any clause, sentence, paragraph, subsection, Section or Article of this Agreement be judicially declared to be invalid, unenforceable or void, such decision will not have the effect of invalidating or voiding the remainder of this Agreement, and the part or parts of this Agreement so held to be invalid, unenforceable or void will be deemed to have been stricken herefrom by the parties hereto, and the remainder will have the same force and effectiveness as if such stricken part or parts had never been included herein. Section 4.07 Applicable Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF. Section 4.08. Entire Agreement. This Agreement sets forth all of the promises, agreements, conditions, understandings, warranties and representations among the parties hereto with respect to the transactions contemplated hereby, and supersedes all prior agreements, arrangements and understandings among the parties hereto, whether written, oral or otherwise. There are no promises, agreements, conditions, understandings, warranties or representations, oral or written, express or implied, among the parties hereto concerning the subject matter hereof except as set forth herein. 33 IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of Merger to be executed by their respective officers thereunto duly authorized on this ___ day of February, 1997. ATTEST: SELFIX, INC. By: - ---------------------------- ------------------------------ Secretary James R. Tennant, Chairman of the Board ATTEST: HPI MERGER, INC. By: - ---------------------------- ------------------------------ Secretary James R. Tennant, Chairman of the Board ATTEST: HOME PRODUCTS INTERNATIONAL, INC. By: - ---------------------------- ------------------------------ Secretary James R. Tennant, Chairman of the Board 34 CERTIFICATE OF THE SECRETARY OF SELFIX, INC. I, James E. Winslow, the Secretary of Selfix, Inc., hereby certify that the Agreement and Plan of Merger to which this certificate is attached was duly adopted pursuant to Section 251(g) of the DGCL and that the conditions specified in the first sentence of Section 251(g) of the DGCL have been satisfied. WITNESS my hand this ____ day of February, 1997. ________________________________ Secretary 35 CERTIFICATE OF THE SECRETARY OF HPI MERGER, INC. I, James E. Winslow, the Secretary of HPI Merger, Inc., hereby certify that the Agreement and Plan of Merger to which this certificate is attached was duly adopted pursuant to Section 251(g) of the DGCL and that the conditions specified in the first sentence of Section 251(g) of the DGCL have been satisfied. WITNESS my hand this ____ day of February, 1997. ________________________________ Secretary 36 CERTIFICATE OF THE SECRETARY OF HOME PRODUCTS INTERNATIONAL, INC. I, James E. Winslow, the Secretary of Home Products International, Inc., hereby certify that the Agreement and Plan of Merger to which this certificate is attached was duly adopted pursuant to Section 251(g) of the DGCL and that the conditions specified in the first sentence of Section 251(g) of the DGCL have been satisfied. WITNESS my hand this ____ day of February, 1997. ________________________________ Secretary EX-3.1.3 4 CERTIFICATE OF INCORPORATION OF SEYMOUR 1 CERTIFICATE OF INCORPORATION EXHIBIT 3.1.3 OF SEYMOUR HOUSEWARES CORPORATION ARTICLE ONE The name of the corporation is Seymour Housewares Corporation. ARTICLE TWO The address of the corporation's registered office in the State of Delaware is 32 Loockerman Square, Suite L-100, Dover Delaware, Kent County, 19901. The name of the registered agent at such address is The Prentice-Hall Corporation System, Inc. ARTICLE THREE The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE FOUR The total number of shares of stock which the corporation has authority to issue is one thousand (1,000) shares of common stock, par value one cent ($0.01) per share. ARTICLE FIVE The name and mailing address of the sole incorporator are as follows: NAME MAILING ADDRESS Karen D. Bielars 200 East Randolph Drive Suite 5700 Chicago, Illinois 60601 ARTICLE SIX The corporation is to have perpetual existence. 1 2 ARTICLE SEVEN In furtherance and not in limitation of the powers conferred by statue, the board of directors of the corporation is expressly authorized to make, alter or repeal the by-laws of the corporation. ARTICLE EIGHT Meetings of stockholders may be held within or without the State of Delaware, as the by-laws of the corporation may provide. The books of the corporation may be kept 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 by-laws of the corporation. Election of directors need not be by written ballot unless the by-laws of the corporation so provide. ARTICLE NINE To the fullest extent permitted by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended, the director of this corporation shall not be liable to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director. Any repeal or modification of this Article Nine shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification. ARTICLE TEN The corporation expressly elects not to be governed by Section 203 of the General Corporation Law of the State of Delaware. ARTICLE ELEVEN 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 herein and by the laws of the State of Delaware, and all rights conferred upon stockholders herein are granted subject to this reservation. 2 3 I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring and certifying that this is my act and deed and the facts stated herein are true, and accordingly have hereunto set my hand on this 22nd day of December, 1992. _____________________________________ Karen D. Bielars, Sole Incorporator 3 4 CERTIFICATE OF OWNERSHIP AND MERGER OF SEYMOUR SALES CORPORATION (A DELAWARE CORPORATION) INTO SEYMOUR HOUSEWARES CORPORATION (A DELAWARE CORPORATION) IT IS HEREBY CERTIFIED THAT: FIRST: Seymour Sales Corporation (hereinafter referred to as the "CORPORATION") is a business corporation of the State of Delaware. SECOND: The Corporation, as the owner of all of the issued and outstanding shares of stock of Seymour Housewares Corporation, a business corporation of the State of Delaware ("HOUSEWARES"), hereby merges itself into Housewares. THIRD: The following is a copy of certain resolutions adopted on December 30, 1997, by the sole Director of the Corporation to merge the Corporation into Housewares: RESOLVED, that the Corporation be merged into Housewares pursuant to the laws of the State of Delaware as hereinafter provided ("Merger"), so that the separate existence of the Corporation shall cease as soon as the Merger shall become effective, and thereupon the Corporation and Housewares will become a single corporation, which shall continue to exist under, and be governed by, the laws of the State of Delaware. RESOLVED, that the terms and conditions of the proposed Merger are as follows: (a) From and after the Effective Date (as hereinafter defined) of the Merger, all of the estate, property, rights, privileges, powers, and franchises of the Corporation shall become vested in and be held by Housewares as fully and entirely and without change or diminution as the same were held and enjoyed by the Corporation, and Housewares shall assume all of the obligations of the Corporation. (b) Each issued and outstanding share of Common Stock, $0.01 par value per share, of the Corporation owned by the sole Stockholder of the Corporation immediately prior to the Effective Date of the Merger, shall, on the Effective Date of the Merger, be converted into one share of Common Stock, $0.01 par value per share, of Housewares; each issued and outstanding share of Common Stock, $0.01 par value per share of Housewares owned by the Corporation immediately prior to the Effective 5 Date of the Merger shall, on the Effective Date of the Merger, be canceled. (c) After the Effective Date of the Merger, the sole holder of record of the outstanding certificate theretofore representing stock of the Corporation may surrender the same to Housewares at its principal office and such holder shall be entitled upon surrender to receive in exchange therefor a certificate representing an equal number of shares of stock of Housewares. Until so surrendered, the outstanding certificate which prior to the Effective Date of the Merger represented shares of stock of the Corporation shall be deemed for all corporate purposes to evidence ownership of an equal number of shares of stock of Housewares. (d) From and after the Effective Date of the Merger, the Certificate of Incorporation and the By-Laws of Housewares shall be the Certificate of Incorporation and the By-Laws of Housewares, as in effect immediately prior to such Effective Date, and said Certificate of Incorporation shall continue in full force and effect until amended and changed in accordance with the provisions of the General Corporation Law of the State of Delaware. (e) The sole member of the Board of Directors and officers of the Corporation shall be the sole member of the Board of Directors and the corresponding officers of Housewares immediately before the Effective Date of the Merger. (f) From and after the Effective Date of the Merger, the assets and liabilities of the Corporation and of Housewares shall be entered on the books of Housewares at the amounts at which they shall be carried at such time on the respective books of the Corporation and of Housewares subject to such inter-corporate adjustments or eliminations, if any, as may be required to give effect to the Merger; and subject to such action as may be taken by the Board of Directors of Housewares, in accordance with generally accepted accounting principles, the capital and surplus of Housewares shall be equal to the capital and surplus of the Corporation and of Housewares. RESOLVED, that the Effective Date of the Certificate of Ownership and Merger setting forth a copy of these resolutions shall be December 30, 1997 ("Effective Date"), and that, insofar as the General Corporation Law of the State of Delaware shall govern the same, said time shall be the effective Merger time. RESOLVED, that these resolutions to merge be submitted to the sole Stockholder of the Corporation. 6 RESOLVED, that the Chairman of the Board, President and Secretary of the Corporation, either acting singly or jointly, are hereby authorized, empowered and directed to execute and deliver, in the name and on behalf of the Corporation, the documents prescribed by the laws of the State of Delaware, including, without limitation, a "CERTIFICATE OF OWNERSHIP AND MERGER" and will cause to be performed all necessary acts within the jurisdiction of organization of Housewares and of the Corporation, and to take such actions, execute and deliver such certificates and such additional documents and effectuate such filings as are necessary, appropriate or expedient to implement the terms and provisions of the foregoing resolutions, and/or are necessary or incident to effectuate the transactions identified in or contemplated by the Agreement, the making of any such modifications, the execution and delivery of any such other documents and the taking of such other action to conclusively evidence their having so deemed. FOURTH: The proposed Merger therein certified has been approved and adopted in writing by the sole Stockholder of the Corporation in accordance with provisions of Section 228 of the General Corporation Law of the State of Delaware. FIFTH: The Effective Date of the Certificate of Ownership and Merger, and the time when the Merger therein certified shall become effective, shall be December 30, 1997. Executed on this 30th day of December, 1997. SEYMOUR SALES CORPORATION By:_______________________________________ James E. Winslow, Executive Vice President EX-3.1.4 5 ARTICLES OF INCORPORATION OF TAMOR 1 Exhibit 3.1.4 THE COMMONWEALTH OF MASSACHUSETTS DEPARTMENT OF CORPORATION AND TAXATION HENRY F. LONG, COMMISSIONER 230 STATE HOUSE, BOSTON ARTICLES OF ORGANIZATION We PETER MORRONI, ANTHONY M. TATA AND DOMENIC P. TATA being a majority of the directors of TAMOR PLASTICS CORP. elected at its first meeting, in compliance with the requirements of General Laws, Chapter 156, Section 10, hereby certify that the following is a true copy of the agreement of association to form said corporation, with the names of the subscribers thereto: We, whose names are hereto subscribed, do, by this agreement, associate ourselves with the intention of forming a corporation under the provision of General Laws, Chapter 156. The name by which the corporation shall be known is TAMOR PLASTICS CORP. The location of the principal office of the corporation in Massachusetts is to be the CITY of LEOMINSTER, and outside Massachusetts, the _____________ of ________________________, State of _________________________. [The business address of the corporation is to be 147 SEVENTH ST. LEOMINSTER. - -------------------------------------------------------------------------------- If such business address is not yet determined, give the name and business address of the treasurer or other officer to receive mail. - -------------------------------------------------------------------------------- The purposes for which the corporation is formed and the nature of the business to be transacted by it are as follows: To manufacture plastic or celluloid materials and articles of all kinds, the buying and selling of the same, and to purchase, here, and lease all machinery, equipment or buildings necessary for said purposes. 2 The total capital stock to be authorized is as follows: ============================================================================= WITHOUT PAR VALUE WITH PAR VALUE ------------------------------------------------------------- CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE AMOUNT - ----------------------------------------------------------------------------- Preferred $ - ----------------------------------------------------------------------------- Common 100 $100 10,000 - ----------------------------------------------------------------------------- ============================================================================= Restriction, if any, imposed upon the transfer of shares: (PRINTED OR PHOTOSTATIC RESTRICTIONS MUST NOT BE ATTACHED IN THIS SPACE.) Any Stockholder, including the heirs, assigns, executor or administrators of a deceased Stockholder, desiring to sell such stock owned by him or them, shall first offer it to the Corporation through the Board of Directors, in the manner following: He shall notify the directors of his desire to sell by notice in writing, which notice shall contain the price at which he is willing to sell and the name of one arbitrator. The director shall within thirty days thereafter either accept the officer, or by notice to him in writing name a second arbitrator, and these two shall name a third. It shall then be the duty of the arbitrators to ascertain the value of the stock, and if either party shall neglect or refuse to appear at the hearing appointed by the arbitrators, they may act in the absence of such party. After the acceptance of the officer, or the report of the arbitrators as to the value of the stock, the directors shall have thirty days within which to purchase the same at such valuation, but if at the expiration of thirty days, the corporation shall not have exercised the right so to purchase, the owner of the stock shall be at liberty to dispose of the same in any manner he may see fit. No shares of stock shall be sold or transferred on the books of the corporation until these provisions have been complied with, but the Board of Directors may in any particular instance waive the requirement. A description of the different classes of stock, if there are to be two or more classes, and a statement of the terms on which they are to be created and the method of voting thereon: Other lawful provisions, if any, for the conduct and regulation of the business of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders: 3 [If seven days' notice is given, complete the following paragraph.] The first meeting shall be called by [If notice is waived, fill in the following paragraph.] We hereby waive all requirements of the General Laws of Massachusetts for notice of the first meeting of the incorporators for the purpose of organization, and appoint the fourth day of March, 1947, at 10:00 o'clock A.M., at Leominster as the time and place for holding such first meeting. The names and residences of the incorporators and the amount of stock subscribed for by each are as follows:
NAME FIRST NAME MUST BE WRITTEN IN FULL CITY OR TOWN OF RESIDENCE AMOUNT OF STOCK SUBSCRIBED FOR Initials and abbreviations are not sufficient Actual place of domicile must be given Preferred Common Domenic P. Tata Leominster 49 Anthony M. Tata Leominster 51 Peter Morroni Leominster 50
IN WITNESS WHEREOF we hereto sign our names, this 14th day of February, 1947. (Type or plainly print the name of each incorporator as signed to the Agreement of Association) 4 And we further certify that: The first meeting of the subscribers to said agreement was held on the fourth day of March, 1947. The amount of capital stock now to be issued is as follows:
=================================================== NUMBER OF SHARES - --------------------------------------------------- CLASS OF STOCK WITHOUT PAR VALUE WITH PAR VALUE - --------------------------------------------------- Preferred - --------------------------------------------------- Common 100 - --------------------------------------------------- ===================================================
- ----------------------------------------------------------------------------- PREFERRED COMMON - ----------------------------------------------------------------------------- TO BE PAID FOR: - ----------------------------------------------------------------------------- IN CASH: - ----------------------------------------------------------------------------- In full $10,000 - ----------------------------------------------------------------------------- By installments to be paid commencing business - ----------------------------------------------------------------------------- Amount of installment - ----------------------------------------------------------------------------- IN PROPERTY: - ----------------------------------------------------------------------------- REAL ESTATE - ----------------------------------------------------------------------------- Location - ----------------------------------------------------------------------------- Area - ----------------------------------------------------------------------------- PERSONAL PROPERTY: - ----------------------------------------------------------------------------- Accounts receivable - ----------------------------------------------------------------------------- Notes receivable - ----------------------------------------------------------------------------- Merchandise - ----------------------------------------------------------------------------- Supplies - ----------------------------------------------------------------------------- Securities - ----------------------------------------------------------------------------- Machinery - ----------------------------------------------------------------------------- Motor vehicles and trailers - ----------------------------------------------------------------------------- Equipment and tools - ----------------------------------------------------------------------------- Furniture and fixtures - ----------------------------------------------------------------------------- Patent rights - ----------------------------------------------------------------------------- Trade-marks - ----------------------------------------------------------------------------- Copyrights - ----------------------------------------------------------------------------- Goodwill - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- IN SERVICES - ----------------------------------------------------------------------------- IN EXPENSES - -----------------------------------------------------------------------------
5 No stock shall be at any time issued unless the cash, so far as due, or the property, services or expenses for which it was authorized to be issued, has been actually received or incurred by, or conveyed or rendered to, the corporation, or is in its possession as surplus; nor shall any note or evidence of indebtedness, secured or unsecured, of any person to whom stock is issued, be deemed to be payment therefor; and the president, treasurer and directors shall be jointly and severally liable to any stockholder of the corporation for actual damages caused to him by such issues. SERVICES AND EXPENSES: Service must have been rendered and expenses incurred before stock is issued therefor State clearly the nature of such services or expenses and the amount of stock to be issued therefor. 6 The name, residence, and post office of each of the officers of the corporation is as follows:
- ----------------------------------------------------------------------------------------- CITY OR TOWN OF RESIDENCE POST OFFICE ADDRESS NAME Actual place of domicile must be given HOME OR BUSINESS - ----------------------------------------------------------------------------------------- President Peter Morroni Leominster, Mass. 248 Seventh St. - ----------------------------------------------------------------------------------------- Treasurer Peter Morroni Leominster, Mass. 248 Seventh St. - ----------------------------------------------------------------------------------------- Clerk Anthony M. Tata Leominster, Mass. 148 Sixth St. - ----------------------------------------------------------------------------------------- Directors Peter Morroni Leominster, Mass. 248 Seventh St. - ----------------------------------------------------------------------------------------- Anthony M. Tata Leominster, Mass. 248 Seventh St. - ----------------------------------------------------------------------------------------- Domenic P. Tata Leominster, Mass. 167 Seventh St. - -----------------------------------------------------------------------------------------
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we hereto sign our names this 4th day of March, 1947. 7 THE COMMONWEALTH OF MASSACHUSETTS WRITING NOTHING BELOW Tamor Plastics Corp. ______________________________ Fee $50 Paid ______________________________ ARTICLES OF ORGANIZATION GENERAL LAWS, CHAPTER 156, SECTION 10 Filed in the office of the Secretary of the Commonwealth and Certificate of Incorporation issued as of March 6, 1947 =========================================== I hereby certify that, upon an examination of the within-written articles of organization, the agreement of association, and the record of the first meeting of the incorporators, including the by-laws, duly submitted to me, it appears that the provisions of the General Laws relative to the organization of corporations have been complied with, and I hereby approve said articles this 6th day of March, 1947. ______________________________/s/ Commissioner of Corporations and Taxation CHARTER TO BE SENT TO James R. Oliver 47 Monument Square Leominster FILING FEE: 1/20 of the 1% of the total amount of the authorized capital stock, with par value, and one cent a share for all authorized shares without par value, but not less than $50. General Laws, Chapter 156, Section 53. 8 THE COMMONWEALTH OF MASSACHUSETTS Office of the Secretary of State FEDERAL IDENTIFICATION Michael Joseph Connolly, Secretary NO. 041072885 CERTIFICATE OF CHANGE OF DIRECTORS OR OFFICERS OF DOMESTIC BUSINESS CORPORATIONS General Laws, Chapter 136b, Section 53 I, Louis Rocca, Clerk or Assistant Clerk of the Tamor Plastics Corporation (Name of Corporation) located at 106 Carter Street, Leominster, MA 01453 (Business Address of Corporation: Number and Street, City or Town) hereby certify in compliance with the provisions of law, that a change in the officers of said corporation has been made, and the names of the present officers are as follows: ADDRESS GIVE NUMBER AND STREET EXPIRATION OF TITLE NAME OF DOMICILE TERM OF OFFICES =============================================================================== President Michael Tata 1100 Main Street Leominster, MA 01453 - ------------------------------------------------------------------------------- Treasurer Leonard J. Tocci 128 Legate Hill Road UNTIL Leominster, MA 01453 - ------------------------------------------------------------------------------- Clerk Louis Rocca 53 Highland Avenue SUCCESSORS Leominster, MA 01453 - ------------------------------------------------------------------------------- Directors Louise Rocca 53 Highland Avenue ARE Leominster, MA 01453 - ------------------------------------------------------------------------------- Michael Tata 1100 Main Street ELECTED Leominster, MA 01453 - ------------------------------------------------------------------------------- Leonard J. Tocci 128 Legate Hill Road Leominster, MA 01453 - ------------------------------------------------------------------------------- Richard M. Tocci 121 Scenic Drive Leominster, MA 01453 =============================================================================== SUBSCRIBED THIS 1st day of March 1989, UNDER THE PENALTIES OF PERJURY. SIGNATURE ___________________________/s/, Clerk or Assistant Clerk 9 THE COMMONWEALTH OF MASSACHUSETTS MICHAEL JOSEPH CONNOLLY Secretary of State FEDERAL IDENTIFICATION State House, Boston, Mass 02133 NO. 041072885 CERTIFICATE OF CHANGE OF DIRECTORS OR OFFICERS OF DOMESTIC BUSINESS CORPORATIONS General Laws, Chapter 156b, Section 53 I, Mark C. Bodanza, Clerk or Assistant Clerk of the Tamor Plastics Corporation (Name of Corporation) located at 106 Carter Street, Leominster, MA 01453 (Business Address of Corporation: Number and Street, City or Town) hereby certify in compliance with the provisions of law, that a change in the officers of said corporation has been made, and the names of the present officers are as follows: Address Give Number and Street Expiration of Title Name of Domicile Term of Offices =============================================================================== 128 Legate Hill President Leonard J. Tocci Leominster, MA 01453 until successors - ------------------------------------------------------------------------------- Treasurer Michael P. Tata 1100 Main Street are elected Leominster, MA 01453 - ------------------------------------------------------------------------------- Clerk Mark C. Bodanza 77 Merriam Avenue " " Leominster, MA 01453 - ------------------------------------------------------------------------------- Directors Lucille M. Tata 1100 Main Street " " Leominster, MA 01453 - ------------------------------------------------------------------------------- Michael P. Tata 1100 Main Street " " Leominster, MA 01453 - ------------------------------------------------------------------------------- Leonard J. Tocci 128 Legate Hill Road " " Leominster, MA 01453 - ------------------------------------------------------------------------------- Richard M. Tocci 121 Scenic Drive " " Leominster, MA 01453 =============================================================================== SUBSCRIBED THIS 1st day of March 1990,UNDER THE PENALTIES OF PERJURY. SIGNATURE ___________________________/s/, Clerk or Assistant Clerk Mark C. Bodanza 10 (1) Federal Information Number 04-1072885 The Commonwealth of Massachusetts Office of the Secretary of State Michael J. Connolly, Secretary One Ashburton Place, Boston, Massachusetts 02108 CERTIFICATE OF CHANGE OF DIRECTORS OR OFFICERS OF DOMESTIC BUSINESS CORPORATIONS General Laws, Chapter 156b, Section 53 (2) I, Mark C. Bodanza, Clerk or Assistant Clerk (3) of Tamor Plastics Corporation (Name of Corporation) (4) located at 106 Carter Street, Leominster, MA 01453 (Business Address of Corporation: Number and Street, City or Town) hereby certify in compliance with the provisions of law, that a change in the officers of said corporation has been made and the names of the present officers are as follows: (5B) Address Give Number & Street (5C) Expiration of Title (5A) Name of Domicile Term of Offices =============================================================================== President Leonard J. Tocci 128 Legate Hill Leominster, MA 01453 - ------------------------------------------------------------------------------- Treasurer Lucille M. Tata 2442 N.E. 2nd Street Lighthouse Point, FL 33064 - ------------------------------------------------------------------------------- Mark C. Bodanza 77 Merriam Avenue Clerk Leominster, MA 01453 UNTIL - ------------------------------------------------------------------------------- Leonard J. Tocci 128 Legate Hill Road Directors Leominster, MA 01453 SUCCESSORS Lucille M. Tata 121 Scenic Drive Leominster, MA 01453 ARE - ------------------------------------------------------------------------------- Richard M. Tocci 121 Scenic Drive ELECTED Leominster, MA 01453 - ------------------------------------------------------------------------------- Lawrence Tata 1100 Main Street Leominster, MA 01453 =============================================================================== (6) SUBSCRIBED THIS 18th day of June 1992, UNDER PENALTIES OF PERJURY. (7) SIGNATURE ______________________________/s/ CLERK PHOTOCOPIES WILL NOT BE ACCEPTED! INSTRUCTIONS ON BACK PAGE 11 ROOM 1717 THE COMMONWEALTH OF MASSACHUSETTS OFFICE OF THE SECRETARY OF STATE MICHAEL J. CONNOLLY, SECRETARY ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108 CERTIFICATE OF CHANGE OF FISCAL YEAR END FEDERAL IDENTIFICATION NUMBER 04 307 2885 ----------------------------- The undersigned Clerk of - -------------------------------------------------------------------------------- Tomar Plastics Corporation - -------------------------------------------------------------------------------- (EXACT Name of Corporation) located at 106 Carter Street, Leominster, MA 01453 - -------------------------------------------------------------------------------- (Business address of corporation in Massachusetts) hereby certifies that at a meeting duly held, the fiscal year end (i.e. the tax year end) of the corporation was changed to: the last day of the month of December SUBSCRIBED TO ON May 3, 1993 UNDER THE PENALTIES OF PERJURY BY ----------- (date) SIGNATURE_________________________ Clerk Mark C. Bodanza NO OFFICER OTHER THAN THE CLERK OR ASSISTANT CLERK MAY SIGN THIS CERTIFICATE. 12 (1) FEDERAL IDENTIFICATION THE COMMONWEALTH OF MASSACHUSETTS NUMBER OFFICE OF THE SECRETARY OF STATE 04 307 2885 MICHAEL J. CONNOLLY, SECRETARY ----------------------- ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108 CERTIFICATE OF CHANGE OF DIRECTORS OR OFFICERS OF DOMESTIC BUSINESS CORPORATIONS GENERAL LAWS, CHAPTER 156b, SECTION 53 (2) I, Mark C. Bodanza Clerk or Assistant Clerk (2A) (3) of Tamor Plastics Corporation 02108 (Name of Corporation) (4) located at 106 Carter Street, Leominster, MA 01453 --------------------------------------- (Business Address of Corporation, Number and Street, City or Town) hereby certify in compliance with the provisions of law, that a change in the officers of said corporation has been made and that the names of the present officers are as follows: =============================================================================== Title (5A) Name (5B) Address: (5C) Expiration of Give Number & Street Term of Office of Domicile - -------------------------------------------------------------------------------- President Leonard J. Tocci 128 Legate Hill Road Leominster, MA 01453 - -------------------------------------------------------------------------------- Treasurer Lucille M. Tata 2442 N.E. 25th Street Lighthouse Point, FL 33064 - -------------------------------------------------------------------------------- Clerk Mark C. Bodanza 77 Merriam Avenue UNTIL Leominster, MA 01453 SUCCESSORS ARE ELECTED - -------------------------------------------------------------------------------- Directors Leonard J. Tocci 122 Legate Hill Road Leominster, MA 01453 - -------------------------------------------------------------------------------- Richard M. Tocci 121 Scenic Drive Leominster, Ma 01453 - -------------------------------------------------------------------------------- Lawrence Tata 1100 Main Street Leominster, MA 01453 - -------------------------------------------------------------------------------- Francis S. Wyman 19 Water Street Leominster, MA 01453 ================================================================================ (6) SUBSCRIBED THIS 25th DAY OF MARCH, 1993, UNDER PENALTIES OF PERJURY. (7) SIGNATURE _________________ CLERK OR ASSISTANT CLERK PHOTOCOPIES WILL NOT BE ACCEPTED INSTRUCTIONS ON BACK PAGE 13 THE COMMONWEALTH OF MASSACHUSETTS MICHAEL JOSEPH CONNOLLY SECRETARY OF STATE ONE ASHBURTON PLACE BOSTON, MASS. 02108 ARTICLES OF CONSOLIDATION MERGER PURSUANT TO GENERAL LAWS, CHAPTER 156b, SECTION 78 The fee for filing this certificate is prescribed by General Laws, Chapter 156b, Section 114 Make checks payable to the Commonwealth of Massachusetts MERGER OF Victory Button Company, Inc. ---------------------------- Tamor Plastics Corp. ----------------------------- ----------------------------- ----------------------------- the constituent corporations into Tamor Plastics Corp. one of the constituent corporations* The undersigned officers of each of the constituent corporations certify under the penalties of perjury as follows: 1. An agreement of merger has been duly adopted in compliance with the requirements of subsections (b) and (c) of General Laws, Chapter 156b, Section 78, and will be kept as provided by subsection (d) thereof. The surviving corporation will furnish a copy of said agreement to any of its stockholders, or to any person who was a stockholder of any constituent corporation, upon written request and without charge. 2. The effective date of the merger determined pursuant to the agreement referred to in paragraph 1 shall be January 1, 1995. 3. (For a merger) **The following amendments to the articles of organization of the SURVIVING corporation have been affected pursuant to the agreement of merger referred to in paragraph 1. The restriction upon the transfer of shares as contained in the Articles of Organization of the surviving corporation dated March 4, 1947 is hereby deleted. "See attachment to paragraph no. 3A" *Delete the inapplicable words. **If there are no provisions state "NONE". NOTE: If the space provided under article 3 is insufficient, additions shall be set forth on separate 8 1/2 x 11 inch sheets of paper, leaving a left hand margin of at least 1 inch for binding. Additions more than one article may be continued on a single sheet so long as each article requiring each such addition is clearly indicated. 14 ATTACHMENT TO PARAGRAPH NO. 3A The purpose clause of the Surviving Corporation shall be amended to read as follows: (a) To manufacture, buy, sell, export, import, or in any manner trade or deal in or with plastic products, plastic materials, or in or with raw materials, moulds, forms, tools, machinery, equipment or factory space; to enter into and perform contracts of sale or purchase, employment, mortgage, pledge, borrowing, guaranty, or for rental or for services to be rendered or received, or any other manner of contract; to invent or design or contrive equipment, patterns, moulds, processes, formulae or sales devices, and to acquire, hold, sell, assign, or license , or do any act to protect any patent, copyright, or trade-name or trade-mark rights in or relating thereto; and to enter into any joint venture, combination, contract, or licensing arrangement with any other corporation or association for doing any of the foregoing; (b) To carry on any business permitted by the Laws of the Commonwealth of Massachusetts to a corporation organized under Chapter 156b of the Massachusetts General Laws. 15 4. The following information shall not for any purpose be treated as a permanent part of the ____________________ organization of the surviving corporation. (a) The post office address of the initial principal office of the surviving corporation in Massachusetts _________ is: 106 Carter Street, Leominster, MA ________. (b) The name, residence and post office address of each of the initial directors and President, Treasurer and Clerk of the resulting surviving corporation is as follows: Name Residence Post Office President Leonard J. Tocci 128 Legate Hill Road, Leominster, MA 01453 Treasurer Richard M. Tocci 121 Scenic Drive, Leominster, Ma 01453 Clerk Mark C. Bodanza 36 School Street, Leominster, MA 01453 Directors Leonard J. Tocci 122 Legate Hill Road, Leominster, MA 01453 Richard M. Tocci 121 Scenic Drive, Leominster, Ma 01453 Francis S. Wyman Newell Hill Road, Leominster, MA 01453 Lawrence Tata 1100 Main Street, Leominster, MA 01453 (c) The date initially adopted on which the fiscal year of the surviving corporation ends is December 31st (d) The date initially fixed in the by-laws for the Annual Meeting of stockholders of the surviving corporation is: Second Monday in January The undersigned officers of the several constituent corporations listed above further state under the penalties of perjury as to their respective corporations that the agreement of consolidation merger referred to in paragraph 1 has been duly executed on behalf of such corporation and duly approved by the stockholders of such corporation in the manner required by General Laws, Chapter 156b, Section 78. ______________________________ President Vice President ______________________________ Clerk Assistant Clerk of Victory Button Co., Inc._________________________________________ (name of constituent corporation) ______________________________ President Vice President ______________________________ Clerk Assistant Clerk of Tamor Plastics Corporation_________________________________________ (name of constituent corporation) *Delete the inapplicable words 16 THE COMMONWEALTH OF MASSACHUSETTS ARTICLES OF CONSOLIDATION/MERGER (GENERAL LAWS, CHAPTER 156b, SECTION 78) I hereby approve the within articles of merger and, the filing fee in the amount of $250.00 having been paid, said articles are deemed to have been filed with me this 15th day of December, 1994. Effective Date January 1, 1995 MICHAEL JOSEPH CONNOLLY - --------------- Secretary of State TO BE FILLED IN BY CORPORATION PHOTO COPY OF ARTICLES OF MERGER TO BE SENT TO: MARK C. BODANZA, ESQUIRE ------------------------ 36 SCHOOL STREET ---------------- LEOMINSTER, MA 01453 --------------------- TELEPHONE (508) 840-0500 ------------------------ COPY MAILED 17 FEDERAL IDENTIFICATION NO. 04-2073885 THE COMMONWEALTH OF MASSACHUSETTS WILLIAM FRANCIS GALVIN SECRETARY OF THE COMMONWEALTH ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 021080-1512 ARTICLES OF AMENDMENT (GENERAL LAWS, CHAPTER 156b, SECTION 72) We, Leonard J. Tocci Vice President, CEO and Mark C. Bodanza, Clerk of Tamor Plastics Corp. - --------------------- (Exact Name of corporation) located at: 106 Carter Street, Leominster, MA 01453 ---------------------------------------- (Street Address of corporation in Massachusetts) certify that these Articles of Amendment affecting articles numbered: Article ------- 1___________________________________________________________________________ (Number those articles 1,2,3,4,5, and/or 6 being amended) of the Articles of Organization were duly adopted at a meeting held on December 30, 1996, by vote of 38.771 shares of common of 38.771 shares - ------------------ ------ ------ ------ (type, class & series, if any) outstanding._______ shares of ______________________________________ of _______ shares outstanding and (type, class & series, if any) _________ shares of ______________ of ____________ shares outstanding. (type, class & series, if any) being at least two-thirds of each type, class or series outstanding and entitled to vote thereon and of each type, class or series of stock whose rights are adversely affected thereby: *Delete the inapplicable words. Delete the inapplicable clause. 1 For amendments adopted pursuant to Chapter 156b Section 70. 2 For amendments adopted pursuant to Chapter 156b Section 71. NOTE: If the space provided under any article or item on this form is insufficient, additions shall be set forth on one side only of separate 8 1/2 x 11 sheets of paper with a left margin of at least 1 inch. Additions to more than one article may be made on a single sheet so long as each article requiring such addition is clearly indicated. 18 To change the number of shares and the par value (if any) of any type, class or series of stock which the corporation is authorized to issue, fill in the following: The total presently authorized is: =============================================================================== WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS - ------------------------------------------------------------------------------- TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - ------------------------------------------------------------------------------- Common: Common: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Preferred: Preferred: - ------------------------------------------------------------------------------- =============================================================================== Change the total authorized to: =============================================================================== WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS - ------------------------------------------------------------------------------- TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - ------------------------------------------------------------------------------- Common: Common: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Preferred: Preferred: - ------------------------------------------------------------------------------- =============================================================================== 19 The name of the corporation shall be changed to: Tamor Corporation The foregoing amendment(s) will become effective when these Articles of Amendment are filed in accordance with General Laws, Chapter 156b, Section 6 unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date. Later effective date: January 1, 1997. SIGNED UNDER THE PENALTIES OF PERJURY, this 30th day of December, 1996. ____________________________________________ Vice President/CEO Leonard J. Tocci ____________________________________________, Clerk Mark C. Bodanza *Delete the inapplicable words. EX-3.1.5 6 ARTICLES OF INCORPORATION OF SHUTTERS 1 Exhibit 3.1.5 BCA-2.10 (Rev. Jul. 1984) File # - ------------------------ ------------------------ Submit In Duplicate This Space for Use by Payment must be made by JIM EDGAR Secretary of State Certified Check, SECRETARY OF STATE Cashier's Check, STATE OF ILLINOIS Date 2-18-88 Illinois Attorney's Check, Illinois C.P.A.'s ARTICLES OF Check of Money order INCORPORATION License Fee $ .50 payable to "Secretary or Franchise Tax $ 25.00 State" Filing Fee $ 75.00 DO NOT SEND CASH Clerk 100.50 - ------------------------ ------------------------- Pursuant to the provisions of "The Business Corporation Act of 1983" the undersigned incorporator(s) hereby adopt the following Articles of Incorporation. ARTICLE ONE The name of the corporation is Selfix Shutters Inc. ----------------------------------- (Shall contain the word "corporation" "company" "incorporated" ----------------------------------------------------------------- "limited" or an abbreviation thereof ARTICLE TWO The name and address of the initial registered agent and its registered office are: Registered Agent Jeffrey C. Rubenstein ------------------------------------------------------ First Name Middle Name Last Name Registered Office 30 South Wacker Drive Suite 2900 ------------------------------------------------------ Number Street Suite # (A.P.O. Box alone is not acceptable) Chicago, 60606-9611 Cook ------------------------------------------------------ City Zip Code County ARTICLE THREE The purpose or purposes for which the corporation is organized are: If not sufficient space to cover this point add one or more sheets of this size. To transact any or all lawful activities and businesses which are authorized by the Illinois Business Corporation Act of 1983, and to purchase or otherwise acquire, hold, use, own, mortgage, sell, convey, lease or otherwise dispose of and deal in real and personal property of every class and description or any interest therein. ARTICLE FOUR PARAGRAPH 1: THE AUTHORIZED SHARES SHALL BE: CLASS PAR VALUE PER SHARE NUMBER OF SHARES AUTHORIZED ----------------------------------------------------------------- Common $0.01 10,000 ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- PARAGRAPH 2: THE PREFERENCES, QUALIFICATIONS, LIMITATIONS, RESTRICTIONS AND THE SPECIAL OR RELATIVE RIGHTS IN RESPECT OF THE SHARES OF EACH CLASS ARE: IF NOT SUFFICIENT SPACE TO COVER THIS POINT ADD ONE OR MORE SHEETS OF THIS SIZE. 2 ARTICLE FIVE The number of shares to be issued initially, and the consideration to be received by the corporation therefor, are: Par Value Number of shares Consideration to be Class per share proposed to be issued received therefor ----------------------------------------------------------------- Common $0.01 1,000 $ 1,000.00 ----------------------------------------------------------------- $ ----------------------------------------------------------------- $ ----------------------------------------------------------------- $ ----------------------------------------------------------------- TOTAL $ 1,000.00 ----------- ARTICLE SIX OPTIONAL THE NUMBER OF DIRECTORS CONSTITUTING THE INITIAL BOARD OF DIRECTORS OF THE CORPORATION IS ______________, AND THE NAMES AND ADDRESSES OF THE PERSONS WHO ARE TO SERVE AS DIRECTORS UNTIL THE FIRST ANNUAL MEETING OF SHAREHOLDERS OR UNTIL THEIR SUCCESSORS BE ELECTED AND QUALIFY ARE: Name Residential Address ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ARTICLE SEVEN OPTIONAL (a) It is estimated that the value of all property to be owned by the corporation for the following year wherever located will be: $ ----------- (b) It is estimated that the value of the property to be located within the State of Illinois during the following year will be: $ ----------- (c) It is estimated that the gross amount of business which will be transacted by the corporation during the following year will be: $ ----------- (d) It is estimated that the gross amount of business which will be transacted from places of business in the State of Illinois during the following year will be: $ ----------- ARTICLE EIGHT OTHER PROVISIONS Attach a separate sheet of this size for any other provision to be included in the Articles of Incorporation. e.g., authorizing pre-emptive rights; denying cumulative voting: regulating internal affairs: voting majority requirements: fixing a duration other than perpetual; etc. NAMES & ADDRESSES OF INCORPORATORS The undersigned incorporator(s) hereby declare(s), under penalties of perjury, that the statements made in the foregoing Articles of Incorporation are true. Dated February 17, 1988 SIGNATURES AND NAMES POST OFFICE ADDRESS 1. 1. 30 South Wacker Drive - Suite 2900 ------------------------- ------------------------------------------ Signature Street Karen Gilbert Chicago, Illinois 60606-9611 ------------------------- ------------------------------------------ Name (Please print) City/Town State Zip 2. 2. ------------------------- ------------------------------------------ Signature Street ------------------------- ------------------------------------------ Name (Please print) City/Town State Zip 3. 3. ------------------------- ------------------------------------------ Signature Street ------------------------- ------------------------------------------ Name (Please print) City/Town State Zip (Signatures must be in ink on original document. Carbon copy xerox or rubber stamp signatures may only be used on conformed copies.) NOTE: If a corporation acts as incorporator, the name of the corporation and the state of incorporation shall be shown and the execution shall be by its President or Vice-President and verified by him, and attested by its Secretary or an Assistant Secretary. 3 ATTACHMENT TO THE ARTICLES OF INCORPORATION OF SELFIX SHUTTERS, INC. ARTICLE EIGHT a) The affirmative vote of the holders of a majority of the outstanding shares entitled to vote shall be required for the adoption or authorization of 1) an amendment to the articles of incorporation, 2) a plan of merger, consolidation or exchange, 3) the sale, lease, exchange or other disposition of all or substantially all of the property and assets of the corporation and 4) the voluntary dissolution of the corporation by vote of shareholders in accordance with Section 12.15 of the Illinois Business Corporation Act of 1983. b) Cumulative voting rights shall be denied in all circumstances. 4 File # 5497-126-5 ------------------------- This Space for Use by BCC-10.30 (Form Rev. Jan. 1986) Secretary of State JIM EDGAR Submit in Duplicate SECRETARY OF STATE Date STATE OF ILLINOIS Remit payment in Check or Money License Fee $ Order payable to "Secretary of Franchise Tax $ State". ARTICLES OF AMENDMENT Filing Fee $ DO NOT SENT CASH! Clerk ------------------------- Pursuant to the provisions of "The Business Corporation Act of 1983", the undersigned corporation hereby adopts these Articles of Amendment to its Articles of Incorporation. ARTICLE ONE The name of the corporation is Selfix Shutters, Inc. ------------------------------------ -----------------------------------------------------------(Note I) ARTICLE TWO The following amendment of the Articles of Incorporation was adopted on May 17, 1988 in the manner indicated below. ("X" one box only.) [ ] By a majority of the incorporators provided no directors were named in the articles of incorporation and no directors have been elected: or by a majority of the board of directors, in accordance with Section 1010 the corporation having issued no shares as of the time of adoption of this amendment; (Note 2) [ ] By a majority of the board of directors in accordance with Section 1015 shares having been issued but shareholder action not being required to the adoption of the amendment; (Note 3) [ ] By shareholders in accordance with Section 10.20, a resolution of the board of directors having been duly adopted and submitted to the shareholders. At a meeting of shareholders, not less than the minimum number of votes required by statute and by the articles of incorporation were voted in favor of the amendment; (Note 4) [ ] By the shareholders, in accordance with Section 10.20 and 7.10, a resolution of the board of directors having been duly adopted and submitted to the shareholders. A consent in writing has been signed by shareholders having not less than the minimum number of votes required by statute and by the articles of incorporation. Shareholders who have not consented in writing have been given notice in accordance with Section 7.10; (Note 4) [X] By the shareholders, in accordance with Sections 10.20 and 7.10, a resolution of the board of directors have been duly adopted and submitted to the shareholders. A consent in writing has been signed by all the shareholders entitled to vote on this amendment. (Note 4) (INSERT AMENDMENT) (Any article being amended is required to be set forth in its entirety.) (Suggested language for an amendment to change the corporate name is RESOLVED that the Articles of Incorporation be amended to read as follows:) RESOLVED, that Article One of the Articles of Incorporation be amended to read in its entirety as follows: - ------------------------------------------------------------------------------- (NEW NAME) The name of the corporation is Shutters, Inc. All changes other than name, include on page 2 (over) 5 Page 2 Resolution 6 PAGE 3 ARTICLE THREE The manner in which any exchange, reclassification or cancellation of issued shares or a reduction of the number of authorized shares of any class below the number of issued shares of that class, provided for or effected by this amendment, is as follows: (If not applicable, insert "No change") No Change ARTICLE FOUR (a) The manner in which said amendment effects a change in the amount of paid-in capital (paid-in capital replaces the terms Stated Capital and Paid in Surplus and is equal to the total of these accounts) is as follows: (If not applicable insert "No change") No Change (b) The amount of paid-in capital (Paid in Capital replaces the terms Stated Capital and Paid in Surplus and is equal to the total of these accounts) as changed by this amendment is as follows: (In not applicable insert "No Chnage") No Change Before Amendment After Amendment Paid-in Capital $ $ ---------------- --------------- (COMPLETE EITHER ITEM 1 OR 2 BELOW) (1) The undersigned corporation has caused these articles to be signed by its duly authorized officers, each of whom affirm, under penalties of perjury, that the facts stated herein are true. Date May 20, 1988 Selfix Shutters, Inc. ------------- ----------------------------------- (Exact Name of Corporation) attested by by ------------------------------ --------------------------------- (Signature of Secretary or (Signature of President or Assistant Secretary) Vice President) Charles F. Veseltis, Secretary Robert K. Manani, President ------------------------------ --------------------------------- (Type or Print Name and Title) (Type or Print Name and Title) (2) If amendment is authorized by the incorporators, the incorporators must sign below: OR If amendment is authorized by the directors and there are no officers then a majority of the directors of such directors as may be designated by the board, must sign below. The undersigned affirms, under penalties of perjury, that the facts stated herein are true. Dated , 19 -------- ---- - ------------------------------------- --------------------------------------- - ------------------------------------- --------------------------------------- - ------------------------------------- --------------------------------------- - ------------------------------------- --------------------------------------- 7 PAGE 4 NOTE AND INSTRUCTIONS NOTE 1: State the true exact corporate name as it appears on the records of the office of the Secretary of State BEFORE any amendment herein reported. NOTE 2: Incorporators are permitted to adopt amendments ONLY before any shares have been issued and before any directors have been named or elected. (Section 10.10) NOTE 3: Directors may adopt amendments without shareholder approval in only six instances as follows: (a) to remove the names and addresses of directors named in the articles of incorporation. (b) to remove the name and address of the initial registered agent and registered office provided a statement pursuant to Section 5.10 is also filed; (c) to split the issued whole shares and unissued authorized shares by multiplying them by a whole number so long as no class or series is adversely affected thereby; (d) to change the corporate name by substituting the word "corporation", "incorporated", "company", "limited", or the abbreviation "Corp", "inc." "Co", or "ltd." for a similar word or abbreviation in the name, or by adding a geographical attribution to the name. (e) to reduce the authorized shares of any class pursuant to a cancellation statement filed in accordance with Section 9.05. (f) to restate the articles of incorporation as currently amended. (Section 10.15) NOTE 4: All amendments not adopted under Section 10.10 or Section 10.15 require (1) that the board of directors adopt a resolution setting forth the proposed amendment and (2) that the shareholders approve the amendment. Shareholder approval may be (1) by vote at a shareholders' meeting (either annual or special) or (2) by consent, in writing, without a meeting. To be adopted, the amendment must receive the affirmative vote or consent of the holders of at least 2/3 of the outstanding shares entitled to vote on the amendment (but if class voting applies, then also at least 2/3 vote within each class is required). The articles of incorporation may supersede the 2/3 vote requirement by specifying any smaller or larger voter requirement not less than a majority of the outstanding shares entitled to vote and not less than a majority within each class when class voting applies. (Section 10.20) NOTE 5: When shareholder approval is by written consent, all shareholders must be given notice of the proposed amendment at least 5 days before the consent is signed. If the amendment is adopted, shareholders who have not signed the consent must be promptly notified of the passage of the amendment (Sections 7.10 & 10.20). 8 File # 5497-126-5 - -------------------------------- Form BCA-5.10 NFP-105.10 (Rev. April 1995) George H. Ryan Secretary of State Department of Business Services ------------------------- Springfield, IL 62755 SUBMIT IN DUPLICATE Telephone (217) 782-3647 - -------------------------------- FILED ------------------------- This space for use by June 21, 1996 Secretary of State STATE OF CHANGE GEORGE H. RYAN Date OF REGISTERED AGENT SECRETARY OF STATE -------------------------- AND/OR REGISTERED Filing Fee $5 OFFICE PAID JUL 08 1996 -------------------------- Approved: -------------------------- Remit payment in check or money order payable to "Secertary of State - ------------------------------------------------------------------------------- Type or print in black ink only See reverse side fo signatures(s) 1. CORPORATE NAME: Shutters, Inc. ------------------------------------------------------------ 2. STATE OR COUNTRY OF INCORPORATION: Illinois - ------------------------------------------------------------------------------- 3. Name and address of the registered agent and registered office as they appear on the records of the office of the Secretary of State (before change): Registered Agent Charles F. Vaselitis ---------------------------------------------------- First Name Middle Name Last Name Registered Office 4501 West 47th Street ----------------------------------------- Number Street Suite No. (A.P.O. Box alone is not acceptable) Chicago 60632 Cook ----------------------------------------------------------------------- City Zip Code County 4. Name and address of the registered agent and registered office shall be (after all changes herein reported): Registered Agent James E. Winslow ---------------------------------------------------- First Name Middle Name Last Name Registered Office 4501 West 47th Street ------------------------------------------ Number Street Suite No. (A.P.O. Box alone is not acceptable) Chicago 60632 Cook --------------------------------------------------------------------- City Zip Code County 9 5. The address of the registered office and the address of the business office of the registered agent, as changed, will be identical. 6. The above change was authorized by: ("X" one box only) a. [X] By resolution duly adopted by the board of directors. (Note 5) b. [ ] By action of the registered agent. (Note 6) NOTE: When the registered agent changes, the signatures of both president and secretary are required. 7. (If authorized by the board of directors, sign here. See Note 5) The undersigned corporation has caused this statement to be signed by its duly authorized officers, each of whom affirms, under penalties of perjury, that the facts stated herein are true. Date May 21 1996 Shutters, Inc. - ------------------------------------------------------------ ------------------------------------------------------- attested by By ----------------------------------------------- ------------------------------------------------------- (Signature of Secretary or Assistant Secretary) (Signature of President or Vice President James E. Winslow James R. Tennant, President ----------------------------------------------- ------------------------------- (Type or Print Name and Title) (Type or Print Name and Title)
(If change of registered office by registered agent, sign here. See Note 6) The undersigned, under penalties of perjury, affirms that the facts stated herein are true. Date June 6 19, 96 ------ ------- ------------------------------------------------ (Signature of Registered Agent of Record) NOTES 1. The registered office may, but need not be the same as the principal office of the corporation. However, the registered office and the office address of the registered agent must be the same. 2. The registered office must include a street or road address: a post office box number alone is not acceptable. 3. A corporation cannot act as its own registered agent. 4. If the registered office is changed from one county to another, then the corporation must file with the recorder of deeds of the new county a certified copy of the articles of incorporation and a certified copy of the statement of change of registered office. Such certified copies may be obtained ONLY from the Secretary of State. 5. Any change of registered agent must be by resolution adopted by the board of directors. This statement must then be signed by the president (or vice-president) and by the secretary (or an assistant secretary). 6. The registered agent may report a change of the registered office of the corporation for which he or she is registered agent. When the agent reports such a change, this statement must be signed by the registered agent. EX-3.2.2 7 BY-LAWS OF SELFIX 1 Exhibit 3.2.2 By-Laws of SELFIX, INC. (a Delaware Corporation) Adopted May 18, 1987 This Document Prepared By: Sachnoff Weaver & Rubenstein, Ltd. 30 South Wacker Drive Suite 2900 Chicago, Illinois 60606 (312) 207-1000 2 SELFIX, INC. BY-LAWS ARTICLE 1 OFFICES The principal office of the Corporation shall be in the State of Illinois, in the City of Chicago, County of Cook. The Corporation may have such other offices, either within or without the State of Illinois, as the business of the Corporation may require from time to time. The registered office of the Corporation required by the General Corporation Law of Delaware to be maintained in the State of Delaware shall be 229 South State Street, City of Dover, County of Kent. The name of the registered agent of the Corporation in Delaware shall be United States Corporation Company. ARTICLE 2 STOCKHOLDERS SECTION 2.1 ANNUAL MEETING. The annual meeting of the stockholders shall be held on the third Wednesday of May at such hour as shall be designated in the notice of the meeting for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. If the election of directors shall not be held on the day designated herein for any annual meeting, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a meeting of the stockholders as soon thereafter as conveniently may be. SECTION 2.2 SPECIAL MEETINGS. Special meetings of the stockholders may be called by the President, or by the Board of Directors, and shall be called by the President at the written request of the stockholders of record holding not less than one-third of all the outstanding voting shares of the Corporation entitled to vote at such meeting specifying the purposes for which such meeting shall be called. SECTION 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. If no designation is made, the place of meeting shall be the registered office of the Corporation in the State of Delaware. Page 1 3 SELFIX, INC. BY-LAWS SECTION 2.4 NOTICE OF MEETING. Written or printed notice stating the place, day and hour of the meeting, and in the case of a special meeting, the purposes for which the meeting is called, shall be delivered not less than ten nor more than sixty days before the date of the meeting, or in the case of a merger or consolidation not less than twenty nor more than sixty days before the meeting, either personally or by mail, by or at the direction of the President or the Secretary to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the stockholder at his address as it appears on the records of the Corporation, with postage thereon prepaid. Whenever notice is required to be given under any provision of these By-Laws or of the certificate of incorporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. Whenever notice is required to be given under these By-Laws or the certificate of incorporation to any stockholder to whom (i) notice of two consecutive annual meetings, and all notices of meetings or of the taking of action by written consent without a meeting to such person during the period between such two consecutive annual meetings, or (ii) all, and at least two, payments (if sent by first class mail) of dividends or interest on securities during a twelve month period, have been mailed addressed to such person at his address as shown on the records of the Corporation and have been returned undeliverable, the giving of such notice to such person shall not be required. Any meeting which shall be taken or held without notice to such person shall have the same force and effect as if such notice had been duly given. If any such person shall deliver to the Corporation a written notice setting forth his then current address, the requirement that notice be given to such person shall be reinstated. SECTION 2.5 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or stockholders entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the Board of Directors of the Corporation may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, sixty days. If the stock transfer books shall be closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten days, or in the case of a merger or consolidation, at least twenty days, immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date in any case to be not more than sixty days and, for a meeting of stockholders, not less than ten days or in the case of a Page 2 4 SELFIX, INC. BY-LAWS merger or consolidation, not less than twenty days, immediately preceding such meeting. If the stock transfer books are not closed and no record date is fixed for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders, or stockholders entitled to receive payment of a dividend, as the case may be, the record date for such determination of stockholders shall be: (a) the day next preceding the date on which notice of the meeting is mailed, or (b) the date on which the resolution of the Board of Directors declaring such dividend is adopted. SECTION 2.6 VOTING LISTS. The officer or agent having charge of the transfer books for shares of the Corporation shall make at least ten days before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten days prior to such meeting, shall be kept on file at the registered office of the Corporation and shall be subject to inspection by any stockholder for any purpose germane to the meeting at any time during usual hours. Such list shall also be produced and kept open at the time and place of the meeting and during the whole time of the meeting shall be subject to the inspection of any stockholder who is present. The original share ledger or transfer book, or a duplicate thereof kept in this State, shall be prima facie evidence as to the identity of the stockholders entitled to examine such list or share ledger or transfer book or to vote at any meetings of stockholders. SECTION 2.7 QUORUM. One-third of the outstanding shares of the Corporation, represented in person or by proxy, shall constitute a quorum at any meeting of stockholders, unless the representation of a larger number be required by law, and, in that case, the representation of the number so requested shall constitute a quorum; provided, that if less than a quorum is represented at said meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice other than announcement at the meeting. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting in person or by proxy shall be the act of the stockholders, unless the vote of a greater number or voting by classes is required by the Delaware General Corporation Law or the certificate of incorporation. SECTION 2.8 PROXIES. At all meetings of stockholders, a stockholder may vote by proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact and delivered to inspectors at the meeting. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meetings. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. SECTION 2.9 VOTING OF SHARES. Each outstanding share, regardless of class, shall be entitled to one vote upon each matter submitted to vote at a meeting of stockholders. Page 3 5 SELFIX, INC. BY-LAWS SECTION 2.10 INSPECTORS. At each meeting of the stockholders, the polls shall be opened and closed, the proxies and ballots shall be received and taken in charge, and all questions touching the qualification of voters and the validity of proxies and the acceptance or rejection of votes, shall be decided by two inspectors. Such inspectors shall be appointed by the Board of Directors before or at the meeting, or, if no such appointment shall have been made, then by the presiding officer at the meeting. If for any reason either of the inspectors previously appointed shall fail to attend or refuse or be unable to serve, inspectors shall be appointed in like manner in their place. SECTION 2.11 VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares standing in the name of a deceased person may be voted by his administrator or executor, either in person or by proxy. Shares standing in the name of a guardian, conservator or trustee may be voted by such fiduciary, either in person or by proxy, but no guardian, conservator or trustee shall be entitled, as such fiduciary, to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. A stockholder whose shares are pledged shall be entitled to vote such shares unless and until in the transfer by the pledgor on the books of the Corporation the pledgor has expressly empowered the pledgee to vote thereon, in which case only the pledgee or his proxy may represent such stock and be entitled to vote thereon. Shares of its own stock belonging to the Corporation shall neither directly nor indirectly be voted or counted for quorum purposes at any meeting. SECTION 2.12 VOTING BY BALLOT. The votes for directors, and, upon demand of any stockholder or where required by law the votes on any question before the meeting, shall be by ballot. On all other questions the voting may be viva voce. Page 4 6 SELFIX, INC. BY-LAWS ARTICLE 3 DIRECTORS SECTION 3.1 GENERAL POWERS. The business and affairs of the Corporation shall be managed by or under the direction of its Board of Directors. SECTION 3.2 NUMBER, TENURE AND QUALIFICATION. The number of directors of the Corporation shall be six. The number of directors may be increased or decreased from time to time by resolution of the Board of Directors. The directors of the Corporation shall be elected by ballot annually by the stockholders and shall hold office until the next annual meeting of stockholders or until his successor shall have been duly elected and qualified. Directors need not be residents of Delaware or stockholders of the Corporation. SECTION 3.3 REGULAR MEETINGS. A regular meeting of the Board of Directors shall be held without other notice than this By-Law, immediately after, and at the same place as, the annual meeting of stockholders. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Delaware, for the holding of additional regular meetings without other notice than such resolution. SECTION 3.4 SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the President or one-third of the Directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Delaware, as the place for holding any special meeting of the Board of Directors called by them. SECTION 3.5 NOTICE. Notice of any special meeting shall be given at least two days previous thereto by written notice delivered personally or mailed to each director at his business address, or by telegram. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered with the telegram is delivered to the telegraph company. Any director may waive notice of any meeting. The attendance of a director at any 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 is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special __________________________ [PAGE 6 IS MISSING] SECTION 3.6 QUORUM. Page 5 7 SELFIX, INC. BY-LAWS SECTION 3.7 MANNER OF ACTING. SECTION 3.8 VACANCIES. SECTION 3.9 COMPENSATION. SECTION 3.10 INFORMAL ACTION BY BOARD OF DIRECTORS. SECTION 3.11 PARTICIPATION BY CONFERENCE TELEPHONE. SECTION 3.12 COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board, designate an executive committee and one or more other committees, and may determine the quorum thereof, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, 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. Any such committee, to the extent provided in the resolution of the Board of Directors, or in these By-Laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation by the Board of Directors, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the By-Laws of the Corporation; and, unless the Board of Directors, By-Laws or Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a Certificate of Ownership and Merger. ARTICLE 4 OFFICERS SECTION 4.1 NUMBER. The principal officers of the Corporation shall be a Chairman of the Board of Directors and a President, both of whom shall be directors, and a Page 6 8 SELFIX, INC. BY-LAWS Treasurer, a Comptroller and a Secretary, and such Vice Presidents (the number thereof to be determined by the Board of Directors)., Assistant Treasurers, Assistant Secretaries or other officers as may be elected or appointed by the Board of Directors. Any two or more offices may be held by the same person, except that the office of President and Secretary may not be held by the same person. SECTION 4.2 ELECTION AND TERMS OF OFFICE. The Chairman of the Board, the Vice Chairman and the President of the Corporation shall be elected by the Board of Directors at the first meeting of the Board of Directors; the other officers may be appointed by the Board of Directors. If the election or appointment of officers shall not be held at such meeting, such election or appointment shall be held as soon thereafter as conveniently may be. Each officer shall hold office until his successor shall have been duly elected or appointed and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Election or appointment of an officer or agent shall not of itself create contract rights. In its discretion, the Board of Directors may leave unfilled any office except those of President, Treasurer and Secretary. SECTION 4.3 REMOVAL. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 4.4 VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, or because of the creation of an office, may be filled by the Board of Directors for the unexpired portion of the term at any time. SECTION 4.5 THE CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors shall be the chief executive officer of the Corporation and, subject to the Board of Directors and the executive committee, shall be in general charge of the affairs of the Corporation. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors. SECTION 4.6 THE PRESIDENT. The President shall be the chief operating officer of the Corporation and shall, subject to the Chairman of the Board of Directors and the Board itself, have general charge of the business and affairs of the Corporation. He shall keep the Board of Directors and the executive committee and the chairman of each fully informed and shall freely consult them concerning the business of the Corporation in his charge. He may sign, with the Secretary or any other officer of the Corporation thereunto authorized by the Board of Directors, certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has Page 7 9 SELFIX, INC. BY-LAWS authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of President and such other duties as may be prescribed by the chairman of the Board of Directors or the Board itself from time to time. SECTION 4.7 THE VICE PRESIDENTS. In the absence of the President or in the event of his inability or refusal to act, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated, or in the absence of any designation, then in the order of their election) 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. Any Vice President may sign, with the Secretary or an Assistant Secretary, certificates for shares of the Corporation, and shall perform such other duties as from time to time may be assigned to him by the President or by the Board of Directors. SECTION 4.8 THE TREASURER. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine. He shall: (a) have charge and custody of and be responsible for all funds and securities of the Corporation, receive and give receipts for moneys due and payable to the Corporation from any source whatsoever, and deposit all such moneys in the name of the Corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Article 6 of these By-Laws; (b) in general perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the President or by the Board of Directors. SECTION 4.9 THE CONTROLLER. The controller shall be the chief accounting officer of the Corporation. He shall keep or cause to be kept all books of accounts and accounting records of the Corporation, and shall prepare or have prepared appropriate financial statements for submission to the Board of Directors, executive committee, and stockholders. He shall perform all other duties incident to his office. SECTION 4.10 THE SECRETARY. The Secretary shall: (a) keep the minutes of the stockholders' and of the Board of Directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these By-Laws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all certificates for shares prior to the issue thereof and to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these By- Page 8 10 SELFIX, INC. BY-LAWS Laws; (d) keep a register of the post office address of each stockholder which shall be furnished to the Secretary by such stockholder; (e) sign with the President, or a Vice President, certificates for shares of the Corporation, the issue of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the Corporation; and (g) in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President or by the Board of Directors. SECTION 4.11 ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their $100duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Secretaries as thereunto authorized by the Board of Directors may sign with the President or a Vice President certificates for shares of the Corporation, the issue of which shall have been authorized by a resolution of $100the Board of Directors. The Assistant Treasurers and Assistant Secretaries, in g$100eneral, shall perform such duties as shall be assigned to them by the Treasurer or the Secretary, respectively, or by the President or the Board of Directors. SECTION 4.12 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. In the event that the Internal Revenue Service shall deem any compensation (including any fringe benefit) paid to an officer to be unreasonable or excessive, such officer must repay to the Corporation the excess over what is determined by the Internal Revenue Service to be reasonable compensation, with interest on such excess at the rate of nine percent (9%) per annum, within 90 days after notice from the Corporation. ARTICLE 5 INDEMNIFICATION AND INSURANCE SECTION 5.1 RIGHT TO INDEMNIFICATION. 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 (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, 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 or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is Page 9 11 SELFIX, INC. BY-LAWS alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by and in the manner set forth in the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA exercise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except a provided in Section 5.2 hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. SECTION 5.2 RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 5.1 of this Article is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of Page 10 12 SELFIX, INC. BY-LAWS such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard or conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. SECTION 5.3 NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. SECTION 5.4 INSURANCE. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. SECTION 5.5 CONSOLIDATION. For the purposes of this Article, references to "the Corporation" include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents, so that any person who is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another 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 with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. For the purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any 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 Page 11 13 SELFIX, INC. BY-LAWS 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. ARTICLE 6 CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 6.1 CONTRACTS. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. SECTION 6.2 LOANS. No loans shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. SECTION 6.3 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers, 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. SECTION 6.4 DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositaries as the Board of Directors may select. ARTICLE 7 CERTIFICATES FOR SHARES AND THEIR TRANSFER SECTION 7.1 CERTIFICATES FOR SHARES. Certificates representing shares of the Corporation shall be in such form not inconsistent with the certificate of incorporation as may be determined by the Board of Directors. No certificate shall be valid unless signed by the President or a Vice President and by the Secretary or an Assistant Secretary, but where such certificate is signed by a registrar other than the Corporation or its employee, the signatures of any such President, Vice President, Secretary or Assistant Secretary and, where authorized by resolution of the Board of Directors, any transfer agent may be facsimiles. In Page 12 14 SELFIX, INC. BY-LAWS case any such President, Vice President, Secretary or Assistant Secretary or transfer agent of the Corporation who shall have signed, or whose facsimile signature or signatures shall have been placed upon any certificate shall cease to serve in such capacity before such certificate shall have been issued, such certificate may be issued by the corporation with the same effect as thought the person or persons who signed such certificate, or whose facsimile signature or signatures shall have been placed thereon, were continuing to serve in such capacities at the date of issue. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the Corporation. All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefore upon such terms and indemnity to the Corporation as the Board of Directors may prescribe. SECTION 7.2 TRANSFER OF SHARES. Transfers of shares of the Corporation shall be made only on the books of the Corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. SECTION 7.3 REGULATIONS. The Board of Directors, and the executive committee also, shall have power and authority to make all such rules and regulations as respectively they may deem expedient, concerning the issue, transfer and registration of certificates for shares of the capital stock of the Corporation. The Board of Directors or the executive committee may appoint one or more transfer agents or assistant transfer agents and one or more registrars or transfers, and may require all stock certificates to bear the signature of a transfer agent or assistant transfer agent and a registrar of transfers. The Board of Directors or the executive committee may at any time terminate the appointment of any transfer agent or any assistant transfer agent or any registrar of transfers. SECTION 7.4 FACSIMILE SIGNATURES. In addition to the provisions for the use of facsimile signatures elsewhere specifically authorized in these By-Laws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or the executive committee. Page 13 15 SELFIX, INC. BY-LAWS ARTICLE 8 FISCAL YEAR The fiscal year of the Corporation shall begin on the first day of June in each year and end on the last day of May in each year. ARTICLE 9 DIVIDENDS The Board of Directors may from time to time, declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Certificate of Incorporation. ARTICLE 10 SEAL The Board of Directors shall provide a suitable seal which shall have inscribed thereon the name of the Corporation, which seal shall be in charge of the Secretary. If and when so directed by the Board of Directors or by the executive committee, if any, duplicates of the seal may be kept and be used by the Treasurer or by any Assistant Secretary or Assistant Treasurer. ARTICLE 11 WAIVER OF NOTICE Whenever any notice whatever is required to be given under the provisions of these By-Laws or under the provisions of the Certificate of Incorporation or under the provisions of the Delaware General Corporation law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Page 14 16 SELFIX, INC. BY-LAWS ARTICLE 12 AMENDMENTS TO THE BY-LAWS These By-Laws may be altered, amended or repealed and new By-Laws may be adopted at any meeting of the Board of Directors of the Corporation by a majority of the directors present at the meeting, subject to the power of the stockholders to alter or repeal By-Laws made by the Board of Directors. Page 15 17 SELFIX, INC. BY-LAWS Amended 6/29/87 ARTICLE 2 STOCKHOLDERS SECTION 2.2 SPECIAL MEETINGS. Special meetings of the Stockholders may be called by the President, or by the Board of Directors, and shall be called by the President at the written request of the stockholders of record holding not less than ten percent (10%) of all the outstanding voting shares of the Corporation entitled to vote at such meeting specifying the purposes for which such meeting shall be called. 18 SELFIX, INC. BY-LAWS Amended 6/29/87 ARTICLE 5 INDEMNIFICATION AND INSURANCE SECTION 5.1 RIGHT TO INDEMNIFICATION. 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 (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, 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 or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by and in the manner set forth in the Delaware General Corporation Law, as the same exists, against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 5.2 hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. SECTION 5.2 RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 5.1 of this Article is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter 19 SELFIX, INC. BY-LAWS bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard or conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. 20 SELFIX, INC. BY-LAWS TABLE OF CONTENTS -----------------
PAGE ---- ARTICLE 1 OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE 2 STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 2.1 ANNUAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 2.2 SPECIAL MEETINGS. . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 2.3 PLACE OF MEETING. . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 2.4 NOTICE OF MEETING . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 2.5 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. . . . . . 2 SECTION 2.6 VOTING LISTS. . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 2.7 QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 2.8 PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 2.9 VOTING OF SHARES. . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 2.10 INSPECTORS . . . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 2.11 VOTING OF SHARES BY CERTAIN HOLDERS. . . . . . . . . . . . . 4 SECTION 2.12 VOTING BY BALLOT . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE 3 DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.1 GENERAL POWERS. . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.2 NUMBER, TENURE AND QUALIFICATION. . . . . . . . . . . . . . . 5 SECTION 3.3 REGULAR MEETINGS. . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.4 SPECIAL MEETINGS. . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.5 NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.6 QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.7 MANNER OF ACTING. . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 3.8 VACANCIES . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 3.9 COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 3.10 INFORMAL ACTION BY BOARD OF DIRECTORS. . . . . . . . . . . . 6 SECTION 3.11 PARTICIPATION BY CONFERENCE TELEPHONE. . . . . . . . . . . . 6 SECTION 3.12 COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE 4 OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 4.1 NUMBER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 4.2 ELECTION AND TERMS OF OFFICE. . . . . . . . . . . . . . . . . 7 SECTION 4.3 REMOVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
21 SELFIX, INC. BY-LAWS TABLE OF CONTENTS ----------------- (CONTINUED)
PAGE ---- SECTION 4.4 VACANCIES. . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 4.5 THE CHAIRMAN OF THE BOARD. . . . . . . . . . . . . . . . . . 7 SECTION 4.6 THE PRESIDENT. . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 4.7 THE VICE PRESIDENTS. . . . . . . . . . . . . . . . . . . . . 8 SECTION 4.8 THE TREASURER. . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 4.9 THE CONTROLLER . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 4.10 THE SECRETARY . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 4.11 ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. . . . . . . 9 SECTION 4.12 SALARIES. . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE 5 INDEMNIFICATION AND INSURANCE. . . . . . . . . . . . . . . . . . . 9 SECTION 5.1 RIGHT TO INDEMNIFICATION . . . . . . . . . . . . . . . . . . 9 SECTION 5.2 RIGHT OF CLAIMANT TO BRING SUIT. . . . . . . . . . . . . . . 10 SECTION 5.3 NON-EXCLUSIVITY OF RIGHTS. . . . . . . . . . . . . . . . . . 11 SECTION 5.4 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 5.5 CONSOLIDATION. . . . . . . . . . . . . . . . . . . . . . . . 11 ARTICLE 6 CONTRACTS, LOANS, CHECKS AND DEPOSITS. . . . . . . . . . . . . . . 12 SECTION 6.1 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 6.2 LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 6.3 CHECKS, DRAFTS, ETC. . . . . . . . . . . . . . . . . . . . . 12 SECTION 6.4 DEPOSITS . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE 7 CERTIFICATES FOR SHARES AND THEIR TRANSFER . . . . . . . . . . . . 12 SECTION 7.1 CERTIFICATES FOR SHARES. . . . . . . . . . . . . . . . . . . 12 SECTION 7.2 TRANSFER OF SHARES . . . . . . . . . . . . . . . . . . . . . 13 SECTION 7.3 REGULATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 7.4 FACSIMILE SIGNATURES . . . . . . . . . . . . . . . . . . . . 13 ARTICLE 8 FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE 9 DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE 10 SEAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE 11 WAIVER OF NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . 14
22 SELFIX, INC. BY-LAWS TABLE OF CONTENTS ----------------- (CONTINUED)
PAGE ---- ARTICLE 12 AMENDMENTS TO THE BY-LAWS . . . . . . . . . . . . . . . . . . . . 15
EX-3.2.3 8 BY-LAWS OF SEYMOUR HOUSEWARES 1 Exhibit 3.2.3 BY-LAWS OF SEYMOUR HOUSEWARES CORPORATION A DELAWARE CORPORATION ARTICLE I OFFICES Section 1. Registered Office. The registered office of the corporation in the State of Delaware shall be located at Prentice Hall Corporation System, Inc., 32 Loockerman Square, Suite L-100, Dover, Delaware, County of Kent, 19901. The name of the corporation's registered agent at such address shall be Prentice-Hall Corporation System, Inc. The registered office and/or registered agent of the corporation may be changed from time to time by action of the board of directors. Section 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 MEETINGS OF STOCKHOLDERS Section 1. Place and Time of Meetings. An annual meeting of the stockholders shall be held each year within one hundred twenty (120) days after the close of the immediately preceding fiscal year of the corporation for the purpose of electing directors and conducting such other proper business as may come before the meeting. The date, time and place of the annual meeting shall be determined by the president of the corporation; provided, that if the president does not act, the board of directors shall determine the date, time and place of such meeting. Section 2. Special Meetings. Special meetings of stockholders may be called for any purpose and may be held at such time and place, within or without the State of Delaware, as shall be stated in a notice of meeting or in a duly executed waiver of notice thereof. Section 3. Place of Meetings. The board of directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special 2 meeting be otherwise called, the place of meeting shall be the principal executive office of the corporation. Section 4. Notice. Whenever stockholders are required or permitted to take action at a meeting, written or printed notice stating the place, date, time, and, in the case of special meetings, the purpose or purposes, of such meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting. All such notices shall be delivered, either personally or by mail, by or at the direction of the board of directors, the president or the secretary, and if mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the stockholder at his, her or its address as the same appears on the records of the corporation. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Section 5. Stockholders List. The officer having charge of the stock ledger of the corporation shall make, at least ten (10) days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting arranged in alphabetical order, showing the address of each stockholder 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. Section 6. Quorum. The holders of a majority of the outstanding shares of capital stock, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders, except as otherwise provided by statute or by the certificate of incorporation. If a quorum is not present, the holders of a majority of the shares present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another time and/or place. Section 7. Adjourned Meetings. When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. 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. Section 8. Vote Required. When a quorum is present, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the question is one upon which 2 3 by express provisions of an applicable law or of the certificate of incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 9. Voting Rights. Except as otherwise provided by the General Corporation Law of the State of Delaware or by the certificate of incorporation of the corporation or any amendments thereto and subject to Section 3 of Article VI hereof, every stockholder shall at every meeting of the stockholders be entitled to one (1) vote in person or by proxy for each share of common stock held by such stockholder. Section 10. Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. Any proxy is suspended when the person executing the proxy is present at a meeting of stockholders and elects to vote, except that when such proxy is coupled with an interest and the fact of the interest appears on the face of the proxy, the agent named in the proxy shall have all voting and other rights referred to in the proxy, notwithstanding the presence of the person executing the proxy. At each meeting of the stockholders, and before any voting commences, all proxies filed at or before the meeting shall be submitted to and examined by the secretary or a person designated by the secretary, and no shares may be represented or voted under a proxy that has been found to be invalid or irregular. Section 11. Action by Written Consent. Unless otherwise provided in the certificate of incorporation, 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 such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken and bearing the dates of signature of the stockholders who signed the consent or consents, 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 shall be delivered to the corporation by delivery to its registered office in the State of Delaware, or the corporation's principal place of business, or an officer or agent of the corporation having custody of the book or books in which proceedings of meetings of the stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested provided, however, that no consent or consents delivered by certified or registered mail shall be deemed delivered until such consent or consents are actually received at the registered office. All consents properly delivered in accordance with this section shall be deemed to be recorded when so delivered. No written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered to the corporation as required by this section, written consents signed by the holders of a sufficient number of 3 4 shares to take such corporate action are so recorded. 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. Any action taken pursuant to such written consent or consents of the stockholders shall have the same force and effect as if taken by the stockholders at a meeting thereof. ARTICLE III DIRECTORS Section 1. General Powers. The business and affairs of the corporation shall be managed by or under the direction of the board of directors. Section 2. Number, Election and Term of Office. The number of directors which shall constitute the first board shall be four (4). Thereafter, the number of directors shall be established from time to time by resolution of the board. The directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote in the election of directors. The directors shall be elected in this manner at the annual meeting of the stockholders, except as provided in Section 4 of this Article III. Each director elected shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided. Section 3. Removal and Resignation. Any director or the entire board of directors may be removed at any time, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Whenever the holders of any class or series are entitled to elect one or more directors by the provisions of the corporation's certificate of incorporation, the provisions of this section shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. Any director may resign at any time upon written notice to the corporation. Section 4. Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director. Each director so chosen shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as herein provided. Section 5. Annual Meetings. The annual meeting of each newly elected board of directors shall be held without other notice than this by-law immediately after, and at the same place as, the annual meeting of stockholders. Section 6. Other Meetings and Notice. Regular meetings, other than the annual meeting, of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of the board. Special meetings of the board 4 5 of directors may be called by or at the request of the president on at least twenty-four (24) hours notice to each director, either personally, by telephone, by mail, or by telegraph. Section 7. Quorum, Required Vote and Adjournment. A majority of the total number of directors shall constitute a quorum for the transaction of business. The vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the board of directors. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 8. Committees. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation, which to the extent provided in such resolution or these by-laws shall have and may exercise the powers of the board of directors in the management and affairs of the corporation except as otherwise limited by law. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. Section 9. Committee Rules. Each committee of the board of directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the board of directors designating such committee. Unless otherwise provided in such a resolution, the presence of at least a majority of the members of the committee shall be necessary to constitute a quorum. In the event that a member and that member's alternate, if alternates are designated by the board of directors as provided in Section 8 of this Article III, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in place of any such absent or disqualified member. Section 10. Communications Equipment. Members of the board of directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in the meeting pursuant to this section shall constitute presence in person at the meeting. Section 11. Waiver of Notice and Presumption of Assent. Any member of the board of directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the 5 6 meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action. Section 12. Action by Written Consent. Unless otherwise restricted by the certificate of incorporation, 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. ARTICLE IV OFFICERS Section 1. Number. The officers of the corporation shall be elected by the board of directors and shall consist of a chairman, president, one or more secretaries, and such other officers and assistant officers as may be deemed necessary or desirable by the board of directors. Any number of offices may be held by the same person. In its discretion, the board of directors may choose not to fill any office for any period as it may deem advisable, except that the offices of president and secretary shall be filled as expeditiously as possible. Section 2. Election and Term of Office. The officers of the corporation shall be elected annually by the board of directors at its first meeting held after each annual meeting of stockholders or as soon thereafter as conveniently may be. The president shall be elected annually by the board of directors at the first meeting of the board of directors held after each annual meeting of stockholders or as soon thereafter as conveniently may be. The president shall appoint other officers to serve for such terms as he or she deems desirable. Vacancies may be filled or new offices created and filled at any meeting of the board of directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided. Section 3. Removal. Any officer or agent elected by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Section 4. Vacancies. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term by the board of directors then in office. Section 5. Compensation. Compensation of all officers shall be fixed by the board of directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a director of the corporation. 6 7 Section 6. The President. The president shall be the chief executive officer of the corporation; shall preside at all meetings of the stockholders and board of directors at which he is present; subject to the powers of the board of directors, shall have general charge of the business, affairs and property of the corporation, and control over its officers, agents and employees; and shall see that all orders and resolutions of the board of directors are carried into effect. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. The president shall have such other powers and perform such other duties as may be prescribed by the board of directors or as may be provided in these by-laws. Section 7. Vice-presidents. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by the board of directors or by the president, shall, in the absence or disability of the president, act with all of the powers and be subject to all the restrictions of the president. The vice-presidents shall also perform such other duties and have such other powers as the board of directors, the president or these by-laws may, from time to time, prescribe. Section 8. The Secretary and Assistant Secretaries. The secretary shall attend all meetings of the board of directors, all meetings of the committees thereof and all meetings of the stockholders and record all the proceedings of the meetings in a book or books to be kept for that purpose. Under the president's supervision, the secretary shall give, or cause to be given, all notices required to be given by these by-laws or by law; shall have such powers and perform such duties as the board of directors, the president or these by-laws may, from time to time, prescribe; and shall have custody of the corporate seal of the corporation. The secretary, or an assistant secretary, shall have authority to affix the corporate seal to any instrument requiring it and when so affixed, it 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 by his signature. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors, the president, or secretary may, from time to time, prescribe. Section 9. The Treasurer and Assistant Treasurer. The treasurer shall have the custody of the corporate funds and securities; shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation; shall deposit all monies and other valuable effects in the name and to the credit of the corporation as may be ordered by the board of directors; shall cause the funds of the corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the president and the board of directors, at its regular meeting or when the board of directors so requires, an account of the corporation; shall have such powers and perform such duties as the board of directors, the president or these by-laws may, from time to time, prescribe. If required by the board of directors, the treasurer shall give the corporation a bond (which shall 7 8 be rendered every six (6) years) in such sums and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of the office of treasurer and for the restoration to the corporation, in case of death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in the possession or under the control of the treasurer belonging to the corporation. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. The assistant treasurers shall perform such other duties and have such other powers as the board of directors, the president or treasurer may, from time to time, prescribe. Section 10. Other Officers, Assistant Officers and Agents. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these by-laws, shall have such authority and perform such duties as may from time to time be prescribed by resolution of the board of directors. Section 11. Absence or Disability of Officers. In the case of the absence or disability of any officer of the corporation and of any person hereby authorized to act in such officer's place during such officer's absence or disability, the board of directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person whom it may select. ARTICLE V INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS Section 1. Nature of Indemnity. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he, or a person of whom he is the legal representative, is or was a director of officer, of the corporation or is or was serving at the request of the corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by the corporation to the fullest extent which it is empowered to do so unless prohibited from doing so by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment) against all expense, liability and loss (including attorneys' fees actually and reasonably incurred by such person in connection with such proceeding) and such indemnification shall inure to the benefit of his heirs, executors and administrators; provided, however, that, except as provided in Section 2 hereof, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the board of directors of the corporation. The right to indemnification conferred in this Article V shall be a contract right and, subject to Sections 2 8 9 and 5 hereof, shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition. The corporation may, by action of its board of directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers. Section 2. Procedure for Indemnification of Directors and Officers. Any indemnification of a director or officer of the corporation under Section 1 of this Article V or advance of expenses under Section 5 of this Article V shall be made promptly, and in any event within thirty (30) days, upon the written request of the director of officer. If a determination by the corporation that the director or officer is entitled to indemnification pursuant to this Article V is required, and the corporation fails to respond within sixty (60) days to a written request for indemnity, the corporation shall be deemed to have approved the request. If the corporation denies a written request for indemnification or advancing of expenses, in whole or in part, or if payment in full pursuant to such request is not made within thirty (30) days, the right to indemnification or advances as granted by this Article V shall be enforceable by the director or officer in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the corporation. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 3. Article Not Exclusive. The rights to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article V shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the certificate of incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. Section 4. Insurance. The corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the corporation 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 or her and incurred by him or her in any such capacity, 9 10 whether or not the corporation would have the power to indemnify such person against such liability under this Article V. Section 5. Expenses. Expenses incurred by any person described in Section 1 of this Article V in defending a proceeding shall be paid by the corporation in advance of such proceeding's final disposition unless otherwise determined by the board of directors in the specific case upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. Section 6. Employees and Agents. Persons who are not covered by the foregoing provisions of this Article V and who are or were employees or agents of the corporation, or who are or were serving at the request of the corporation as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized at any time or from time to time by the board of directors. Section 7. Contract Rights. The provisions of this Article V shall be deemed to be a contract right between the corporation and each director or officer who serves in any such capacity at any time while this Article V and the relevant provisions of the General Corporation Law of the State of Delaware or other applicable law are in effect, and any repeal or modification of this Article V or any such law shall not affect any rights or obligations then existing with respect to any state of facts or proceeding then existing. Section 8. Merger or Consolidation. For purposes of this Article V, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or 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 this Article V with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. ARTICLE VI CERTIFICATES OF STOCK Section 1. Form. 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 president or a vice-president and the secretary or an assistant secretary of the corporation, certifying the number of shares of a specific class or series owned by such holder in the corporation. If such a certificate is countersigned (1) by a transfer agent or an assistant transfer agent other than the corporation or 10 11 its employee or (2) by a registrar, other than the corporation or its employee, the signature of any such president, vice-president, secretary, or assistant secretary may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation whether because of death, resignation or otherwise before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the corporation. Shares of stock of the corporation shall only be transferred on the books of the corporation by the holder of record thereof or by such holder's attorney duly authorized in writing, upon surrender to the corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization, and other matters as the corporation may reasonably require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate or certificates, and record the transaction on its books. The board of directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the corporation. Section 2. Lost Certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates previously issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his or her legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against the corporation on account of the loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 3. Fixing a Record Date for Stockholder Meetings. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day 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. 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; 11 12 provided, however, that the board of directors may fix a new record date for the adjourned meeting. Section 4. Fixing a Record Date for Action by Written Consent. In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no record date has been fixed by the board of directors, the record date for determining 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 by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by the board of directors is required by statute, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action. Section 5. Fixing a Record Date for Other Purposes. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purposes of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. Section 6. Registered Stockholders. Prior to the surrender to the corporation of the certificate or certificates for a share or shares of stock with a request to record the transfer of such share or shares, the corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner. The corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof. Section 7. Subscriptions for Stock. Unless otherwise provided for in the subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times, as shall be determined by the board of directors. Any call made by the board of directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call 12 13 when such payment is due, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation. ARTICLE VII GENERAL PROVISIONS Section 1. Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or any other purpose and the directors may modify or abolish any such reserve in the manner in which it was created. Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders for the payment of money by or to the corporation and all notes and other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner, as shall be determined by resolution of the board of directors or a duly authorized committee thereof. Section 3. Contracts. The board of directors may authorize any officer or officers, or any agent or agents, of the corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. Section 4. Loans. The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the board of directors. Section 6. Corporate Seal. The board of directors shall provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the 13 14 corporation and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Section 7. Voting Securities Owned By Corporation. Voting securities in any other corporation held by the corporation shall be voted by the president, unless the board of directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution. Section 8. Inspection of Books and Records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in the State of Delaware or at its principal place of business. Section 9. Section Headings. Section headings in these by-laws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein. Section 10. Inconsistent Provisions. In the event that any provision of these by-laws is or becomes inconsistent with any provision of the certificate of incorporation, the General Corporation Law of the State of Delaware or any other applicable law, the provision of these by-laws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect. ARTICLE VIII AMENDMENTS These by-laws may be amended, altered, or repealed and new by-laws adopted at any meeting of the board of directors by a majority vote. The fact that the power to adopt, amend, alter, or repeal the by-laws has been conferred upon the board of directors shall not divest the stockholders of the same powers. 14 EX-3.2.4 9 BY-LAWS OF TAMOR 1 Exhibit 3.2.4 BY-LAWS OF TAMOR PLASTICS CORPORATION ARTICLE I - CHANGES OF BY-LAWS Section 1. The By-Laws may be amended only at an annual or specifically called meeting of the Corporation, provided notice has been given of the proposed amendment at least seven days before such meeting, and by vote of a majority of all the stock outstanding. ARTICLE II - MEETINGS Section 1. Stockholders meetings shall be held at the principal office or place of business of this corporation in the Commonwealth of Massachusetts. Section 2. The annual meeting of the stockholders of this company shall be held at its principal office, 106 Carter Street, in the City of Leominster, Commonwealth of Massachusetts, at 10 o'clock in the forenoon on the second Monday of April of each year. Section 3. At any meeting a quorum shall consist of one stockholder representing at least a majority of shares, but a majority of stockholders present and voting may adjourn any meeting from time to time until the business shall have been finished. Section 4. At all meetings each stockholder may cast one vote for each share owned by him; absent stockholders may vote by proxy authorized by a writing executed and dated within six months previous to the meeting at which it is used, if the maker thereof resides in the United States. All proxies shall be filed with the clerk at or before the time of voting. ARTICLE III - OFFICERS OF THE CORPORATION Section 1. The officers of the corporation need not, except for the President, be stockholders and shall consist of a President, Treasurer and Clerk, and a board of four Directors, and such other officers as the corporation may from time to time authorize. ARTICLE IV - ELECTION OF OFFICERS Section 1. The Directors, Treasurer and Clerk shall be chosen by ballot at the annual meeting, an adjournment thereof, or at a meeting in lieu of such annual meeting as above 2 provided, and shall hold their office for one year from the time in the year in which they were chosen, and thereafter until others are chosen and qualified in their stead. ARTICLE V - DIRECTORS Section 1. Any vacancy occurring in the board of directors from death, resignation or inability to serve of any director, shall be filled by the remaining members of the board at their next regular meeting, or at a special meeting to be called for the purpose. Section 2. Special meetings may be called as hereinafter provided in Article VI, or at any time, at the request of a director, provided all the directors have notice thereof and thereto in writing. Section 3. At all meetings a quorum shall consist of not less than two of the directors. Section 4. The directors shall annually, immediately after their election, choose one of their number President. Section 5. The directors shall have the management of the affairs of the company and are hereby invested with all the powers which the corporation itself possesses not incompatible with the provisions of these by-laws and the laws of the Commonwealth. Section 6. They may appoint and remove at pleasure such officers and employees as may seem to them wise; shall have access to the books, vouchers and funds of the treasurer; shall determine upon the form of certificate of stock and of transfer thereof; and upon a corporate seal; shall fix all salaries; shall declare dividends as they may deem best; shall fill all vacancies that may occur at any time during the year in any office; shall make for their government such rules and regulations not inconsistent with these by-laws as they may think fit, and at every annual meeting of the stockholders shall present a brief report of the financial condition of the company and of the state of its property and assets. ARTICLE VI - THE PRESIDENT Section 1. The President shall preside at all meetings of the stockholders and of the board; shall be chairman ex-officio of all committees of the directors; shall sign all certificates of stock; shall exercise a general supervision of the company's affairs; and shall have the custody of the treasurer's bond where one is required. Section 2. He may at any time call a special meeting of the directors by depositing in the post office or delivering personally one day's notice in writing thereof to each director. 2 3 ARTICLE VII - THE CLERK Section 1. The clerk, who shall be sworn, shall be clerk both of the Directors and of the Company, shall attend all their meetings and keep accurate records thereof, and perform all other duties incident to his office. Section 2. In the absence of the clerk from any meeting, a clerk pro tempore shall be chosen, who shall be sworn. ARTICLE VIII - THE TREASURER Section 1. The treasurer shall have the custody of the corporate seal and of the funds of the company; shall receive moneys and make disbursements as directed; shall keep accurate books of account and be custodian of the company's deeds, bonds, agreements, and other business papers. He shall sign all certificates of stock which shall be under the seal of the corporation. ARTICLE IX - MANAGER AND EMPLOYEES Section 1. The directors may employ some suitable person as manager of the company, who shall have such control and direction of its interests as the directors may deem best and he shall receive such compensation as they may determine. The manager shall employ and discharge such general employees and laborers as in his judgment the interests of the company may require. ARTICLE X - CERTIFICATE OF STOCK Section 1. Each stockholder shall be entitled to a certificate of his stock under the seal of the corporation and signed by the President and Treasurer. In case of the loss of a certificate a duplicate certificate may be issued upon such reasonable terms as the directors may prescribe. ARTICLE XI - INDEMNIFICATION OF DIRECTORS AND OFFICERS The corporation shall, to the extent permitted by law, indemnify each person who may serve or who has served at any time as a director or officer of the corporation or of any of its subsidiaries, or who at the request of the corporation may serve or at any time has served as a director or officer, administrator or trustee of, or in a similar capacity with, another organization or any employee benefit plan, against all expenses and liabilities, including counsel fees, reasonably incurred by or imposed upon such person in connection with any proceeding in which he may become involved by reason of his serving or having served in such capacity (other than a proceeding voluntarily initiated by such person unless he is successful on the merits, the proceeding was authorized by a majority of the full board or the proceeding seeks a declaratory 3 4 judgment regarding his own conduct); provided that no indemnification shall be provided for any such person with respect to any matter as to which he shall have been finally adjudicated in any proceeding not to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation or to the extent such matter relates to service with respect to an employee benefit plan in the reasonable belief that his action was in the best interests of the participants or beneficiaries of such employee benefit plan. Such indemnification may, to the extent authorized by the corporation, include payment by the corporation of expenses incurred in defending a civil or criminal action or proceeding in advance of the final disposition of such action or proceeding, upon receipt of an undertaking by the person indemnified to repay such payment if he shall be adjudicated to be not entitled to indemnification under this article, which undertaking may be accepted without regard to the financial ability of such person to make repayment. The payment of any such indemnification shall be conclusively deemed authorized by the corporation under this article, and each director of the corporation approving such payment shall be wholly protected, if: (i) the payment has been approved or ratified (1) by a majority vote of a quorum of the directors consisting of persons who are not at that time parties to the proceeding, (2) by a majority vote of a committee of two or more directors who are not at that time parties to the proceeding and are selected for this purpose by the full board (in which selection directors who are parties may participate), or (3) by a majority vote of a quorum of the outstanding shares of stock of all classes entitled to vote for directors, voting as a single class, which quorum shall consist of stockholders who are not at that time parties to the proceeding; or (ii) the action is taken in reliance upon the opinion of independent legal counsel (who may be counsel to the corporation) appointed for the purpose by vote of the directors or in the manner specified in clauses (1), (2) or (3) of subparagraph (i); or (iii) the directors have otherwise acted in accordance with the standard of conduct set forth in the Massachusetts Business Corporation Law, as amended. The indemnification provided hereunder shall inure to the benefit of the heirs, executors and administrators of a director, officer or other person entitled to indemnification hereunder. The foregoing right of indemnification shall be in addition to and not exclusive of any other rights to which such director or officer or other person may be entitled under any agreement or pursuant to any action taken by the directors or stockholders of the corporation or otherwise. 4 EX-3.2.5 10 BY-LAWS OF SHUTTERS 1 Exhibit 3.2.5 By-Laws of Selfix Shutters, Inc. (an Illinois Corporation) Adopted February 18, 1988 This Document Prepared By: Sachnoff Weaver & Rubenstein, Ltd. 30 South Wacker Drive Suite 2900 Chicago, Illinois 60606 (312) 207-1000 2 TABLE OF CONTENTS Page Number Article 1 -- CORPORATE OFFICES................................... 1 Section 1.1 Principal Corporate Office......................... 1 Section 1.2 Registered Office in Illinois...................... 1 Article 2 -- SHAREHOLDERS........................................ 1 Section 2.1 Annual Meeting..................................... 1 Section 2.2 Special Meetings................................... 2 Section 2.3 Place of Meeting................................... 2 Section 2.4 Notice of Meeting.................................. 2 Section 2.5 Meeting of All Shareholders........................ 2 Section 2.6 Fixing of Record Date.............................. 2 Section 2.7 Voting Lists....................................... 3 Section 2.8 Quorum of Shareholders............................. 3 Section 2.9 Proxies............................................ 3 Section 2.10 Voting of Shares.................................. 4 Section 2.11 Voting of Shares by Certain Holders............... 4 Section 2.12 Voting by Ballot; Inspectors...................... 5 Section 2.13 Informal Action by Shareholders................... 5 Article 3 -- DIRECTORS........................................... 5 Section 3.1 General Powers..................................... 6 Section 3.2 Number, Tenure and Qualification................... 6 Section 3.3 Regular Meetings................................... 6 Section 3.4 Special Meetings................................... 6 Section 3.5 Notice............................................. 6 Section 3.6 Quorum............................................. 6 Section 3.7 Manner of Action................................... 7 Section 3.8 Vacancies.......................................... 7 Section 3.9 Removal of Directors............................... 7 Section 3.10 Compensation...................................... 7 Section 3.11 Presumption of Assent............................. 8 Section 3.12 Informal Action By Directors...................... 8 Section 3.13 Participation By Conference Telephone............. 8 Section 3.14 Committees........................................ 8 Section 3.15 Director Conflict of Interest..................... 9 Article 4 -- OFFICERS............................................ 10 Section 4.1 Number............................................. 10 Section 4.2 Election and Term of Office........................ 10 Section 4.3 Removal............................................ 10 -i- 3 Section 4.4 Vacancies.......................................... 11 Section 4.5 The Chairman of the Board.......................... 11 Section 4.6 The President...................................... 11 Section 4.7 The Vice-Presidents................................ 11 Section 4.8 The Secretary...................................... 11 Section 4.9 The Treasurer...................................... 12 Section 4.10 Assistant Secretaries and Assistant Treasurers.... 12 Section 4.11 Salaries.......................................... 12 Article 5 -- INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS; INSURANCE..................... 13 Section 5.1 Actions Other Than Actions By or in the Right of the Corporation........................................ 13 Section 5.2 Actions By or in the Right of the Corporation...... 13 Section 5.3 Indemnification in Event of Successful Defense..... 14 Section 5.4 Procedures for Indemnification..................... 14 Article 6 -- CONTRACTS, LOANS, CHECKS AND DEPOSITS............... 15 Section 6.1 Contracts.......................................... 15 Section 6.2 Loans.............................................. 15 Section 6.3 Pledges of Property and Assets..................... 16 Section 6.4 Checks, Drafts, Etc................................ 16 Section 6.5 Deposits........................................... 16 Article 7 -- SHARES AND THEIR TRANSFER........................... 16 Section 7.1 Consideration for Shares........................... 16 Section 7.2 Payment for Shares................................. 16 Section 7.3 Shares Represented by Certificates................. 17 Section 7.4 Uncertificated Shares.............................. 17 Article 8 -- FISCAL YEAR........................................ 18 Article 9 -- DIVIDENDS.......................................... 18 Article 10 -- SEAL............................................... 18 Article 11 -- WAIVER OF NOTICE................................... 18 Article 12 -- AMENDMENTS TO THE BY-LAWS.......................... 19 Article 13 -- STATUTORY REFERENCES............................... 19 -ii- 4 SELFIX SHUTTERS, INC. BY-LAWS Article 1 CORPORATE OFFICES Section 1.1 Principal Corporate Office. The principal corporate office of Selfix Shutters, Inc. in Illinois shall be located in the Village of Hebron, County of McHenry, or at such other place as the Board of Directors may determine by resolution from time to time. The Corporation may have such other offices, either within or without the State of Illinois, as the Board of Directors may designate or the Corporation's business may require from time to time. [BCA Section 3.10(j)] Section 1.2 Registered Office in Illinois. The Registered Office of the Corporation required by the Illinois Business Corporation Act of 1983 ("BCA") to be maintained in the State of Illinois may be, but need not be, the same as the principal corporate office or its principal place of business in the State of Illinois, but shall in any event be identical with the business office of the Corporation's Registered Agent in Illinois. [BCA Section 5.05] The address of the Registered Office in Illinois may be changed from time to time by the Board of Directors or by such Registered Agent. [BCA Sections 5.10, 5.20] Article 2 SHAREHOLDERS Section 2.1 Annual Meeting. Except as the Board of Directors of the Corporation may otherwise provide by resolution duly adopted pursuant to the authority granted hereby, the Annual Meeting of Shareholders of the Corporation shall be held each year on the third Wednesday of May (beginning with the year 1989), commencing at the hour of 10:00 A.M., for the purpose of electing Directors and for the transaction of such other business as may properly come before the Meeting. If the day fixed for the Annual Meeting shall be a legal holiday, such Meeting shall be held on the next succeeding business day. [BCA Section 7.05] Section 2.2 Special Meetings. Special Meetings of the Shareholders may be called by the President, by the Board of Directors, or by the holders of not less than one-fifth of all the outstanding shares of the Corporation entitled to vote on the matter for which the Special Meeting is called. [BCA Section 7.05] Section 2.3 Place of Meeting. The Board of Directors may by resolution designate any place, either within or without the State of Illinois, as the place of meeting for any Annual Meeting of Shareholders or for any Special Meeting called by the Board of Directors or by the President, and may designate any place within the State of Illinois for any Special Meeting called by Shareholders. A waiver of notice signed by all Shareholders may designate any place, either within or without the State of Illinois, as the place for the holding of any Meeting. If no designation of a meeting place is made, or if a Special Meeting be otherwise called, the place of meeting shall be the Registered Office of the Corporation in the State of Illinois, except as otherwise provided in Section 2.5 of these By-Laws. [BCA Section 7.05] 5 SELFIX SHUTTERS, INC. BY-LAWS Section 2.4 Notice of Meeting. Written notice stating the place, day and hour of the Meeting, and, in the case of a Special Meeting, the purpose or purposes for which the Meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the Meeting, or, in the case of a merger, consolidation, share exchange, dissolution, or sale, lease or exchange of assets requiring Shareholder approval, not less than twenty (20) nor more than sixty (60) days before the date of the Meeting, either personally or by mail, by or at the direction of the President, or the Secretary, or the Officer or persons calling the Meeting, to each Shareholder of record entitled to vote at such Meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the Shareholder at his or her address as it appears on the records of the Corporation, with postage thereon prepaid. [BCA Section 7.15] Section 2.5 Meeting of All Shareholders. If all of the Shareholders shall meet at any time and place, either within or without the State of Illinois, and consent to the holding of a Meeting at such time and place, such Meeting shall be valid without call or notice, and at such Meeting any corporate action may be taken. [BCA Section 7.20] Section 2.6 Fixing of Record Date. For the purpose of determining Shareholders entitled to notice of or to vote at any Meeting of Shareholders, or Shareholders entitled to receive payment of any dividend or distribution, or in order to make a determination of Shareholders for any other proper purpose, the Board of Directors of the Corporation may fix in advance a date as the record date for any such determination of Shareholders, such date in any case to be not more than sixty (60) days immediately preceding the date of the Meeting, payment or other transaction, and, for a Meeting of Shareholders, not less than ten (10) days, or in the case of a merger, consolidation, share exchange, dissolution, or sale, lease or exchange of assets requiring Shareholder approval, not less than twenty (20) days, immediately preceding such Meeting. If no record date is fixed for the determination of Shareholders entitled to notice of or to vote at a Meeting of Shareholders, or Shareholders entitled to receive payment of a dividend or other distribution, the date on which notice of the Meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend or distribution is adopted, as the case may be, shall be the record date for such determination of Shareholders. When a determination of Shareholders entitled to vote at any Meeting of Shareholders has been made as provided in this Section 2.6, such determination shall apply to any adjournment thereof. [BCA Section 7.25] Section 2.7 Voting Lists. The Officer or agent having charge of the transfer books and records for shares of the Corporation shall make, within twenty (20) days after the record date for a Meeting of Shareholders or ten (10) days before such Meeting, whichever is earlier, a complete list of the Shareholders entitled to vote at such Meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten (10) days prior to such Meeting, shall be kept on file at the Registered Office of the Corporation and shall be subject to inspection by any Shareholder, and to copying at the Shareholder's expense, Page 2 6 SELFIX SHUTTERS, INC. BY-LAWS at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the Meeting and shall be subject to the inspection of any Shareholder during the whole time of the Meeting. The original share ledger or transfer book, or a duplicate thereof kept in Illinois, shall be prima facie evidence as to who are the Shareholders entitled to examine such list or share ledger or transfer book, or to vote at any Meeting of Shareholders. Failure to comply with the requirements of this Section 2.7 shall not affect the validity of any action taken at such Meeting. An Officer or agent having charge of the transfer books or records who shall fail to prepare the list of Shareholders, or keep the same on file for a period of ten (10) days, or produce and keep the same open for inspection at the Meeting, as provided in this Section 2.7, shall be liable to any Shareholder suffering damage on account of such failure, to the extent of such damage as provided by law. [BCA Section 7.30] Section 2.8 Quorum of Shareholders. A majority of the outstanding shares of the Corporation entitled to vote on a matter, represented in person or by proxy, shall constitute a quorum for consideration of such matter at a meeting of Shareholders. If a quorum is present, the affirmative vote of the majority of the shares represented at the Meeting and entitled to vote on a matter shall be the act of the Shareholders, unless the vote of a greater number or voting by classes is required by the Illinois Business Corporation Act of 1983, by the Corporation's Articles of Incorporation, or by these By-Laws. [BCA Section 7.60] Section 2.9 Proxies. A Shareholder may appoint a proxy to vote or otherwise act for him or her by signing an appointment form and delivering it to the person so appointed. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy. Every proxy continues in full force and effect until revoked by the person executing it prior to the vote pursuant thereto, except as otherwise provided in this Section 2.9 and in Section 7.50 of the Illinois Business Corporation Act of 1983. Such revocation may be effected by a writing delivered to the Corporation stating that the proxy is revoked or by a subsequent proxy executed by, or by attendance at the Meeting and voting in person by, the person executing the proxy. The dates contained on the forms of proxy presumptively determine the order of execution, regardless of any postmark dates on envelopes in which they are mailed. An appointment of a proxy is revocable by the Shareholder unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest in the shares or in the Corporation generally. Unless the appointment of a proxy contains an express limitation on the proxy's authority, the Corporation may accept the proxy's vote or other action as that of the Shareholder making the appointment. [BCA Section 7.50] Section 2.10 Voting of Shares. Each outstanding share of the Corporation shall be entitled to one vote in each matter submitted to a vote by the Shareholders, except as the Illinois Business Corporation Act of 1983 and the Corporation's Articles of Incorporation may otherwise limit or deny voting rights or provide special voting rights as to any class or classes or series of shares. [BCA Section 7.40] Page 3 7 SELFIX SHUTTERS, INC. BY-LAWS Section 2.11 Voting of Shares by Certain Holders. Shares of its own stock belonging to this Corporation shall not be voted, directly or indirectly, at any Meeting and shall not be counted in determining the total of outstanding shares at any given time, but shares of the Corporation held by the Corporation in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares entitled to vote at any given time. Shares registered in the name of another corporation, domestic or foreign, may be voted by any Officer, agent, proxy or other legal representative authorized to vote such shares under the law of incorporation of such corporation. The Corporation may treat the president or other person holding the position of chief executive officer of such other corporation as authorized to vote such shares, together with any other person indicated and any other holder of an office indicated by the corporate Shareholder to the Corporation as a person or office authorized to vote such shares. Such persons and offices indicated shall be registered by the Corporation on the transfer books for shares and included in any voting list prepared in accordance with Section 2.7 of these By-Laws. Shares registered in the name of a deceased person, a minor ward or a person under legal disability may be voted by his or her administrator, executor or court appointed guardian, either in person or by proxy without a transfer of such shares into the name of such administrator, executor or court appointed guardian. Shares registered in the name of a trustee may be voted by him or her, either in person or by proxy. Shares registered in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his or her name if authority so to do is contained in an appropriate order of the court by which such receiver was appointed. A Shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. [BCA Section 7.45] Section 2.12 Voting by Ballot: Inspectors. Voting by Shareholders on any matter or in any election may be viva voce unless the Chairman of the Meeting shall order, or any Shareholder entitled to vote thereon shall demand, that voting be by ballot. At any Meeting of Shareholders, the Chairman of the Meeting may, or upon the request of any Shareholder shall, appoint one or more persons as inspectors for such Meeting. Such inspectors shall ascertain and report the number of shares represented at the Meeting, based upon their determination of the validity and effect of proxies; count all votes and report the results; and do such other acts as are proper to conduct the election and voting with impartiality and fairness to all the Shareholders. Each report of an inspector shall be in writing and signed by him or her or by a majority of them if there be more than one inspector acting at such Meeting. Page 4 8 SELFIX SHUTTERS, INC. BY-LAWS If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the Meeting and the results of the voting shall be prima facie evidence thereof. [BCA Section 7.35] Section 2.13 Informal Action by Shareholders. Any action required to be taken at any Annual or Special Meeting of Shareholders of the Corporation, or any other action which may be taken at a Meeting of the Shareholders, may be taken without a Meeting and without a vote, if a consent in writing, setting forth the action so taken, shall be signed (i) by the holders of outstanding shares 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 voting or (ii) by all of the Shareholders entitled to vote with respect to the subject matter thereof. If such consent is signed by less than all of the Shareholders entitled to vote, then such consent shall become effective only if, at least five (5) days prior to the execution of the consent, a notice of the proposed action is delivered in writing to all of the Shareholders entitled to vote with respect to the subject matter thereof and, after the effective date of the consent, prompt notice of the taking of the action without a meeting by less than unanimous written consent shall be delivered in writing to those Shareholders who have not consented in writing. [BCA Section 7.10] Article 3 DIRECTORS Section 3.1 General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. [BCA Section 8.05] Section 3.2 Number, Tenure and Qualification. The number of Directors of the Corporation shall be three. Each Director shall serve until the next Annual Meeting of Shareholders or until his or her successor shall have been elected and qualified. Directors need not be residents of Illinois or Shareholders of the Corporation. A Director may resign at any time by giving written notice to the Board of Directors, its Chairman, or to the President or Secretary of the Corporation. A resignation is effective when the notice is given unless the notice specifies a future date. The pending vacancy may be filled before the effective date, but the successor shall not take office until the effective date. [BCA Sections 8.01, 8.10] Section 3.3 Regular Meetings. A Regular Meeting of the Board of Directors shall be held without other notice than this By-Law, immediately after, and at the same place as, the Annual Meeting of Shareholders. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Illinois, for the holding of additional Regular Meetings without other notice than such resolution. [BCA Sections 8.20, 8.25] Page 5 9 SELFIX SHUTTERS, INC. BY-LAWS Section 3.4 Special Meetings. Special Meetings of the Board of Directors may be called by or at the request of the President or any two Directors. The person or persons authorized to call Special Meetings of the Board of Directors may fix any place, either within or without the State of Illinois, as the place for holding any Special Meeting of the Board of Directors called by them. [BCA Sections 8.20, 8.25] Section 3.5 Notice. Notice of any Special Meeting shall be given at least three days previous thereto by written notice delivered personally or by telegram or mailgram to each Director at his or her business address, or given at least five (5) days previous thereto if mailed. If mailed, such notice shall be deemed to be delivered on the second day following the date on which it was deposited in the United States mail so addressed, proper postage thereon prepaid. If notice be given by telegram or mailgram, such notice shall be deemed to be delivered when the telegram or mailgram is delivered to the telegraph company. Any Director may waive notice of any Meeting by executing a waiver of notice. The attendance of a Director at any 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 is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any Regular or Special Meeting of the Board of Directors need be specified in the notice or waiver of notice of such Meeting. [BCA Section 8.25] Section 3.6 Quorum. A majority of the number of Directors fixed by these By-Laws shall constitute a quorum for transaction of business at any Meeting of the Board of Directors, provided that if less than a majority of such number of Directors is present at said Meeting, a majority of the Directors present may adjourn the Meeting from time to time without further notice. [BCA Section 8.15(a)] Section 3.7 Manner of Action. The act of the majority of Directors present at a Meeting at which a quorum is present shall be the act of the Board of Directors. [BCA Section 8.15(c)] SECTION 3.8 VACANCIES. Any vacancy occurring in the Board of Directors and any directorship to be filled by reason of an increase in the number of Directors may be filled by election at an Annual Meeting or at a Special Meeting of Shareholders called for that purpose. In the absence of a Special Meeting of Shareholders, the Board of Directors may fill the vacancy, except as otherwise specified in the Articles of Incorporation. A Director elected by the Shareholders to fill a vacancy shall hold office for the balance of the term for which he or she was elected. A Director appointed to fill a vacancy shall serve until the next Meeting of Shareholders at which Directors are to be elected. [BCA Section 8.30] Section 3.9 Removal of Directors. One or more of the Directors may be removed, with or without cause, at a Meeting of Shareholders by the affirmative vote of the holders of a majority of the outstanding shares then entitled to vote at an election of Directors, except that: Page 6 10 SELFIX SHUTTERS, INC. BY-LAWS (a) No Director shall be removed at a Meeting of Shareholders unless the notice of such Meeting shall state that a purpose of the Meeting is to vote upon the removal of one or more Directors named in the notice. Only the named Director or Directors may be removed at such Meeting. (b) If less than the entire Board of Directors is to be removed, no Director may be removed, with or without cause, if the votes cast against his or her removal would be sufficient to elect him or her if then cumulatively voted at an election of the entire Board of Directors. [BCA Section 8.35] Section 3.10 Compensation. Except as otherwise provided in any written agreement and except as otherwise set forth below, the Board of Directors, by the affirmative vote of a majority of Directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all Directors for services to the Corporation as Directors, Officers or otherwise. [BCA Section 8.05(b)] By resolution of the Board of Directors, the Directors may be paid their expenses, if any, of attendance at each Meeting of the Board of Directors. In the event the Internal Revenue Service shall determine any such compensation paid to a Director to be unreasonable or excessive, such Director must repay to the Corporation the excess over what is determined to be reasonable compensation, with interest on such excess at the rate of nine percent (9%) per annum, within ninety (90) days after notice from the Corporation. Section 3.11 Presumption of Assent. A Director of the Corporation who is present at a Meeting of the Board of Directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken unless his or her dissent shall be entered in the minutes of the Meeting or unless he or she shall file his or her written dissent to such action with the person acting as the Secretary of the Meeting before the adjournment thereof or shall forward such dissent by registered or certified mail to the Secretary of the Corporation immediately after the adjournment of the Meeting. Such right to dissent shall not apply to a Director who voted in favor of such action. [BCA Section 8.65(b)] Section 3.12 Informal Action By Directors. Unless specifically prohibited by the Articles of Incorporation or by these By-Laws, any action required to be taken at a Meeting of the Board of Directors, or any other action which may be taken at a Meeting of the Board of Directors or of a Committee thereof, may be taken without a Meeting if a consent in writing, setting forth the action so taken, is signed by all the Directors entitled to vote with respect to the subject matter thereof, or by all the members of such Committee, as the case may be. The consent shall be evidenced by one or more written approvals, each of which sets forth the action taken and bears the signature of one or more Directors. All the approvals evidencing the consent shall be delivered to the Secretary to be filed in the corporate records. The action taken shall be effective when all the Directors have approved the consent unless the consent specifies a Page 7 11 SELFIX SHUTTERS, INC. BY-LAWS different effective date. Any such consent signed by all the Directors or all the members of a Committee shall have the same effect as a unanimous vote. [BCA Section 8.45] Section 3.13 Participation By Conference Telephone. Members of the Board of Directors or of any Committee of the Board of Directors may participate in and act at any Meeting of the Board of Directors or any Committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the Meeting can hear each other. Participation in such Meeting shall constitute attendance and presence in person at the Meeting of the person or persons so participating. [BCA Section 8.15(d)] Section 3.14 Committees. A majority of the Directors may create one or more Committees and appoint members of the Board to serve on such Committee or Committees. Each Committee shall two or more members, who serve at the pleasure of the Board of Directors. Unless the appointment by the Board of Directors requires a greater number, a majority of any Committee shall constitute a quorum and a majority of a quorum is necessary for Committee action. A Committee may act by unanimous consent in writing without a meeting and, subject to the provisions of these By-Laws or action by the Board of Directors, such Committee, by majority vote of its members, shall determine the time and place of meetings and the notice required therefor. To the extent specified by the Board of Directors, each Committee may exercise the authority of the Board of Directors under Section 3.1 of these By-Laws; provided, however, that a Committee may not: (a) authorize distributions; (b) approve or recommend to Shareholders any act which is required to be approved by Shareholders; (c) fill vacancies on the Board of Directors or on any of its Committees; (d) elect or remove Officers or fix the compensation of any member of the Committee; (e) adopt, amend or repeal these By-Laws; (f) approve a plan of merger not requiring Shareholder approval; (g) authorize or approve reacquisition of shares, except according to a general formula or method prescribed by the Board of Directors; Page 8 12 (h) authorize or approve the issuance or sale, or contract for sale, of shares or determine the designation and relative rights, preferences and limitations of a series of shares, except that the Board of Directors may direct a Committee to fix the specific terms of the issuance or sale or contract for sale or the number of shares to be allocated to particular employees under an employee benefit plan; or (i) amend, alter, repeal or take action inconsistent with any resolution or action of the Board of Directors when the resolution or action of the Board of Directors provides by its terms that it shall not be amended, altered or repealed by action of a Committee. [BCA Section 8.40] Section 3.15 Director Conflict of Interest. If a transaction is fair to the Corporation at the time it is authorized, approved or ratified, the fact that a Director of the Corporation is directly or indirectly a party to the transaction is not grounds for invalidating the transaction. In a proceeding contesting the validity of a transaction described in the preceding paragraph, the person asserting validity has the burden of proving fairness unless: (1) the material facts of the transaction and the Director's interest or relationship were disclosed or known to the Board of Directors or a Committee of the Board of Directors and the Board of Directors or Committee authorized, approved or ratified the transaction by the affirmative votes of a majority of disinterested Directors, even though the disinterested Directors be less than a quorum; or (2) the material facts of the transaction and the Director's interest or relationship were disclosed or known to the Shareholders entitled to vote and they authorized, approved or ratified the transaction without counting the vote of any Shareholder who was an interested Director. The presence of the Director, who is directly or indirectly a party to the transaction described in the first paragraph of this section, or a Director who is otherwise not disinterested, may be counted in determining whether a quorum is present but may not be counted when the Board of Directors or a Committee of the Board of Directors takes action on the transaction. A Director is "indirectly" a party to a transaction if the other party to the transaction is an entity in which the Director has a material financial interest or of which the Director is an Officer, Director or General Partner. [BCA Section 8.60] Article 4 OFFICERS Section 4.1 Number. The Officers of the Corporation shall be a Chairman of the Board of Directors, a President, one or more Vice Presidents (the number thereof to be determined by Page 9 13 SELFIX SHUTTERS, INC. BY-LAWS the Board of Directors), a Secretary, and a Treasurer, and such Assistant Secretaries, Assistant Treasurers or other officers as may be elected or appointed by the Board of Directors. Any two or more offices may be held by the same person. All Officers and agents of the Corporation shall have such express authority and perform such duties in the management of the property and affairs of the Corporation as may be provided herein, or as may be determined by resolution of the Board of Directors not inconsistent with these By-Laws, and such implied authority as is recognized by the common law from time to time. [BCA Section 8.50] Section 4.2 Election and Term of Office. The Officers of the Corporation shall be elected by the Board of Directors at the first Meeting of the Board of Directors and thereafter at each Annual Meeting of the Board of Directors. The Board of Directors may create and fill new offices at Annual or Special Meetings. If the election of Officers shall not be held at such Meeting, such election shall be held as soon thereafter as is convenient. Each Officer shall hold office until his or her successor shall have been duly elected and shall have qualified or until his or her death or until he or she shall resign or shall have been removed in the manner hereinafter provided. Election or appointment of an Officer or agent shall not of itself create contract rights. [BCA Section 8.50] Section 4.3 Removal. Any Officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. [BCA Section 8.55] Section 4.4 Vacancies. A vacancy in any Office because of death, resignation, removal, disqualification, or otherwise, or because of the creation of an office, may be filled by the Board of Directors for the unexpired portion of the term. Section 4.5 The Chairman of the Board. The Chairman of the Board of Directors shall be the chief executive officer of the Corporation and, subject to the Board of Directors, shall be in general charge of the affairs of the Corporation. The Chairman of the Board shall preside at all meetings of the shareholders and of the Board of Directors. Section 4.6 The President. The President shall be the chief operating officer of the Corporation and shall, subject to the Chairman of the Board and the Board itself, have general charge of the business and affairs of the Corporation. He shall keep the Board of Directors and its Chairman fully informed and shall freely consult with them concerning the business of the Corporation in his charge. He may sign, with the Secretary or any other officer of the Corporation thereunto authorized by the Board of Directors, certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed on behalf of the Corporation, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other Officer or agent of the Corporation or to the President alone, or shall Page 10 14 SELFIX SHUTTERS, INC. BY-LAWS be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the Office of President and such other duties as may be prescribed by the Chairman of the Board of Directors or the Board itself from time to time. [BCA Section 8.50] Section 4.7 The Vice-Presidents. In the absence of the President or in the event of his or her inability or refusal to act, the Vice-President (or in the event there be more than one Vice President, the Vice-Presidents in the order designated, or in the absence of any designation, then in the order of their election) 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. Any Vice-President may sign, with the Secretary or an Assistant Secretary, certificates for shares of the Corporation, and shall perform such other duties as from time to time may be assigned to him or her by the President or by the Board of Directors. [BCA Section 8.50] Section 4.8 The Secretary. The Secretary shall: (a) keep, or supervise and be responsible for the keeping of, the minutes and records of all Meetings and official actions of the Shareholders and of the Board of Directors, and any Committees of the Board of Directors in one or more books provided for that purpose; (b) see that all notices of such Meetings are duly given or waivers of notice obtained in accordance with the provisions of these By-Laws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all certificates for shares prior to the issuance thereof and to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these By-Laws; (d) keep a register of the post office address of each Shareholder which shall be furnished to the Secretary by such Shareholder; (e) sign with the President, or a Vice President, certificates for shares of the Corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books and records of the Corporation; (g) have the authority to certify the By-Laws, resolutions of the Board of Directors and Committees thereof, and other documents of the Corporation as true and correct copies thereof; and (h) in general perform all duties incident to the Office of Secretary and such other duties as from time to time may be assigned to him or her by the President or by the Board of Directors. [BCA Section 8.50] Section 4.9 The Treasurer. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his or her duties in sum and with such surety or sureties as the Board of Directors shall determine. He or she shall: (a) have charge and custody of and be responsible for all funds and securities of the Corporation; receive and give receipts for moneys due and payable to the Corporation from any source whatsoever, and deposit all such moneys in the name of the Corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Article 6 of these By-Laws; and (b) in general perform all the 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 President or by the Board of Directors. [BCA Section 8.50] Page 11 15 SELFIX SHUTTERS, INC. BY-LAWS Section 4.10 Assistant Secretaries and Assistant Treasurers. The Assistant Secretaries as thereunto authorized by the Board of Directors may sign with the President or a Vice-President certificates for shares of the Corporation, the issuance of which shall have been authorized by a resolution of the Board of Directors. The Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Secretaries and Assistant Treasurers, in general, shall perform such duties and exercise such authority as shall be assigned or granted to them by the Secretary or the Treasurer, respectively, or by the President or the Board of Directors. [BCA Section 8.50] Section 4.11 Salaries. Except as otherwise provided in any written employment agreement duly executed on behalf of the Corporation and except as otherwise set forth below, the compensation (including salaries and benefits) of the Officers shall be fixed from time to time by resolution of the Board of Directors and no Officer shall be prevented from receiving such salary by reason of the fact that he or she is also a Director of the Corporation. [BCA Section 8.50] In the event the Internal Revenue Service shall determine any such compensation (including any fringe benefit) paid to an Officer to be unreasonable or excessive, such Officer must repay to the Corporation the excess over what is determined to be reasonable compensation, with interest on such excess at the rate of nine percent (9%) per annum, within ninety (90) days after notice from the Corporation. Article 5 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS; INSURANCE Section 5.1 Actions Other Than Actions By or in the Right of the Corporation. The Corporation shall indemnify any of its Directors or Officers and may indemnify any of its employees and agents 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 or she or it is or was a Director, Officer, employee or agent of the Corporation, or who 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 such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner he or she or it 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 or her or its 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 or she or it Page 12 16 SELFIX SHUTTERS, INC. BY-LAWS reasonably believed to be in, or not opposed to, the best interests of the Corporation or, with respect to any criminal action or proceeding, that the person had reasonable cause to believe that his or her or its conduct was unlawful. [BCA Section 8.75(c)] Section 5.2 Actions By or in the Right of the Corporation . The Corporation may 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 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, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation, provided 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 for negligence or misconduct in the performance of his or her duty to the Corporation, unless, and only to the extent that, 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 as the court shall deem proper. [BCA Section 8.75(b)] Section 5.3 Indemnification in Event of Successful Defense. To the extent that a Director, Officer, employee or agent of the Corporation has been successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to in Sections 5.1 or 5.2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. [BCA Section 8.75(c)] Section 5.4 Procedures for Indemnification. Any indemnification under Sections 5.1 and 5.2 (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 or she or it has met the applicable standard of conduct set forth in said Sections. 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, if a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or (c) by the Shareholders. [BCA, Section 8.75(d)] Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding, as authorized by the Board of Directors in the specific case, upon receipt of a written undertaking by or on behalf of the Director, Officer, employee or agent to repay such amount unless it shall Page 13 17 SELFIX SHUTTERS, INC. BY-LAWS ultimately be determined that he or she or it is entitled to be indemnified by the Corporation as authorized in this Article 5. [BCA Section 8.75(e)] The indemnification provided by this Article 5 shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any By-Law, agreement, vote of Shareholders or disinterested Directors, or otherwise, both as to action in his or her or its official capacity and as to action in another capacity while holding such Office, and 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 a person. [BCA Section 8.75(f)] If the Corporation has paid indemnity or has advanced expenses to a Director, Officer, employee or agent, the Corporation shall report the indemnification or advance in writing to the Shareholders with or before the notice of the next Shareholders' Meeting. [BCA Section 8.75(h)] For purposes of this Article 5, references to the "Corporation" shall include, in addition to the surviving corporation, any merging corporation (including any corporation having merged with a merging corporation) absorbed in a merger which, if its separate existence had continued, would have had the power and authority to indemnify its Directors, Officers, and employees or agents, so that any person who was a director, officer, employee or agent of such merging corporation, or was serving at the request of such merging 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 5 with respect to the surviving corporation as such person would have with respect to such merging corporation if its separate existence had continued. [BCA Section 8.75(i)] For purposes of this Article 5, 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. A person who acted in good faith and in a manner he or she or it reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interest of the Corporation" as referred to in this Article 5. [BCA Section 8.75(j)] Section 5.5 Indemnity Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a Director, Officer, employee or agent of the Corporation, or who 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 such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have Page 14 18 SELFIX SHUTTERS, INC. BY-LAWS the power to indemnify such person against such liability under the provisions of this Article 5 or under the provisions of Section 8.75 of the Illinois Business Corporation Act of 1983. [BCA Section 8.75(g)] Article 6 CONTRACTS, LOANS, CHECKS AND DEPOSITS Section 6.1 Contracts. The Board of Directors may expressly authorize any Officer or Officers and agent or agents of the Corporation to enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation, and such authority may be general or confined to specific instances. [BCA Section 8.50] Section 6.2 Loans. All loans contracted on behalf of the Corporation and all evidence of indebtedness issued in the Corporation's name shall be authorized by resolution of the Board of Directors. Such authority may be general or confined to specific instances. Section 6.3 Pledges of Property and Assets. The pledge of all, or substantially all, the property and assets of the Corporation in the usual and regular course of business may be authorized by the Board of Directors upon such terms and conditions as the Board of Directors deems necessary or desirable, without authorization or consent of the Shareholders of the Corporation. [BCA Section 11.55] Section 6.4 Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such Officer or Officers, 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. Section 6.5 Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies, or other depositaries as the Board of Directors may select. Article 7 SHARES AND THEIR TRANSFER Section 7.1 Consideration for Shares. Shares may be issued for such consideration as shall be authorized from time to time by the Board of Directors through action which establishes a price in cash or other consideration, or both, or a minimum price or a general formula or method by which the price can be determined. Upon authorization by the Board of Directors, the Corporation may issue its own shares in exchange for or in conversion of its outstanding shares, or may distribute its own shares pro rata to its Shareholders or the Shareholders of one Page 15 19 SELFIX SHUTTERS, INC. BY-LAWS or more classes or series to effectuate dividends or splits, and any such transactions shall not require consideration; provided that no such issuance of shares of any class or series shall be made to the holders of shares of any other class or series unless it is either expressly provided for in the Articles of Incorporation or authorized by an affirmative vote of the holders of at least a majority of the outstanding shares of the class or series in which the distribution is to be made. [BCA Section 6.25] Section 7.2 Payment for Shares. The consideration for the issuance of shares shall be paid, in whole or in part, in money, in other property, tangible or intangible, or in labor or services actually performed for the Corporation, as determined by the Board of Directors. When payment of the consideration for which shares are to be issued shall have been received by the Corporation, such shares shall be deemed to be fully paid and non-assessable. In the absence of actual fraud in the transaction, and subject to the provisions of the Business Corporation Act of 1983, the judgment of the Board of Directors or the Shareholders, as the case may be, as to the value of the consideration received for shares shall be conclusive. [BCA Section 6.30] Section 7.3 Shares Represented by Certificates. Except as otherwise provided pursuant to this Article 7, the issued shares of the Corporation shall be represented by certificates. Certificates shall be signed by the appropriate corporate Officers and may be sealed with the seal, or a facsimile of the seal, of the Corporation. In case the seal of the Corporation is changed after the certificate is sealed with the seal or a facsimile of the seal of the Corporation, but before it is issued, the certificate may be issued by the Corporation with the same effect as if the seal had not been changed. If a certificate is countersigned by a transfer agent or registrar, other than the Corporation itself or its employee, any other signatures or countersignatures on the certificate may be facsimiles. In case any Officer of the Corporation, or any officer or employee of the transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, such certificate ceases to be an Officer of the Corporation, or an officer or employee of the transfer agent or registrar, before such certificate is issued, the certificate may be issued by the Corporation with the same effect as if the Officer of the Corporation, or the officer or employee of the transfer agent or registrar, had not ceased to be such at the date of its issue. Every certificate representing shares issued by the Corporation at a time when the Corporation is authorized to issue shares of more than one class shall set forth upon the face or back of the certificate a full summary or statement of all of the designations, preferences, qualifications, limitations, restrictions and special or relative rights of the shares of each class authorized to be issued, and, if the Corporation is authorized to issue any preferred or special class in series, the variations in the relative rights and preferences between the shares of each such series so far as the same have been fixed and determined, and the authority of the Board of Directors to fix and determine the relative rights and preferences of subsequent series. Such statement may be omitted from the certificate if it shall be set forth upon the face or back of the Page 16 20 SELFIX SHUTTERS, INC. BY-LAWS certificate that such statement, in full, will be furnished by the Corporation to any Shareholder upon request and without charge. Each certificate representing shares shall also state: (a) That the Corporation is organized under the laws of Illinois; (b) The name of the person to whom issued; and (c) The number and class of shares, and the designation of the series, if any, which such certificate represents. No certificate shall be issued for any share until such share is fully paid. [BCA Section 6.35] Section 7.4 Uncertificated Shares. The Board of Directors of the Corporation may provide by resolution that some or all of any or all classes and series of its shares shall be uncertificated shares, provided that such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this Article 7. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of holders of certificates representing shares of the same class and series shall be identical. [BCA Section 6.35] Article 8 FISCAL YEAR Except as the Board of Directors of the Corporation may otherwise provide by resolution duly adopted pursuant to the authority granted hereby, the fiscal year of the Corporation shall begin on the first day of June in each year and end on the last day of May in each year. Article 9 DIVIDENDS The Board of Directors may from time to time declare or effect, and the Corporation may pay or make dividends on its outstanding shares or other distributions to Shareholders, including without limitation purchases of shares of the Corporation, subject in each case to any and all terms, conditions, preferences and restrictions provided by law, by the Articles of Incorporation and by any binding contract or instrument duly executed on behalf of the Corporation. [BCA Sections 9.05, 9.10] Page 17 21 SELFIX SHUTTERS, INC. BY-LAWS Article 10 SEAL The Board of Directors may provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the Corporation and the words "Corporate Seal, Illinois." [BCA Section 3.10] Article 11 WAIVER OF NOTICE Whenever any notice whatever is required to be given to any Shareholder or Director of the Corporation under the provisions of these By-Laws or under the provisions of the Articles of Incorporation or under the Illinois Business Corporation Act of 1983, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Attendance at any Meeting shall constitute waiver of notice thereof unless the person at the Meeting objects to the holding of the Meeting because proper notice was not given. [BCA Section 7.20] Article 12 AMENDMENTS TO THE BY-LAWS The By-Laws of the Corporation may be made, altered, amended or repealed by the Shareholders or the Board of Directors of the Corporation, but, if such By-Law expressly so provides, no By-Law adopted by the Shareholders may be altered, amended or repealed by the Board of Directors. These By-Laws may be altered or amended to contain any provisions for the regulation and management of the affairs of the Corporation not inconsistent with law or with the Articles of Incorporation. [BCA Section 2.25] Article 13 STATUTORY REFERENCES The statutory references in these By-Laws to the "Business Corporation Act of 1983" refer, except where the context otherwise requires, to the Illinois Business Corporation Act of 1983, as amended from time to time. The citations to sections of the BCA appearing in brackets throughout the text of these By-Laws are for convenience of reference only, are not made a part hereof, shall not be construed as incorporating the referenced provisions of the law into these By-Laws and shall not be deemed in any way to alter, affect or qualify the meaning or effect of these By-Laws as written and adopted. Page 18 EX-4.1.1 11 INDENTURE 1 Exhibit 4.1.1 ============================================================ HOME PRODUCTS INTERNATIONAL, INC., THE SUBSIDIARY GUARANTORS (as defined herein), and LASALLE NATIONAL BANK, as Trustee 9 5/8% Senior Subordinated Notes due 2008 ===================== INDENTURE Dated as of May 14, 1998 ==================== ============================================================= 2 TABLE OF CONTENTS
Page ---- ARTICLE I Definitions and Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.2. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 1.3. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 1.4. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE II The Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 2.1. Form, Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 2.2. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 2.3. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 2.4. Paying Agent To Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 2.5. Securityholder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 2.6. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 2.7. Form of Certificate to be Delivered in Connection with Transfers to Institutional Accredited Investors . . . . . . . . . . . . . . . . . . . . 30 SECTION 2.8. Form of Certificate to be Delivered in Connection with Transfers Pursuant to Regulation S . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 2.9. Mutilated, Destroyed, Lost or Stolen Securities . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 2.10. Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 2.11. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 2.12. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 2.13. Payment of Interest; Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 2.14. Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 2.15. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE III Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 SECTION 3.1. Payment of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 SECTION 3.2. SEC Reports and Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 SECTION 3.3. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 SECTION 3.4. Limitation on Layering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 3.5. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3 SECTION 3.6. Limitation on Restrictions on Distributions from Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 SECTION 3.7. Limitation on Sales of Assets and Subsidiary Stock . . . . . . . . . . . . . . . . . . . . . 41 SECTION 3.8. Limitation on Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 SECTION 3.9. Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 3.10. Limitation on Capital Stock of Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . 47 SECTION 3.11. Future Subsidiary Guarantors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 3.12. Limitation on Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 3.13. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 3.14. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 3.15. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 3.16. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 3.17. Further Instruments and Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 ARTICLE IV Successor Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 4.1. Merger and Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 ARTICLE V Redemption of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 5.1. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 5.2. Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 5.3. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 5.4. Selection by Trustee of Securities to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 5.5. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 5.6. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 SECTION 5.7. Notes Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 SECTION 5.8. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 ARTICLE VI Defaults and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 6.2. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 6.3. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 6.4. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 6.5. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 6.6. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 6.7. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 6.8. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ii 4 SECTION 6.9. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 ARTICLE VII Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 7.1. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 7.2. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 7.3. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 7.4. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 7.5. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 7.6. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 7.7. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 7.8. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 7.9. Successor Trustee by Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 7.11. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . . 63 ARTICLE VIII Discharge of Indenture; Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 8.1. Discharge of Liability on Securities; Defeasance . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 8.2. Conditions to Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 8.3. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 SECTION 8.4. Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 SECTION 8.5. Indemnity for U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 66 SECTION 8.6. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 ARTICLE IX Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 SECTION 9.1. Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 SECTION 9.2. With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 SECTION 9.3. Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 SECTION 9.4. Revocation and Effect of Consents and Waivers . . . . . . . . . . . . . . . . . . . . . . . . 68 SECTION 9.5. Notation on or Exchange of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 SECTION 9.6. Trustee To Sign Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
iii 5 ARTICLE X Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 SECTION 10.1. Agreement To Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 SECTION 10.2. Liquidation, Dissolution, Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 SECTION 10.3. Default on Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 SECTION 10.4. Acceleration of Payment of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 SECTION 10.5. When Distribution Must Be Paid Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 SECTION 10.6. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 SECTION 10.7. Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 SECTION 10.8. Subordination May Not Be Impaired by Company . . . . . . . . . . . . . . . . . . . . . . . . 71 SECTION 10.9. Rights of Trustee and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 SECTION 10.10. Distribution or Notice to Representative . . . . . . . . . . . . . . . . . . . . . . . . . . 72 SECTION 10.11. Article X Not To Prevent Events of Default or Limit Right To Accelerate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 SECTION 10.12. Trust Moneys Not Subordinated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 SECTION 10.13. Trustee Entitled To Rely . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 SECTION 10.14. Trustee To Effectuate Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . . 73 SECTION 10.16. Reliance by Holders of Senior Indebtedness on Subordination Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 ARTICLE XI Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 SECTION 11.1. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 SECTION 11.2. Limitation on Liability; Termination, Release and Discharge . . . . . . . . . . . . . . . . 75 SECTION 11.3. Right of Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 SECTION 11.4. No Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 ARTICLE XII Subordination of Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 SECTION 12.1. Agreement To Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 SECTION 12.2. Liquidation, Dissolution, Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 SECTION 12.3. Default on Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 SECTION 12.4. Acceleration of Payment of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 SECTION 12.5. When Distribution Must Be Paid Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 SECTION 12.6. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 SECTION 12.7. Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 SECTION 12.8. Subordination May Not Be Impaired by Subsidiary Guarantor . . . . . . . . . . . . . . . . . 79
iv 6 SECTION 12.9. Rights of Trustee and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 SECTION 12.10. Distribution or Notice to Representative . . . . . . . . . . . . . . . . . . . . . . . . . . 79 SECTION 12.11. Article XII Not To Prevent Events of Default or Limit Right To Accelerate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 SECTION 12.12. Trust Moneys Not Subordinated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 SECTION 12.13. Trustee Entitled To Rely . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 SECTION 12.14. Trustee To Effectuate Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 SECTION 12.15. Trustee Not Fiduciary for Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . . 80 SECTION 12.16. Reliance on Subordination Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 ARTICLE XIII Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 SECTION 13.1. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 SECTION 13.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 SECTION 13.3. Communication by Holders with other Holders . . . . . . . . . . . . . . . . . . . . . . . . 82 SECTION 13.4. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . 82 SECTION 13.5. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . 82 SECTION 13.6. When Securities Disregarded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 SECTION 13.7. Rules by Trustee, Paying Agent and Registrar . . . . . . . . . . . . . . . . . . . . . . . . 83 SECTION 13.8. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 SECTION 13.9. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 SECTION 13.10. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 SECTION 13.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 SECTION 13.12. Multiple Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 SECTION 13.13. Variable Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 SECTION 13.14. Qualification of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 SECTION 13.15. Table of Contents; Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
v 7 EXHIBIT A Form of the Initial Security EXHIBIT B Form of the Exchange Security EXHIBIT C Form of Subsidiary Guarantee vi 8 CROSS-REFERENCE TABLE
TIA Indenture Section Section - ------- --------- 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10 (a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8; 7.10 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6 (b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2; 3.10; 13.2 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.4 (c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.4 (c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.5 (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5; 13.2 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11 316(a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.6 (a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5 (a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.1
N.A. means Not Applicable. - -------------------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of the Indenture. vii 9 INDENTURE dated as of May 14, 1998, among HOME PRODUCTS INTERNATIONAL, INC., a Delaware corporation (the "Company"), THE SUBSIDIARY GUARANTORS (as defined) and LASALLE NATIONAL BANK (the "Trustee"). Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's 9 5/8% Senior Subordinated Notes due 2008 (the "Initial Securities") and, if and when issued in exchange for Initial Securities as provided in the Exchange and Registration Rights Agreement (as hereinafter defined), the Company's 9 5/8% Senior Subordinated Notes due 2008 (the "Exchange Securities" and, together with the Initial Securities, the "Securities"): ARTICLE I Definitions and Incorporation by Reference SECTION 1.1. Definitions. "Additional Assets" means (i) any property or assets (other than Indebtedness and Capital Stock) to be used by the Company or a Restricted Subsidiary in a Related 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; or (iii) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary of the Company; provided, however, that, in the case of clauses (ii) and (iii), such Restricted Subsidiary is primarily engaged in a Related Business. "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 a Restricted Subsidiary (other than directors' qualifying shares), 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) the sale of Cash Equivalents in the ordinary course of business, (iii) a disposition of inventory in the ordinary course of business, (iv) 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, (v) the sale, discount or factoring (with or without recourse on commercially reasonable terms) of accounts receivable arising in the ordinary course of business, (vi) transactions permitted under Section 4.1 of this Indenture and (vii) for purposes 10 2 of Section 3.7 of this Indenture only, a disposition that constitutes a Restricted Payment permitted under Section 3.5 of this Indenture. "Attributable Indebtedness" in respect of a sale/leaseback transaction means, as of the time of determination, the present value (discounted at the interest rate assumed in making calculations in accordance with GAAP) 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 or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Indebtedness or Preferred Stock multiplied by the amount of such payment by (ii) the sum of all such payments. "Bank Indebtedness" means any and all amounts, whether outstanding on the Issue Date or thereafter Incurred, payable by the Company or any Subsidiary under or in respect of the Senior Credit Agreement and any related notes, collateral documents, letters of credit and guarantees or any Interest Rate Agreement entered into with a Lender or an Affiliate of a Lender (as defined in the Senior Credit Agreement) in connection with the Senior Credit Agreement, including principal, premium, if any, interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company at the rate specified therein whether or not a claim for post filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means, as to any Person, the board of directors of such Person or any duly authorized committee thereof. "Borrowing Base" means, as of any date, an amount equal to the sum of (i) 40% of the aggregate book value of inventory and (ii) 75% of the aggregate book value of all accounts receivable of the Company and its Restricted Subsidiaries on a consolidated basis, as determined in accordance with GAAP consistently applied. To the extent that information is not available as to the amount of inventory or accounts receivable as of a specific date, the Company shall use the most recent available information for purposes of calculating the Borrowing Base. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banking institutions are authorized or required by law to close in New York City. "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. 11 3 "Capitalized Lease Obligation" 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. "Cash Equivalents" means (i) securities issued or directly and fully guaranteed or insured by the United States Government or any agency or instrumentality thereof, having maturities of not more than one year from the date of acquisition; (ii) marketable general obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition thereof, having a credit rating of "A" or better from either Standard & Poor's Ratings Group or Moody's Investors Service, Inc.; (iii) certificates of deposit, time deposits, eurodollar time deposits, overnight bank deposits or bankers' acceptances having maturities of not more than one year from the date of acquisition thereof issued by any commercial bank the long-term debt of which is rated at the time of acquisition thereof at least "A" or the equivalent thereof by Standard & Poor's Rating Group, or "A" or the equivalent thereof by Moody's Investors Service, Inc., and having capital and surplus in excess of $250 million (or foreign currency equivalent thereof); (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (i), (ii) and (iii) entered into with any bank meeting the qualifications specified in clause (iii) above; (v) commercial paper rated at the time of acquisition thereof at least "A-2" or the equivalent thereof by Standard & Poor's Rating Group or "P-2" or the equivalent thereof by Moody's Investors Service, Inc., or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of investments, and in either case maturing within 270 days after the date of acquisition thereof; and (vi) interests in any investment company which invests solely in instruments of the type specified in clauses (i) through (v) above. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means Home Products International, Inc. or a successor. "Consolidated Coverage Ratio" as of any date of determination means, with respect to any Person, the ratio of (i) the aggregate amount of Consolidated EBITDA of such Person for the period of the most recent four consecutive fiscal quarters for which financial statements are available ending prior to the date of such determination to (ii) Consolidated Interest Expense for such four fiscal quarters; provided, however, that (A) If the Company or any Restricted Subsidiary (1) has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, Consolidated EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period (except that in making such computation, the amount of Indebtedness under any revolving credit facility outstanding on the date of such calculation 12 4 shall be computed based on (a) the average daily balance of such Indebtedness during such four fiscal quarters or such shorter period for which such facility was outstanding or (b) if such facility was created after the end of such four fiscal quarters, the average daily balance of such Indebtedness during the period from the date of creation of such facility to the date of such calculation) and 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, or (2) has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of the period that is no longer outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio involves a discharge of Indebtedness (in each case other than Indebtedness incurred under any revolving credit facility unless such Indebtedness has been permanently repaid), Consolidated EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such discharge of such Indebtedness, including 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 the Company or any Restricted Subsidiary 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, the Consolidated EBITDA for such period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period or increased by an amount equal to the Consolidated EBITDA (if negative) directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary 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 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), (C) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, including any 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 EBITDA 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 (D) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (B) or (C) above if made by the Company or a Restricted Subsidiary during such period, Consolidated EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition or 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 13 5 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 Consolidated 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 (any Interest Rate Agreement applicable to such Indebtedness for a period (not in excess of 12 months) corresponding to the remaining term of such Interest Rate Agreement as of the date of determination). "Consolidated EBITDA" 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 of intangibles and (v) other non-cash charges reducing Consolidated Net Income (excluding any such non-cash charge to the extent it represents an accrual of or reserve for cash charges in any future period or amortization of a prepaid cash expense that was paid in a prior period not included in the calculation). Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the interest, depreciation and amortization of, a Restricted Subsidiary of a Person shall be added to Consolidated Net Income to compute Consolidated EBITDA of such Person only to the extent (and in the same proportion) that the net income of such Subsidiary was included in calculating the Consolidated Net Income of such Person. "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its Consolidated Subsidiaries, plus, to the extent not included in such interest expense, (i) interest expense attributable to Capitalized Lease Obligations and the interest portion of rent expense associated with Attributable Indebtedness in respect of the relevant lease giving rise thereto, determined as if such lease were a capitalized lease in accordance with GAAP, (ii) amortization of debt discount and debt issuance cost (other than costs incurred in connection with the Refinancing), (iii) capitalized interest and accrued interest, (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 Subsidiary under any Guarantee of Indebtedness or other obligation of any other Person, (vii) net costs associated with Hedging Obligations (including amortization of fees), (viii) dividends in respect of all Disqualified Stock of the Company and all Preferred Stock of Subsidiaries, in each case, held by Persons other than the Company or a Wholly-Owned Subsidiary and (ix) 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; provided, however, that there shall be excluded therefrom any such interest expense of any Unrestricted Subsidiary to the extent the related Indebtedness is not Guaranteed or paid by the Company or any Restricted Subsidiary. For purposes of the foregoing, total interest expense shall be determined after giving effect to any net payments made or received by the Company and its Subsidiaries with respect to Interest Rate Agreements. 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 14 6 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 net income (loss) of the Company and its Consolidated Subsidiaries; provided, however, that there shall not be included in such Consolidated Net Income: (i) any net income (loss) of any Person if such Person is not a Restricted Subsidiary, except that (A) subject to the limitations contained in (iv) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (iii) below) and (B) the Company's equity in a net loss of any such Person (other than an Unrestricted Subsidiary) for such period shall be included in determining such Consolidated Net Income to the extent such loss has been funded with cash from the Company or a Restricted Subsidiary; (ii) any net income (loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (iii) any net income (loss) of any Restricted Subsidiary if such 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, except that (A) subject to the limitations contained in (iv) below the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution that could have been made to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period will be included in determining such Consolidated Net Income; (iv) any gain (loss) realized upon the sale or other disposition of any property, plant, equipment or other asset of the Company or its consolidated Subsidiaries which is not sold or otherwise disposed of in the ordinary course of business and any gain (loss) realized upon the sale or other disposition of any Capital Stock of any Person; (v) any extraordinary gain or loss and (vi) the cumulative effect of a change in accounting principles. "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. "Defaulted Interest" shall have the meaning set forth in Section 2.13. "DTC" means The Depository Trust Company, its nominees and their respective successors and assigns, or such other depository institution hereinafter appointed by the Company. 15 7 "Designated Senior Indebtedness" means (i) the Bank Indebtedness in the case of the Company and (ii) any other Senior Indebtedness which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $25 million and is specifically designated in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture. "Disqualified Stock" means, with respect to any Person, any Capital Stock of such Person 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 (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or Disqualified Stock (excluding capital stock which is convertible or exchangeable solely at the option of the Company or a Restricted Subsidiary) or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to the Stated Maturity of the Securities, provided, that only the portion of Capital Stock which so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such Stated Maturity shall be deemed to be Disqualified Stock. "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. "Exchange and Registration Rights Agreement" means the Exchange and Registration Rights Agreement, dated May 14, 1998, among the Company, the Subsidiary Guarantors, Chase Securities Inc. and NationsBanc Montgomery Securities LLC. "Exchange Securities" means, if and when issued in exchange for the Initial Securities as provided in the Exchange and Registration Rights Agreement, the Company's 9 5/8% Senior Subordinated Notes due 2008. "Fiscal Year" means a 52 or 53 week period ending on the last Saturday in December. "Foreign Subsidiary" means any Subsidiary that is not organized under the laws of the United States of America or any state thereof or the District of Columbia. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the date of this 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 this Indenture shall be computed in conformity with GAAP. 16 8 "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 agreements 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 Senior Indebtedness" means, with respect to a Subsidiary Guarantor, the following obligations, whether outstanding on the date of this Indenture or thereafter issued, without duplication: (i) any Subsidiary Guarantee of the Bank Indebtedness by such Subsidiary Guarantor and all other Subsidiary Guarantees by such Subsidiary Guarantor of Senior Indebtedness of the Company or Guarantor Senior Indebtedness for any other Subsidiary Guarantor; and (ii) all obligations consisting of the principal of and premium, if any, and accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Subsidiary Guarantor regardless of whether post filing interest is allowed in such proceeding) on, and fees and other amounts owing in respect of, all other Indebtedness of the Subsidiary Guarantor, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is expressly provided that the obligations in respect of such Indebtedness are not senior in right of payment to the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee; provided, however, that Guarantor Senior Indebtedness shall not include (A) any obligations of such Subsidiary Guarantor to another Subsidiary Guarantor or any other Subsidiary of the Subsidiary Guarantor, (B) any liability for Federal, state, local, foreign or other taxes owed or owing by such Subsidiary Guarantor, (C) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities), (D) any Indebtedness of such Subsidiary Guarantor that is expressly subordinate in right of payment to any of the Indebtedness of such Subsidiary Guarantor, including any Guarantor Senior Subordinated Indebtedness and Guarantor Subordinated Obligations of such Subsidiary Guarantor or (E) any obligation with respect to Capital Stock. "Guarantor Senior Subordinated Indebtedness" means with respect to a Subsidiary Guarantor, the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee and any other Indebtedness of such Subsidiary Guarantor (whether outstanding on the Issue Date or thereafter Incurred) that specifically provides that such Indebtedness is to rank pari passu in right of payment with the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee and is not expressly subordinated by its terms in right of payment to any Indebtedness of such Subsidiary Guarantor which is not Guarantor Senior Indebtedness of such Subsidiary Guarantor. 17 9 "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 in right of payment to the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee pursuant to a written agreement. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency 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); (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except trade payables), 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) 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 Subsidiary, any Preferred Stock (but excluding, in each case, any accrued dividends); (vii) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of such Indebtedness shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness of such other Persons; (viii) all Indebtedness of other Persons to the extent Guaranteed by such Person; and (ix) to the extent not otherwise included in this definition, net obligations of such Person under Currency Agreements and Interest Rate Agreements (the amount of any such obligations to be equal at any time to the net termination value of such agreement or arrangement giving rise to such obligation that would be payable by such Person at such time). The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "Indenture" means this Indenture as amended or supplemented from time to time. "Initial Securities" means the Company's 9 5/8% Senior Subordinated Notes due 2008 issued under this Indenture. 18 10 "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) 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 Section 3.5, (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 (A) the Company's "Investment" in such Subsidiary at the time of such redesignation less (B) 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 re-designated 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 of the Company. "Issue Date" means the date on which the Initial Securities are originally issued. "Legal Holiday" has the meaning ascribed to it in Section 13.8. "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). "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 that are the subject of such Asset Disposition or received in any other noncash form) therefrom, in each case net of (i) all legal, accounting, investment banking, title and recording tax expenses, commissions and other fees and expenses Incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition, (ii) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon, or other 19 11 security agreement of any kind with respect to, such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition, (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition and (iv) 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 and retained by the Company or any Restricted Subsidiary after such Asset Disposition. "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-U.S. Person" means a person who is not a U.S person, as defined in Regulation S. "Note Register" means the register of Securities, maintained by the Trustee, pursuant to Section 2.3. "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Permitted Holders" means (i) directors and officers of the Company on the Issue Date and (ii) Chase Venture Capital Associates, L.P. and any Affiliate thereof. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in (i) a Restricted Subsidiary or a Person which shall, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Related Business; (ii) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that such Person's primary business is a Related Business; (iii) cash and Cash Equivalents; (iv) receivables owing to the Company or any Restricted Subsidiary created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (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 20 12 accounting purposes and that are made in the ordinary course of business; (vi) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary; (vii) any Investment in an entity conducting a Related Business that is not a Restricted Subsidiary; provided that the aggregate fair market value of all Investments made pursuant to this clause (vii) (valued on the date each such Investment was made and without giving effect to subsequent changes in value) may not at any one time exceed $5 million; (viii) Investments in Selfix Europe, L.L.C. or its Successors; provided that the aggregate fair market value of all Investments made pursuant to this clause (viii) (valued on the date each such Investment was made and without giving effect to subsequent changes in value) may not at any one time exceed $3 million; (ix) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; (x) any Investment in securities or other assets received in connection with Asset Dispositions made in accordance with the provisions of Section 3.7; and (xi) Currency Agreements, Interest Rate Agreements and related Hedging Obligations entered into in compliance with Section 3.3 and hedging arrangements with respect to the purchase of raw materials entered into in the ordinary course of business on customary terms for bona fide hedging purposes. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof 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. "Private Exchange Securities" shall have the meaning set forth in the Exchange and Registration Rights Agreement. A "Public Market" exists at any time with respect to the common stock of the Company if (i) the common stock of the Company is then registered with the 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 (ii) at least 15% of the total issued and outstanding common stock of the Company has been distributed prior to such time by means of an effective registration statement under the Securities Act. "Purchase Money Indebtedness" of any Person means any Indebtedness of such person to any seller or other person incurred to finance the acquisition or construction of any asset (or, in each case, any interest therein) acquired or constructed after the Issue Date which is related to a Related Business of the Company and which is incurred concurrently with, or within 180 days of, such acquisition or the completion of such construction and, if secured, is secured only by the assets so financed. 21 13 "QIB" means any "qualified institutional buyer" (as defined in Rule 144A under the Securities Act). "Refinancing Indebtedness" means Indebtedness that is Incurred to refund, refinance, replace, renew, repay, redeem, retire or extend (including pursuant to any defeasance or discharge mechanism) (collectively, "refinance", "refinances," and "refinanced" shall have a correlative meaning) any Indebtedness existing on the date of this Indenture or Incurred in compliance with this 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 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 Average Life of the Indebtedness being refinanced, and (iii) such Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the sum of the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding (plus fees and expenses, including any premium and defeasance costs) of the Indebtedness being refinanced. "Registered Exchange Offer" shall have the meaning set forth in the Exchange and Registration Rights Agreement. "Related 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 this Indenture. "Representative" means any trustee, agent or representative (if any) of an issue of Senior Indebtedness. "Restricted Period" means the 40 consecutive days beginning on and including the later of (A) the day on which the Initial Securities are offered to persons other than distributors (as defined in Regulation S under the Securities Act) and (B) the Issue Date. "Restricted Securities Legend" means the Private Placement Legend set forth in clause (A) of Section 2.1(c) or the Regulation S Legend set forth in clause (B) of Section 2.1(c), as applicable. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "SEC" means the Securities and Exchange Commission. "Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. 22 14 "Securities" means the Securities issued under this Indenture. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means the custodian with respect to the Global Security (as appointed by DTC), or any successor Person thereto and shall initially be the Trustee. "Senior Credit Agreement" means (i) the Credit Agreement dated as of May 14, 1998 among the Company, The Chase Manhattan Bank, as Administrative Agent, and the lenders parties thereto from time to time, as the same may be amended, supplemented or otherwise modified from time to time and any guarantees issued thereunder and (ii) any renewal, extension, refunding, restructuring, replacement or refinancing thereof (whether with the original Administrative Agent and lenders or another administrative agent or agents or other lenders and whether provided under the original Senior Credit Agreement or any other credit or other agreement or indenture). "Senior Indebtedness" means, whether outstanding on the Issue Date or thereafter issued, created, incurred or assumed, the Bank Indebtedness and all other Indebtedness of the Company, including accrued and unpaid interest thereon (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company at the rate specified in the documentation with respect thereto whether or not a claim for post filing interest is allowed in such proceeding) and fees relating thereto, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that the obligations in respect of such Indebtedness are not superior in right of, or are subordinate to, payment of the Securities; provided, however, that Senior Indebtedness will not include (i) any obligation of the Company to any Subsidiary, (ii) any liability for Federal, state, foreign, local or other taxes owed or owing by the Company, (iii) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities), (iv) any Indebtedness, Guarantee or obligation of the Company that is expressly subordinate or junior in right of payment to any other Indebtedness, Guarantee or obligation of the Company, including any Senior Subordinated Indebtedness and any Subordinated Obligations or (v) any obligations in respect of Capital Stock. "Senior Subordinated Indebtedness" means the Securities and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Securities in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "Significant Subsidiary" means any 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 final payment of principal of such security is due and 23 15 payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Subordinated Obligation" means any Indebtedness of the Company (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Securities pursuant to a written agreement. "Subsequent Series Securities" has the meaning ascribed to it in Section 2.2. "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 Guarantee" means, individually, any Guarantee of payment of the Securities by a Subsidiary Guarantor pursuant to the terms of this Indenture, and, collectively, all such Guarantees. Each such Subsidiary Guarantee by any Restricted Subsidiary created or acquired by the Company after the Issue Date (other than a Foreign Subsidiary) which Guarantees the Bank Indebtedness or Incurs Indebtedness under paragraph (a) of Section 3.3 will be in the form set forth in Exhibit C of this Indenture. "Subsidiary Guarantor" means each Subsidiary of the Company in existence on the Issue Date (Selfix, Inc., Seymour Housewares Corporation, Shutters, Inc. and Tamor Corporation) and any Restricted Subsidiary created or acquired by the Company after the Issue Date (other than a Foreign Subsidiary) which Guarantees the Bank Indebtedness or Incurs Indebtedness under paragraph (a) of Section 3.3. "TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb), as in effect on the date of this Indenture. "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor. "Trust Officer" shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. 24 16 "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 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 Section 3.5. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (i) the Company could Incur $1.00 of additional Indebtedness pursuant to Section 3.3(a) and (ii) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "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. "Voting Stock" of a corporation means all classes of Capital Stock of such corporation then outstanding and normally entitled to vote in the election of directors. "Wholly-Owned Subsidiary" means a Restricted Subsidiary of the Company, all of the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or one or more Wholly-Owned Subsidiaries. 25 17 SECTION 1.2. Other Definitions.
Defined in Term Section ---- ----------- "Affiliate Transaction" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8 "Agent Member" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(d) "Authenticating Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 "Bankruptcy Law" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 "Blockage Notice" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3 "Change of Control" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9 "Change of Control Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9 "Change of Control Payment" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9 "Change of Control Payment Date" . . . . . . . . . . . . . . . . . . . . . . . . . 3.9 "Company Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 "covenant defeasance option" . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(b) "Custodian" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 "Definitive Securities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(e) "Event of Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 "Excess Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7 "Exchange Global Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 "Global Securities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a) "Institutional Accredited Investor Global Note" . . . . . . . . . . . . . . . . . 2.1 "Institutional Accredited Investor Note" . . . . . . . . . . . . . . . . . . . . . 2.1 "legal defeasance option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(b) "Obligations" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1 "Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7 "Offer Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7 "Offer Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7 "pay the Securities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3 "Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 "Payment Blockage Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3 "Private Placement Legend" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(c) "Purchase Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7 "Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 "Regulation S" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a) "Regulation S Certificate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 "Regulation S Global Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 "Regulation S Legend" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 "Regulation S Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 "Release Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 "Resale Restriction Termination Date" . . . . . . . . . . . . . . . . . . . . . . 2.6 "Restricted Payment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 "Rule 144A" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b) "Rule 144A Global Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 "Rule 144A Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 "Special Interest Payment Date" . . . . . . . . . . . . . . . . . . . . . . . . . 2.13 "Special Record Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.13 "Subsequent Series Securities" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 "Successor Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1
SECTION 1.3. Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. 26 18 "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined in the TIA by reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.4. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Indebtedness shall not be deemed to be subordinate or junior to Secured Indebtedness merely by virtue of its nature as unsecured Indebtedness; (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; and (8) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater. ARTICLE II The Securities SECTION 2.1. Form, Dating and Terms. (a) The Initial Securities are being offered and sold by the Company pursuant to a Purchase Agreement, dated May 7, 1998, 27 19 among the Company, the Subsidiary Guarantors, Chase Securities Inc. and NationsBanc Montgomery Securities LLC. Initial Securities offered and sold to the qualified institutional buyers (as defined in Rule 144A under the Securities Act ("Rule 144A")) in the United States of America (the "Rule 144A Note") will be issued on the Issue Date in the form of a permanent global Security substantially in the form of Exhibit A, which is hereby incorporated by reference and made a part of this Indenture, together with appropriate legends as set forth in Section 2.1(c) (the "Rule 144A Global Note"), deposited with the Trustee, as custodian for DTC, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Rule 144A Global Note may be represented by more than one certificate, if so required by DTC's rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of the Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as hereinafter provided. Initial Securities offered and sold outside the United States of America ("Regulation S Note") in reliance on Regulation S will be issued on the Issue Date in the form of a permanent global Security, without interest coupons, substantially in the form set forth in Exhibit A, which is hereby incorporated by reference and made a part of this Indenture, together with appropriate legends as set forth in Section 2.1(c) (the "Regulation S Global Note") deposited with the Trustee, as custodian for DTC, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Regulation S Global Note may be represented by more than one certificate, if so required by DTC's rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of the Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as hereinafter provided. Initial Securities resold to institutional "accredited investors" (as defined in Rules 501(a)(1), (2), (3) and (7) under the Securities Act) in the United States of America (the "Institutional Accredited Investor Note") will be issued in the form of a permanent global Security substantially in the form of Exhibit A, which is hereby incorporated by reference and made a part of this Indenture, together with appropriate legends as set forth in Section 2.1(c) (the "Institutional Accredited Investor Global Note") deposited with the Trustee, as custodian for DTC, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Institutional Accredited Investor Global Note may be represented by more than one certificate, if so required by DTC's rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of the Institutional Accredited Investor Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as hereinafter provided. Exchange Securities exchanged for interests in the Rule 144A Note, the Regulation S Note and the Institutional Accredited Investor Note will be issued in the form of a permanent global Security substantially in the form of Exhibit B, which is hereby 28 20 incorporated by reference and made a part of this Indenture, deposited with the Trustee as hereinafter provided, with the appropriate legend set forth in Section 2.1(c) (the "Exchange Global Note"). The Exchange Global Note may be represented by more than one certificate, if so required by DTC's rules regarding the maximum principal amount to be represented by a single certificate. The Rule 144A Global Note, the Regulation S Global Note, the Exchange Global Note and the Institutional Accredited Investor Global Note are sometimes collectively herein referred to as the "Global Securities." The principal of (and premium, if any) and interest on the Securities shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose pursuant to Section 2.3; provided, however, that, at the option of the Company, each installment of interest may be paid by (i) check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Note Register or (ii) wire transfer to an account located in the United States maintained by the payee. The Private Exchange Securities shall be in the form of Exhibit A. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage, in addition to those set forth on Exhibits A and B and in Section 2.1(c). The Company and the Trustee shall approve the forms of the Securities and any notation, endorsement or legend on them. Each Security shall be dated the date of its authentication. The terms of the Securities set forth in Exhibit A and Exhibit B are part of the terms of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to be bound by such terms. (b) Denominations. The Securities shall be issuable only in fully registered form, without coupons, and only in denominations of $1,000 and any integral multiple thereof. (c) Restrictive Legends. Unless and until (i) an Initial Security is sold under an effective registration statement or (ii) an Initial Security is exchanged for an Exchange Security in connection with an effective registration statement, in each case pursuant to the Exchange and Registration Rights Agreement, (A) such Rule 144A Global Note and the Institutional Accredited Investor Global Note shall bear the following legend (the "Private Placement Legend") on the face thereof: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH 29 21 TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A TRANSACTION INVOLVING A MINIMUM PRINCIPAL AMOUNT OF $250,000 OF SECURITIES, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) AND (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE."; and (B) the Regulation S Global Note shall bear the following legend (the "Regulation S Legend") on the face thereof: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED 30 22 STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT ("REGULATION S"), (2) BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A TRANSACTION INVOLVING A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND IN THE CASE OF THE FOREGOING CLAUSE (E), A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED AFTER 40 CONSECUTIVE DAYS BEGINNING ON AND INCLUDING THE LATER OF (A) THE DAY ON WHICH THE SECURITIES ARE OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN REGULATION S) AND (B) THE DATE OF THE CLOSING OF THE ORIGINAL OFFERING. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE 31 23 MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT." The Global Securities, whether or not an Initial Security, shall bear the following legend on the face thereof: "UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF." (d) Book-Entry Provisions. (i) This Section 2.1(d) shall apply only to Global Securities deposited with the Trustee, as custodian for DTC. (ii) Each Global Security initially shall (x) be registered in the name of DTC for such Global Security or the nominee of DTC, (y) be delivered to the Trustee as custodian for DTC and (z) bear legends as set forth in Section 2.1(c). (iii) Members of, or participants in, DTC ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by DTC or by the Trustee as the custodian of DTC or under such Global Security, and DTC may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and its Agent Members, the operation of customary practices of DTC governing the exercise of the rights of a holder of a beneficial interest in any Global Security. 32 24 (iv) In connection with any transfer of a portion of the beneficial interest in a Global Security pursuant to subsection (e) of this Section to beneficial owners who are required to hold Definitive Securities, the Security Trustee shall reflect on its books and records the date and a decrease in the principal amount of such Global Security in an amount equal to the principal amount of the beneficial interest in the Global Security to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Definitive Securities of like tenor and amount. (v) In connection with the transfer of an entire Global Security to beneficial owners pursuant to subsection (e) of this Section, such Global Security shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by DTC in exchange for its beneficial interest in such Global Security, an equal aggregate principal amount of Definitive Securities of authorized denominations. (e) Definitive Securities. Except as provided below, owners of beneficial interests in Global Securities will not be entitled to receive certificated Securities ("Definitive Securities"). If required to do so pursuant to any applicable law or regulation, beneficial owners may obtain Definitive Securities in exchange for their beneficial interests in a Global Security upon written request in accordance with DTC's and the Registrar's procedures. In addition, Definitive Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in a Global Security if (i) DTC notifies the Company that it is unwilling or unable to continue as depositary for such Global Security or DTC ceases to be a clearing agency registered under the Exchange Act, at a time when DTC is required to be so registered in order to act as depositary, and in each case a successor depositary is not appointed by the Company within 90 days of such notice or, (ii) the Company executes and delivers to the Trustee and Registrar an Officers' Certificate stating that such Global Security shall be so exchangeable or (iii) an Event of Default has occurred and is continuing and the Registrar has received a request from DTC. (f) Any Definitive Security delivered in exchange for an interest in a Global Security pursuant to Section 2.1(d)(iv) or (v) shall, except as otherwise provided by Section 2.6(c), bear the applicable legend regarding transfer restrictions applicable to the Definitive Security set forth in Section 2.1(c). (g) The registered holder of a Global Security may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. SECTION 2.2. Execution and Authentication. One Officer shall sign the Securities for the Company by manual or facsimile signature. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. 33 25 A Security shall not be valid until an authorized signatory of the Trustee manually authenticates the Security. The signature of the Trustee on a Security shall be conclusive evidence that such Security has been duly and validly authenticated and issued under this Indenture. At any time and from time to time after the execution and delivery of this Indenture, the Trustee shall authenticate and make available for delivery: (1) Initial Securities for original issue on the Issue Date in an aggregate principal amount of $125.0 million and (2) Exchange Securities for issue only in a Registered Exchange Offer pursuant to the Exchange and Registration Rights Agreement, and only in exchange for Initial Securities of an equal principal amount, and (3) additional series of notes which may be offered subsequent to the Issue Date (the "Subsequent Series Securities") in an aggregate principal amount not to exceed $125,000,000, in each case upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company (the "Company Order"). Such Company Order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities or Exchange Securities. The aggregate principal amount of notes which may be authenticated and delivered under this Indenture is limited to $250.0 million outstanding except as provided in Section 2.9. No Subsequent Series Securities may be authenticated and delivered in an aggregate principal amount of less than $25,000,000. All Securities issued on the Issue Date and all Subsequent Series Securities shall be identical in all respects other than issue dates, the date from which interest accrues and any changes relating thereto. Notwithstanding anything to the contrary contained in this Indenture, all notes issued under this Indenture shall vote and consent together on all matters as one class and no series of notes will have the right to vote or consent as a separate class on any matter. The Trustee may appoint an agent (the "Authenticating Agent") reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, any such Authenticating Agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by the Authenticating Agent. In case the Company or any Subsidiary Guarantor, pursuant to Article IV, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company or any Subsidiary Guarantor shall have been merged, or the Person which shall have received a conveyance, transfer, lease or other disposition as aforesaid, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article IV, any of the Securities authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Securities executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Securities surrendered for such exchange and of like principal amount; and the Trustee, upon Company Order of the successor Person, shall authenticate and deliver 34 26 Securities as specified in such order for the purpose of such exchange. If Securities shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section 2.2 in exchange or substitution for or upon registration of transfer of any Securities, such successor Person, at the option of the Holders but without expense to them, shall provide for the exchange of all Securities at the time outstanding for Securities authenticated and delivered in such new name. SECTION 2.3. Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Company shall cause each of the Registrar and the Paying Agent to maintain an office or agency in the Borough of Manhattan, The City of New York. The Registrar shall keep a register of the Securities and of their transfer and exchange (the "Note Register"). The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of each such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.7. The Company or any of its domestically incorporated Wholly-Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent. The Company initially appoints the Trustee as Registrar and Paying Agent for the Securities. SECTION 2.4. Paying Agent To Hold Money in Trust. By at least 12:00 p.m. (New York City time) on the date on which any principal of or interest on any Security is due and payable, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal or interest when due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that such Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by such Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee in writing of any default by the Company or any Subsidiary Guarantor in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent (other than the Trustee) to pay all money held by it to the Trustee and to account for any funds disbursed by such Paying Agent. Upon complying with this Section, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money delivered to the Trustee. Upon any bankruptcy, reorganization or similar proceeding with respect to the Company, the Trustee shall serve as Paying Agent for the Securities. SECTION 2.5. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and 35 27 addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.6. Transfer and Exchange. (a) The following provisions shall apply with respect to any proposed transfer of a Rule 144A Note or an Institutional Accredited Investor Note prior to the date which is two years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date"): (i) a transfer of a Rule 144A Note or an Institutional Accredited Investor Note or a beneficial interest therein to a QIB shall be made upon the representation of the transferee that it is purchasing the Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; (ii) a transfer of a Rule 144A Note or an Institutional Accredited Investor Note or a beneficial interest therein to an institutional accredited investor shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.7 from the proposed transferee and, if requested by the Company or the Trustee, the delivery of an opinion of counsel, certification and/or other information satisfactory to each of them; and (iii) a transfer of a Rule 144A Note or an Institutional Accredited Investor Note or a beneficial interest therein to a Non-U.S. Person shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.8 from the proposed transferee and, if requested by the Company or the Trustee, the delivery of an opinion of counsel, certification and/or other information satisfactory to each of them. (b) The following provisions shall apply with respect to any proposed transfer of a Regulation S Note prior to the expiration of the Restricted Period: (i) a transfer of a Regulation S Note or a beneficial interest therein to a QIB shall be made upon the representation of the transferee, in the form of assignment on the reverse of the certificate, that it is purchasing the Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of 36 28 Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; (ii) a transfer of a Regulation S Note or a beneficial interest therein to an institutional accredited investor shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.7 from the proposed transferee and, if requested by the Company or the Trustee, the delivery of an opinion of counsel, certification and/or other information satisfactory to each of them; and (iii) a transfer of a Regulation S Note or a beneficial interest therein to a Non-U.S. Person shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.8 from the proposed transferee and, if requested by the Company or the Trustee, receipt by the Trustee or its agent of an opinion of counsel, certification and/or other information satisfactory to each of them. After the expiration of the Restricted Period, interests in the Regulation S Note may be transferred without requiring certification set forth in Section 2.8 or any additional certification. (c) Restricted Securities Legend. Upon the transfer, exchange or replacement of Securities not bearing a Restricted Securities Legend, the Registrar shall deliver Securities that do not bear a Restricted Securities Legend. Upon the transfer, exchange or replacement of Securities bearing a Restricted Securities Legend, the Registrar shall deliver only Securities that bear a Restricted Securities Legend unless there is delivered to the Registrar an Opinion of Counsel to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (d) The Company shall deliver to the Trustee an Officer's Certificate setting forth the Resale Restriction Termination Date and the Restricted Period. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.1 or this Section 2.6. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. (e) Obligations with Respect to Transfers and Exchanges of Securities. (i) To permit registrations of transfers and exchanges, the Company shall, subject to the other terms and conditions of this Article II, execute and the Trustee shall authenticate Definitive Securities and Global Securities at the Registrar's or co-registrar's request. 37 29 (ii) No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charges payable upon exchange or transfer pursuant to Sections 3.7, 3.9 or 9.5). (iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of any Security for a period beginning (1) 15 days before the mailing of a notice of an offer to repurchase or redeem Securities and ending at the close of business on the day of such mailing or (2) 15 days before an interest payment date and ending on such interest payment date. (iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. (v) Any Definitive Security delivered in exchange for an interest in a Global Security pursuant to Section 2.1(d) shall, except as otherwise provided by Section 2.6(c), bear the applicable legend regarding transfer restrictions applicable to the Definitive Security set forth in Section 2.1(c). (vi) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. (f) No Obligation of the Trustee. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in, DTC or other Person with respect to the accuracy of the records of DTC or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than DTC) of any notice (including any notice of redemption) or the payment of any amount or delivery of any Securities (or other security or property) under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders in respect of the Securities shall be given or made only to or upon the order of the registered Holders (which shall be DTC or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through DTC subject to the applicable rules and procedures of DTC. The Trustee may rely and shall be fully protected in relying upon information furnished by DTC with respect to its members, participants and any beneficial owners. 38 30 (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among DTC participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. SECTION 2.7. Form of Certificate to be Delivered in Connection with Transfers to Institutional Accredited Investors. [Date] LaSalle National Bank 135 South LaSalle Street, Suite 1825 Chicago, Illinois 60603 Attention: Corporate Trust Services Division Dear Sirs: This certificate is delivered to request a transfer of $ principal amount of the 9 5/8% Senior Subordinated Notes due 2008 (the "Securities") of Home Products International, Inc. (the "Company"). The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")) purchasing for our own account or for the account of such an institutional "accredited investor" at least $250,000 principal amount of the Securities, and we are acquiring the Securities not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risk of our investment in the Securities and we invest in or purchase securities similar to the Securities in the normal course of our business. We and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 2. We understand that the Securities have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Securities to offer, sell or otherwise transfer such Securities prior to the date which is two years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any 39 31 predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act, to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act, (e) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor," in each case in a minimum principal amount of Securities of $250,000 or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to any offer, sale or other transfer prior to the Resale Termination Date of the Securities pursuant to clauses (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Company and the Trustee. TRANSFEREE: --------------------- BY ------------------------------ SECTION 2.8. Form of Certificate to be Delivered in Connection with Transfers Pursuant to Regulation S. [Date] LaSalle National Bank 135 South LaSalle Street, Suite 1825 Chicago, Illinois 60603 Attention: Corporate Trust Services Division Re: Home Products International, Inc. 9 5/8% Senior Subordinated Notes due 2008 (the "Securities") 40 32 Ladies and Gentlemen: In connection with our proposed sale of $________ aggregate principal amount of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (a) the offer of the Securities was not made to a person in the United States; (b) either (i) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (ii) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre- arranged with a buyer in the United States; (c) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (d) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. In addition, if the sale is made during a restricted period and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By: --------------------------- ------------------------------ Authorized Signature Signature Medallion Guaranteed SECTION 2.9. Mutilated, Destroyed, Lost or Stolen Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform 41 33 Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced, and, in the absence of notice to the Company, any Subsidiary Guarantor or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon Company Order the Trustee shall authenticate and make available for delivery, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) in connection therewith. Every new Security issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, any Subsidiary Guarantor (if applicable) and any other obligor upon the Securities, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 2.10. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. If a Security is replaced pursuant to Section 2.9, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture, 42 34 then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. SECTION 2.11. Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Securities. After the preparation of Definitive Securities, the temporary Securities shall be exchangeable for Definitive Securities upon surrender of the temporary Securities at any office or agency maintained by the Company for that purpose and such exchange shall be without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute, and the Trustee shall authenticate and make available for delivery in exchange therefor, one or more Definitive Securities representing an equal principal amount of Securities. Until so exchanged, the Holder of temporary Securities shall in all respects be entitled to the same benefits under this Indenture as a holder of Definitive Securities. SECTION 2.12. Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and return to the Company all Securities surrendered for registration of transfer, exchange, payment or cancellation. The Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation for any reason other than in connection with a transfer or exchange. SECTION 2.13. Payment of Interest; Defaulted Interest. Interest on any Security which is payable, and is punctually paid or duly provided for, on any interest payment date shall be paid to the Person in whose name such Security (or one or more predecessor Securities) is registered at the close of business on the regular record date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 2.3. Any interest on any Security which is payable, but is not paid when the same becomes due and payable and such nonpayment continues for a period of 30 days shall forthwith cease to be payable to the Holder on the regular record date by virtue of having been such Holder, and such defaulted interest and (to the extent lawful) interest on such defaulted interest at the rate borne by the Securities (such defaulted interest and interest thereon herein collectively called "Defaulted Interest") shall be paid by the Company, at its election in each case, as provided in clause (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective predecessor Securities) are registered at the close of business on a Special Record Date (as defined below) for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest 43 35 proposed to be paid on each Security and the date (not less than 30 days after such notice) of the proposed payment (the "Special Interest Payment Date"), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a record date (the "Special Record Date") for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the Special Interest Payment Date and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date, and in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date and Special Interest Payment Date therefor to be given in the manner provided for in Section 13.2, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date and Special Interest Payment Date therefor having been so given, such Defaulted Interest shall be paid on the Special Interest Payment Date to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (b). (b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 2.14. Computation of Interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. SECTION 2.15. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such CUSIP numbers. 44 36 In the event that the Company shall issue and the Trustee shall authenticate any Subsequent Series Securities pursuant to Section 2.2, the Company shall use its best efforts to obtain the same CUSIP number for such Subsequent Series Securities as is printed on the Securities outstanding at such time; provided, however, that if any series of Subsequent Series Securities is determined, pursuant to an Opinion of Counsel, to be a different class of security than the Securities outstanding at such time for federal income tax purposes, the Company may obtain a CUSIP number for such series of Subsequent Series Securities that is different from the CUSIP number printed on the Securities then outstanding. ARTICLE III Covenants SECTION 3.1. Payment of Securities. The Company shall promptly pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. Notwithstanding anything to the contrary contained in this Indenture, the Company may, to the extent it is required to do so by law, deduct or withhold income or other similar taxes imposed by the United States of America from principal or interest payments hereunder. SECTION 3.2. SEC Reports and Available Information. Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, to the extent permitted by the Exchange Act, the Company will file with the SEC, and provide, within 15 days after the Company is required to file the same with the SEC, the Trustee and the holders of the Securities with the annual reports and the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) that are specified in Sections and 15(d) of the Exchange Act. In the event that the Company is not permitted to file such reports, documents and information with the SEC pursuant to the Exchange Act, the Company shall nevertheless provide such Exchange Act information to the Trustee and the holders of the Securities as if the Company were subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act. The Company shall also comply with the other provisions of TIA Section 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such 45 37 shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 3.3. Limitation on Indebtedness. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, Incur any Indebtedness; provided, however, that the Company may Incur Indebtedness if on the date thereof the Consolidated Coverage Ratio for the Company and its Restricted Subsidiaries is at least (i) 2.00 to 1.00, if such Indebtedness is Incurred on or prior to the second anniversary of the Issue Date and (ii) 2.25 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)(A) Indebtedness Incurred pursuant to the Senior Credit Agreement in an aggregate principal amount not to exceed the greater of (1) $100 million less the amount of all mandatory reductions of the revolving credit commitments thereunder and (2) the Borrowing Base and (B) Indebtedness Incurred under any other senior credit facility or facilities, providing for revolving loans; provided, that the aggregate principal amount of all such additional revolving Indebtedness under such other senior credit facility or facilities after giving effect to such Incurrence, does not exceed (1) the Borrowing Base, less (2) the maximum aggregate commitments under the Senior Credit Agreement; (ii) the Subsidiary Guarantees and Guarantees of, or Liens in respect of, Indebtedness Incurred pursuant to paragraph (a) above or clause (i) of this paragraph (b); (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 another Wholly-Owned Subsidiary) will be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof; (iv) Indebtedness represented by (A) the Securities, (B) any Indebtedness (other than the Indebtedness described in clauses (i), (ii) and (iii)) outstanding on the Issue Date and (C) any Refinancing Indebtedness Incurred in respect of any Indebtedness described in this clause (iv), clause (v) or clause (vii) or Incurred pursuant to paragraph (a) above; (v) 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 (A) to provide all or any portion of the funds 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 or (B) otherwise in connection with, or in contemplation of, such acquisition); 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); (vi) Indebtedness under Currency Agreements and Interest Rate Agreements and certain raw material hedging transactions; 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 46 38 Subsidiaries (as determined in good faith by the Board of Directors or senior management 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 this Indenture or to business transactions of the Company or its Restricted Subsidiaries on customary terms entered into in the ordinary course of business and in the case of raw material hedging transactions, such are entered into with respect to the purchase of raw materials and are entered in the ordinary course of business for bona fide hedging purposes; (vii) Purchase Money Indebtedness and Capitalized Lease Obligations Incurred on or after the Issue Date; provided, however, that the aggregate principal amount of such Indebtedness Incurred on or after the Issue Date and outstanding at any time pursuant to this clause (vii) shall not exceed $15 million, and such Indebtedness as originally Incurred shall not constitute more than 100% of the cost (determined in accordance with GAAP) of the property so purchased or leased; and (viii) Indebtedness (other than Indebtedness described in clauses (i) - (vii)) in a principal amount which, when taken together with the principal amount of all other Indebtedness Incurred pursuant to this clause (viii) and then outstanding, will not exceed $10 million. (c) Neither the Company nor any Restricted Subsidiary shall Incur any Indebtedness under Section 3.3(b) 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 Securities to at least the same extent as such Subordinated Obligations. No Subsidiary Guarantor shall incur any Indebtedness under Section 3.3(b) if the proceeds thereof are used, directly or indirectly to refinance any Guarantor Subordinated Obligations of such Subsidiary Guarantor unless such Indebtedness shall be subordinated to the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee to at least the same extent as such Guarantor Subordinated Obligations. (d) In addition, the Company shall not Incur any Secured Indebtedness which is not Senior Indebtedness unless contemporaneously therewith effective provision is made to secure the Securities equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. No Subsidiary Guarantor shall Incur any Secured Indebtedness which is not Guarantor Senior Indebtedness of such Subsidiary Guarantor unless contemporaneously therewith effective provision is made to secure such Subsidiary Guarantor's obligations under its Subsidiary Guarantee equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. (e) For purposes of determining compliance with, and the outstanding principal amount of any particular Indebtedness Incurred pursuant to and in compliance with, this Section 3.3, (i) in the event that Indebtedness meets the criteria of more than one of the types of Indebtedness described in Section 3.3(b), the Company, in its sole discretion, shall classify, or later reclassify, such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses; and (ii) the amount of Indebtedness issued at a price that is less than the principal amount thereof will be equal to the amount of the liability in respect thereof determined in accordance with GAAP. 47 39 SECTION 3.4. Limitation on Layering. The Company shall not Incur any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is contractually subordinated in right of payment to Senior Subordinated Indebtedness. No Subsidiary Guarantor shall Incur any Indebtedness if such Indebtedness is contractually subordinate or junior in ranking in any respect to any Guarantor Senior Indebtedness of such Subsidiary Guarantor unless such Indebtedness is Guarantor Senior Subordinated Indebtedness of such Subsidiary Guarantor or is contractually subordinated in right of payment to Guarantor Senior Subordinated Indebtedness of such Subsidiary Guarantor. SECTION 3.5. 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 (and if such Restricted Subsidiary is not a Wholly-Owned Subsidiary, to its other holders of Capital Stock or other equity interests, as applicable, 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 Restricted Subsidiary of the Company or any Capital Stock of a Restricted Subsidiary of the Company held by any Affiliate of the Company, other than another Restricted 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 (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition) or (iv) make any Investment (other than a Permitted Investment) in any Unrestricted Subsidiary or any other Person (any such dividend, distribution, purchase, redemption, repurchase, defeasance, other acquisition, retirement or Investment being herein referred to in clauses (i) through (iv) as a "Restricted Payment"), if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (A) a Default shall have occurred and be continuing (or would result therefrom); or (B) the Company is not able to Incur an additional $1.00 of Indebtedness pursuant to Section 3.3(a); or (C) the aggregate amount of such Restricted Payment and all other Restricted Payments declared or made (without double counting) subsequent to the Issue Date would exceed the sum of: (1) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from 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 (or, in case such Consolidated Net Income is a deficit, minus 100% of such deficit); (2) the aggregate Net Cash 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 a Subsidiary of the Company or an employee stock ownership plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust is financed by loans 48 40 from or guaranteed by the Company or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination); (3) 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 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 (4) the amount equal to the net reduction in Investments made by the Company or any of its Restricted Subsidiaries in any Person resulting from (x) 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 (including by way of dividend or distribution) by such Person to the Company or any Restricted Subsidiary of the Company or (y) 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 made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount was included in the calculation of the amount of Restricted Payments; provided, however, that no amount shall be included under this clause (4) to the extent it is already included in Consolidated Net Income. (b) The provisions of Section 3.5(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 of the Company issued or sold to a Subsidiary or an employee stock ownership plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust is financed by loans from or guaranteed by the Company or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination); provided, however, that (A) such purchase or redemption will be excluded in subsequent calculations of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale will be excluded from clause (C) (2) 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; provided, however, that such purchase or redemption will be excluded in subsequent calculations of the amount of Restricted Payments; (iii) any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent permitted under Section 3.7; provided, however, that such purchase or redemption will be excluded in subsequent calculations of the amount of Restricted Payments; (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 dividends will be included in subsequent calculations of the amount of Restricted Payments; (v) repurchases of Capital Stock deemed to occur upon the exercise of stock options if such Capital Stock represents a portion of the exercise price hereof; provided, however, that such repurchases will be excluded from the calculation of the amount of Restricted Payments; and (vi) any repurchase, retirement or other acquisition or retirement for value of Capital Stock of the Company held by any future, present or former employee of the Company or any Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement; provided, however, that the aggregate Restricted Payment made under this 49 41 clause (vi) does not exceed in any calendar year $2 million; provided further that such amount in any calendar year may be increased by any unused amounts from any of the three years prior to such calendar year. SECTION 3.6. Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company shall not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness or other obligations 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 date of this Indenture (including, without limitation, the Senior Credit Agreement); (B) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by a Restricted Subsidiary on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company) and outstanding on such date; (C) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement effecting a refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (A) or (B) of this Section 3.6 or this clause (C) or contained in any amendment to an agreement referred to in clause (A) or (B) of this Section 3.6 or this clause (C); provided, however, that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such agreement or amendment are no less favorable to the Holders of the Securities than encumbrances and restrictions contained in such agreements; (D) in the case of clause (iii) above, any encumbrance or restriction (1) that restricts in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, or the assignment or transfer of any such lease, license or other contract, (2) 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 this Indenture, (3) contained in mortgages, pledges or other security agreements securing Indebtedness of a Restricted Subsidiary to the extent such encumbrance or restrictions restrict the transfer of the property subject to such mortgages, pledges or other security agreements or (4) pursuant to customary provisions restricting dispositions of real property interests set forth in any reciprocal easement agreements of the Company or any Restricted Subsidiary; (E) any restriction with respect to a Restricted Subsidiary (or any of its property or assets) imposed pursuant to an agreement entered into for the direct or indirect sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary (or the property or assets that are subject to such restriction) pending the closing of such sale or disposition; and (F) encumbrances or restrictions arising or existing by reason of applicable law. SECTION 3.7. Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, make any Asset Disposition unless (i) the Company or such Restricted Subsidiary receives consideration 50 42 (including by way of relief from, or by any other Person assuming sole responsibility for, any liabilities, contingent or otherwise) at the time of such Asset Disposition at least equal to the fair market value, as determined in good faith by the 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, as the case may be, elects (or is required by the terms of any Senior Indebtedness, Guarantor Senior Indebtedness or Indebtedness (other than Preferred Stock) of a Wholly-Owned Subsidiary), to prepay, repay or purchase Senior Indebtedness or Indebtedness (other than any Preferred Stock) of a Wholly-Owned Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) within 180 days from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) second, to the extent of the balance of such Net Available Cash after application in accordance with clause (A), at the Company's election to invest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary) within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (C) third, to the extent of the balance of such Net Available Cash after application and in accordance with clauses (A) and (B) (the "Excess Proceeds"), to make an offer to purchase the Securities and other Senior Subordinated Indebtedness outstanding with similar provisions requiring the Company to make an offer to purchase such Indebtedness with the proceeds from any Asset Disposition ("Pari Passu Notes") at 100% of the principal amount thereof (or 100% of the accreted value of such Pari Passu Notes so tendered if such Pari Passu Notes were issued at a discount) plus accrued and unpaid interest, if any, to the date of purchase; and (D) fourth, to the extent of the balance of the Excess Proceeds, after application in accordance with clause (C), to fund other corporate purposes not prohibited by this Indenture; provided, however, that, in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) above, the Company or such Restricted Subsidiary will retire such Indebtedness and will 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, (i) the Company and its Restricted Subsidiaries will 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 Section 3.7 exceed $5 million and (ii) in addition, the Company and its Restricted Subsidiaries may make in the aggregate $1 million in Asset Dispositions each year which are not subject to the provisions of this Section 3.7. For the purposes of this Section 3.7, the following will be deemed to be cash: (i) the assumption by the transferee of Senior Indebtedness of the Company or 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 or Indebtedness in connection with such Asset Disposition (in which case the Company will, without further action, be deemed to have applied such assumed Indebtedness in accordance with clause (iii) (A) of the preceding paragraph) and (ii) securities received by the 51 43 Company or any Restricted Subsidiary of the Company from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash. (b) In the event of an Asset Disposition that requires the purchase of Securities pursuant to clause (iii)(C) of paragraph (a), the Company will be required to apply such Excess Proceeds to the repayment of the Securities and any Pari Passu Notes as follows: (i) the Company will make an offer to purchase (an "Offer") within ten days of such time from all holders of the Securities in accordance with the procedures set forth in this Indenture in the maximum principal amount (expressed as a multiple of $1,000) of Securities that may be purchased out of an amount (the "Note Amount") equal to the product of such Excess Proceeds multiplied by a fraction, the numerator of which is the outstanding principal amount of the Securities and the denominator of which is the sum of the outstanding principal amount of the Securities and the outstanding principal amount (or accreted value, as the case may be) of the Pari Passu Notes at a purchase price of 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase and (ii) the Company will make an offer to purchase any Pari Passu Notes (a "Pari Passu Offer") in an amount equal to the excess of the Excess Proceeds over the Note Amount at a purchase price of 100% of the principal amount (or accreted value, as the case may be) thereof plus accrued and unpaid interest, if any, to the date of purchase in accordance with the procedures (including prorating in the event of oversubscription) set forth in the documentation governing such Pari Passu Notes with respect to the Pari Passu Offer. If the aggregate purchase price of the Securities and Pari Passu Notes tendered pursuant to the Offer and the Pari Passu Offer is less than the Excess Proceeds, the remaining Excess Proceeds will be available to the Company for use in accordance with clause (iii)(D) of paragraph (a) of this Section 3.7. The Company will not be required to make an Offer for Securities pursuant to this Section 3.7 if the Excess Proceeds available therefor are less than $10 million (which lesser amounts will be carried forward for purposes of determining whether an Offer is required with respect to the Excess Proceeds from any subsequent Asset Disposition). (c) (1) Promptly, and in any event within 10 days after the Company is required to make an Offer, the Company will deliver to the Trustee and send, by first-class mail to each Holder, a written notice stating that the Holder may elect to have his Securities purchased by the Company either in whole or in part (subject to prorating as hereinafter described in the event the Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at the applicable purchase price. The notice shall specify a purchase date not less than 30 days nor more than 60 days after the date of such notice (the "Purchase Date"). (2) Not later than the date upon which such written notice of an Offer is delivered to the Trustee and the Holders, the Company will deliver to the Trustee an Officers' Certificate setting forth (i) the amount of the Offer (the "Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset Dispositions as a result of which such Offer is being made and (iii) the compliance of such allocation with the provisions of Section 3.7(a). Upon the expiration of the period (the "Offer Period") for which the Offer remains open, the Company shall deliver to the Trustee for cancellation the Securities or portions thereof which have been properly tendered to and are to be accepted by the Company. The Trustee shall, on the Purchase Date, mail or deliver payment to each tendering Holder in the amount of the 52 44 purchase price of the Securities tendered by such Holder to the extent such funds are available to the Trustee. (3) Holders electing to have a Security purchased will be required to surrender the Security, with an appropriate form entitled "Option of Holder to Elect Purchase" duly completed, to the Company at the address specified in the notice prior to the expiration of the Offer Period. Each Holder will be entitled to withdraw its election if the Trustee or the Company receives, not later than one Business Day prior to the expiration of the Offer Period, a facsimile transmission or overnight mail from such Holder setting forth the name of such Holder, the principal amount of the Security or Securities which were delivered for purchase by such Holder and a statement that such Holder is withdrawing his election to have such Security or Securities purchased. If at the expiration of the Offer Period the aggregate principal amount of Securities surrendered by Holders exceeds the Offer Amount, the Company shall select the Securities to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Securities in denominations of $1,000, or integral multiples thereof, shall be purchased). Holders whose Securities are purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. (d) 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 Securities pursuant to this Indenture. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 3.7, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Indenture by virtue thereof. SECTION 3.8. 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 (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless: (i) the terms of such Affiliate Transaction are no less favorable to the Company or such 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 $5 million, the terms of such transaction have been approved by a majority of the members of the Board of Directors of the Company having no personal stake in such transaction, if any (and such majority 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 $10 million, the Company has received a written opinion from an independent investment banking firm of nationally recognized standing that such Affiliate Transaction is not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate. (b) The foregoing paragraph (a) will not apply to (i) any Restricted Payment permitted to be made pursuant to Section 3.5, (ii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, 53 45 employment arrangements or bonuses (whether or not pursuant to an employment agreement), stock options and stock ownership plans 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, (iv) the payment of reasonable fees to directors of the Company and its Restricted Subsidiaries who are not employees of the Issuer or its Restricted Subsidiaries, (v) any payments to the Company by the Restricted Subsidiaries pursuant to a tax sharing agreement, (vi) transactions in the ordinary course of business between the Company or any Restricted Subsidiary with Selfix Europe L.L.C. or its successors and (vii) any transaction between the Company and a Wholly-Owned Subsidiary or between Wholly-Owned Subsidiaries. SECTION 3.9. Change of Control. Upon the occurrence of any of the following events (each a "Change of Control"), unless the Company shall have exercised its right to redeem the Securities as described in Section 5.1, each holder will have the right to require the Company to repurchase all or any part of such holder's Securities 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) (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 40% of the total voting power of the Voting Stock of the Company (or its successor by merger, consolidation or purchase of all or substantially all of its assets); and (B) the Permitted Holders "beneficially own" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company (or its successor by merger, consolidation or purchase of all or substantially all of its assets) than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of the Company or such successor; or (ii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of at least a majority of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved or is a designee of the Permitted Holders or was nominated or elected by such Permitted Holders or any of their designees) cease for any reason to constitute a majority of the Board of Directors of the Company then in office; or 54 46 (iii) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted Holder; or (iv) the adoption by the stockholders of a plan for the liquidation or dissolution of the Company. Within 30 days following any Change of Control, unless the Company has mailed a redemption notice with respect to all the outstanding Securities in connection with such Change of Control as described in Section 5.1, the Company shall mail a notice to each holder with a copy to the Trustee stating: (i) that a Change of Control has occurred and that such holder has the right to require the Company pursuant to this Section 3.9 to purchase such holder's Securities (the "Change of Control Offer") 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); (ii) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); (iii) that any Security not tendered shall continue to accrue interest, if any; (iv) that, unless the Company defaults in the payment of principal or interest, all Securities accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest, if any, after the Change of Control Payment Date; (v) that holders electing to have any Securities purchased pursuant to a Change of Control Offer shall be required to surrender the Securities to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the date of purchase for the Change of Control Payment Date; (vi) that holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a facsimile transmission or letter setting forth the name of the holder, the principal amount of Securities delivered for purchase, and a statement that such holder is withdrawing his election to have the Securities purchased; and (vii) that holders whose Securities are being purchased only in part shall be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. On a Business Day that is no earlier than 30 days nor later than 60 days from the date that the Company mails or causes to be mailed notice of the Change of Control to the holders (the "Change of Control Payment Date"), the Company shall, to the extent lawful, (i) accept for payment all Securities or portions thereof properly tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all the Securities or portions thereof so tendered and (iii) deliver or cause to be delivered to the Trustee the Securities so accepted together with an Officers' Certificate stating the aggregate principal amount of such Securities or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of the Securities so tendered the Change of Control Payment for such Securities, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book-entry) to 55 47 each Holder a new Security equal in principal amount to any unpurchased portion of the Securities surrendered, if any; provided that each such new Security shall be in a principal amount of $1,000 or an integral multiple thereof. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. 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 Securities pursuant to this Section 3.9. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Indenture, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof. SECTION 3.10. Limitation on Capital Stock of Restricted Subsidiaries. The Company shall not sell any shares of Capital Stock of a Restricted Subsidiary, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell any shares of its Capital Stock except: (i) to the Company or a Wholly-Owned Subsidiary; or (ii) (A) in compliance with Section 3.7 if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would continue to be a Restricted Subsidiary or (B) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer be a Restricted Subsidiary, and, in each case, the Investment of the Company in such Person after giving effect to such issuance or sale would have been permitted to be made under Section 3.5 as if made on the date of such issuance or sale. Notwithstanding the foregoing, the Company may sell all the Capital Stock of a Subsidiary as long as the Company is in compliance with the terms of Section 3.7. SECTION 3.11. Future Subsidiary Guarantors. After the Issue Date, the Company will cause each Restricted Subsidiary other than a Foreign Subsidiary created or acquired by the Company which Guarantees the Bank Indebtedness or Incurs Indebtedness under paragraph (a) of Section 3.3 to execute and deliver to the Trustee a Subsidiary Guarantee pursuant to which such Restricted Subsidiary will unconditionally Guarantee, on a joint and several basis with the other Subsidiary Guarantors, the full and prompt payment of the principal of, premium, if any and interest on the Securities on a senior subordinated basis and become a party to this Indenture as a Subsidiary Guarantor for all purposes of the Indenture. SECTION 3.12. Limitation on Lines of Business. The Company shall not, and will not permit any Restricted Subsidiary to, engage in any business other than a Related Business. Notwithstanding the foregoing, the Company may acquire and operate any business which is primarily engaged in a Related Business at the time of acquisition. 56 48 SECTION 3.13. Maintenance of Office or Agency. The Company will maintain in The City of New York, an office or agency where the Securities may be presented or surrendered for payment, where, if applicable, the Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The principal corporate trust office (the "Corporate Trust Office") of the Trustee shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency. SECTION 3.14. Corporate Existence. Subject to Article IV and Section 11.2, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence and that of each Restricted Subsidiary and the corporate rights (charter and statutory) licenses and franchises of the Company and each Restricted Subsidiary; provided, however, that the Company shall not be required to preserve any such existence (except the Company), right, license or franchise if the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and each of its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not, and will not be, disadvantageous in any material respect to the Holders. SECTION 3.15. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all material taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary and (ii) all lawful claims for labor, materials and supplies, which, if unpaid, might by law become a material liability or lien upon the property of the Company or any Restricted Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which appropriate reserves, if necessary (in the good faith judgment of management of the Company), are being maintained in accordance with GAAP or where the failure to effect such payment will not be disadvantageous to the Holders. 57 49 SECTION 3.16. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each Fiscal Year of the Company an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default or Event of Default and whether or not the signers know of any Default or Event of Default that occurred during such period. If they do, the certificate shall describe the Default or Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with TIA Section 314(a)(4). SECTION 3.17. Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. ARTICLE IV Successor Company SECTION 4.1. Merger and Consolidation. The Company shall not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person, unless: (i) the resulting, surviving or transferee Person (the "Successor Company") shall be a corporation, partnership, trust, limited liability company or other similar entity 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 Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture; (ii) immediately after giving effect to such transaction (and treating any Indebtedness that becomes an obligation of the Successor Company or any Restricted 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 would be able to Incur at least an additional $1.00 of Indebtedness pursuant to paragraph (a) of Section 3.3 of this Indenture; and (iv) the Company shall have delivered to the 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 this Indenture. 58 50 The Successor Company will succeed to, and be substituted for, and may exercise every right and power of, the Company under this 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 Securities. Notwithstanding clauses (ii) and (iii) of the first sentence of this Section 4.1, (i) any Restricted Subsidiary of the Company may consolidate with, merge into or transfer all or part of its properties and assets to the Company and (ii) the Company may merge with an Affiliate incorporated solely for the purpose of reincorporating the Company in another jurisdiction to realize tax or other benefits. ARTICLE V Redemption of Securities SECTION 5.1. Optional Redemption. The Securities may or shall, as the case may be, be redeemed, as a whole or from time to time in part, subject to the conditions and at the Redemption Prices specified in the form of Securities set forth in Exhibits A and B hereto, which are hereby incorporated by reference and made a part of this Indenture, together with accrued and unpaid interest to the redemption date. SECTION 5.2. Applicability of Article. Redemption of Securities at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. SECTION 5.3. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities pursuant to Section 5.1 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, upon not less than 30 and not more than 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed and shall deliver to the Trustee such documentation and records as shall enable the Trustee to select the Securities to be redeemed pursuant to Section 5.4. SECTION 5.4. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed at any time pursuant to an optional redemption, the particular Securities to be redeemed shall be selected not more than 90 days prior to the Redemption Date by the Trustee, from the outstanding Securities not previously called for redemption, in compliance with the requirements of the principal securities exchange, if any, on which such Securities are listed, or, if such Securities are not so listed, on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate (and in such manner as complies with applicable legal requirements) and which may provide for the selection for redemption of portions of the principal of the Securities; provided, however, that no such partial redemption shall reduce the portion of the principal amount of a Security not redeemed to less than $1,000. 59 51 The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. SECTION 5.5. Notice of Redemption. Notice of redemption shall be given in the manner provided for in Section 13.2 not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed. The Trustee shall give notice of redemption in the Company's name and at the Company's expense; provided, however, that the Company shall deliver to the Trustee, at least 45 days prior to the Redemption Date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the following items. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price and the amount of accrued interest to the Redemption Date payable as provided in Section 5.7, if any, (3) if less than all outstanding Securities are to be redeemed, the identification of the particular Securities (or portion thereof) to be redeemed, as well as the aggregate principal amount of Securities to be redeemed and the aggregate principal amount of Securities to be Outstanding after such partial redemption, (4) in case any Security is to be redeemed in part only, the notice which relates to such Security shall state that on and after the Redemption Date, upon surrender of such Security, the holder will receive, without charge, a new Security or Securities of authorized denominations for the principal amount thereof remaining unredeemed, (5) that on the Redemption Date the Redemption Price (and accrued interest, if any, to the Redemption Date payable as provided in Section 5.7) will become due and payable upon each such Security, or the portion thereof, to be redeemed, and, unless the Company defaults in making the redemption payment, that interest on Securities called for redemption (or the portion thereof) will cease to accrue on and after said date, (6) the place or places where such Securities are to be surrendered for payment of the Redemption Price and accrued interest, if any, (7) the name and address of the Paying Agent, 60 52 (8) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price, (9) the CUSIP number, and that no representation is made as to the accuracy or correctness of the CUSIP number, if any, listed in such notice or printed on the Securities, and (10) the paragraph of the Securities pursuant to which the Securities are to be redeemed. SECTION 5.6. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 2.4) an amount of money sufficient to pay the Redemption Price of, and accrued interest on, all the Securities which are to be redeemed on that date. SECTION 5.7. Notes Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Regular Record Date or Special Record Date, as the case may be, according to their terms and the provisions of Section 2.13. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Securities. SECTION 5.8. Securities Redeemed in Part. Any Security which is to be redeemed only in part (pursuant to the provisions of this Article) shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 3.13 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security at the expense of the Company, a new Security or Securities, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered, provided, that each such new Security will be in a principal amount of $1,000 or integral multiple thereof. 61 53 ARTICLE VI Defaults and Remedies SECTION 6.1. Events of Default. An "Event of Default" occurs if: (1) the Company defaults in any payment of interest on any Security when the same becomes due and payable, whether or not such payment shall be prohibited by Article X of this Indenture, and such default continues for a period of 30 days; (2) the Company defaults in the payment of the principal or premium, if any, of any Security when the same becomes due and payable at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise, whether or not such payment shall be prohibited by Article X of this Indenture; (3) the Company fails to comply with Article IV of this Indenture; (4) the Company fails to comply with any of Sections 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, and 3.15 (in each case other than a failure to repurchase Securities when required pursuant to Sections 3.7 or 3.9, which failure shall constitute an Event of Default under Section 6.1(2)) and such failure continues for 30 days after the notice specified below; (5) the Company defaults in the performance of or a breach by the Company of any other covenant or agreement in this Indenture or under the Securities (other than those referred to in (1), (2), (3) or (4) above) and such default continues for 60 days after the notice specified below; (6) 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 and the total amount of such unpaid or accelerated Indebtedness exceeds $5.0 million or its foreign currency equivalent at the time; (7) the Company or a Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law (as defined below): (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian (as defined below) of it or for any substantial part of its property; or 62 54 (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Significant Subsidiary in an involuntary case; (B) appoints a Custodian of the Company or any Significant Subsidiary or for any substantial part of its property; or (C) orders the winding up or liquidation of the Company or any Significant Subsidiary; or any similar relief is granted under any foreign laws and the order, decree or relief remains unstayed and in effect for 60 days; (9) any judgment or decree for the payment of money in excess of $5.0 million or its foreign currency equivalent at the time is rendered against the Company or a Significant Subsidiary if such judgment or decree remains undischarged or unstayed for a period of 60 days following such judgment or decree becomes final and non-appealable; or (10) any Subsidiary Guarantee ceases to be in full force and effect (except as contemplated by the terms hereof) or any Subsidiary Guarantor denies or disaffirms its obligations under the terms of this Indenture or its Subsidiary Guarantee. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. Notwithstanding the foregoing, a Default under clause (4) or (5) of this Section 6.1 will not constitute an Event of Default until the Trustee or the Holders of more than 25% in principal amount of the outstanding Securities notify the Company of the Default and the Company does not cure such Default within the time specified in said clause (4) or (5) after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". 63 55 The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Default or Event of Default under clauses (3), (4), (5), (6), (9) or (10) of this Section 6.1. SECTION 6.2. Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.1(7) or (8) with respect to the Company or a Significant Subsidiary) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in outstanding principal amount of the Securities by notice to the Company and the Trustee, may, and the Trustee at the request of such Holders shall, declare the principal of, premium, if any, and accrued but unpaid interest on all the Securities to be due and payable. Upon such a declaration, such principal, premium and interest shall, subject to Section 10.4 of this Indenture, be immediately due and payable. In the event of a declaration of acceleration because an Event of Default set forth in Section 6.1(6) above has occurred and is continuing, such declaration of acceleration shall be automatically rescinded and annulled if the event of default or payment default triggering such Event of Default pursuant to Section 6.1(6) shall be remedied or cured by the Company and/or the relevant Significant Subsidiaries or waived by the holders of the relevant Indebtedness within 60 days after the declaration of acceleration with respect thereto. If an Event of Default specified in Section 6.1(7) or (8) with respect to the Company occurs, the principal of, premium and accrued and unpaid interest on all the Securities will become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. The Holders of a majority in principal amount of the Securities by notice to the Trustee may waive all past defaults (except with respect to nonpayment of principal, premium or interest) and rescind an acceleration with respect to the Securities and its consequences if (i) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction and (ii) all existing Events of Default, other than the nonpayment of principal or interest that has become due solely because of such acceleration, have been cured or waived. No such rescission shall affect any subsequent Default or Event of Default or impair any right consequent thereto. SECTION 6.3. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.4. Waiver of Past Defaults. The Holders of a majority in principal amount of the Securities by notice to the Trustee may waive an existing Default or Event of Default and its consequences except (i) a Default or Event of Default in the payment of the principal of or interest on a Security or (ii) a Default or Event of Default in respect of a provision that under Section 9.2 cannot be amended without the consent of each 64 56 Securityholder affected. When a Default or Event of Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any consequent right. SECTION 6.5. Control by Majority. The Holders of a majority in principal amount of the Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Sections 7.1 and 7.2, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the 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. SECTION 6.6. Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25% in outstanding principal amount of the Securities make a request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense (including reasonable attorneys' fees and expenses); (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (5) the Holders of a majority in principal amount of the Securities do not give the Trustee a direction inconsistent with the request during such 60-day period. SECTION 6.7. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of, premium (if any) or interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.8. Collection Suit by Trustee. If an Event of Default specified in Section 6.1(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.7. 65 57 SECTION 6.9. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, its Subsidiaries or its or their respective creditors or properties and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.7. SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article VI, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.7; SECOND: to holders of Senior Indebtedness to the extent required by Article X; THIRD: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and FOURTH: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Company shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by the Company, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in outstanding principal amount of the Securities. 66 58 ARTICLE VII Trustee SECTION 7.1. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall examine such certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. 67 59 (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. (i) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (j) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses (including reasonable attorneys' fees and expenses) and liabilities that might be incurred by it in compliance with such request or direction. SECTION 7.2. Rights of Trustee. Subject to Section 7.1, (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on an Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute wilful misconduct or negligence. (e) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. SECTION 7.3. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 68 60 Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.5. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if a Trust Officer has actual knowledge thereof, the Trustee shall mail to each Securityholder notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium (if any), or interest on any Security (including payments pursuant to the optional redemption or required repurchase provisions of such Security, if any), the Trustee may withhold the 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 the notice is in the interests of Securityholders. SECTION 7.6. Reports by Trustee to Holders. As promptly as practicable after each April 15 beginning with the April 15 following the date of this Indenture, and in any event prior to June 15 in each year, the Trustee shall mail to each Securityholder a brief report dated as of such April 15 that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b). The Trustee shall also transmit by mail all reports required by TIA Section 313(c). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.7. Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder as the Company and the Trustee shall from time to time agree in writing. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, costs of preparing and reviewing reports, certificates and other documents, costs of preparation and mailing of notices to Securityholders and reasonable costs of counsel retained by the Trustee in connection with the delivery of an Opinion of Counsel or otherwise, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify the Trustee against any and all loss, liability or expense (including reasonable attorneys' fees and expenses) incurred by it without negligence or bad faith on its part in connection with the administration of this trust and the performance 69 61 of its duties hereunder, including the costs and expenses of enforcing this Indenture (including this Section 7.7) and of defending itself against any claims (whether asserted by any Securityholder, the Company or otherwise). The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee may have separate counsel and the Company shall pay the fees and expenses of such counsel provided that the Company shall not be required to pay such fees and expenses if it assumes the Trustee's defense, and, in the reasonable judgement of outside counsel to the Trustee, there is no conflict of interest between the Company and the Trustee in connection with such defense. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own wilful misconduct, negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities. The Trustee's right to receive payment of any amounts due under this Section 7.7 shall not be subordinate to any other liability or indebtedness of the Company. The Company's payment obligations pursuant to this Section shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.1(7) or (8) with respect to the Company, the expenses are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 7.8. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed by the Company or by the Holders of a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of the Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring 70 62 Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.7. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Securities may petition, at the Company's expense, any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.7 shall continue for the benefit of the retiring Trustee. SECTION 7.9. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture, any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Section 310(a). The Trustee shall have a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b); provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated. 71 63 ARTICLE VIII Discharge of Indenture; Defeasance SECTION 8.1. Discharge of Liability on Securities; Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.9) for cancellation or (ii) all outstanding Securities have become due and payable, whether at maturity or upon redemption and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Securities (other than Securities replaced pursuant to Section 2.9), including interest thereon to maturity or such redemption date, and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 8.1(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company (accompanied by an Officers' Certificate and an Opinion of Counsel stating that all conditions precedent specified herein relating to the satisfaction and discharge of this Indenture have been complied with) and at the cost and expense of the Company. (b) Subject to Sections 8.1(c) and 8.2, the Company at any time may terminate (i) all its obligations under the Securities and this Indenture ("legal defeasance option"), and after giving effect to such legal defeasance, any omission to comply with such obligations shall no longer constitute a Default or Event of Default or (ii) its obligations under Sections 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14 and 3.15, and 4.1(iii) and the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall no longer constitute a Default or an Event of Default under Section 6.1(3) and 6.1(4) ("covenant defeasance option"), but except as specified above, the remainder of this Indenture and the Securities shall be unaffected thereby. The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its covenant defeasance option, the Company may, by written notice to the Trustee prior to the delivery of the Opinion of Counsel referred to in Section 8.2(8), elect to have any Subsidiary Guarantees in effect at such time terminate. If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of any event that, in the absence of such legal defeasance, would have constituted an Event of Default, and the Subsidiary Guarantees in effect at such time shall terminate. If the Company exercises its covenant defeasance option, the events specified in Sections 6.1(4), 6.1(6), 6.1(7) (but only with respect to a Significant Subsidiary), 6.1(8) (but only with respect to a Significant Subsidiary), 6.1(9) and 6.1(10) will no longer constitute an Event of Default, and payment of the Securities may not be accelerated because of the occurrence of any such event or because of the failure of the Company to comply with Sections 4.1(iii). 72 64 Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (c) Notwithstanding the provisions of Sections 8.1(a) and (b), the Company's obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.9, 7.7, 7.8, 8.4, 8.5 and 8.6 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.7 and 8.5 and the Trustee's obligations in Section 8.4 shall survive. SECTION 8.2. Conditions to Defeasance. The Company may exercise its legal defeasance option or its covenant defeasance option only if: (1) the Company irrevocably deposits in trust with the Trustee for the benefit of the Holders money in U.S. dollars or U.S. Government Obligations or a combination thereof for the payment of principal of and interest on the Securities to maturity or redemption, as the case may be; (2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all the Securities to maturity; (3) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default with respect to this Indenture resulting from the Incurrence of Indebtedness, all or a portion of which will be used to defease the Securities concurrently with such Incurrence); (4) such legal defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a Default under, this Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (5) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that (A) the Securities and (B) assuming no intervening bankruptcy of the Company between the date of deposit and the 91st day following the deposit and that no Holder of the Securities is an insider of the Company, after 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' right generally; (6) the deposit does not constitute a default under any other agreement binding on the Company and is not prohibited by Article X; 73 65 (7) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (8) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such legal defeasance had not occurred; (9) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States to the effect that the Securityholders will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (10) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities and this Indenture as contemplated by this Article VIII have been complied with. SECTION 8.3. Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article VIII. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. Money and securities so held in trust are not subject to Article X. SECTION 8.4. Repayment to Company. The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them upon payment of all the obligations under this Indenture. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal of or interest on the Securities that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors. SECTION 8.5. Indemnity for U.S. Government Obligations. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. 74 66 SECTION 8.6. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article VIII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the obligations of the Company under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article VIII until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article VIII; provided, however, that, if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE IX Amendments SECTION 9.1. Without Consent of Holders. The Company, the Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Article IV in respect of the assumption by a Successor Company of an obligation of the Company under this Indenture; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (4) to add guarantees with respect to the Securities or to secure the Securities; (5) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (6) to comply with any requirements of the SEC in connection with qualifying this Indenture under the TIA; (7) to make any change that does not adversely affect the rights of any Securityholder; or (8) to provide for the issuance of the Exchange Securities, which will have terms substantially identical in all material respects to the Initial Securities (except that the transfer restrictions contained in the Initial Securities will be modified or 75 67 eliminated, as appropriate), and which will be treated, together with any outstanding Initial Securities, as a single issue of securities. An amendment under this Section may not make any change that adversely affects the rights under Article X of any holder of Senior Indebtedness or under Article XII of any holder of Guarantor Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.2. With Consent of Holders. The Company, the Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the Securities. However, without the consent of each Securityholder affected, an amendment may not: (1) reduce the amount of Securities whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Security; (3) reduce the principal of or extend the Stated Maturity of any Security; (4) reduce the premium payable upon the redemption or repurchase of any Security or change the time at which any Security may or shall be redeemed or repurchased in accordance with this Indenture; (5) make any Security payable in money other than that stated in the Security; (6) impair the right of any Holder to receive payment of principal of and interest on such Holder's Securities 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 Securities; (7) make any change to the amendment provisions which require each Holder's consent or to the waiver provisions. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. 76 68 An amendment under this Section may not make any change that adversely affects the rights under Article X or Article XII of any holder of Senior Indebtedness or Guarantor Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness or Guarantor Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.3. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.4. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver shall become effective upon receipt by the Trustee of the requisite number of written consents under Section 9.1 or 9.2 as applicable. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall become valid or effective more than 120 days after such record date. SECTION 9.5. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.6. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article IX if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need 77 69 not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Sections 7.1 and 7.2) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. ARTICLE X Subordination SECTION 10.1. Agreement To Subordinate. The Company agrees, and each Securityholder by accepting a Security agrees, that the Indebtedness evidenced by the Securities and other obligations relating to the Securities are subordinated in right of payment, to the extent and in the manner provided in this Article X, to the prior payment when due in cash or Cash Equivalents of all Senior Indebtedness and that the subordination is for the benefit of and enforceable by the holders of Senior Indebtedness. The Securities shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Company and only Indebtedness of the Company which is Senior Indebtedness will rank senior to the Securities in accordance with the provisions set forth herein. All provisions of this Article X shall be subject to Section 10.12. SECTION 10.2. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets or securities of the Company upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its respective properties: (1) holders of Senior Indebtedness of the Company shall be entitled to receive payment in full in cash or Cash Equivalents of the Senior Indebtedness (including interest accruing after, or which would accrue but for, the commencement of any proceeding at the rate specified in the applicable Senior Indebtedness, whether or not a claim for such interest would be allowed) before Securityholders shall be entitled to receive any payment of principal of or interest on or other amounts with respect to the Securities; and (2) until the Senior Indebtedness is paid in full in cash or Cash Equivalents, any payment or distribution to which Securityholders would be entitled but for this Article X shall be made to holders of Senior Indebtedness as their respective interests may appear. SECTION 10.3. Default on Senior Indebtedness. The Company shall not pay the principal of, premium (if any) or interest on or other amounts with respect to the Securities or make any deposit pursuant to Section 8.1 or repurchase, redeem or otherwise retire any Securities ("pay the Securities") if (i) any Senior Indebtedness of the Company is not paid when due in cash or Cash Equivalents or (ii) any other default on Senior Indebtedness of the Company occurs and the maturity of such Senior Indebtedness of the Company is accelerated in accordance with its terms unless, in either case, (x) the default has 78 70 been cured or waived and any such acceleration has been rescinded in writing or (y) such Senior Indebtedness of the Company has been paid in full in cash or Cash Equivalents; provided, however, that the Company may pay the Securities without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of the Senior Indebtedness of the Company with respect to which either of the events set forth in clause (i) or (ii) of this sentence has occurred or is continuing. During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding sentence) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Securities for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to the Company) of written notice (a "Blockage Notice") of such default from the Representative of the holders of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (ii) because the default giving rise to such Blockage Notice is no longer continuing or (iii) because such Designated Senior Indebtedness has been repaid in full in cash or Cash Equivalents). Notwithstanding the provisions of the immediately preceding sentence, unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Securities after the end of such Payment Blockage Period. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. SECTION 10.4. Acceleration of Payment of Securities. If payment of the Securities is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness (or their Representatives) of the acceleration; provided, however, that the Company and the Trustee shall be obligated to notify such a Representative only if such Representative has delivered or caused to be delivered to the Company and the Trustee an address for service of such a notice (and the Company and the Trustee shall only be obligated to deliver the notice to the address so specified). If any Designated Senior Indebtedness is outstanding, the Company shall not pay the Securities until five Business Days after the holders or Representative of such Designated Senior Indebtedness receives notice of such acceleration and, thereafter, may pay the Securities only if this Article X otherwise permits payments at that time. SECTION 10.5. When Distribution Must Be Paid Over. If a payment or distribution is made to the Trustee or Securityholders that because of this Article X should not have been made to them, the Trustee or the Securityholders who receive the payment or distribution shall hold it in trust for holders of Senior Indebtedness and promptly pay it over to them as their respective interests may appear. SECTION 10.6. Subrogation. After all Senior Indebtedness is paid in full in cash or Cash Equivalents and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of Senior Indebtedness to receive distributions applicable to 79 71 Senior Indebtedness. A payment or distribution made under this Article X to holders of Senior Indebtedness which otherwise would have been made to Securityholders is not, as between the Company and Securityholders, a payment by the Company of Senior Indebtedness. SECTION 10.7. Relative Rights. This Article X defines the relative rights of Securityholders and holders of Senior Indebtedness. Nothing in this Indenture shall: (1) impair, as between the Company and Securityholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; or (2) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of Senior Indebtedness to receive payments and distributions otherwise payable to Securityholders. SECTION 10.8. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by the failure of any of them to comply with this Indenture. SECTION 10.9. Rights of Trustee and Paying Agent. Notwithstanding Section 10.3, the Trustee or Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than one Business Day prior to the date of such payment, a Trust Officer of the Trustee receives notice satisfactory to it that payments may not be made under this Article X. The Company, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness may give the notice; provided, however, that, if an issue of Senior Indebtedness has a Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article X with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness; and nothing in Article VII shall deprive the Trustee of any of its rights as such holder. Nothing in this Article X shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.7. Each Paying Agent shall have the same rights and obligations under this Article X as does the Trustee. SECTION 10.10. Distribution or Notice to Representative. Whenever a payment or distribution is to be made or a notice given to holders of Senior Indebtedness, the payment or distribution may be made and the notice given to their Representative (if any). 80 72 SECTION 10.11. Article X Not To Prevent Events of Default or Limit Right To Accelerate. The failure to make a payment in respect of the Securities by reason of any provision in this Article X shall not be construed as preventing the occurrence of a Default or Event of Default. Nothing in this Article X shall have any effect on the right of the Securityholders or the Trustee to accelerate the maturity of the Securities. SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust under Article VIII by the Trustee for the payment of principal of and interest on the Securities shall not be subordinated to the prior payment of any Senior Indebtedness or subject to the restrictions set forth in this Article X, and none of the Securityholders shall be obligated to pay over any such amount to the Company, any holder of Senior Indebtedness of the Company, or any other creditor of the Company. SECTION 10.13. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article X, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.2 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (iii) upon the Representatives for the holders of Senior Indebtedness for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article X. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article X, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article X, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.1 and 7.2 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article X. SECTION 10.14. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on its behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Indebtedness as provided in this Article X and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and, subject to Section 10.9, shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this Article X or otherwise. 81 73 SECTION 10.16. Reliance by Holders of Senior Indebtedness on Subordination Provisions. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. 82 74 ARTICLE XI Guarantee SECTION 11.1. Guarantee. Each Subsidiary Guarantor hereby fully, unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, jointly and severally with each other Subsidiary Guarantor, to each Holder of the Securities and the Trustee, the full and punctual payment when due, whether at maturity, by acceleration, by redemption or otherwise, of the principal of, premium, if any, and interest on the Securities (all the foregoing being hereinafter collectively called the "Obligations"). Each Subsidiary Guarantor further agrees (to the extent permitted by law) that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from it, and that it will remain bound under this Article XI notwithstanding any extension or renewal of any Obligation. Each Subsidiary Guarantor waives presentation to, demand of payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. Each Subsidiary Guarantor waives notice of any default under the Securities or the Obligations. The obligations of each Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any Holder to assert any claim or demand or to enforce any right or remedy against the Company or any other person under this Indenture, the Securities or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Obligations or any of them; (e) the failure of any Holder to exercise any right or remedy against any other Subsidiary Guarantor; or (f) any change in the ownership of the Company. Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee herein constitutes a Guarantee of payment when due (and not a Guarantee of collection) and waives any right to require that any resort be had by any Holder to any security held for payment of the Obligations. The Subsidiary Guarantee of each Subsidiary Guarantor is, to the extent and in the manner set forth in Article XII, subordinated and subject in right of payment to the prior payment in full of all Guarantor Senior Indebtedness of such Subsidiary Guarantor and the Subsidiary Guarantee is made subject to such provisions of such Guarantees. The obligations of each Subsidiary Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than payment of the Obligations in full), including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Subsidiary Guarantor herein shall not be discharged or impaired or otherwise affected by 83 75 the failure of any Holder to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of any Subsidiary Guarantor or would otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law or equity. Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any of the Obligations is rescinded or must otherwise be restored by any Holder upon the bankruptcy or reorganization of the Company or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Holder has at law or in equity against any Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay any of the Obligations when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, each Subsidiary Guarantor hereby promises to and will, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders an amount equal to the sum of (i) the unpaid amount of such Obligations then due and owing and (ii) accrued and unpaid interest on such Obligations then due and owing (but only to the extent not prohibited by law). Each Subsidiary Guarantor further agrees that, as between such Subsidiary Guarantor, on the one hand, and the Holders, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in this Indenture for the purposes of the Subsidiary Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby and (y) in the event of any such declaration of acceleration of such Obligations, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Subsidiary Guarantor for the purposes of this Subsidiary Guarantee. Each Subsidiary Guarantor also agrees to pay any and all reasonable costs and expenses (including reasonable attorneys' fees) incurred by the Trustee or the Holders in enforcing any rights under this Section. SECTION 11.2. Limitation on Liability; Termination, Release and Discharge. The obligations of each Subsidiary Guarantor will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor (including, without limitation, any guarantees under the Senior Credit Agreement) 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 Subsidiary Guarantee or pursuant to its contribution obligations under this Indenture, result in the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. 84 76 Each Subsidiary Guarantor may consolidate with or merge into or sell its assets to the Company or another Subsidiary Guarantor without limitation. Each Subsidiary Guarantor may 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 except that if the surviving corporation of any such merger or consolidation is a Subsidiary of the Company, such Subsidiary shall not be a Foreign Subsidiary. Upon the sale or disposition of a Subsidiary Guarantor (by merger, consolidation, the sale of its Capital Stock or the sale of 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 this Indenture (including Section 3.7), such Subsidiary Guarantor will be deemed released from all its obligations under this Indenture and its Subsidiary Guarantee and such Subsidiary Guarantee will terminate; provided, however, that any such termination will occur only to the extent that all obligations of such Subsidiary Guarantor under the Senior Credit Agreement 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 will also terminate upon such release, sale or transfer. SECTION 11.3. Right of Contribution. Each Subsidiary Guarantor hereby agrees that to the extent that any Subsidiary Guarantor shall have paid more than its proportionate share of any payment made on the obligations under the Subsidiary Guarantees, such Subsidiary Guarantor shall be entitled to seek and receive contribution from and against the Company or any other Subsidiary Guarantor who has not paid its proportionate share of such payment. Each Subsidiary Guarantor's right of contribution shall be subject to the terms and conditions of Section 3.6. The provisions of this Section 11.3 shall in no respect limit the obligations and liabilities of each Subsidiary Guarantor to the Trustee and the Holders and each Subsidiary Guarantor shall remain liable to the Trustee and the Holders for the full amount guaranteed by such Subsidiary Guarantor hereunder. SECTION 11.4. No Subrogation. Notwithstanding any payment or payments made by each Subsidiary Guarantor hereunder, no Subsidiary Guarantor shall be entitled to be subrogated to any of the rights of the Trustee or any Holder against the Company or any other Subsidiary Guarantor or any collateral security or guarantee or right of offset held by the Trustee or any Holder for the payment of the Obligations, nor shall any Subsidiary Guarantor seek or be entitled to seek any contribution or reimbursement from the Company or any other Subsidiary Guarantor in respect of payments made by such Subsidiary Guarantor hereunder, until all amounts owing to the Trustee and the Holders by the Company on account of the Obligations are paid in full. If any amount shall be paid to any Subsidiary Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Subsidiary Guarantor in trust for the Trustee and the Holders, segregated from other funds of such Subsidiary Guarantor, and shall, forthwith upon receipt by such Subsidiary Guarantor, be turned over to the Trustee in the exact form received by such Subsidiary Guarantor (duly indorsed by such Subsidiary Guarantor to the Trustee, if required), to be applied against the Obligations. 85 77 ARTICLE XII Subordination of Subsidiary Guarantees SECTION 12.1. Agreement To Subordinate. Each Subsidiary Guarantor agrees, and each Securityholder by accepting a Security agrees, that the Indebtedness evidenced by each Subsidiary Guarantee and other obligations relating to the Securities are subordinated in right of payment, to the extent and in the manner provided in this Article XII, to the prior payment when due in cash or Cash Equivalents of all Guarantor Senior Indebtedness and that the subordination is for the benefit of and enforceable by the holders of Guarantor Senior Indebtedness. Each Subsidiary Guarantee shall in all respects rank pari passu with all other Guarantor Senior Subordinated Indebtedness of such Subsidiary Guarantor and only Indebtedness of the Subsidiary Guarantor which is Guarantor Senior Indebtedness will rank senior to such Subsidiary Guarantee in accordance with the provisions set forth herein. All provisions of this Article XII shall be subject to Section 12.12. SECTION 12.2. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets or securities of any Subsidiary Guarantor upon a total or partial liquidation or a total or partial dissolution of a Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to any Subsidiary Guarantor or its respective properties: (1) holders of Guarantor Senior Indebtedness shall be entitled to receive payment in full in cash or Cash Equivalents of the Guarantor Senior Indebtedness (including interest accruing after, or which would accrue but for, the commencement of any proceeding at the rate specified in the applicable Guarantor Senior Indebtedness, whether or not a claim for such interest would be allowed) before Securityholders shall be entitled to receive any payment of principal of, premium, if any, or interest on or other amounts with respect to the Securities; and (2) until the Guarantor Senior Indebtedness is paid in full in cash or Cash Equivalents, any payment or distribution to which Securityholders would be entitled but for this Article XII shall be made to holders of Guarantor Senior Indebtedness as their respective interests may appear. SECTION 12.3. Default on Senior Indebtedness. No Subsidiary Guarantor shall pay the principal of, premium (if any) or interest on or other amounts with respect to the Securities or make any deposit pursuant to Section 8.1 or pay the Securities if (i) any Guarantor Senior Indebtedness or Senior Indebtedness of the Company is not paid when due in cash or Cash Equivalents or (ii) any other default on Guarantor Senior Indebtedness or Senior Indebtedness of the Company occurs and the maturity of such Guarantor Senior Indebtedness or Senior Indebtedness of the Company is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded in writing or (y) such Guarantor Senior Indebtedness or Senior Indebtedness of the Company has been paid in full in cash or Cash Equivalents; provided, however, that a Subsidiary Guarantor may pay the Securities without regard to the 86 78 foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of the Guarantor Senior Indebtedness or the Senior Indebtedness of the Company with respect to which either of the events set forth in clause (i) or (ii) of this sentence has occurred or is continuing. During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding sentence) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Subsidiary Guarantor may not pay the Securities for a Payment Blockage Period commencing upon the receipt by the Trustee (with a copy to the Company) of a Blockage Notice of such default from the Representative of the holders of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (ii) because the default giving rise to such Blockage Notice is no longer continuing or (iii) because such Designated Senior Indebtedness has been repaid in full in cash or Cash Equivalents). Notwithstanding the provisions of the immediately preceding sentence, unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, a Subsidiary Guarantor may resume payments on the Securities after the end of such Payment Blockage Period. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. SECTION 12.4. Acceleration of Payment of Securities. If payment of the Securities is accelerated because of an Event of Default and if any Designated Senior Indebtedness is outstanding, no Subsidiary Guarantor shall pay the Securities until five Business Days after the holders or Representative of the Designated Senior Indebtedness receives notice of such acceleration as provided in this Indenture and, thereafter, Subsidiary Guarantors may pay the Securities only if this Article XII otherwise permits payments at that time. SECTION 12.5. When Distribution Must Be Paid Over. If a payment or distribution is made to the Trustee or Securityholders that because of this Article XII should not have been made to them, the Trustee or the Securityholders who receive the payment or distribution shall hold it in trust for holders of Guarantor Senior Indebtedness and promptly pay it over to them as their respective interests may appear. SECTION 12.6. Subrogation. After all Guarantor Senior Indebtedness is paid in full in cash or Cash Equivalents and the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of Guarantor Senior Indebtedness to receive distributions applicable to Guarantor Senior Indebtedness. A payment or distribution made under this Article XII to holders of Guarantor Senior Indebtedness which otherwise would have been made to Securityholders is not, as between a Subsidiary Guarantor and Securityholders, a payment by such Subsidiary Guarantor of Guarantor Senior Indebtedness. 87 79 SECTION 12.7. Relative Rights. This Article XII defines the relative rights of Holders and holders of Guarantor Senior Indebtedness. Nothing in the Subsidiary Guarantee shall: (1) impair, as between a Subsidiary Guarantor and Holders, the obligation of a Subsidiary Guarantor which is absolute and unconditional, to pay the Obligations in accordance with the terms of the Subsidiary Guarantee; or (2) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of Guarantor Senior Indebtedness to receive payments and distributions otherwise payable to Securityholders. SECTION 12.8. Subordination May Not Be Impaired by Subsidiary Guarantor. No right of any holder of Guarantor Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Subsidiary Guarantee shall be impaired by any act or failure to act by a Subsidiary Guarantor or by the failure of any of them to comply with the Subsidiary Guarantee or this Indenture. SECTION 12.9. Rights of Trustee and Paying Agent. Notwithstanding Section 12.3, the Trustee or Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than one Business Day prior to the date of such payment, a Trust Officer of the Trustee receives notice satisfactory to it that payments may not be made under this Article XII. A Subsidiary Guarantor, the Company, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of the Company or Guarantor Senior Indebtedness may give the notice; provided, however, that, if an issue of Senior Indebtedness of the Company or Guarantor Senior Indebtedness has a Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Guarantor Senior Indebtedness with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article XII with respect to any Guarantor Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Guarantor Senior Indebtedness; and nothing in Article VII shall deprive the Trustee of any of its rights as such holder. Nothing in this Article XII shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.7. Each Paying Agent shall have the same rights and obligations under this Article XII as does the Trustee. SECTION 12.10. Distribution or Notice to Representative. Whenever a payment or distribution is to be made or a notice given to holders of Guarantor Senior Indebtedness, the payment or distribution may be made and the notice given to their Representative (if any). 88 80 SECTION 12.11. Article XII Not To Prevent Events of Default or Limit Right To Accelerate. The failure to make a payment in respect of the Securities by reason of any provision in this Article XII shall not be construed as preventing the occurrence of a Default or Event of Default. Nothing in this Article XII shall have any effect on the right of the Securityholders or the Trustee to accelerate the maturity of the Securities. SECTION 12.12. Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust under Article VIII by the Trustee for the payment of principal of and interest on the Securities shall not be subordinated to the prior payment of any Guarantor Senior Indebtedness or subject to the restrictions set forth in this Article XII, and none of the Securityholders shall be obligated to pay over any such amount to a Subsidiary Guarantor, any holder of Guarantor Senior Indebtedness or Senior Indebtedness of the Company, or any other creditor of a Subsidiary Guarantor or the Company. SECTION 12.13. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article XII, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 12.2 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (iii) upon the Representatives for the holders of Guarantor Senior Indebtedness or Senior Indebtedness of the Company for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Guarantor Senior Indebtedness or Senior Indebtedness and other Indebtedness of the Company or a Subsidiary Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XII. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Guarantor Senior Indebtedness to participate in any payment or distribution pursuant to this Article XII, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Guarantor Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article XII, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.1 and 7.2 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article XII. SECTION 12.14. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on its behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Guarantor Senior Indebtedness and Senior Indebtedness of the Company as provided in this Article XII and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 12.15. Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Guarantor Senior 89 81 Indebtedness or Senior Indebtedness of the Company and, subject to Section 12.9, shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of Guarantor Senior Indebtedness shall be entitled by virtue of this Article XII or otherwise. SECTION 12.16. Reliance on Subordination Provisions. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Guarantor Senior Indebtedness, whether such Guarantor Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Guarantor Senior Indebtedness and such holder of Guarantor Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Guarantor Senior Indebtedness. ARTICLE XIII Miscellaneous SECTION 13.1. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the provision required by the TIA shall control. SECTION 13.2. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows: if to the Company: Home Products International, Inc. 4501 West 47th Street Chicago, Illinois 60632 Attention: James Winslow With a copy to: Sonnenschein Nath & Rosenthal 8000 Sears Tower Chicago, Illinois 60606 Attention: Kenneth Kolmin 90 82 if to the Trustee: LaSalle National Bank 135 South LaSalle Street, Suite 1825 Chicago, Illinois 60603 Attention: Corporate Trust Services Division The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a registered Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 13.3. Communication by Holders with other Holders. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 13.4. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 13.5. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; 91 83 (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. In giving such Opinion of Counsel, counsel may rely as to factual matters on an Officer's Certificate or on certificates of public officials. SECTION 13.6. When Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 13.7. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by, or a meeting of, Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 13.8. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or other day on which commercial banking institutions are authorized or required to be closed in New York City. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 13.9. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. SECTION 13.10. No Recourse Against Others. An incorporator, director, officer, employee, stockholder or controlling person, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By 92 84 accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 13.11. Successors. All agreements of the Company in this Indenture and the Securities shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 13.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 13.13. Variable Provisions. The Company initially appoints the Trustee as Paying Agent and Registrar and custodian with respect to any Global Securities. SECTION 13.14. Qualification of Indenture. The Company shall qualify this Indenture under the TIA in accordance with the terms and conditions of the Exchange and Registration Rights Agreement and shall pay all reasonable costs and expenses (including attorneys' fees and expenses for the Company, the Trustee and the Holders) incurred in connection therewith, including, but not limited to, costs and expenses of qualification of this Indenture and the Securities and printing this Indenture and the Securities. The Trustee shall be entitled to receive from the Company any such Officers' Certificates, Opinions of Counsel or other documentation as it may reasonably request in connection with any such qualification of this Indenture under the TIA. SECTION 13.15. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. 93 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. HOME PRODUCTS INTERNATIONAL, INC. By: ---------------------------- Name: Title: SELFIX, INC., as a Subsidiary Guarantor By: ------------------------------- Name: Title: SEYMOUR HOUSEWARES CORPORATION, as a Subsidiary Guarantor By: ------------------------------- Name: Title: SHUTTERS, INC., as a Subsidiary Guarantor By: ------------------------------- Name: Title: TAMOR CORPORATION, as a Subsidiary Guarantor By: ------------------------------- Name: Title: LASALLE NATIONAL BANK By: ------------------------------- Name: Title: 94 EXHIBIT A [FORM OF FACE OF INITIAL SECURITY] No. [___] Principal Amount $[_______] CUSIP NO. ____________ 9 5/8% Senior Subordinated Notes due 2008 Home Products International, Inc., a Delaware corporation, promises to pay to [___________], or registered assigns, the principal sum of [__________________] Dollars on May 15, 2008. Interest Payment Dates: May 15 and November 15, commencing on November 15, 1998 Record Dates: May 1 and November 1 Additional provisions of this Security are set forth on the other side of this Security. HOME PRODUCTS INTERNATIONAL, INC. By: -------------------------- TRUSTEE'S CERTIFICATE OF AUTHENTICATION LASALLE NATIONAL BANK as Trustee, certifies that this is one of the Securities referred to in the Indenture. By ------------------------------ Authorized Signatory Date: _____________, 1998 A-1 95 [FORM OF REVERSE SIDE OF INITIAL SECURITY] 9 5/8% Senior Subordinated Note due 2008 1. Interest Home Products International, Inc., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on May 15 and November 15 of each year commencing on November 15, 1998. Interest on the Securities will accrue from the most recent date to which interest has been paid on the Securities or, if no interest has been paid, from November 15, 1998. The Company shall pay interest on overdue principal or premium, if any (plus interest on such interest to the extent lawful), at the rate borne by the Securities to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment By at least 12:00 p.m. (New York City time) on the date on which any principal of or interest on any Security is due and payable, the Company shall irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay such principal, premium, if any, and/or interest. The Company will pay interest (except Defaulted Interest) to the Persons who are registered Holders of Securities at the close of business on the May 1 or November 1 immediately preceding the interest payment date even if Securities are cancelled, repurchased or redeemed after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal and interest by check payable in such money. It may mail an interest check to a Holder's registered address. 3. Paying Agent and Registrar Initially, LaSalle National Bank, a banking corporation duly organized and existing under the laws of the State of Illinois (the "Trustee"), will act as Trustee, Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice to any Securityholder. The Company or any of its domestically incorporated Wholly-Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Company issued the Securities under an Indenture dated as of May 14, 1998 (as it may be amended or supplemented from time to time in accordance with the terms thereof, the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 A-2 96 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are general unsecured senior subordinated obligations of the Company limited to $125.0 million aggregate principal amount (subject to Section 2.9 of the Indenture). The aggregate principal amount of notes which may be authenticated and delivered under the Indenture, including the Securities, is limited to $250.0 million (subject to Section 2.9 of the Indenture). This Security is one of the Initial Securities referred to in the Indenture. The Securities include the Initial Securities and any Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture and the Exchange and Registration Rights Agreement. The Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on: the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries, the Incurrence of Indebtedness by the Company and its Subsidiary Guarantors if subordinate or junior in any respect to any Senior Indebtedness or Guarantor Senior Indebtedness, respectively, the payment of dividends and other distributions on the Capital Stock of the Company and its Restricted Subsidiaries, the purchase or redemption of Capital Stock of the Company and Capital Stock of such Restricted Subsidiaries, certain purchases or redemptions of Subordinated Indebtedness, the sale or transfer of assets and Capital Stock of Restricted Subsidiaries, the issuance or sale of Capital Stock of Restricted Subsidiaries, the business activities and investments of the Company and its Restricted Subsidiaries and transactions with Affiliates. In addition, the Indenture limits the ability of the Company and its Restricted Subsidiaries to restrict distributions and dividends from Restricted Subsidiaries. To guarantee the due and punctual payment of the principal, premium, if any, and interest on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Subsidiary Guarantors have unconditionally guaranteed (and future Subsidiary Guarantors, together with the Subsidiary Guarantors, will unconditionally guarantee), jointly and severally, such obligations on a senior subordinated basis pursuant to the terms of the Indenture. 5. Redemption Except as set forth below, the Securities will not be redeemable at the option of the Company prior to May 15, 2003. On and after such date, the Securities 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), 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): A-3 97 If redeemed during the 12-month period commencing on May 15 of the years set forth below:
PERIOD REDEMPTION PRICE - ------ ---------------- 2003 104.813 % 2004 103.208 % 2005 101.604 % 2006 and thereafter 100.000 %
In addition, at any time and from time to time prior to May 15, 2001, the Company may redeem in the aggregate up to 35% of the original principal amount of the Securities with the proceeds of one or more Equity Offerings received by, or invested in, the Company so long as there is a Public Market at the time of such redemption, at a redemption price (expressed as a percentage of principal amount) of 109.625% plus accrued and unpaid interest, if any, 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); provided, however, that at least 65% of the original principal amount of the Securities must remain outstanding after each such redemption; provided, further, that each such redemption occurs within 90 days after the closing of each Equity Offering. In the case of any partial redemption, selection of the Securities for redemption will be made by the Trustee on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate, although no Securities of $1,000 in original principal amount or less will be redeemed in part. If any Security is to be redeemed in part only, the notice of redemption relating to such Security shall state the portion of the principal amount thereof to be redeemed. A new Security in principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original Security. 6. Repurchase Provisions (a) Upon a Change of Control, unless the Company has exercised its right to redeem the Securities as described under Section 5 hereof, any Holder of Securities will have the right to cause the Company to repurchase all or any part of the Securities of such Holder 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 repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date) as provided in, and subject to the terms of, the Indenture. (b) If the Company or a Restricted Subsidiary consummates any Asset Sales permitted by the Indenture, when the aggregate amount of Excess Proceeds equals or exceeds $10.0 million, the Company shall make an Offer for all outstanding Securities pro rata up to a maximum principal amount (expressed as a multiple of $1,000) of Securities equal to such Excess Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of purchase in accordance with the procedures set forth in Section 3.7 of the Indenture. A-4 98 7. Subordination The Securities are subordinated to Senior Indebtedness and the Guarantees are subordinated to Guarantor Senior Indebtedness, each as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give them effect and appoints the Trustee as attorney-in-fact for such purpose. The Securities will in all respects rank pari passu with all other Senior Subordinated Indebtedness. 8. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of principal amount of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange (i) any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) for a period beginning 15 days before the mailing of a notice of Securities to be redeemed and ending on the date of such mailing or (ii) any Securities for a period beginning 15 days before an interest payment date and ending on such interest payment date. 9. Persons Deemed Owners The registered holder of this Security may be treated as the owner of it for all purposes. 10. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 11. Defeasance Subject to certain conditions set forth in the Indenture, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 12. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount of the then outstanding Securities and (ii) any default (other than with respect to nonpayment) or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount of the then outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the A-5 99 Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article IV of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make any change that does not adversely affect the rights of any Securityholder, or to provide for the issuance of Exchange Securities. 13. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest when due on the Securities; (ii) default in payment of principal on the Securities at maturity, upon required repurchase or upon redemption pursuant to paragraphs 5 and 6 of the Securities, upon declaration or otherwise; (iii) the failure by the Company to comply with its obligations under Article IV of the Indenture, (iv) failure by the Company to comply for 30 days after notice with any of its obligations under the covenants described under Sections 3.2 through 3.15 inclusive of the Indenture (in each case, other than a failure to purchase Securities, which shall constitute an Event of Default under clause (ii) above), (v) the failure by the Company to comply for 60 days after notice with its other agreements contained in the Indenture, (vi) Indebtedness of the Company or any Restricted Subsidiary if 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 $5 million (the "cross acceleration provision"), (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 $5.0 million 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 Subsidiary Guarantee ceases to be in full force and effect (except as contemplated by the terms of the Indenture) or any Subsidiary Guarantor denies or disaffirms its obligations under the Indenture or its Subsidiary Guarantee. However, a default under clauses (iv) and (v) will not constitute an Event of Default until the Trustee or the holders of more than 25% in principal amount of the outstanding Securities notify the Company of the default and the Company does not cure such default within the time specified in clauses (iv) and (v) hereof after receipt of such notice. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default or Event of Default (except a Default or Event of Default in payment of principal or interest) if it determines that withholding notice is in their interest. A-6 100 14. Trustee Dealings with the Company Subject to certain limitations set forth in the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its affiliates with the same rights it would have if it were not Trustee. 15. No Recourse Against Others An incorporator, director, officer, employee, stockholder or controlling person, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 16. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent acting on its behalf) manually signs the certificate of authentication on the other side of this Security. 17. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act). 18. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 19. Governing Law This Security shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. A-7 101 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: Your Signature: ---------------------- ------------------------- Signature Guarantee: ------------------------------------ (Signature must be guaranteed) - -------------------------------------------------------------------------------- Sign exactly as your name appears on the other side of this Security. The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. In connection with any transfer or exchange of any of the Securities evidenced by this certificate occurring prior to the date that is two years after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being: CHECK ONE BOX BELOW: 1 [ ] acquired for the undersigned's own account, without transfer; or 2 [ ] transferred to the Company; or 3 [ ] transferred pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"); or 4 [ ] transferred pursuant to an effective registration statement under the Securities Act; or 5 [ ] transferred pursuant to and in compliance with Regulation S under the Securities Act; or A-8 102 6 [ ] transferred to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter appears as Section 2.7 of the Indenture); or 7 [ ] transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (5), (6) or (7) is checked, the Trustee or the Company may require, prior to registering any such transfer of the Securities, in their sole discretion, such legal opinions, certifications and other information as the Trustee or the Company may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act. ------------------------------ Signature Signature Guarantee: - ------------------------------ ------------------------------ (Signature must be guaranteed) Signature - ---------------------------------------------- The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. TO BE COMPLETED BY PURCHASER IF (1) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has A-9 103 determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. - ----------------------- Dated: A-10 104 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made:
Principal Amount of Signature of Amount of decrease in Amount of increase in this Global Security authorized signatory Date of Principal Amount of Principal Amount of following such of Trustee or Exchange this Global Security this Global Security decrease or increase Securities Custodian _______ ______________ __________ ____________ ______________
A-11 105 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 3.7 or 3.9 of the Indenture, check either box: [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 3.7 or 3.9 of the Indenture, state the amount in principal amount (must be integral multiple of $1,000): $ Date: Your Signature --------- -------------------------------------- (Sign exactly as your name appears on the other side of the Security) Signature Guarantee: ------------------------------------------------ (Signature must be guaranteed) The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. A-12 106 EXHIBIT B [FORM OF FACE OF EXCHANGE SECURITY] No. [_____] Principal Amount $[____________] CUSIP NO. _____________ 9 5/8% Senior Subordinated Notes due 2008 Home Products International, Inc., a Delaware corporation, promises to pay to [______________], or registered assigns, the principal sum of [_______________] Dollars on May 15, 2008. Interest Payment Dates: May 15 and November 15, commencing on November 15, 1998 Record Dates: May 1 and November 1 Additional provisions of this Security are set forth on the other side of this Security. HOME PRODUCTS INTERNATIONAL, INC. By: ---------------------------- By: ---------------------------- B-1 107 TRUSTEE'S CERTIFICATE OF AUTHENTICATION LASALLE NATIONAL BANK as Trustee, certifies that this is one of the Securities referred to in the Indenture. By: ----------------------------- Authorized Signatory Date: B-2 108 [FORM OF REVERSE SIDE OF EXCHANGE SECURITY] 9 5/8% Senior Subordinated Note due 2008 1. Interest Home Products International, Inc., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on May 15 and November 15 of each year commencing on November 15, 1998. Interest on the Securities will accrue from the most recent date to which interest has been paid on the Securities or, if no interest has been paid, from November 15, 1998. The Company shall pay interest on overdue principal or premium, if any (plus interest on such interest to the extent lawful), at the rate borne by the Securities to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment By at least 12:00 p.m. (New York City time) on the date on which any principal of or interest on any Security is due and payable, the Company shall irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay such principal, premium, if any, and/or interest. The Company will pay interest (except Defaulted Interest) to the Persons who are registered Holders of the Securities at the close of business on the May 1 or November 1 immediately preceding the interest payment date even if Securities are cancelled, repurchased or redeemed after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal and interest by check payable in such money. It may mail an interest check to a Holder's registered address. 3. Paying Agent and Registrar Initially, LaSalle National Bank, a banking corporation duly organized and existing under the laws of the State of Illinois (the "Trustee"), will act as Trustee, Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice to any Securityholder. The Company or any of its domestically incorporated Wholly-Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Company issued the Securities under an Indenture dated as of May 14, 1998 (as it may be amended or supplemented from time to time in accordance with the terms thereof, the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Capitalized terms B-3 109 used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are general unsecured senior subordinated obligations of the Company limited to $125.0 million aggregate principal amount (subject to Section 2.9 of the Indenture). The aggregate principal amount of notes which may be authenticated and delivered under the Indenture, including the Securities, is limited to $250.0 million (subject to Section 2.9 of the Indenture). This Security is one of the Exchange Securities referred to in the Indenture. The Securities include the Initial Securities and any Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture and the Exchange and Registration Rights Agreement. The Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on: the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries, the Incurrence of Indebtedness by the Company and its Subsidiary Guarantors if subordinate or junior in any respect to any Senior Indebtedness or Guarantor Senior Indebtedness, respectively, the payment of dividends and other distributions on the Capital Stock of the Company and its Restricted Subsidiaries, the purchase or redemption of Capital Stock of the Company and Capital Stock of such Restricted Subsidiaries, certain purchases or redemptions of Subordinated Indebtedness, the sale or transfer of assets and Capital Stock of Restricted Subsidiaries, the issuance or sale of Capital Stock of Restricted Subsidiaries, the business activities and investments of the Company and its Restricted Subsidiaries, and transactions with Affiliates. In addition, the Indenture limits the ability of the Company and its Subsidiaries to restrict distributions and dividends from Restricted Subsidiaries. To guarantee the due and punctual payment of the principal, premium, if any, and interest on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Subsidiary Guarantors have unconditionally guaranteed (and future Subsidiary Guarantors, together with the Subsidiary Guarantors, will unconditionally guarantee), jointly and severally, such obligations on a senior subordinated basis pursuant to the terms of the Indenture. 5. Optional Redemption Except as set forth below, the Securities will not be redeemable at the option of the Company prior to May 15, 2003. On and after such date, the Securities 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), 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): B-4 110 If redeemed during the 12-month period commencing on May 15 of the years set forth below:
PERIOD REDEMPTION PRICE - ------ ---------------- 2003 104.813% 2004 103.208% 2005 101.604% 2006 and thereafter 100.000%
In addition, at any time and from time to time prior to May 15, 2001, the Company may redeem in the aggregate up to 35% of the original principal amount of the Securities with the proceeds of one or more Equity Offerings received by, or invested in, the Company so long as there is a Public Market at the time of such redemption, at a redemption price (expressed as a percentage of principal amount) of 109.625% plus accrued and unpaid interest, if any, 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); provided, however, that at least 65% of the original principal amount of the Securities must remain outstanding after each such redemption; provided, further, that each such redemption occurs within 90 days after the closing of each Equity Offering. In the case of any partial redemption, selection of the Securities for redemption will be made by the Trustee on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate, although no Securities of $1,000 in original principal amount or less will be redeemed in part. If any Security is to be redeemed in part only, the notice of redemption relating to such Security shall state the portion of the principal amount thereof to be redeemed. A new Security in principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original Security. 6. Repurchase Provisions (a) Upon a Change of Control, unless the Company has exercised its right to redeem the Securities as described under Section 5 hereof, any Holder of Securities will have the right to cause the Company to repurchase all or any part of the Securities of such Holder 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 repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date) as provided in, and subject to the terms of, the Indenture. (b) If the Company or a Restricted Subsidiary consummates any Asset Sales permitted by the Indenture, when the aggregate amount of Excess Proceeds equals or exceeds $10.0 million, the Company shall make an Offer for all outstanding Securities pro rata up to a maximum principal amount (expressed as a multiple of $1,000) of Securities equal to such Excess Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of purchase in accordance with the procedures set forth in Section 3.7 of the Indenture. B-5 111 7. Subordination The Securities are subordinated to Senior Indebtedness and the Guarantees are subordinated to Guarantor Senior Indebtedness, each as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give them effect and appoints the Trustee as attorney-in-fact for such purpose. The Securities will in all respects rank pari passu with all other Senior Subordinated Indebtedness. 8. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of principal amount of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange (i) any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or for a period beginning 15 days before the mailing of a notice of Securities to be redeemed and ending on the date of such mailing or (ii) any Securities for a period beginning 15 days before an interest payment date and ending on such interest payment date. 9. Persons Deemed Owners The registered holder of this Security may be treated as the owner of it for all purposes. 10. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 11. Defeasance Subject to certain conditions set forth in the Indenture, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 12. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount of the then outstanding Securities and (ii) any default (other than with respect to nonpayment) or noncompliance with any provision may be waived with the written consent of the B-6 112 Holders of a majority in principal amount of the then outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article IV of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company or Communications or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make any change that does not adversely affect the rights of any Securityholder, or to provide for the issuance of Exchange Securities. 13. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest when due on the Securities; (ii) default in payment of principal on the Securities at maturity, upon required repurchase, upon required repurchase or upon redemption pursuant to paragraphs 5 and 6 of the Securities, upon declaration or otherwise; (iii) the failure by the Company to comply with its obligations under Article IV of the Indenture (iv) failure by the Company to comply for 30 days after notice with any of its obligations under the covenants described under Sections 3.2 through 3.15 inclusive of the Indenture (in each case, other than a failure to purchase Securities, which shall constitute an Event of Default under clause (ii) above), (v) the failure by the Company to comply for 60 days after notice with its other agreements contained in the Indenture, (vi) Indebtedness of the Company or any Restricted Subsidiary if 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 $5.0 million (the "cross acceleration provision"), (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 $5.0 million 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 Subsidiary Guarantee ceases to be in full force and effect (except as contemplated by the terms of the Indenture) or any Subsidiary Guarantor denies or disaffirms its obligations under the Indenture or its Subsidiary Guarantee. However, a default under clauses (iv) and (v) will not constitute an Event of Default until the Trustee or the holders of more than 25% in principal amount of the outstanding Securities notify the Company of the default and the Company does not cure such default within the time specified in clauses (iv) and (v) hereof after receipt of such notice. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default or Event of Default (except a B-7 113 Default or Event of Default in payment of principal or interest) if it determines that withholding notice is in their interest. 14. Trustee Dealings with the Company Subject to certain limitations set forth in the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its affiliates with the same rights it would have if it were not Trustee. 15. No Recourse Against Others An incorporator, director, officer, employee, stockholder or controlling person, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 16. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent acting on its behalf) manually signs the certificate of authentication on the other side of this Security. 17. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act). 18. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 19. Governing Law This Security shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. B-8 114 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: Your Signature ------------------ ------------------------- Signature Guarantee: ------------------------------------------------- (Signature must be guaranteed) - -------------------------------------------------------------------------------- Sign exactly as your name appears on the other side of this Security. The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. B-9 115 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 3.7 or 3.9 of the Indenture, check either box: [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 3.7 or 3.9 of the Indenture, state the amount in principal amount (must be integral multiple of $1,000): $ Date: Your Signature: --------- -------------------------------------- (Sign exactly as your name appears on the other side of the Security) Signature Guarantee: -------------------------------------------- (Signature must be guaranteed) The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. B-10 116 EXHIBIT C FORM OF SUBSIDIARY GUARANTEE This Supplemental Indenture, dated as of [__________] (this "Supplemental Indenture" or "Guarantee"), among [name of future Subsidiary Guarantor] (the "Guarantor"), Home Products International, Inc. (together with its successors and assigns, the "Company"), each other then existing Subsidiary Guarantor under the Indenture referred to below, and LaSalle National Bank, as Trustee under the Indenture referred to below. W I T N E S S E T H: WHEREAS, the Company and the Trustee have heretofore executed and delivered an Indenture, dated as of May 14, 1998 (as amended, supplemented, waived or otherwise modified, the "Indenture"), providing for the issuance of an aggregate principal amount of $125.0 million of 9 5/8% Senior Subordinated Notes due 2008 of the Company (the "Securities"); WHEREAS, Section 3.11 of the Indenture provides that the Company is required to cause each Restricted Subsidiary (other than a Foreign Subsidiary) created or acquired by the Company which Guarantees the Bank Indebtedness or Incurs Indebtedness under paragraph (a) of Section 3.3 of the Indenture to execute and deliver to the Trustee a Subsidiary Guarantee pursuant to which such Subsidiary Guarantor will unconditionally Guarantee, on a joint and several basis, the full and prompt payment of the principal of, premium, if any and interest on the Securities on a senior subordinated basis; and WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee and the Company are authorized to execute and deliver this Supplemental Indenture to amend the Indenture, without the consent of any Securityholder; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guarantor, the Company, the other Subsidiary Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: ARTICLE I Definitions SECTION 1.1 Defined Terms. As used in this Subsidiary Guarantee, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined, except that the term "Holders" in this Guarantee shall refer to the term "Holders" as defined in the Indenture and the Trustee acting on behalf or for the benefit of such holders. The words "herein," "hereof" and "hereby" and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof. C-1 117 ARTICLE II Agreement to be Bound; Guarantee SECTION 2.1 Agreement to be Bound. The Guarantor hereby becomes a party to the Indenture as a Subsidiary Guarantor and as such will have all of the rights and be subject to all of the obligations and agreements of a Subsidiary Guarantor under the Indenture. The Guarantor agrees to be bound by all of the provisions of the Indenture applicable to a Subsidiary Guarantor and to perform all of the obligations and agreements of a Subsidiary Guarantor under the Indenture. SECTION 2.2 Guarantee. (a) The Guarantor hereby fully, unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, jointly and severally with each other Subsidiary Guarantor, to each Holder of the Securities and the Trustee, the full and punctual payment when due, whether at maturity, by acceleration, by redemption or otherwise, of the Obligations pursuant to Article XI of the Indenture. (b) The Guarantor agrees that the Indebtedness evidenced by its Subsidiary Guarantee shall be subordinated in right of payment, to the extent and in the manner provided in Article XII of the Indenture, to the prior payment when due in cash or Cash Equivalents of all Guarantor Senior Indebtedness of the Guarantor and that the subordination is for the benefit of and enforceable by the holders of Guarantor Senior Indebtedness of the Guarantor. This Guarantee shall in all respects rank pari passu with all other Guarantor Senior Subordinated Indebtedness of the Guarantor and only Indebtedness of the Guarantor which is Guarantor Senior Indebtedness will rank senior to this Guarantee in accordance with the provisions set forth herein. ARTICLE III Miscellaneous SECTION 3.1 Notices. All notices and other communications to the Guarantor shall be given as provided in the Indenture to the Guarantor, at its address set forth below, with a copy to the Company as provided in the Indenture for notices to the Company. SECTION 3.2 Parties. Nothing expressed or mentioned herein is intended or shall be construed to give any Person, firm or corporation, other than the Holders and the Trustee and the holders of any Guarantor Senior Indebtedness, any legal or equitable right, remedy or claim under or in respect of this Supplemental Indenture or the Indenture or any provision herein or therein contained. SECTION 3.3 Governing Law. This Supplemental Indenture shall be governed by the laws of the State of New York. SECTION 3.4 Severability Clause. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability. C-2 118 SECTION 3.5 Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity or sufficiency of this Supplemental Indenture. SECTION 3.6 Counterparts. The parties hereto may sign one or more copies of this Supplemental Indenture in counterparts, all of which together shall constitute one and the same agreement. SECTION 3.7 Headings. The headings of the Articles and the sections in this Guarantee are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. [NAME OF GUARANTOR], as a Subsidiary Guarantor By: ---------------------------- Name: Title: HOME PRODUCTS INTERNATIONAL, INC. By: ---------------------------- Name: Title: SELFIX, INC., as a Subsidiary Guarantor By: ---------------------------- Name: Title: C-3 119 SEYMOUR HOUSEWARES CORPORATION, as a Subsidiary Guarantor By: ---------------------------- Name: Title: SHUTTERS, INC., as a Subsidiary Guarantor By: ---------------------------- Name: Title: TAMOR CORPORATION, as a Subsidiary Guarantor By: ---------------------------- Name: Title: [Add signature block for any other existing Subsidiary Guarantors] LASALLE NATIONAL BANK By: ---------------------------- Name: Title: C-4 EX-4.1.4 12 EXCHANGE AND REGISTRATION RIGHTS 1 Exhibit 4.1.4 HOME PRODUCTS INTERNATIONAL, INC. $125,000,000 9 5/8% Senior Subordinated Notes due 2008 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT May 14, 1998 CHASE SECURITIES INC. NATIONSBANC MONTGOMERY SECURITIES LLC c/o Chase Securities Inc. 270 Park Avenue, 4th floor New York, New York 10017 Ladies and Gentlemen: Home Products International, Inc., a Delaware corporation (the "Company"), proposes to issue and sell to Chase Securities Inc. ("CSI") and NationsBanc Montgomery Securities LLC ("NationsBanc" and, together with CSI, the "Initial Purchasers"), upon the terms and subject to the conditions set forth in a purchase agreement dated May 7, 1998 (the "Purchase Agreement"), $125,000,000 aggregate principal amount of its 9 5/8% Senior Subordinated Notes due 2008 (together with the related Subsidiary Guarantees, the "Securities"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase Agreement. As an inducement to the Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Initial Purchasers thereunder, the Company agrees with the Initial Purchasers, for the benefit of the holders (including the Initial Purchasers and the Market-Maker (as defined herein)) from time to time of the Securities, the Exchange Securities (as defined herein) and the Private Exchange Securities (as defined herein) (collectively, the "Holders"), as follows: 2 2 1. Registered Exchange Offer. The Company shall (i) prepare and, not later than 60 days following the date of original issuance of the Securities (the "Issue Date"), file with the Securities and Exchange Commission (the "Commission") a registration statement (together with the prospectus included therein, the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act") with respect to a proposed offer to the Holders of the Securities (the "Registered Exchange Offer"), to issue and deliver to such Holders, in exchange for the Securities, a like aggregate principal amount of debt securities of the Company and the Subsidiary Guarantors (the "Exchange Securities") that are identical in all material respects to the Securities, except for the transfer restrictions relating to the Securities, (ii) use commercially reasonable efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act no later than 150 days after the Issue Date and the Registered Exchange Offer to be consummated no later than 180 days after the Issue Date and (iii) keep the Exchange Offer Registration Statement effective for not less than 30 days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). The Exchange Securities will be issued under the Indenture dated as of May 14, 1998, among the Company, the Subsidiary Guarantors and LaSalle National Bank, as trustee (the "Indenture") or an indenture (the "Exchange Securities Indenture") among the Company, the Subsidiary Guarantors and LaSalle National Bank (or such other bank or trust company that is reasonably satisfactory to the Initial Purchasers) as trustee (the "Exchange Securities Trustee"), such indenture to be identical in all material respects to the Indenture, except for the transfer restrictions relating to the Securities (as described above). All references in this Agreement to "prospectus" and "Registration Statement" shall, except where the context otherwise requires, include any prospectus (or amendment or supplement thereto) and Registration Statement (or amendment thereto), respectively, filed with the Commission pursuant to Section 6 of this Agreement. Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Securities for Exchange Securities (assuming that such Holder (i) is not an affiliate of the Company or an Exchanging Dealer (as defined herein) not complying with the requirements of the next sentence, (ii) is not an Initial Purchaser holding Securities that have, or that are reasonably likely to have, the status of an unsold allotment in an initial distribution, (iii) acquires the Exchange Securities in the ordinary course of such Holder's business and (iv) has no arrangements or understandings with any person to participate in the distribution of the Exchange Securities) and to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company, the Initial Purchasers and each Exchanging Dealer acknowledge that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, each Holder that is a broker-dealer electing to exchange Securities, acquired for its own account as a result of market-making activities or other trading activities, for Exchange Securities (an "Exchanging Dealer"), is required to deliver a prospectus containing substantially the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in 3 3 Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer. If, prior to the consummation of the Registered Exchange Offer, any Holder holds any Securities acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or any Holder is not entitled to participate in the Registered Exchange Offer, the Company shall, upon the request of any such Holder, simultaneously with the delivery of the Exchange Securities in the Registered Exchange Offer, issue and deliver to any such Holder, in exchange for the Securities held by such Holder (the "Private Exchange"), a like aggregate principal amount of debt securities of the Company and the Subsidiary Guarantors (the "Private Exchange Securities") that are identical in all material respects to the Exchange Securities, except for the transfer restrictions relating to such Private Exchange Securities. The Private Exchange Securities will be issued under the same indenture as the Exchange Securities, and the Company shall use commercially reasonable efforts to cause the Private Exchange Securities to bear the same CUSIP number as the Exchange Securities. In connection with the Registered Exchange Offer, the Company shall: (i) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (ii) keep the Registered Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders; (iii) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York; (iv) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York City time, on the last business day on which the Registered Exchange Offer shall remain open; and (v) otherwise comply in all respects with all laws that are applicable to the Registered Exchange Offer. As soon as practicable after the close of the Registered Exchange Offer and any Private Exchange, as the case may be, the Company shall: (i) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; (ii) deliver to the Trustee for cancellation all Securities so accepted for exchange; and 4 4 (iii) cause the Trustee or the Exchange Securities Trustee, as the case may be, promptly to authenticate and deliver to each Holder, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Securities of such Holder so accepted for exchange. The Company shall use commercially reasonable efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein in order to permit such prospectus to be used by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Securities; provided that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers have sold all Exchange Securities held by them and (ii) the Company shall make such prospectus and any amendment or supplement thereto available to any broker-dealer for use in connection with any resale of any Exchange Securities for a period of not less than 90 days after the consummation of the Registered Exchange Offer. The Indenture or the Exchange Securities Indenture, as the case may be, shall provide that the Securities, the Exchange Securities and the Private Exchange Securities shall vote and consent together on all matters as one class and that none of the Securities, the Exchange Securities or the Private Exchange Securities will have the right to vote or consent as a separate class on any matter. Interest on each Exchange Security and Private Exchange Security issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Securities surrendered in exchange therefor or, if no interest has been paid on the Securities, from the Issue Date. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understandings with any person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Securities Act and (iii) such Holder is not an affiliate of the Company or, if it is such an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus 5 5 forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not, as of the consummation of the Registered Exchange Offer, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 2. Shelf Registration. If (i) because of any change in law or applicable interpretations thereof by the Commission's staff the Company is not permitted to effect the Registered Exchange Offer as contemplated by Section 1 hereof, or (ii) any Securities validly tendered pursuant to the Registered Exchange Offer are not exchanged for Exchange Securities within 180 days after the Issue Date, or (iii) any Initial Purchaser so requests with respect to Securities or Private Exchange Securities not eligible to be exchanged for Exchange Securities in the Registered Exchange Offer and held by it following the consummation of the Registered Exchange Offer, or (iv) any applicable law or interpretations do not permit any Holder to participate in the Registered Exchange Offer, or (v) any Holder that participates in the Registered Exchange Offer does not receive freely transferable Exchange Securities in exchange for tendered Securities, or (vi) the Company so elects, then the following provisions shall apply: (A) The Company shall use commercially reasonable efforts to file as promptly as practicable (but in no event more than 30 days after so required or requested pursuant to this Section 2) with the Commission, and thereafter shall use commercially reasonable efforts to cause to be declared effective, a shelf registration statement on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities (as defined herein) by the Holders thereof from time to time in accordance with the methods of distribution set forth in such registration statement (hereafter, a "Shelf Registration Statement" and, together with any Exchange Offer Registration Statement, a "Registration Statement"). (B) The Company shall use commercially reasonable efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus forming part thereof to be used by Holders of Transfer Restricted Securities for a period of two years from the Issue Date or such shorter period that will terminate when all the Transfer Restricted Securities covered by the Shelf Registration Statement have been sold pursuant thereto (in any such case, such period being called the "Shelf Registration Period"). The Company shall be deemed not to have used commercially reasonable efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Transfer Restricted Securities covered thereby not being able to offer and sell such Transfer Restricted Securities during that period, unless such action is required by applicable law. (C) Notwithstanding any other provisions hereof, the Company will ensure that (1) any Shelf Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (2) any Shelf Registration Statement and any amendment thereto (in either case, other than with respect to information included therein in reliance upon or in conformity with written information furnished to the Company by or on behalf of any Holder specifically for use therein (the 6 6 "Holders' Information")) does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (3) any prospectus forming part of any Shelf Registration Statement, and any supplement to such prospectus (in either case, other than with respect to Holders' Information), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Liquidated Damages. (a) The parties hereto agree that the Holders of Transfer Restricted Securities will suffer damages if the Company fails to fulfill its obligations under Section 1 or Section 2, as applicable, and that it would not be feasible to ascertain the extent of such damages. Accordingly, if (i) the applicable Registration Statement is not filed with the Commission on or prior to 60 days after the Issue Date, (ii) the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, is not declared effective within 150 days after the Issue Date (or in the case of a Shelf Registration Statement required to be filed in response to a change in law or the applicable interpretations of the Commission's staff, if later, within 45 days after publication of the change in law or interpretation), (iii) the Registered Exchange Offer is not consummated on or prior to 180 days after the Issue Date, or (iv) the Shelf Registration Statement is filed and declared effective within 150 days after the Issue Date (or in the case of a Shelf Registration Statement required to be filed in response to a change in law or the applicable interpretations of Commission's staff, if later, within 45 days after publication of the change in law or interpretation) but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 45 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company will be obligated to pay liquidated damages to each Holder of Transfer Restricted Securities, during the period of one or more such Registration Defaults, in an amount equal to $ 0.192 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder until (i) the applicable Registration Statement is filed, (ii) the Exchange Offer Registration Statement is declared effective and the Registered Exchange Offer is consummated, (iii) the Shelf Registration Statement is declared effective or (iv) the Shelf Registration Statement again becomes effective, as the case may be. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. As used herein, the term "Transfer Restricted Securities" means (i) each Security until the date on which such Security has been exchanged for a freely transferable Exchange Security in the Registered Exchange Offer, (ii) each Security or Private Exchange Security until the date on which it has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) each Security or Private Exchange Security until the date on which it is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary in this Section 3(a), the Company shall not be required to pay liquidated damages to a Holder of Transfer Restricted Securities if such Holder failed to comply with its obligations to make the representations set forth in the second to last paragraph of Section 1 or failed to provide the information required to be provided by it, if any, pursuant to Section 4(n). 7 7 (b) The Company shall notify the Trustee and the Paying Agent under the Indenture immediately upon the happening of each and every Registration Default. The Company shall pay the liquidated damages due on the Transfer Restricted Securities by depositing with the Paying Agent (which may not be the Company for these purposes), in trust, for the benefit of the Holders thereof, prior to 10:00 a.m., New York City time, on the next interest payment date specified by the Indenture and the Securities, sums sufficient to pay the liquidated damages then due. The liquidated damages due shall be payable on each interest payment date specified by the Indenture and the Securities to the record holder entitled to receive the interest payment to be made on such date. Each obligation to pay liquidated damages shall be deemed to accrue from and including the date of the applicable Registration Default. (c) The parties hereto agree that the liquidated damages provided for in this Section 3 constitute a reasonable estimate of and are intended to constitute the sole damages that will be suffered by Holders of Transfer Restricted Securities by reason of the failure of (i) the Shelf Registration Statement or the Exchange Offer Registration Statement to be filed, (ii) the Shelf Registration Statement to remain effective or (iii) the Exchange Offer Registration Statement to be declared effective and the Registered Exchange Offer to be consummated, in each case to the extent required by this Agreement. 4. Registration Procedures. In connection with any Registration Statement, the following provisions shall apply: (a) The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and shall use commercially reasonable efforts to reflect in each such document, when so filed with the Commission, such comments as any Initial Purchaser may reasonably propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement, and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; and (iii) if requested by any Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement. (b) The Company shall advise each Initial Purchaser, each Exchanging Dealer and each of the Holders (if applicable) and, if requested by any such person, confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when any Registration Statement and any amendment thereto has been filed with the Commission and when such Registration Statement or any post-effective amendment thereto has become effective; 8 8 (ii) of any request by the Commission for amendments or supplements to any Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities, the Exchange Securities or the Private Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the making of any changes in any Registration Statement or the prospectus included therein in order that the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) The Company will make every reasonable effort to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of any Registration Statement. (d) The Company will furnish to each Holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, at least one conformed copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (e) The Company will, during the Shelf Registration Period, promptly deliver to each Holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the prospectus (including each preliminary prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use of such prospectus or any amendment or supplement thereto by each of the selling Holders of Transfer Restricted Securities in connection with the offer and sale of the Transfer Restricted Securities covered by such prospectus or any amendment or supplement thereto. (f) The Company will furnish to each Initial Purchaser and each Exchanging Dealer, and to any other Holder who so requests, without charge, at least one conformed copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if any Initial Purchaser or Exchanging Dealer or any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (g) The Company will, during the Exchange Offer Registration Period or the Shelf Registration Period, as applicable, promptly deliver to each Initial Purchaser, each 9 9 Exchanging Dealer and such other persons that are required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement or the Shelf Registration Statement and any amendment or supplement thereto as such Initial Purchaser, Exchanging Dealer or other persons may reasonably request; and the Company consents to the use of such prospectus or any amendment or supplement thereto by any such Initial Purchaser, Exchanging Dealer or other persons, as applicable, as aforesaid. (h) Prior to the effective date of any Registration Statement, the Company will use commercially reasonable efforts to register or qualify, or cooperate with the Holders of Securities, Exchange Securities or Private Exchange Securities included therein and their respective counsel in connection with the registration or qualification of, such Securities, Exchange Securities or Private Exchange Securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holder reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities, Exchange Securities or Private Exchange Securities covered by such Registration Statement; provided that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (i) The Company will cooperate with the Holders of Securities, Exchange Securities or Private Exchange Securities to facilitate the timely preparation and delivery of certificates representing Securities, Exchange Securities or Private Exchange Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders thereof may request in writing prior to sales of Securities, Exchange Securities or Private Exchange Securities pursuant to such Registration Statement. (j) If any event contemplated by Section 4(b)(ii) through (v) occurs during the period for which the Company is required to maintain an effective Registration Statement, the Company will promptly prepare and file with the Commission a post-effective amendment to the Registration Statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to purchasers of the Securities, Exchange Securities or Private Exchange Securities from a Holder, the prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Securities, the Exchange Securities and the Private Exchange Securities, as the case may be, and provide the applicable trustee with printed certificates for the Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Company will comply with all applicable rules and regulations of the Commission and will make generally available to its security holders as soon as practicable after 10 10 the effective date of the applicable Registration Statement an earning statement satisfying the provisions of Section 11(a) of the Securities Act; provided that in no event shall such earning statement be delivered later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the applicable Registration Statement, which statement shall cover such 12-month period. (m) The Company will cause the Indenture or the Exchange Securities Indenture, as the case may be, to be qualified under the Trust Indenture Act as required by applicable law in a timely manner. (n) The Company may require each Holder of Transfer Restricted Securities to be registered pursuant to any Shelf Registration Statement to furnish to the Company such information concerning the Holder and the distribution of such Transfer Restricted Securities as the Company may from time to time reasonably require for inclusion in such Shelf Registration Statement, and the Company may exclude from such registration the Transfer Restricted Securities of any Holder that fails to furnish such information within a reasonable time after receiving such request. (o) In the case of a Shelf Registration Statement, each Holder of Transfer Restricted Securities to be registered pursuant thereto agrees by acquisition of such Transfer Restricted Securities that, upon receipt of any notice from the Company pursuant to Section 4(b)(ii) through (v), such Holder will discontinue disposition of such Transfer Restricted Securities until such Holder's receipt of copies of the supplemental or amended prospectus contemplated by Section 4(j) or until advised in writing (the "Advice") by the Company that the use of the applicable prospectus may be resumed. If the Company shall give any notice under Section 4(b)(ii) through (v) during the period that the Company is required to maintain an effective Registration Statement (the "Effectiveness Period"), such Effectiveness Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Transfer Restricted Securities covered by such Registration Statement shall have received (x) the copies of the supplemental or amended prospectus contemplated by Section 4(j) (if an amended or supplemental prospectus is required) or (y) the Advice (if no amended or supplemental prospectus is required). (p) In the case of a Shelf Registration Statement, the Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold or the managing underwriters (if any) shall reasonably request in order to facilitate any disposition of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement. (q) In the case of a Shelf Registration Statement, the Company shall (i) make reasonably available for inspection by a representative of, and Special Counsel (as defined below) acting for, Holders of a majority in aggregate principal amount of the Securities, 11 11 Exchange Securities and Private Exchange Securities being sold and any underwriter participating in any disposition of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries and (ii) use commercially reasonable efforts to have its officers, directors, employees, accountants and counsel supply all relevant information reasonably requested by such representative, Special Counsel or any such underwriter (an "Inspector") in connection with such Shelf Registration Statement. (r) In the case of a Shelf Registration Statement, the Company shall, if requested by Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold, their Special Counsel, or the managing underwriters (if any) in connection with such Shelf Registration Statement, use commercially reasonable efforts to cause (i) its counsel to deliver an opinion relating to the Shelf Registration Statement and the Securities, Exchange Securities or Private Exchange Securities, as applicable, in customary form, (ii) its officers to execute and deliver all customary documents and certificates requested by Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold, their Special Counsel, or the managing underwriters (if any) and (iii) its independent public accountants to provide a comfort letter in customary form, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. 5. Registration Expenses. The Company will bear all expenses incurred in connection with the performance of its obligations under Sections 1, 2, 3 and 4 and the Company will reimburse the Initial Purchasers and the Holders for the reasonable fees and disbursements of one firm of attorneys (in addition to any local counsel) chosen by the Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities to be sold pursuant to each Registration Statement (the "Special Counsel") acting for the Initial Purchasers or Holders in connection therewith. 6. Market Making (a) The Company will, for the sole benefit of Chase Securities Inc. (the "Market-Maker"), unless the Market Maker, in the opinion of counsel to the Company, is not an affiliate of the Company, for so long as the Market-Maker proposes to make a market in the Securities, Exchange Securities or Private Exchange Securities as part of its business in the ordinary course: (i) (A) On the date that the Exchange Offer Registration Statement is filed with the Commission, the Company shall file a Registration Statement (which may be the Exchange Offer Registration Statement or the Shelf Registration Statement if permitted by the rules and regulations of the Commission) and shall use commercially reasonable efforts to cause such Registration Statement to be declared effective by the Commission prior to or on the consummation of the Exchange Offer; (B) periodically amend such Registration Statement so that the information contained therein complies with the 12 12 requirements of Section 10(a) under the Securities Act; (C) file on a timely basis all reports and proxy and information statements required to be filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act or, if the Company is not eligible to use Form S-3 (or any successor form) under the Securities Act, file a supplement to the prospectus contained in the Registration Statement within 45 days following the end of each of the Company's fiscal quarters which sets forth the financial results of the Company for such quarter; (D) amend the Registration Statement or supplement the related prospectus when necessary to reflect any material changes in the information provided therein; provided, however, that (1) prior to filing with the Commission any post-effective amendment to the Registration Statement or any supplement to the related prospectus (other than reports to be filed under the Exchange Act which will be deemed to be incorporated by reference in the Registration Statement and related prospectus), the Company will furnish to the Market-Maker copies of all such documents proposed to be filed, which documents will be subject to the review of the Market-Maker and its counsel, (2) the Company will not file such documents to which the Market-Maker and its counsel shall reasonably object after having been given reasonable notice of the proposed filing thereof unless the Company is required by law to make such filing and (3) the Company will provide the Market-Maker and its counsel with copies of each amendment or supplement filed. (ii) If at any time the Company becomes no longer eligible to use Form S-3 under the Securities Act with respect to sales of the Securities, Exchange Securities or Private Exchange Securities, file a post-effective amendment to the Registration Statement to convert it to a Form S-1 registration statement as soon as practicable. (iii) Notify the Market-Maker, and (if requested by the Market-Maker) confirm such advice in writing, (A) when any post-effective amendment to the Registration Statement or any amendment or supplement to the related prospectus has been filed, and, with respect to any post-effective amendment, when the same has become effective; (B) of any request by the Commission for any post-effective amendment to the Registration Statement, any supplement or amendment to the related prospectus or for additional information; (C) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (D) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceedings for such purpose; (E) of the happening of any event which makes any statement made in the Registration Statement, the related prospectus or any amendment or supplement thereto untrue or which requires the making of any changes in the Registration Statement, such prospectus or any amendment or supplement thereto, in order to make the statements therein not misleading; and (F) of any advice from a nationally recognized statistical rating organization that such organization has placed the Company under surveillance or review with negative implications or has determined to downgrade the rating of the Securities, Exchange Securities or Private Exchange Securities or any other debt obligation of the Company whether or not such downgrade shall have been publicly announced. 13 13 (iv) Furnish to the Market-Maker, without charge, (i) at least one conformed copy of any post-effective amendment to the Registration Statement; and (ii) as many copies of the related prospectus and any amendment or supplement thereto as the Market-Maker may reasonably request. (v) Consent to the use of the prospectus contained in the Registration Statement or any amendment or supplement thereto by the Market-Maker in connection with the offering and sale of the Securities. (vi) For so long as the Securities, Exchange Securities or Private Exchange Securities shall be outstanding, furnish to the Market-Maker (A) as soon as practicable after the end of each of the Company's fiscal years, the number of copies reasonably requested by the Market-Maker of the Company's annual report to stockholders for such year, (B) as soon as available, the number of copies reasonably requested by the Market-Maker of each report (including, without limitation, Reports on Forms 10-K, 10-Q and 8-K) or definitive proxy statements of the Company filed under the Exchange Act or mailed to stockholders and (C) all public reports and all reports and financial statements furnished by the Company to the Nasdaq National Market System or any U.S. national securities exchange or quotation service upon which the Securities or Exchange Securities may be listed pursuant to requirements of or agreements with such exchange or quotation service or to the Commission pursuant to the Exchange Act or any rule or regulation of the Commission thereunder. (vii) In the event of the issuance of any stop order suspending the effectiveness of the Registration Statement or of any order suspending the qualification of the Securities, Exchange Securities or Private Exchange Securities for sale in any jurisdiction, to use promptly its best efforts to obtain its withdrawal. (b) The Company represents that any post-effective amendments to the Registration Statement, any amendments or supplements to the related prospectus and any documents filed by it under the Exchange Act will, when they become effective or are filed with the Commission, as the case may be, conform in all material respects to the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission thereunder and will not, as of the effective date of such post-effective amendments and as of the filing date of amendments or supplements to such prospectus or filings under the Exchange Act, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Registration Statement or the related prospectus in reliance upon and in conformity with Holders' Information furnished to the Company by the Market-Maker specifically for inclusion therein. (c) Each time that the Registration Statement or the related prospectus shall be amended or such prospectus shall be supplemented, the Company shall (at the reasonable request of the Market-Maker), concurrently with such amendment or supplement, furnish the Market- 14 14 Maker and its counsel with a certificate of its Chairman of the Board or its President and its chief financial officer to the effect that: (i) The Registration Statement has been declared effective and such amendment has become effective under the Securities Act as of the date and time specified in such certificate, if applicable, such amendment to the prospectus (or such supplement to the prospectus, as the case may be) was filed with the Commission pursuant to the subparagraph of Rule 424(b) under the Securities Act specified in such certificate on the date specified therein; and, to the knowledge of such officers, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose is pending or threatened by the Commission; and (ii) Such officers have carefully examined the Registration Statement and the prospectus and such amendment or supplement thereto and, in their opinion, as of the date of such amendment or supplement, the Registration Statement and the prospectus, as amended or supplemented, as the case may be, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (d) Each time that the Registration Statement or the related prospectus shall be amended or such prospectus shall be supplemented, the Company shall (at the reasonable request of the Market-Maker), concurrently with such amendment or supplement, furnish the Market-Maker and its counsel with the written opinion of counsel for the Company satisfactory to the Market-Maker to the effect that: (i) The Registration Statement has been declared effective and such amendment has become effective under the Securities Act as of the date and time specified in such certificate, if applicable, such amendment to the prospectus (or such supplement to the prospectus, as the case may be) was filed with the Commission pursuant to the subparagraph Rule 424(b) under the Securities Act specified in such opinion on the date specified therein; and, to the knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose is pending or threatened by the Commission; and (ii) Counsel for the Company has reviewed such amendment or supplement and participated with officers of the Company and independent public accountants for the Company in the preparation of such amendment or supplement and has no reason to believe that the Registration Statement (or any post-effective amendment thereto), at the time of its effective date, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the prospectus contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 15 15 (e) Each time that the Registration Statement or the related prospectus shall be amended or such prospectus shall be supplemented to include audited annual financial information, the Company shall (at the reasonable request of the Market-Maker), concurrently with such amendment or supplement, furnish the Market-Maker and its counsel with a letter of Arthur Andersen LLP (or other independent public accountants for the Company of nationally recognized standing), in form satisfactory to the Market-Maker, addressed to the Market-Maker and dated the date of delivery of such letter, (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission and (ii) a letter substantially in the form of the letter delivered to the Underwriters pursuant to Section 5(f) of the Purchase Agreement with such changes as may be necessary to reflect the amended or supplemental financial information. (f) The agreements contained in this Section 6 and the representations, warranties and agreements contained in this Agreement shall survive all offers and sales of the Securities and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. (g) For purposes of this Section 6, any reference to the terms "amend", "amendment" or "supplement" with respect to the Registration Statement or the prospectus contained therein shall be deemed to refer to and include the filing under the Exchange Act of any document deemed to be incorporated therein by reference. 7. Indemnification. (a) In the event of a Shelf Registration Statement or in connection with any prospectus delivery pursuant to an Exchange Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as applicable, or in connection with any prospectus delivery by the Market-Maker, the Company shall indemnify and hold harmless each Holder (including, without limitation, any such Initial Purchaser, the Market-Maker or any such Exchanging Dealer), its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 7 and Section 8 as a Holder) from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of Securities, Exchange Securities or Private Exchange Securities), to which that Holder may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (iii) in the case of the Market-Maker, any material breach by the Company of its representations, warranties and agreements contained in Section 6, and shall reimburse each Holder promptly upon demand for any legal or 16 16 other expenses reasonably incurred by that Holder in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Holders' Information furnished to the Company by such Holder; and provided, further, that with respect to any such untrue statement in or omission from any related preliminary prospectus, the indemnity agreement contained in this Section 7(a) shall not inure to the benefit of any Holder from whom the person asserting any such loss, claim, damage, liability or action received Securities, Exchange Securities or Private Exchange Securities to the extent that such loss, claim, damage, liability or action of or with respect to such Holder results from the fact that both (A) a copy of the related final prospectus or any amendment or supplement thereto was not sent or given to such person at or prior to the written confirmation of the sale of such Securities, Exchange Securities or Private Exchange Securities to such person and (B) the untrue statement in or omission from the related preliminary prospectus was corrected in the related final prospectus or any amendment or supplement thereto unless such failure to deliver the final prospectus was a result of non-compliance by the Company with Section 4(d), 4(e), 4(f), 4(g) or Section 6. (b) In the event of a Shelf Registration Statement, or in connection with any prospectus delivery by the Market-Maker, each Holder (including if applicable, the Market-Maker) shall indemnify and hold harmless the Company, its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 7(b) and Section 8 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Holders' Information furnished to the Company by such Holder, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that no such Holder shall be liable for any indemnity claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement. 17 17 (c) Promptly after receipt by an indemnified party under this Section 7 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 7(a) or 7(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 7 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 7. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 7 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than the reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 7(a) and 7(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless 18 18 such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. 8. Contribution. If the indemnification provided for in Section 7 is unavailable or insufficient to hold harmless an indemnified party under Section 7(a) or 7(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company from the offering and sale of the Securities, on the one hand, and a Holder with respect to the sale by such Holder of Securities, Exchange Securities or Private Exchange Securities, on the other, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and such Holder on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and a Holder on the other with respect to such offering and such sale shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities (before deducting expenses) received by or on behalf of the Company as set forth in the table on the cover of the Offering Memorandum, on the one hand, bear to the total proceeds received by such Holder with respect to its sale of Securities, Exchange Securities or Private Exchange Securities, on the other. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Company or information supplied by the Company on the one hand or to any Holders' Information furnished by such Holder on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 8 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 8 shall be deemed to include, for purposes of this Section 8, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 8, an indemnifying party that is a Holder of Securities, Exchange Securities or Private Exchange Securities shall not be required to contribute any amount in excess of the amount by which the total price at which the Securities, Exchange Securities or Private Exchange Securities sold by such indemnifying party to any purchaser exceeds the amount of any damages which such indemnifying party has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 9. Rules 144 and 144A. The Company shall use commercially reasonable efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely 19 19 manner and, if at any time the Company is not required to file such reports, it will, upon the written request of any Holder of Transfer Restricted Securities or the Market-Maker, make publicly available other information so long as necessary to permit sales of such Holder's securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further action as any Holder of Transfer Restricted Securities or the Market-Maker may reasonably request, all to the extent required from time to time to enable such Holder or the Market-Maker to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including, without limitation, the requirements of Rule 144A(d)(4)). Upon the written request of any Holder of Transfer Restricted Securities or the Market-Maker, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 9 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 10. Underwritten Registrations. If any of the Transfer Restricted Securities covered by any Shelf Registration Statement is to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities included in such offering, subject to the consent of the Company (which shall not be unreasonably withheld or delayed), and such Holders shall be responsible for all underwriting commissions and discounts in connection therewith. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 11. Miscellaneous. (a) Amendments and Waivers. No failure or delay by any Holder or the Market-Maker in exercising any right under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or any abandonment or discontinuance of steps to enforce any such right preclude any other or further exercise thereof or the exercise of any other right. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities, taken as a single class (and, with respect to the provisions of Section 6, the written consent of the Market-Maker). Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Securities, Exchange Securities or Private Exchange Securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities being sold by such Holders pursuant to such Registration Statement. 20 20 (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telecopier or air courier guaranteeing next-day delivery: (i) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 11(b), which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to CSI and NationsBanc; (ii) if to an Initial Purchaser or the Market-Maker, initially at its address set forth in the Purchase Agreement; and (iii) if to the Company, initially at the address of the Company set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; one business day after being delivered to a next-day air courier; five business days after being deposited in the mail; and when receipt is acknowledged by the recipient's telecopier machine, if sent by telecopier. (c) Successors And Assigns. This Agreement shall be binding upon the Company and its successors and assigns. (d) Counterparts. This Agreement may be executed in any number of counterparts (which may be delivered in original form or by telecopier) and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (e) Definition of Terms. For purposes of this Agreement, (i) the term "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, (ii) the term "subsidiary" has the meaning set forth in Rule 405 under the Securities Act and (iii) except where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. (f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (G) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 21 21 (h) Remedies. In the event of a breach by the Company or by any Holder of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law, including recovery of damages (other than the recovery of damages for a breach by the Company of its obligations under Sections 1 or 2 hereof for which liquidated damages have been paid pursuant to Section 3 hereof), will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (i) No Inconsistent Agreements. The Company represents, warrants and agrees that (i) it has not entered into, shall not, on or after the date of this Agreement, enter into any agreement that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof, (ii) it has not previously entered into any agreement which remains in effect granting any registration rights with respect to any of its debt securities to any person and (iii) without limiting the generality of the foregoing, without the written consent of the Holders of a majority in aggregate principal amount of the then outstanding Transfer Restricted Securities and the Market-Maker, it shall not grant to any person the right to request the Company to register any debt securities of the Company under the Securities Act which are in conflict or inconsistent with the provisions of this Agreement. (j) No Piggyback on Registrations. Neither the Company nor any of its security holders (other than the Holders of Transfer Restricted Securities in such capacity and the Market-Maker) shall have the right to include any securities of the Company in any Shelf Registration or Registered Exchange Offer other than Transfer Restricted Securities. (k) Severability. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. 22 22 Please confirm that the foregoing correctly sets forth the agreement among the Company and the Initial Purchasers. Very truly yours, HOME PRODUCTS INTERNATIONAL, INC. By ------------------------------ Name: Title: Accepted: CHASE SECURITIES INC. By ---------------------------------- Name: Title: NATIONSBANC MONTGOMERY SECURITIES LLC By ---------------------------------- Name: Title: 23 ANNEX A Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. 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. 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 Securities received in exchange for Securities where such Securities were acquired by 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 consummation of the Exchange Offer, it will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." - 23 - 24 ANNEX B Each broker-dealer that receives Exchange Securities for its own account in exchange for Securities, where such Securities 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 in connection with any resale of such Exchange Securities. See "Plan of Distribution." - 24 - 25 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. 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 Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the consummation of the Exchange Offer, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until _______________, 199_, all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus.1 The Company will not receive any proceeds from any sale of Exchange Securities by broker-dealers. Exchange Securities received by broker-dealers for their own account pursuant to the Registered Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities. Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Registered Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the consummation of the Exchange Offer the Company will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Registered Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any broker-dealers and will indemnify the Holders of the - -------------------- 1 In addition, the legend required by Item 502(e) of Regulation S-K will appear on the back cover page of the Registered Exchange Offer prospectus. - 25 - 26 Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. - 26 - 27 ANNEX D CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: Address: If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities. If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. - 27 - EX-5.1.1 13 OPINION OF SONNENSCHEIN NATH 1 EXHIBIT 5.1.1 Sonnenschein Nath & Rosenthal 1221 Avenue of the Americas Suite 2400 New York, New York 10020 June 10, 1998 Home Products International, Inc. 4501 West 47th Street Chicago, Illinois 60632 Ladies and Gentlemen: You have requested our opinion as special securities counsel to Home Products International, Inc., a Delaware corporation (the "Company"), in connection with the preparation and filing of the Company's Registration Statement on Form S-4 (the "Registration Statement") relating to the proposed offer to exchange (the "Exchange Offer") the Company's 9 5/8% Senior Subordinated Notes due 2008 (the "Exchange Notes"), for all outstanding 9 5/8% Senior Subordinated Notes due 2008 (the "Original Notes") of the Company, such Exchange Notes to be issued pursuant to an Indenture, dated as of May 14, 1998 (the "Indenture"), by and among the Company, certain of its subsidiaries (the "Subsidiary Guarantors") and LaSalle National Bank, as Trustee (the "Trustee"). Payment of the Exchange Notes will be guaranteed by the Subsidiary Guarantors in accordance with the terms of the Indenture (the "Subsidiary Guarantees" and, together with the Exchange Notes, the "Securities"). We have participated in the preparation of the Registration Statement and, in connection therewith, have examined and relied upon the originals or copies of such records, agreements, documents and other instruments, and have made such inquiries of such officers and representatives, as we have deemed relevant and necessary as the basis for the opinion hereinafter set forth. In such examination, we have assumed, without independent verification, the genuineness of all signatures (whether original or photostatic), the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as certified or photostatic copies. We have assumed, without independent verification, the accuracy of the relevant facts stated therein. In making our examination of documents executed by parties other than the Company and its subsidiaries, we have assumed that such parties had the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, and execution and delivery by such parties of such documents and the validity and binding effect thereof. As to any other facts material to the opinion expressed herein that were not independently established or verified, we have relied upon statements and representations of officers and employees of the Company. Based upon the foregoing and subject to the assumptions and qualifications set forth herein, we are of the opinion that the Securities have been duly authorized, and when issued, assuming the due authentication of the Exchange Notes by the Trustee, will be valid and binding obligations of the Company or the respective Subsidiary Guarantors, as the case may be, enforceable against them in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject to general 2 principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). The foregoing opinions are limited to the laws of the States of New York and Illinois, the laws of the United States of America and the general corporate law of the State of Delaware, and do not purport to express any opinion on the laws of any other jurisdiction. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm and this opinion under the heading "Legal Matters" in the prospectus comprising a part of such Registration Statement and any amendment thereto. In giving such consent, we do not hereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except to the extent provided in the preceding paragraph, this opinion is rendered solely to the Company in connection with the Exchange Offer and may not be relied upon by, nor may copies be delivered to, any other person or entity for any purpose without our prior written consent. Very truly yours, SONNENSCHEIN NATH & ROSENTHAL By: /S/ PHILIP A. HABER ------------------- Philip A. Haber - -2- EX-10.1.1 14 CREDIT AGREEMENT 1 Exhibit 10.1.1 ________________________________________________________________________________ $100,000,000 CREDIT AGREEMENT AMONG HOME PRODUCTS INTERNATIONAL, INC., AS BORROWER, THE SEVERAL LENDERS FROM TIME TO TIME PARTIES HERETO, AND THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT DATED AS OF MAY 14, 1998 ____________________________ CHASE SECURITIES INC., AS ARRANGER (LOGO) ________________________________________________________________________________ 2 TABLE OF CONTENTS Page ---- SECTION 1. DEFINITIONS................................................... 1 1.1 Defined Terms................................................... 1 1.2 Other Definitional Provisions................................... 19 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS............................... 19 2.1 Revolving Commitments........................................... 19 2.2 Procedure for Revolving Loan Borrowing.......................... 20 2.3 Swingline Commitment............................................ 20 2.4 Procedure for Swingline Borrowing; Refunding of Swingline Loans. 21 2.5 Commitment Fees, etc............................................ 22 2.6 Termination or Reduction of Revolving Commitments............... 23 2.7 Optional Prepayments............................................ 23 2.8 Mandatory Prepayments and Commitments Reductions................ 23 2.9 Conversion and Continuation Options............................. 24 2.10 Limitations on Eurodollar Tranches............................. 24 2.11 Interest Rates and Payment Dates............................... 25 2.12 Computation of Interest and Fees............................... 25 2.13 Inability to Determine Interest Rate........................... 26 2.14 Pro Rata Treatment and Payments................................ 26 2.15 Requirements of Law............................................ 27 2.16 Taxes.......................................................... 29 2.17 Indemnity...................................................... 30 2.18 Change of Lending Office....................................... 31 2.19 Replacement of Lenders......................................... 31 2.20 Reporting Requirements of Issuing Lenders...................... 31 SECTION 3. LETTERS OF CREDIT............................................. 31 3.1 L/C Commitment.................................................. 31 3.2 Procedure for Issuance of Letter of Credit...................... 32 3.3 Fees and Other Charges.......................................... 32 3.4 L/C Participations.............................................. 33 3.5 Reimbursement Obligation of the Borrower........................ 34 3.6 Obligations Absolute............................................ 34 3.7 Letter of Credit Payments....................................... 34 3.8 Applications.................................................... 35 SECTION 4. REPRESENTATIONS AND WARRANTIES................................ 35 4.1 Financial Condition............................................. 35 4.2 No Change....................................................... 36 4.3 Corporate Existence; Compliance with Law........................ 36 4.4 Corporate Power; Authorization; Enforceable Obligations......... 36 4.5 No Legal Bar.................................................... 36 4.6 Litigation...................................................... 37 4.7 No Default...................................................... 37
3
Page ---- 4.8 Ownership of Property; Liens..................................... 37 4.9 Intellectual Property............................................ 37 4.10 Taxes............................................................ 37 4.11 Federal Regulations.............................................. 37 4.12 Labor Matters.................................................... 38 4.13 ERISA............................................................ 38 4.14 Investment Company Act; Other Regulations........................ 38 4.15 Subsidiaries..................................................... 38 4.16 Use of Proceeds.................................................. 38 4.17 Environmental Matters............................................ 39 4.18 Accuracy of Information, etc..................................... 39 4.19 Security Documents............................................... 40 4.20 Solvency......................................................... 40 4.21 Senior Indebtedness.............................................. 40 4.22 Year 2000 Matters................................................ 41 4.23 Regulation H..................................................... 41 SECTION 5. CONDITIONS PRECEDENT............................................ 41 5.1 Conditions to Initial Extension of Credit........................ 41 5.2 Conditioins to Each Extension of Credit.......................... 45 SECTION 6. AFFIRMATIVE COVENANTS........................................... 45 6.1 Financial Statements............................................. 45 6.2 Certificates; Other Information.................................. 46 6.3 Payment of Obligations........................................... 47 6.4 Maintenance of Existence; Compliance............................. 47 6.5 Maintenance of Property, Insurance............................... 48 6.6 Inspection of Property; Books and Records; Discussions........... 48 6.7 Notices.......................................................... 48 6.8 Environmental Laws............................................... 49 6.9 Additional Collateral, etc....................................... 49 SECTION 7. NEGATIVE COVENANTS.............................................. 51 7.1 Financial Condition Covenants.................................... 51 7.2 Indebtedness..................................................... 52 7.3 Liens............................................................ 53 7.4 Fundamental Changes.............................................. 55 7.5 Disposition of Property.......................................... 55 7.6 Restricted Payments.............................................. 55 7.7 Capital Expenditures............................................. 56 7.8 Investments...................................................... 56 7.9 Optional Payments and Modifications of Debt Instruments etc...... 57 7.10 Transactions with Affiliates..................................... 58 7.11 Changes in Fiscal Periods........................................ 58 7.12 Negative Pledge Clauses.......................................... 58 7.13 Clauses Restricting Subsidiary Distributions..................... 58 7.14 Lines of Business................................................ 58
- ii - 4
Page ---- SECTION 8. EVENTS OF DEFAULT............................................ 59 SECTION 9. THE ADMINISTRATIVE AGENT..................................... 62 9.1 Appointment.................................................. 62 9.2 Delegation of Duties......................................... 62 9.3 Exculpatory Provisions....................................... 62 9.4 Reliance by Administrative Agent............................. 63 9.5 Notice of Default............................................ 63 9.6 Non-Reliance on Administrative Agent and Other Lenders....... 64 9.7 Indemnification.............................................. 64 9.8 Administrative Agent in Its Individual Capacity.............. 65 9.9 Successor Administrative Agent............................... 65 9.10 Authorization to Release Liens............................... 65 SECTION 10. MISCELLANEOUS............................................... 65 10.1 Amendments and Waivers...................................... 65 10.2 Notices..................................................... 66 10.3 No Waiver; Cumulative Remedies.............................. 67 10.4 Survival of Representations and Warranties.................. 68 10.5 Payment of Expenses and Taxes............................... 68 10.6 Successors and Assigns; Participations and Assignments...... 69 10.7 Adjustments; Set-off........................................ 71 10.8 Counterparts................................................ 71 10.9 Severability................................................ 71 10.10 Integration................................................. 72 10.11 GOVERNING LAW............................................... 72 10.12 Submission To Jurisdiction; Waivers......................... 72 10.13 Acknowledgements............................................ 72 10.14 WAIVERS OF JURY TRIAL....................................... 73 10.15 Confidentiality............................................. 73
- iii - 5 TABLE OF CONTENTS
ANNEX: A Pricing Grid SCHEDULES: 1.1A Revolving Commitments 1.1B Mortgaged Property 3.1 Existing Letters of Credit 4.1(b) Contingent Liabilities 4.4 Consents, Authorizations, Filings and Notices 4.6 Litigation 4.13 ERISA Matters 4.15 Subsidiaries 4.17 Environmental Matters 4.19(a) UCC Filing Jurisdictions 4.19(b) Mortgage Filing Jurisdictions 7.2(d) Existing Indebtedness 7.3(f) Existing Liens 7.5 Planned Dispositions EXHIBITS: A Form of Guarantee and Collateral Agreement B Form of Compliance Certificate C Form of Closing Certificate D Form of Mortgage E Form of Assignment and Acceptance F Form of Legal Opinion of Sonnenschein Nath & Rosenthal
6 CREDIT AGREEMENT, dated as of May 14, 1998, among HOME PRODUCTS INTERNATIONAL, INC., a Delaware corporation (the "Borrower"), the several banks and other financial institutions or entities from time to time parties to this Agreement (the "Lenders"), and THE CHASE MANHATTAN BANK, as administrative agent. The parties hereto hereby agree as follows: 1. DEFINITIONS 1. Defined Terms. As used in this Agreement, the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1. "ABR": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Reference Lender as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by the Reference Lender in connection with extensions of credit to debtors); "Base CD Rate" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which is one and the denominator of which is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate; and "Three-Month Secondary CD Rate" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 A.M., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Reference Lender from three New York City negotiable certificate of deposit dealers of recognized standing selected by it. Any change in the ABR due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively. "ABR Loans": Loans the rate of interest applicable to which is based upon the ABR. "Acquisition": any acquisition, whether in a single transaction or series of related transactions, by the Borrower or any one or more of its Subsidiaries of (a) all or a substantial majority of the assets, or of a business, unit or division, of any Person, whether through purchase of assets or securities, by merger or otherwise; (b) any Person that becomes a Subsidiary after 7 2 giving effect to such acquisition; or (c) control (as defined in clause (b) of the definition of "Affiliate") of a partnership, joint venture or other Person. "Adjustment Date": as defined in the Pricing Grid. "Administrative Agent": The Chase Manhattan Bank, together with its affiliates, as the arranger of the Revolving Commitments and as the administrative agent for the Lenders under this Agreement and the other Loan Documents, together with any of its successors. "Affiliate": as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Aggregate Exposure": with respect to any Lender at any time, an amount equal to such Lender's Revolving Commitment then in effect or, if the Revolving Commitments have been terminated, the amount of such Lender's Revolving Extensions of Credit then outstanding. "Aggregate Exposure Percentage": with respect to any Lender at any time, the ratio (expressed as a percentage) of such Lender's Aggregate Exposure at such time to the Aggregate Exposure of all Lenders at such time. "Agreement": this Credit Agreement, as amended, supplemented or otherwise modified from time to time. "Applicable Margin": for each Type of Loan, the rate per annum set forth under the relevant column heading below:
ABR Loans Eurodollar Loans --------- ---------------- Revolving Loans 0.75% 1.75% Swingline Loans 0.75% Not applicable
; provided, that on and after the first Adjustment Date occurring after the Closing Date, the Applicable Margin with respect to Revolving Loans and Swingline Loans will be determined pursuant to the Pricing Grid. "Application": an application, in such form as the applicable Issuing Lender may specify from time to time, requesting the Issuing Lender to open a Letter of Credit. "Asset Sale": any Disposition of property or series of related Dispositions of property (excluding any such Disposition permitted by clause (a), (b), (c) or (d) of Section 7.5) that yields gross proceeds to the Borrower or any of its Subsidiaries (valued at the initial 8 3 principal amount thereof in the case of non-cash proceeds consisting of notes or other debt securities and valued at fair market value in the case of other non-cash proceeds) in excess of $250,000. "Assignee": as defined in Section 10.6(c). "Assignor": as defined in Section 10.6(c). "Available Revolving Commitment": as to any Lender at any time, an amount equal to the excess, if any, of (a) such Lender's Revolving Commitment over (b) such Lender's Revolving Extensions of Credit; provided, that in calculating any Lender's Revolving Extensions of Credit for the purpose of determining such Lender's Available Revolving Commitment pursuant to Section 2.5(a), the aggregate principal amount of Swingline Loans then outstanding shall be deemed to be zero. "Board": the Board of Governors of the Federal Reserve System of the United States (or any successor). "Borrowing Date": any Business Day specified by the Borrower as a date on which the Borrower requests the relevant Lenders to make Loans hereunder. "Business": as defined in Section 4.17. "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City or Chicago, Illinois are authorized or required by law to close, provided, that with respect to notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, such day is also a day for trading by and between banks in Dollar deposits in the interbank eurodollar market. "Capital Expenditures": for any period, with respect to any Person, the aggregate of all expenditures by such Person and its Subsidiaries for the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) that are required to be capitalized under GAAP on a consolidated balance sheet of such Person and its Subsidiaries. "Capital Lease Obligations": as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests 9 4 in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing. "Cash Equivalents": (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of one year or less from the date of acquisition issued by any Lender or by any commercial bank organized under the laws of the United States of America or any state thereof having combined capital and surplus of not less than $500,000,000; (c) commercial paper of an issuer rated at least A-1 by Standard & Poor's Ratings Group ("S&P") or P-1 by Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within one year from the date of acquisition; and (d) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States or by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) carry the highest possible rating from S&P or Moody's. "C/D Assessment Rate": for any day as applied to any ABR Loan, the annual assessment rate in effect on such day that is payable by a member of the Bank Insurance Fund maintained by the Federal Deposit Insurance Corporation (the "FDIC") classified as well-capitalized and within supervisory subgroup "B" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. Section 327.4 (or any successor provision) to the FDIC (or any successor) for the FDIC's (or such successor's) insuring time deposits at offices of such institution in the United States. "C/D Reserve Percentage": for any day as applied to any ABR Loan, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board, for determining the maximum reserve requirement for a Depositary Institution (as defined in Regulation D of the Board as in effect from time to time) in respect of new non-personal time deposits in Dollars having a maturity of 30 days or more. "Closing Date": the date on which the conditions precedent set forth in Section 5.1 shall have been satisfied, which date is May 14, 1998. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Collateral": all property of the Loan Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document. 10 5 "Commitment Fee Rate": 1/2 of 1% per annum; provided, that on and after the first Adjustment Date occurring after the Closing Date, the Commitment Fee Rate will be determined pursuant to the Pricing Grid. "Commonly Controlled Entity": an entity, whether or not incorporated, that is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group that includes the Borrower and that is treated as a single employer under Section 414(b) or (c) of the Code or, for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 (m), (n), (o) or (p) of the Code. "Compliance Certificate": a certificate duly executed by a Responsible Officer substantially in the form of Exhibit B. "Confidential Information Memorandum": the Confidential Information Memorandum dated April 1998 and furnished to the Lenders. "Consolidated EBITDA": for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs, (e) any extraordinary, unusual or non-recurring expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, non-cash losses on sales of assets outside of the ordinary course of business), (f) any other non-cash charges (including, without limitation, the amount of any non-cash deduction to Consolidated Net Income as a result of any grant to members of management of any Capital Stock of the Borrower) and (g) the prepayment costs associated with the termination of the Existing Credit Agreement, not to exceed an aggregate amount of $3,100,000, and minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of (a) any extraordinary, unusual or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, gains on the sales of assets outside of the ordinary course of business) and (b) any other non-cash income, all as determined on a consolidated basis; provided, that for purposes of determining Consolidated EBITDA for the four quarter period ending on or about June 30, 1998, there shall be added to Consolidated EBITDA for such period the amount of $3,500,000 and for purposes of determining Consolidated EBITDA for the four quarter period ending on or about September 30, 1998, there shall be added to Consolidated EBITDA for such period the amount of $3,350,000. "Consolidated Interest Coverage Ratio": for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period. 11 6 "Consolidated Interest Expense": for any period, total cash interest expense (including that attributable to Capital Lease Obligations) of the Borrower and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income": for any period, the consolidated net income (or loss) of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of the Borrower) in which the Borrower or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary. "Consolidated Net Worth": as of the date of determination, all items which in conformity with GAAP would be included under shareholders' equity on a consolidated balance sheet of the Borrower at such date. "Consolidated Senior Debt": at any date, the aggregate principal amount of all Indebtedness of the Borrower and its Subsidiaries (including the Loans) which is not by its terms subordinated to any other Indebtedness of the Borrower or any such Subsidiary at such date, determined on a consolidated basis in accordance with GAAP. "Consolidated Senior Leverage Ratio": as at the last day of any period, the ratio of (a) Consolidated Senior Debt on such day to (b) Consolidated EBITDA for such period. "Consolidated Total Debt": at any date, the aggregate principal amount of all Indebtedness of the Borrower and its Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP. "Consolidated Total Leverage Ratio": as at the last day of any period, the ratio of (a) Consolidated Total Debt on such day to (b) Consolidated EBITDA for such period. "Continuing Directors": the directors of the Borrower on the Closing Date, after giving effect to the Refinancing and the other transactions contemplated hereby, and each other director, if, in each case, such other director's nomination for election to the board of directors of the Borrower is recommended by at least a majority of the then Continuing Directors. 12 7 "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Default": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "Disposition": with respect to any property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof; and the terms "Dispose" and "Disposed of" shall have correlative meanings. "Dollars" and "$": dollars in lawful currency of the United States of America. "Domestic Subsidiary": any Subsidiary of the Borrower organized under the laws of any jurisdiction within the United States of America. "Environmental Laws": any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurocurrency Reserve Requirements": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board) maintained by a member bank of the Federal Reserve System. "Eurodollar Base Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period appearing on Page 3750 of the Dow Jones Markets screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Dow Jones Markets screen (or otherwise on such screen), the "Eurodollar Base Rate" shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered Dollar deposits at or about 11:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where its eurodollar and foreign currency and 13 8 exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein. "Eurodollar Loans": Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurodollar Base Rate ---------------------------------------- 1.00 - Eurocurrency Reserve Requirements "Eurodollar Tranche": the collective reference to Eurodollar Loans the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day). "Event of Default": any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "Excluded Foreign Subsidiary": any Foreign Subsidiary in respect of which either (a) the pledge of all of the Capital Stock of such Subsidiary as Collateral or (b) the guaranteeing by such Subsidiary of the Obligations, would, in the good faith judgment of the Borrower, result in adverse tax consequences to the Borrower. "Excluded Taxes": as defined in Section 2.16(a). "Existing Credit Agreement": as defined in Section 5.1(b). "Federal Funds Effective Rate": for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by the Reference Lender from three federal funds brokers of recognized standing selected by it. "Foreign Subsidiary": any Subsidiary of the Borrower that is not a Domestic Subsidiary. "Funding Office": the office of the Administrative Agent specified in Section 10.2. "GAAP": generally accepted accounting principles in the United States of America as in effect from time to time set forth in the opinions and pronouncements of the 14 9 Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board and the rules and regulations of the Securities and Exchange Commission, or in such other statements by such other entity as may be in general use by significant segments of the accounting profession, that are applicable to the circumstances of the Borrower as of the date of determination, except that for purposes of Section 7.1, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements delivered pursuant to Section 4.1(b). In the event that any "Accounting Change" (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the Borrower and the Administrative Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the Borrower's financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such time as such an amendment shall have been executed and delivered by the Borrower, the Administrative Agent and the Required Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Changes had not occurred. "Accounting Changes" refers to changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the Securities and Exchange Commission (or successors thereto or agencies with similar functions). "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government (including, without limitation, the National Association of Insurance Commissioners). "Guarantee and Collateral Agreement": the Guarantee and Collateral Agreement to be executed and delivered by the Borrower and each Subsidiary Guarantor, substantially in the form of Exhibit A, as the same may be amended, supplemented or otherwise modified from time to time. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit), as to which, to induce the creation of such obligation, the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of 15 10 assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lesser of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Incur": as defined in Section 7.2; and the terms "Incurred" and "Incurrence" shall have correlative meanings. "Indebtedness": of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than current trade payables incurred in the ordinary course of such Person's business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party under acceptance, letter of credit or similar facilities, (g) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any Capital Stock of such Person, (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above; (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation; and (j) for the purposes of Section 8(e) only, all obligations of such Person in respect of Interest Rate Protection Agreements. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245(b) of ERISA and any section incorporated by reference therein. "Insolvent": pertaining to a condition of Insolvency. 16 11 "Intellectual Property": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom. "Interest Payment Date": (a) as to any ABR Loan, the last day of each March, June, September and December to occur while such Loan is outstanding and the final maturity date of such Loan, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day that is three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period and (d) as to any Eurodollar Loan, the date of any repayment or prepayment made in respect thereof. "Interest Period": as to any Eurodollar Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (ii) any Interest Period that would otherwise extend beyond the Revolving Termination Date shall end on the Revolving Termination Date; (iii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; and (iv) the Borrower shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Loan. 17 12 "Interest Rate Protection Agreement": any interest rate protection agreement, interest rate futures contract, interest rate option, interest rate cap or other interest rate hedge arrangement, to or under which the Borrower or any of its Subsidiaries is a party or a beneficiary on the date hereof or becomes a party or a beneficiary after the date hereof. "Investments": as defined in Section 7.8. "Issuing Lender": The Chase Manhattan Bank (or any of its Affiliates, including, without limitation, Chase Manhattan Bank Delaware), LaSalle National Bank or any other Lender (or any of their respective Affiliates), in its capacity as issuer of any Letter of Credit, as determined by the Borrower for the applicable Letter of Credit. "L/C Commitment": $15,000,000. "L/C Fee Payment Date": the last day of each March, June, September and December and the last day of the Revolving Commitment Period. "L/C Obligations": at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit that have not then been reimbursed pursuant to Section 3.5. "L/C Participants": the collective reference to all the Lenders other than the Issuing Lender. "Letters of Credit": as defined in Section 3.1(a). "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing). "Loan": any loan made by any Lender pursuant to this Agreement. "Loan Documents": this Agreement, the Security Documents and the Notes. "Loan Parties": the Borrower and each Subsidiary of the Borrower that is a party to a Loan Document. "Material Adverse Effect": a material adverse effect on (a) the Refinancing, (b) the business, property, assets, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole or (c) the validity or enforceability of this Agreement or any of 18 13 the other Loan Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder. "Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. "Mortgaged Properties": the real properties listed on Schedule 1.1B, as to which the Administrative Agent for the benefit of the Lenders shall be granted a Lien pursuant to the Mortgages. "Mortgages": each of the mortgages and deeds of trust made by any Loan Party in favor of, or for the benefit of, the Administrative Agent for the benefit of the Lenders, substantially in the form of Exhibit D (with such changes thereto as shall be advisable under the law of the jurisdiction in which such mortgage or deed of trust is to be recorded), as the same may be amended, supplemented or otherwise modified from time to time. "Multiemployer Plan": a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds": (a) in connection with any Asset Sale or any Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received) of such Asset Sale or Recovery Event, net of attorneys' fees, accountants' fees, investment banking fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset that is the subject of such Asset Sale or Recovery Event (other than any Lien pursuant to a Security Document) and other customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (b) in connection with any issuance or sale of equity securities or debt securities or instruments or the incurrence of loans, the cash proceeds received from such issuance or incurrence, net of attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith. "Non-Excluded Taxes": as defined in Section 2.16(a). "Non-U.S. Lender": as defined in Section 2.16(b). "Notes": the collective reference to any promissory note evidencing Loans. 19 14 "Obligations": the unpaid principal of and interest on (including, without limitation, interest accruing after the maturity of the Loans and Reimbursement Obligations and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Borrower to the Administrative Agent or to any Lender (or, in the case of Interest Rate Protection Agreements, any affiliate of any Lender), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document, the Letters of Credit, any Interest Rate Protection Agreement entered into with any Lender or any affiliate of any Lender or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise. "Participant": as defined in Section 10.6(b). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor). "Permitted Acquisition": as defined in Section 7.8(g). "Permitted Investors": the collective reference to officers and directors of the Borrower on the date hereof and any holder of more than 15% of the outstanding common stock of the Borrower on the date hereof. "Person": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan that is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Preferred Stock": any Capital Stock entitled by its terms to a preference (a) as to dividends or (b) upon a distribution of assets. "Pricing Grid": the pricing grid attached hereto as Annex A. "Pro Forma Balance Sheet": as defined in Section 4.1(a). "Projections": as defined in Section 6.2(c). 20 15 "Properties": as defined in Section 4.17. "Purchase Price": with respect to any Acquisition, the sum (without duplication) of (a) the amount of cash paid by the Borrower and its Subsidiaries in connection with such Acquisition, (b) the value (as determined for purposes of such Acquisition in accordance with the applicable acquisition agreement) of all Capital Stock of the Borrower issued or given as consideration in connection with such Acquisition, (c) the principal amount (or, if less, the accreted value) at the time of such Acquisition of all Indebtedness incurred, assumed or acquired by Borrower and its Subsidiaries in connection with such Acquisition, (d) all additional purchase price amounts in connection with such Acquisition in the form of earnouts, deferred purchase price and other contingent obligations that should be recorded as a liability on the balance sheet of the Borrower and its Subsidiaries in accordance with GAAP, Regulation S-X under the Securities Act of 1933, as amended, or any other rule or regulation of the United States Securities and Exchange Commission, (e) all amounts paid by the Borrower and its Subsidiaries in respect of covenants not to compete, consulting agreements and other affiliated contracts in connection with such Acquisition, and (f) the aggregate fair market value of all other consideration given by the Borrower and its Subsidiaries in connection with such Acquisition. "Recovery Event": any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of the Borrower or any of its Subsidiaries. "Reference Lender": The Chase Manhattan Bank. "Reference Period": with respect to any date, means the period of four consecutive fiscal quarters of the Borrower immediately preceding such date or, if such date is the last day of a fiscal quarter, ending on such date. "Refinancing": as defined in Section 5.1(b). "Refunded Swingline Loans": as defined in Section 2.4. "Refunding Date": as defined in Section 2.4. "Register": as defined in Section 10.6(d). "Regulation U": Regulation U of the Board as in effect from time to time. "Reimbursement Obligation": the obligation of the Borrower to reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of Credit. "Reinvestment Deferred Amount": with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received by the Borrower or any of its Subsidiaries in connection 21 16 therewith that are not applied to reduce the Revolving Commitments pursuant to Section 2.8(b) as a result of the delivery of a Reinvestment Notice. "Reinvestment Event": any Asset Sale or Recovery Event in respect of which the Borrower has delivered a Reinvestment Notice. "Reinvestment Notice": a written notice executed by a Responsible Officer stating that no Event of Default has occurred and is continuing and that the Borrower (directly or indirectly through a Subsidiary) intends and expects to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or Recovery Event to acquire assets useful in its business. "Reinvestment Prepayment Amount": with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant Reinvestment Prepayment Date to acquire assets useful in the Borrower's business. "Reinvestment Prepayment Date": with respect to any Reinvestment Event, the earlier of (a) the date occurring six months after such Reinvestment Event and (b) the date on which the Borrower shall have determined not to, or shall have otherwise ceased to, acquire assets useful in the Borrower's business with all or any portion of the relevant Reinvestment Deferred Amount. "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .22, .23, .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. Section 4043. "Required Lenders": the holders of more than 50% of the Total Revolving Commitments or, if the Revolving Commitments have been terminated, the Total Revolving Extensions of Credit. "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer": the chief executive officer, president or chief financial officer of the Borrower, but in any event, with respect to financial matters, the chief financial officer of the Borrower. "Restricted Payments": as defined in Section 7.6. 22 17 "Revolving Commitment": as to any Lender, the obligation of such Lender, if any, to make Revolving Loans and participate in Swingline Loans and Letters of Credit, in an aggregate principal and/or face amount not to exceed the amount set forth under the heading "Revolving Commitment" opposite such Lender's name on Schedule 1.1A, as the same may be changed from time to time pursuant to the terms hereof. The original amount of the Total Revolving Commitments is $100,000,000. "Revolving Commitment Period": the period from and including the Closing Date to the Revolving Termination Date. "Revolving Extensions of Credit": as to any Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Loans made by such Lender then outstanding, (b) such Lender's Revolving Percentage of the L/C Obligations then outstanding and (c) such Lender's Revolving Percentage of the aggregate principal amount of Swingline Loans then outstanding. "Revolving Facility": the Revolving Commitments and the extensions of credit made thereunder. "Revolving Loans": as defined in Section 2.1. "Revolving Percentage": as to any Lender at any time, the percentage which such Lender's Revolving Commitment then constitutes of the Total Revolving Commitments (or, at any time after the Revolving Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender's Revolving Loans then outstanding constitutes of the aggregate principal amount of the Revolving Loans then outstanding). "Revolving Termination Date": May 13, 2003. "Security Documents": the collective reference to the Guarantee and Collateral Agreement, the Mortgages and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any property of any Person to secure the obligations and liabilities of any Loan Party under any Loan Document. "Senior Subordinated Note Indenture": the Indenture entered into by the Borrower and certain of its Subsidiaries in connection with the issuance of the Senior Subordinated Notes, together with all instruments and other agreements entered into by the Borrower or such Subsidiaries in connection therewith, as the same may be amended, supplemented or otherwise modified from time to time in accordance with Section 7.9. "Senior Subordinated Notes": the subordinated notes of the Borrower issued on the Closing Date pursuant to the Senior Subordinated Note Indenture. 23 18 "Single Employer Plan": any Plan that is covered by Title IV of ERISA, but that is not a Multiemployer Plan. "Solvent": when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the probable liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "Specified Change of Control": a "Change of Control" as defined in the Senior Subordinated Note Indenture. "Subsidiary": as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Subsidiary Guarantor": each Subsidiary of the Borrower other than any Excluded Foreign Subsidiary. "Swingline Commitment": the obligation of the Swingline Lender to make Swingline Loans pursuant to Section 2.3 in an aggregate principal amount at any one time outstanding not to exceed $5,000,000. "Swingline Lender": The Chase Manhattan Bank, in its capacity as the lender of Swingline Loans. "Swingline Loans": as defined in Section 2.3. 24 19 "Swingline Participation Amount": as defined in Section 2.4. "Total Revolving Commitments": at any time, the aggregate amount of the Revolving Commitments then in effect. "Total Revolving Extensions of Credit": at any time, the aggregate amount of the Revolving Extensions of Credit of the Lenders outstanding at such time. "Transferee": any Assignee or Participant. "Type": as to any Loan, its nature as an ABR Loan or a Eurodollar Loan. "Uniform Customs": the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time. "U.S. Taxes": as defined in Section 10.6(d). "Wholly Owned Subsidiary": as to any Person, any other Person all of the Capital Stock of which (other than directors' qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries. "Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor that is a Wholly Owned Subsidiary of the Borrower. 2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto. (a) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, (i) accounting terms relating to the Borrower and its Subsidiaries not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP and (ii) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, Capital Stock, securities, accounts and contract rights. (b) For the purposes of calculating Consolidated EBITDA for any Reference Period pursuant to any determination of the Consolidated Senior Leverage Ratio and the Consolidated Total Leverage Ratio, (i) if at any time during such Reference Period the Borrower or any Subsidiary shall have made any Material Disposition, the Consolidated EBITDA for such Reference Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable 25 20 thereto for such Reference Period and (ii) if during such Reference Period the Borrower or any Subsidiary shall have made a Material Acquisition, Consolidated EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto as if such Material Acquisition occurred on the first day of such Reference Period. As used in this paragraph, "Material Acquisition" means any acquisition of property or series of related acquisitions of property that (a) constitutes assets comprising all or substantially all of an operating unit of a business or constitutes all or substantially all of the common stock of a Person and (b) involves the payment of consideration by the Borrower and its Subsidiaries in excess of $10,000,000 (including any Indebtedness assumed or incurred in connection therewith); and "Material Disposition" means any Disposition of property or series of related Dispositions of property that yields gross proceeds to the Borrower or any of its Subsidiaries in excess of $10,000,000. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. AMOUNT AND TERMS OF COMMITMENTS 1 Revolving Commitments. (a) Subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans ("Revolving Loans") to the Borrower from time to time during the Revolving Commitment Period in an aggregate principal amount at any one time outstanding which, when added to such Lender's Revolving Percentage of the sum of (i) the L/C Obligations then outstanding and (ii) the aggregate principal amount of the Swingline Loans then outstanding, does not exceed the amount of such Lender's Revolving Commitment. During the Revolving Commitment Period the Borrower may use the Revolving Commitments by borrowing, prepaying the Revolving Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. The Revolving Loans may from time to time be Eurodollar Loans or ABR Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 2.9, provided that no Revolving Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Revolving Termination Date. (b) The Borrower shall repay all outstanding Revolving Loans on the Revolving Termination Date. 2 Procedure for Revolving Loan Borrowing. The Borrower may borrow under the Revolving Commitments during the Revolving Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 12:00 Noon, New York City time, (a) three Business Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, or 26 21 (b) on the requested Borrowing Date, in the case of ABR Loans), specifying (i) the amount and Type of Revolving Loans to be borrowed, (ii) the requested Borrowing Date and (iii) in the case of Eurodollar Loans, the respective amounts of each such Type of Loan and the respective lengths of the initial Interest Period therefor. Any Revolving Loans made on the Closing Date shall initially be ABR Loans. Each borrowing under the Revolving Commitments shall be in an amount equal to (x) in the case of ABR Loans, $500,000 or a whole multiple of $250,000 in excess thereof (or, if the then aggregate Available Revolving Commitments are less than $500,000, such lesser amount) and (y) in the case of Eurodollar Loans, $1,000,000 or a whole multiple of $500,000 in excess thereof; provided, that the Swingline Lender may request, on behalf of the Borrower, borrowings under the Revolving Commitments that are ABR Loans in other amounts pursuant to Section 2.4. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the Funding Office prior to 2:00 P.M., New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent or by depositing such amounts to such other account as shall be directed by the Borrower. 3 Swingline Commitment. (a) Subject to the terms and conditions hereof, the Swingline Lender agrees to make a portion of the credit otherwise available to the Borrower under the Revolving Commitments from time to time during the Revolving Commitment Period by making swing line loans ("Swingline Loans") to the Borrower; provided that (i) the aggregate principal amount of Swingline Loans outstanding at any time shall not exceed the Swingline Commitment then in effect (notwithstanding that the Swingline Loans outstanding at any time, when aggregated with the Swingline Lender's other outstanding Revolving Loans hereunder, may exceed the Swingline Commitment or such Lender's Revolving Commitment then in effect) and (ii) the Borrower shall not request, and the Swingline Lender shall not make, any Swingline Loan if, after giving effect to the making of such Swingline Loan, the aggregate amount of the Available Revolving Commitments would be less than zero. During the Revolving Commitment Period, the Borrower may use the Swingline Commitment by borrowing, repaying and reborrowing, all in accordance with the terms and conditions hereof. Swingline Loans shall be ABR Loans only. (a) The Borrower shall repay all outstanding Swingline Loans on the Revolving Termination Date. 4 Procedure for Swingline Borrowing; Refunding of Swingline Loans. Whenever the Borrower desires that the Swingline Lender make Swingline Loans it shall give the Swingline Lender irrevocable telephonic notice confirmed promptly in writing (which telephonic notice must be received by the Swingline Lender not later than 1:00 P.M., New York City time, on the proposed Borrowing Date), specifying (i) the amount to be borrowed and (ii) 27 22 the requested Borrowing Date (which shall be a Business Day during the Revolving Commitment Period). Each borrowing under the Swingline Commitment shall be in an amount equal to $250,000 or a whole multiple of $100,000 in excess thereof. Not later than 3:00 P.M., New York City time, on the Borrowing Date specified in a notice in respect of Swingline Loans, the Swingline Lender shall make available to the Administrative Agent at the Funding Office an amount in immediately available funds equal to the amount of the Swingline Loan to be made by the Swingline Lender. The Administrative Agent shall make the proceeds of such Swingline Loan available to the Borrower on such Borrowing Date by depositing such proceeds in the account of the Borrower with the Administrative Agent or such other account as shall be directed by the Borrower on such Borrowing Date in immediately available funds. (a) The Swingline Lender, at any time and from time to time in its sole and absolute discretion may, on behalf of the Borrower (which hereby irrevocably directs the Swingline Lender to act on its behalf), on one Business Day's notice given by the Swingline Lender no later than 12:00 Noon, New York City time, request each Lender to make, and each Lender hereby agrees to make, a Revolving Loan, in an amount equal to such Lender's Revolving Percentage of the aggregate amount of the Swingline Loans (the "Refunded Swingline Loans") outstanding on the date of such notice, to repay the Swingline Lender. Each Lender shall make the amount of such Revolving Loan available to the Administrative Agent at the Funding Office in immediately available funds, not later than 10:00 A.M., New York City time, one Business Day after the date of such notice. The proceeds of such Revolving Loans shall be immediately made available by the Administrative Agent to the Swingline Lender for application by the Swingline Lender to the repayment of the Refunded Swingline Loans. The Borrower irrevocably authorizes the Swingline Lender to charge the Borrower's accounts with the Administrative Agent (up to the amount available in each such account) in order to immediately pay the amount of such Refunded Swingline Loans to the extent amounts received from the Lenders are not sufficient to repay in full such Refunded Swingline Loans. (b) If prior to the time a Revolving Loan would have otherwise been made pursuant to Section 2.4(b), one of the events described in Section 8(f) shall have occurred and be continuing with respect to the Borrower or if for any other reason, as determined by the Swingline Lender in its sole discretion, Revolving Loans may not be made as contemplated by Section 2.4(b), each Lender shall, on the date such Revolving Loan was to have been made pursuant to the notice referred to in Section 2.4(b) (the "Refunding Date"), purchase for cash an undivided participating interest in the then outstanding Swingline Loans by paying to the Swingline Lender an amount (the "Swingline Participation Amount") equal to (i) such Lender's Revolving Percentage times (ii) the sum of the aggregate principal amount of Swingline Loans then outstanding that were to have been repaid with such Revolving Loans. (c) Whenever, at any time after the Swingline Lender has received from any Lender such Lender's Swingline Participation Amount, the Swingline Lender receives any payment on account of the Swingline Loans, the Swingline Lender will distribute to such Lender its Swingline Participation Amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participating interest was outstanding and 28 23 funded and, in the case of principal and interest payments, to reflect such Lender's pro rata portion of such payment if such payment is not sufficient to pay the principal of and interest on all Swingline Loans then due); provided, however, that in the event that such payment received by the Swingline Lender is required to be returned, such Lender will return to the Swingline Lender any portion thereof previously distributed to it by the Swingline Lender. (d) Each Lender's obligation to make the Revolving Loans referred to in Section 2.4(b) and to purchase participating interests pursuant to Section 2.4(c) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any setoff, counterclaim, recoupment, defense or other right that such Lender or the Borrower may have against the Swingline Lender, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 5; (iii) any adverse change in the condition (financial or otherwise) of the Borrower; (iv) any breach of this Agreement or any other Loan Document by the Borrower, any other Loan Party or any other Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. 5 Commitment Fees, etc. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee for the period from and including the Closing Date to the last day of the Revolving Commitment Period, computed at the Commitment Fee Rate on the average daily amount of the Available Revolving Commitment of such Lender during the period for which payment is made, payable quarterly in arrears on the last day of each March, June, September and December and on the Revolving Termination Date, commencing on the first of such dates to occur after the date hereof. (a) The Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the dates previously agreed to in writing by the Borrower and the Administrative Agent. 6 Termination or Reduction of Revolving Commitments. The Borrower shall have the right, upon not less than three Business Days' notice to the Administrative Agent, to terminate the Revolving Commitments or, from time to time, to reduce the amount of the Revolving Commitments; provided that no such termination or reduction of Revolving Commitments shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Loans and Swingline Loans made on the effective date thereof, the Total Revolving Extensions of Credit would exceed the Total Revolving Commitments. Any such reduction shall be in an amount equal to $1,000,000, or a whole multiple thereof, and shall reduce permanently the Revolving Commitments then in effect. 7 Optional Prepayments. The Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty, upon irrevocable notice delivered to the Administrative Agent at least three Business Days prior thereto in the case of Eurodollar Loans and by 12:00 Noon, New York City time on the Business Day of such 29 24 prepayment in the case of ABR Loans, which notice shall specify the date and amount of prepayment and whether the prepayment is of Eurodollar Loans or ABR Loans; provided, that if a Eurodollar Loan is prepaid on any day other than the last day of the Interest Period applicable thereto, the Borrower shall also pay any amounts owing pursuant to Section 2.17. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with (in the case of Eurodollar Loans) accrued interest to such date on the amount prepaid. Partial prepayments of Revolving Loans shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof. Partial prepayments of Swingline Loans shall be in an aggregate principal amount of $100,000 or a whole multiple thereof. 8 Mandatory Prepayments and Commitment Reductions. (a) Unless the Required Lenders shall otherwise agree, if any Indebtedness shall be issued or Incurred by the Borrower or any of its Subsidiaries (excluding any Indebtedness Incurred in accordance with Section 7.2), an amount equal to 100% of the Net Cash Proceeds thereof shall be applied on the date of such issuance or Incurrence toward the reduction of the Revolving Commitments as set forth in Section 2.8(c). (a) Unless the Required Lenders shall otherwise agree, if on any date the Borrower or any of its Subsidiaries shall receive Net Cash Proceeds from any Asset Sale or Recovery Event then, unless a Reinvestment Notice shall be delivered in respect thereof, such Net Cash Proceeds shall be applied on such date toward the reduction of the Revolving Commitments as set forth in Section 2.8(c); provided, that, notwithstanding the foregoing, on each Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event shall be applied toward the reduction of the Revolving Commitments as set forth in Section 2.8(c). (b) Amounts to be applied in connection with Revolving Commitment reductions made pursuant to this Section 2.8 shall be accompanied by prepayment of the Revolving Loans and/or Swingline Loans to the extent, if any, that the Total Revolving Extensions of Credit exceed the amount of the Total Revolving Commitments as so reduced, provided that if the aggregate principal amount of Revolving Loans and Swingline Loans then outstanding is less than the amount of such excess (because L/C Obligations constitute a portion thereof), the Borrower shall, to the extent of the balance of such excess, replace outstanding Letters of Credit and/or deposit an amount in cash in a cash collateral account established with the Administrative Agent for the benefit of the Lenders on terms and conditions satisfactory to the Administrative Agent. The application of any prepayment pursuant to this Section 2.8 shall be made first to ABR Loans and second to Eurodollar Loans. Each prepayment of the Revolving Loans under this Section 2.8 (in the case of Eurodollar Loans) shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid. 9 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurodollar Loans to ABR Loans by giving the Administrative Agent at least two Business Days' prior irrevocable notice of such election, provided that any such conversion 30 25 of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans by giving the Administrative Agent at least three Business Days' prior irrevocable notice of such election (which notice shall specify the length of the initial Interest Period therefor), provided that no ABR Loan may be converted into a Eurodollar Loan (i) when any Event of Default has occurred and is continuing and the Administrative Agent or the Required Lenders have determined in its or their sole discretion not to permit such conversions or (ii) after the date that is one month prior to the Revolving Termination Date. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. (a) Any Eurodollar Loan may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving irrevocable notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Revolving Loans, provided that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Lenders have determined in its or their sole discretion not to permit such continuations or (ii) after the date that is one month prior to the Revolving Termination Date, and provided, further, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Revolving Loans shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. 10 Limitations on Eurodollar Tranches. Notwithstanding anything to the contrary in this Agreement, all borrowings, conversions, continuations and optional prepayments of Eurodollar Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, (a) after giving effect thereto, the aggregate principal amount of the Eurodollar Loans comprising each Eurodollar Tranche shall be equal to $1,000,000 or a whole multiple of $500,000 in excess thereof and (b) no more than ten Eurodollar Tranches shall be outstanding at any one time. 11 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin. (a) Each ABR Loan shall bear interest at a rate per annum equal to the ABR plus the Applicable Margin. (b) (i) If all or a portion of the principal amount of any Loan or Reimbursement Obligation shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), all outstanding Loans and Reimbursement Obligations (whether or not overdue) shall bear interest at a rate per annum equal to (x) in the case of the Loans, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section 2.11 plus 2% 31 26 or (y) in the case of Reimbursement Obligations, the rate applicable to ABR Loans plus 2%, and (ii) if all or a portion of any interest payable on any Loan or Reimbursement Obligation or any commitment fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate then applicable to ABR Loans plus 2%, in each case, with respect to clauses (i) and (ii) above, from the date of such non-payment until such amount is paid in full (as well after as before judgment). (c) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section 2.11 shall be payable from time to time on demand. 12 Computation of Interest and Fees. (a) Interest and fees payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to ABR Loans the rate of interest on which is calculated on the basis of the Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the ABR or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of the effective date and the amount of each such change in interest rate. (a) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.11(a). 13 Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (b) the Administrative Agent shall have received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, 32 27 the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the relevant Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as ABR Loans or not borrowed, at the Borrower's option, (y) any Revolving Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be prepaid or continued as ABR Loans at the Borrower's option and (z) any outstanding Eurodollar Loans shall be prepaid or converted at the Borrower's option, on the first day of such Interest Period, to ABR Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Revolving Loans to Eurodollar Loans. 14 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Lenders hereunder, each payment by the Borrower on account of any commitment fee and any reduction of the Revolving Commitments of the Lenders shall be made pro rata according to the respective Revolving Percentages of the Lenders. (a) Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Revolving Loans shall be made pro rata according to the respective outstanding principal amounts of the Revolving Loans then held by the Lenders. (b) All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Funding Office, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension. (c) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available 33 28 to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this Section 2.14(d) shall be conclusive in the absence of manifest error. If such Lender's share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to ABR Loans, on demand, from the Borrower. (d) Unless the Administrative Agent shall have been notified in writing by the Borrower prior to the date of any payment being made hereunder that the Borrower will not make such payment to the Administrative Agent, the Administrative Agent may assume that the Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders their respective pro rata shares of a corresponding amount. If such payment is not made to the Administrative Agent by the Borrower within three Business Days of such required date, the Administrative Agent shall be entitled to recover, on demand, from each Lender to which any amount which was made available pursuant to the preceding sentence, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate. Nothing herein shall be deemed to limit the rights of the Administrative Agent or any Lender against the Borrower. 15 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall change the basis of Excluded Taxes of any Lender with respect to this Agreement, any Letter of Credit, any Application or any Eurodollar Loan made by it; (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender that is not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount that such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable; provided that the Borrower shall not be required to compensate a Lender pursuant to this paragraph for any amounts incurred more than six months prior to the date that such Lender notifies the Borrower of such Lender's intention to claim compensation therefor; and provided further that, if the circumstances giving rise to such 34 29 claim have a retroactive effect, then such six-month period shall be extended to include the period of such retroactive effect. If any Lender becomes entitled to claim any additional amounts pursuant to this Section 2.15, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a written request therefor, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction; provided that the Borrower shall not be required to compensate a Lender pursuant to this paragraph for any amounts incurred more than six months prior to the date that such Lender notifies the Borrower of such Lender's intention to claim compensation therefor; and provided further that, if the circumstances giving rise to such claim have a retroactive effect, then such six-month period shall be extended to include the period of such retroactive effect. (c) A certificate as to any additional amounts payable pursuant to this Section 2.15 submitted by any Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The obligations of the Borrower pursuant to this Section 2.15 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 16 Taxes. (a) All payments made by the Borrower under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document) (such excluded taxes, "Excluded Taxes"). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder, the amounts so payable 35 30 to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof to the extent such Lender's compliance with the requirements of Section 2.16(b) at the time such Lender becomes a party to this Agreement fails to establish a complete exemption from such withholding; provided, further, that the Borrower shall not be required to increase any such amounts pursuant to this paragraph for any amounts incurred more than six months prior to the date such Lender notified the Borrower of such Lender's intention to claim compensation therefor unless (x) such Lender did not have actual knowledge of the circumstances giving rise to the obligation of the Borrower to so increase such amount or (y) the Borrower did have actual knowledge of the circumstances giving rise to its obligation to so increase such amount; and provided further that, if the circumstances giving rise to such claim have a retroactive effect, then such six-month period shall be extended to include the period of such retroactive effect. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt, if available, received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. The agreements in this Section 2.16 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (a) Each Lender (or Transferee) that is not a citizen or resident of the United States of America, a corporation, partnership or other entity created or organized in or under the laws of the United States of America (or any jurisdiction thereof), or any estate or trust that is subject to federal income taxation regardless of the source of its income (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a Form W-8, or any subsequent versions thereof or successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, an annual certificate representing that such Non-U.S. Lender is not a "bank" for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the Code)), properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such 36 31 Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this Section 2.16(b), a Non-U.S. Lender shall not be required to deliver any form pursuant to this Section 2.16(b) that such Non-U.S. Lender is not legally able to deliver. 17 Indemnity. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense that such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Loans on a day that is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Revolving Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. A certificate as to any amounts payable pursuant to this Section 2.17 submitted to the Borrower by any Lender shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 18 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 2.15 or 2.16(a) with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal or regulatory disadvantage, and provided, further, that nothing in this Section 2.18 shall affect or postpone any of the obligations of any Borrower or the rights of any Lender pursuant to Section 2.15 or 2.16(a). 19 Replacement of Lenders. The Borrower shall be permitted to replace any Lender that (a) requests reimbursement for amounts owing pursuant to Section 2.15 or 2.16 or (b) defaults in its obligation to make Loans hereunder, with a replacement financial institution; provided that (i) such replacement does not conflict with any Requirement of Law, (ii) no Event 37 32 of Default shall have occurred and be continuing at the time of such replacement, (iii) if applicable, prior to any such replacement, such Lender shall have taken no action under Section 2.18 so as to eliminate the continued need for payment of amounts owing pursuant to Section 2.15 or 2.16, (iv) the replacement financial institution shall purchase, at par, all Loans and other amounts owing to such replaced Lender on or prior to the date of replacement, (v) the Borrower shall be liable to such replaced Lender under Section 2.17 if any Eurodollar Loan owing to such replaced Lender shall be purchased other than on the last day of the Interest Period relating thereto, (vi) the replacement financial institution, if not already a Lender, shall be reasonably satisfactory to the Administrative Agent, (vii) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 10.6 (provided that the Borrower shall be obligated to pay the registration and processing fee referred to therein), (viii) until such time as such replacement shall be consummated, the Borrower shall pay all additional amounts (if any) required pursuant to Section 2.15 or 2.16, as the case may be, and (ix) any such replacement shall not be deemed to be a waiver of any rights that the Borrower, the Administrative Agent or any other Lender shall have against the replaced Lender. 20 Reporting Requirements of Issuing Lenders. Within two Business Days following the last day of each calendar month, each Issuing Lender shall deliver to the Administrative Agent a report detailing all activity during the preceding month with respect to any Letters of Credit issued by any such Issuing Lender, including the face amount, the account party, the beneficiary and the expiration date of such Letters of Credit and any other information with respect thereto as may be requested by the Administrative Agent. 3. LETTERS OF CREDIT 1 L/C Commitment. (a) Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the other Lenders set forth in Section 3.4(a), agrees to issue letters of credit ("Letters of Credit") for the account of the Borrower on any Business Day during the Revolving Commitment Period in such form as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the aggregate amount of the Available Revolving Commitments would be less than zero. Letters of Credit may be either standby letters of credit or commercial letters of credit. Notwithstanding the foregoing, each of the letters of credit described on Schedule 3.1 shall, from and after the Closing Date, be deemed to have been issued pursuant to this Section 3.1(a) with the issuing lender listed on such schedule being deemed to be the Issuing Lender in respect of such letters of credit. Each Letter of Credit shall (i) be denominated in Dollars and (ii) expire no later than the earlier of (x) the first anniversary of its date of issuance and (y) the date that is five Business Days prior to the Revolving Termination Date, provided that any Letter of Credit with a one-year term may provide for the renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (y) above), provided, however, that any Letter of Credit which is a commercial letter of credit shall expire no later than 180 days after its date of issuance. 38 33 (a) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, the laws of the State of New York. (b) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law. 2 Procedure for Issuance of Letter of Credit. The Borrower may from time to time request that the Issuing Lender issue a Letter of Credit by delivering to the Issuing Lender and the Administrative Agent at their respective addresses for notices specified herein (or to such other address provided by such Issuing Lender) an Application therefor, completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by the Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower promptly following the issuance thereof. The Issuing Lender shall promptly furnish to the Administrative Agent, which shall in turn promptly furnish to the Lenders, notice of the issuance of each Letter of Credit (including the amount thereof). 3 Fees and Other Charges. (a) The Borrower will pay a fee on all outstanding Letters of Credit at a per annum rate equal to (i) the Applicable Margin then in effect with respect to Eurodollar Loans minus 1/8% times (ii) the average daily undrawn face amount of all such Letters of Credit, shared ratably among the Lenders and payable quarterly in arrears on each L/C Fee Payment Date after the issuance date. In addition, the Borrower shall pay to the relevant Issuing Lender for its own account a fronting fee at a rate to be agreed with such Issuing Lender, payable quarterly in arrears on each L/C Fee Payment Date after the Issuance Date. (a) In addition to the foregoing fees, the Borrower shall pay or reimburse the Issuing Lender for such normal and customary costs and expenses as are incurred or charged by the Issuing Lender in issuing, negotiating, effecting payment under, amending or otherwise administering any Letter of Credit. 4 L/C Participations. (a) The Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's 39 34 Revolving Percentage in the Issuing Lender's obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at the Issuing Lender's address for notices specified herein an amount equal to such L/C Participant's Revolving Percentage of the amount of such draft, or any part thereof, that is not so reimbursed. (a) If any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Lender under any Letter of Credit is paid to the Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective Rate during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to Section 3.4(a) is not made available to the Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, the Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to ABR Loans. A certificate of the Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error. (b) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with Section 3.4(a), the Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by the Issuing Lender), or any payment of interest on account thereof, the Issuing Lender will distribute to such L/C Participant its pro rata share thereof; provided, however, that in the event that any such payment received by the Issuing Lender shall be required to be returned by the Issuing Lender, such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it. 5 Reimbursement Obligation of the Borrower. The Borrower agrees to reimburse the Issuing Lender on each date on which the Issuing Lender notifies the Borrower of the date and amount of a draft presented under any Letter of Credit and paid by the Issuing Lender for the amount of (a) such draft so paid and (b) any taxes, fees, charges or other costs or expenses incurred by the Issuing Lender in connection with such payment. Each such payment shall be made to the Issuing Lender at its address for notices specified herein in lawful money of the United States of America and in immediately available funds. Interest shall be payable on any and all amounts remaining unpaid by the Borrower under this Section from the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until payment 40 35 in full at the rate set forth in (i) until the second Business Day following the date of the applicable drawing, Section 2.11(b) and (ii) thereafter, Section 2.11(c). 6 Obligations Absolute. The Borrower's obligations under this Section 3 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment that the Borrower may have or have had against the Issuing Lender, any beneficiary of a Letter of Credit or any other Person. The Borrower also agrees with the Issuing Lender that the Issuing Lender shall not be responsible for, and the Borrower's Reimbursement Obligations under Section 3.5 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged (subject to the immediately succeeding sentence), or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. The Issuing Lender shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions resulting from the gross negligence or willful misconduct of the Issuing Lender. The Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards or care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Borrower and shall not result in any liability of the Issuing Lender to the Borrower. 7 Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the Issuing Lender shall promptly notify the Borrower of the date and amount thereof. The responsibility of the Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are substantially in conformity with such Letter of Credit. 8 Applications. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall apply. 4. REPRESENTATIONS AND WARRANTIES To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, the Borrower hereby represents and warrants to the Administrative Agent and each Lender that: 1 Financial Condition. (a) The unaudited pro forma consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at March 28, 1998 (including the notes 41 36 thereto) (the "Pro Forma Balance Sheet"), copies of which have heretofore been furnished to each Lender, has been prepared giving effect (as if such events had occurred on such date) to (i) the consummation of the Refinancing, (ii) the Loans to be made and the Senior Subordinated Notes to be issued on the Closing Date and the use of proceeds thereof and (iii) the payment of fees and expenses in connection with the foregoing. The Pro Forma Balance Sheet has been prepared based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable as of the date of delivery thereof, and presents fairly on a pro forma basis the estimated financial position of Borrower and its consolidated Subsidiaries as at March 28, 1998, assuming that the events specified in the preceding sentence had actually occurred at such date. (a) The audited consolidated balance sheets of the Borrower as at December 28, 1996 and December 27, 1997, and the related audited consolidated statements of income and of cash flows for the fiscal years ended on such dates and the unaudited consolidating balance sheet of the Borrower as at December 27, 1997, and the related unaudited consolidating statement of income and of cash flows for the fiscal year ended on such date, in each case, reported on, in the case of the consolidated statements, by and accompanied by an unqualified report from Arthur Andersen LLP, present fairly the consolidated and consolidating financial condition of the Borrower as at such date, and the consolidated and consolidating results of its operations and its consolidated and consolidating cash flows for the respective fiscal years then ended. The unaudited consolidated and consolidating balance sheets of the Borrower as at March 28, 1998, and the related unaudited consolidated and consolidating statements of income and cash flows for the thirteen-week period ended on such date, present fairly the consolidated and consolidating financial condition of the Borrower as at such date and the consolidated and consolidating results of its operations and its consolidated and consolidating cash flows for the thirteen-week period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). Except as set forth in Schedule 4.1(b), the Borrower and its Subsidiaries do not have any material Guarantee Obligations, contingent liabilities or liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including, without limitation, any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph. During the period from December 27, 1997 to and including the date hereof there has been no Disposition by the Borrower of any material part of its business or property. 2 No Change. Since December 27, 1997 there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect. 3 Corporate Existence; Compliance with Law. Each of the Borrower and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the 42 37 business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect, and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 4 Corporate Power; Authorization; Enforceable Obligations. Each Loan Party has the corporate power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and, in the case of the Borrower, to borrow hereunder. Each Loan Party has taken all necessary corporate action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the borrowings on the terms and conditions of this Agreement. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the Refinancing and the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Documents, except (i) consents, authorizations, filings and notices described in Schedule 4.4, which consents, authorizations, filings and notices have been obtained or made and are in full force and effect and (ii) the filings referred to in Section 4.19. Each Loan Document has been duly executed and delivered on behalf of each Loan Party party thereto. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Loan Party party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 5 No Legal Bar. The execution, delivery and performance of this Agreement and the other Loan Documents, the issuance of Letters of Credit, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of the Borrower or any of its Subsidiaries and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents). 6 Litigation. Except as set forth on Schedule 4.6, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of its Subsidiaries or against any of their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) that could reasonably be expected to have a Material Adverse Effect. 7 No Default. Neither the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect that could reasonably be 43 38 expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 8 Ownership of Property; Liens. Each of the Borrower and its Subsidiaries has title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other material property, and none of such property is subject to any Lien except as permitted by Section 7.3. 9 Intellectual Property. The Borrower and each of its Subsidiaries owns, or is licensed to use, all Intellectual Property necessary for the conduct of its business as currently conducted. No material claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property, nor does the Borrower know of any valid basis for any such claim. To the knowledge of the Borrower, the use of Intellectual Property by the Borrower and its Subsidiaries does not infringe on the rights of any Person in any material respect. 10 Taxes. Each of the Borrower and each of its Subsidiaries has filed or caused to be filed all Federal, state and other material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (in each case, other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower or its Subsidiaries, as the case may be); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. 11 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the Regulations of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in Regulation U. 12 Labor Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against the Borrower or any of its Subsidiaries pending or, to the knowledge of the Borrower, threatened; (b) hours worked by and payment made to employees of the Borrower and its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters; (c) all payments due from the Borrower or any of its Subsidiaries on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the Borrower or the relevant Subsidiary. 44 39 13 ERISA. Except as set forth on Schedule 4.13, neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. Except as set forth on Schedule 4.13, no termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by a material amount. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan that has resulted or could reasonably be expected to result in a material liability under ERISA, and neither the Borrower nor any Commonly Controlled Entity would become subject to any material liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent. 14 Investment Company Act; Other Regulations. No Loan Party is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any Requirement of Law that limits its ability to incur Indebtedness. 15 Subsidiaries. The Subsidiaries listed on Schedule 4.15 constitute all the Subsidiaries of the Borrower at the date hereof. 16 Use of Proceeds. The proceeds of the Revolving Loans and the Swingline Loans, and the Letters of Credit, shall be used to refinance the Existing Credit Agreement, to finance working capital needs and for general corporate purposes (including Permitted Acquisitions). 17 Environmental Matters. Except as, in the aggregate, could not reasonably be expected to result in a Material Adverse Effect and except as set forth on Schedule 4.17: (a) the facilities and properties owned, leased or operated by the Borrower or any of its Subsidiaries (the "Properties") do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations or under circumstances that constitute or constituted a violation of, or could give rise to liability under, any Environmental Law; (b) neither the Borrower nor any of its Subsidiaries has received or is aware of any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to 45 40 any of the Properties or the business operated by the Borrower or any of its Subsidiaries (the "Business"), nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened; (c) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location that could give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law; (d) no judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Borrower or any Subsidiary is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business; (e) there has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of the Borrower or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws; (f) the Properties and all operations at the Properties are in compliance, and have in the last five years been in compliance, with all applicable Environmental Laws; and (g) neither the Borrower nor any of its Subsidiaries has assumed any liability of any other Person under Environmental Laws. 18 Accuracy of Information, etc. No statement or information contained in this Agreement, any other Loan Document, the Confidential Information Memorandum or any other document, certificate or statement furnished to the Administrative Agent or the Lenders or any of them, by or on behalf of any Loan Party for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained as of the date such statement, information, document or certificate was so furnished (or, in the case of the Confidential Information Memorandum, as of the Closing Date), any untrue statement of a material fact or omitted to state a material fact necessary to make the statements contained herein or therein not misleading. The projections and pro forma financial information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual 46 41 results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount. 19 Security Documents. (a) The Guarantee and Collateral Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Stock described in the Guarantee and Collateral Agreement, when stock certificates representing such Pledged Stock are delivered to the Administrative Agent, and in the case of the other Collateral described in the Guarantee and Collateral Agreement, when financing statements in appropriate form are filed in the offices specified on Schedule 4.19(a), the Guarantee and Collateral Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds thereof, as security for the Obligations (as defined in the Guarantee and Collateral Agreement), in each case prior and superior in right to any other Person other than the holders of the Liens permitted pursuant to Section 7.3. (a) Each of the Mortgages is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable Lien on the Mortgaged Properties described therein and proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 4.19(b), each such Mortgage shall constitute a legal, valid and enforceable Lien on, and security interest in, all right, title and interest of the Loan Parties in the Mortgaged Properties and the proceeds thereof, as security for the Obligations (as defined in the relevant Mortgage), in each case prior and superior in right to any other Person other than the holders of the Liens permitted with respect to such Mortgaged Properties pursuant to Section 7.3. 20 Solvency. Each Loan Party is, and after giving effect to the Refinancing and the incurrence of all Indebtedness and obligations being incurred in connection herewith and therewith will be and will continue to be, Solvent. 21 Senior Indebtedness. The Obligations constitute "Senior Indebtedness" of the Borrower under and as defined in the Senior Subordinated Note Indenture. The obligations of each Subsidiary Guarantor under the Guarantee and Collateral Agreement constitute "Guarantor Senior Indebtedness" of such Subsidiary Guarantor under and as defined in the Senior Subordinated Note Indenture. 22 Year 2000 Matters. Any reprogramming reasonably foreseen to be necessary in accordance with customary business practices to permit the proper functioning (but only to the extent that such proper functioning would otherwise be impaired by the occurrence of the year 2000) in and following the year 2000 of computer systems and other equipment containing embedded microchips, in either case owned or operated by the Borrower or any of its Subsidiaries and the testing of all such systems and other equipment as so reprogrammed, will be completed by June 30, 1999 (or September 30, 1999 in the case of Tamor Corporation). The Borrower will make reasonable inquiry of all Persons the computer systems of which interface with the Borrower's computer systems (other than those of any Lender or any immaterial 47 42 customer or vendor) with regard to such Person's year 2000 compliance. The Borrower does not have actual knowledge that any of such Persons will not be year 2000 compliant. The Borrower does not have any actual knowledge that the reasonably anticipated remaining costs to the Borrower and its Subsidiaries for such reprogramming and testing and for the other reasonably foreseeable consequences to them of any improper functioning of other computer systems and equipment containing embedded microchips due to the occurrence of the year 2000 could result in a Default or Event of Default or to have a Material Adverse Effect. Except for any reprogramming referred to above, the computer systems of the Borrower and its Subsidiaries are and, with ordinary course upgrading and maintenance, will continue for the term of this Agreement to be, sufficient for the conduct of their business as currently conducted. The Borrower does not make any representations other than as set forth above about any other Person's year 2000 compliance. 23 Regulation H. No Mortgage encumbers improved real property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968. 5. CONDITIONS PRECEDENT 1 Conditions to Initial Extension of Credit. The agreement of each Lender to make the initial extension of credit requested to be made by it is subject to the satisfaction, prior to or concurrently with the making of such extension of credit on the Closing Date, of the following conditions precedent: (a) Credit Agreement; Guarantee and Collateral Agreement. The Administrative Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of the Borrower and (ii) the Guarantee and Collateral Agreement, executed and delivered by a duly authorized officer of the Borrower and each Subsidiary Guarantor. (b) Refinancing. The following transactions shall have been consummated, in each case on terms and conditions reasonably satisfactory to the Lenders (such events, collectively, the "Refinancing"): (i) all amounts owing under the Amended and Restated Credit Agreement, dated as of December 30, 1997 (the "Existing Credit Agreement"), among Selfix, Inc., Tamor Corporation, Shutters, Inc. and Seymour Housewares Corporation, as borrowers, the other credit parties signatory thereto, the lenders from time to time signatory thereto and General Electric Capital Corporation, as agent, shall have been repaid in full contemporaneously with the drawing of the Loans on the Closing Date, the Existing Credit Agreement and all documents executed in connection therewith shall have been terminated and the liens securing the obligations under the Existing Credit Agreement shall have been 48 43 terminated pursuant to documentation in form and substance satisfactory to the Administrative Agent; (ii) the Subordinated Notes (as defined in the Existing Credit Agreement) shall have been repaid in full contemporaneously with the drawing of the Loans on the Closing Date; and (iii) the Borrower shall have received at least $125,000,000 in gross cash proceeds from the issuance of the Senior Subordinated Notes on terms and conditions satisfactory to the Lenders. (c) Pro Forma Balance Sheet; Financial Statements. The Lenders shall have received (i) the Pro Forma Balance Sheet, (ii) audited consolidated and unaudited consolidating financial statements of the Borrower for the 1996 and 1997 fiscal years and (iii) unaudited interim consolidated financial statements of the Borrower for each fiscal quarterly period ended subsequent to the date of the latest applicable financial statements delivered pursuant to clause (ii) of this paragraph as to which such financial statements are available, and such financial statements shall not, in the reasonable judgment of the Lenders, reflect any material adverse change in the consolidated financial condition of the Borrower, as reflected in the financial statements or projections contained in the Confidential Information Memorandum. (d) Approvals. All governmental and third party approvals (including landlords' and other consents) necessary or, in the discretion of the Administrative Agent, advisable in connection with the Refinancing, the continuing operations of the Borrower and its Subsidiaries and the transactions contemplated hereby shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose adverse conditions on the Refinancing or the financing contemplated hereby. (e) Lien Searches. The Administrative Agent shall have received the results of a recent lien search in each of the jurisdictions where assets of the Loan Parties are located, and such search shall reveal no liens on any of the assets of the Borrower or its Subsidiaries except for liens permitted by Section 7.3. (f) Environmental Audit. The Administrative Agent shall have received a reasonably satisfactory environmental audit with respect to the real properties of the Borrower and its Subsidiaries specified by the Administrative Agent. (g) Closing Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of each Loan Party, dated the Closing Date, substantially in the form of Exhibit C, with appropriate insertions and attachments. 49 44 (h) Legal Opinions. The Administrative Agent shall have received the following executed legal opinions: (i) the legal opinion of Sonnenschein Nath & Rosenthal, counsel to the Borrower and its Subsidiaries, substantially in the form of Exhibit F; and ii) the legal opinion of local counsel in each jurisdiction where a Mortgaged Property is located and of such other special and local counsel, in each case, as may be required by the Administrative Agent. Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require. (i) Pledged Stock; Stock Powers. The Administrative Agent shall have received the certificates representing the shares of Capital Stock pledged pursuant to the Guarantee and Collateral Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof. (j) Filings, Registrations and Recordings. Each document (including, without limitation, any Uniform Commercial Code financing statement) required by the Security Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Lenders, a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than with respect to Liens expressly permitted by Section 7.3), shall be in proper form for filing, registration or recordation. (k) Mortgages, etc. (i) The Administrative Agent shall have received a Mortgage with respect to each Mortgaged Property, executed and delivered by a duly authorized officer of each party thereto. (ii) If requested by the Administrative Agent, the Administrative Agent shall have received, and the title insurance company issuing the policy referred to in clause (iii) below (the "Title Insurance Company") shall have received, maps or plats of an as-built survey of the sites of the Mortgaged Properties certified to the Administrative Agent (if the Administrative Agent determines such certification to it is reasonably practicable) and the Title Insurance Company in a manner satisfactory to them, dated a date satisfactory to the Administrative Agent and the Title Insurance Company by an independent professional licensed land surveyor satisfactory to the Administrative Agent and the Title Insurance Company, which maps or plats and the surveys on which they are based shall be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 1992, and, without limiting the generality of the foregoing, there shall be surveyed and shown on 50 45 such maps, plats or surveys the following: (A) the locations on such sites of all the buildings, structures and other improvements and the established building setback lines; (B) the lines of streets abutting the sites and width thereof; (C) all access and other easements appurtenant to the sites; (D) all roadways, paths, driveways, easements, encroachments and overhanging projections and similar encumbrances affecting the site, whether recorded, apparent from a physical inspection of the sites or otherwise known to the surveyor; (E) any encroachments on any adjoining property by the building structures and improvements on the sites; (F) if the site is described as being on a filed map, a legend relating the survey to said map; and (G) the flood zone designations, if any, in which the Mortgaged Properties are located. (iii) The Administrative Agent shall have received in respect of each Mortgaged Property a mortgagee's title insurance policy (or policies) or marked up unconditional binder for such insurance. Each such policy shall (A) be in an amount satisfactory to the Administrative Agent; (B) be issued at ordinary rates; (C) insure that the Mortgage insured thereby creates a valid first Lien on such Mortgaged Property free and clear of all defects and encumbrances, except as disclosed therein; (D) name the Administrative Agent for the benefit of the Lenders as the insured thereunder; (E) be in the form of ALTA Loan Policy - 1970 (Amended 10/17/70 and 10/17/84) (or equivalent policies); (F) contain such endorsements and affirmative coverage as the Administrative Agent may reasonably request and (G) be issued by title companies satisfactory to the Administrative Agent (including any such title companies acting as co-insurers or reinsurers, at the option of the Administrative Agent). The Administrative Agent shall have received evidence satisfactory to it that all premiums in respect of each such policy, all charges for mortgage recording tax, and all related expenses, if any, have been paid. (iv) If requested by the Administrative Agent, the Administrative Agent shall have received (A) a policy of flood insurance that (1) covers any parcel of improved real property that is encumbered by any Mortgage, (2) is written in an amount not less than the outstanding principal amount of the indebtedness secured by such Mortgage that is reasonably allocable to such real property or the maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 1968, whichever is less, and (3) has a term ending not later than the maturity of the Indebtedness secured by such Mortgage and (B) confirmation that the Borrower has received the notice required pursuant to Section 208(e)(3) of Regulation H of the Board. (v) The Administrative Agent shall have received a copy of all recorded documents referred to, or listed as exceptions to title in, the title policy or policies referred to in clause (iii) above and a copy of all other material documents affecting the Mortgaged Properties. 51 46 (1) Fees. The Lenders and the Administrative Agent shall have received all fees required to be paid, and all expenses for which invoices have been presented, on or before the Closing Date. 2 Conditions to Each Extension of Credit. The agreement of each Lender to make any extension of credit requested to be made by it on any date (including, without limitation, its initial extension of credit) is subject to the satisfaction of the following conditions precedent: (a) Representations and Warranties. Each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date except to the extent any such representation or warranty relates specifically to an earlier date, in which case such representation or warranty shall be true and correct in all material respects on and as of such earlier date. (b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date. Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such extension of credit that the conditions contained in this Section 5.2 have been satisfied. 6. AFFIRMATIVE COVENANTS The Borrower hereby agrees that, so long as the Revolving Commitments remain in effect, any Letter of Credit remains outstanding or any Loan or other amount is owing to any Lender or the Administrative Agent hereunder, the Borrower shall and shall cause each of its Subsidiaries to: 1 Financial Statements. Furnish to the Administrative Agent and each Lender: (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by Arthur Andersen LLP or other independent certified public accountants of nationally recognized standing; and 52 47 (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments). All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 2 Certificates; Other Information. Furnish to the Administrative Agent and each Lender (or, in the case of clause (f), to the relevant Lender): (a) concurrently with the delivery of the financial statements referred to in Section 6.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) concurrently with the delivery of any financial statements pursuant to Section 6.1, (i) a certificate of a Responsible Officer stating that such Responsible Officer has obtained no knowledge of any Default or Event of Default during the period covered by such financial statements except as specified in such certificate (including, in the case of any such Default or Event of Default, an explanation of the proposed actions the Borrower intends to take with respect thereto), (ii) a Compliance Certificate containing all information necessary for determining compliance by the Borrower and its Subsidiaries with the provisions of this Agreement referred to therein as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be, (iii) to the extent not previously disclosed to the Administrative Agent, a listing of the locations within the United States as to which UCC financing statements in favor of the Administrative Agent have not been filed and in which any Loan Party keeps inventory or equipment with an aggregate value for all such locations and all such Loan Parties in excess of $500,000, (iv) in the case of annual financial statements, a report of all Intellectual Property owned by any Loan Party and (v) in the case of quarterly financial statements, a report of any material Intellectual Property acquired by any Loan Party since the date of the most recent list delivered pursuant to this clause (v) (or, in the case of the first such list so delivered, since the Closing Date); (c) as soon as available, and in any event no later than 45 days after the end of each fiscal year of the Borrower, a detailed consolidated budget for the following fiscal 53 48 year (including a projected consolidated balance sheet of the Borrower and its Subsidiaries as of the end of the following fiscal year, and the related consolidated statements of projected cash flow, projected changes in financial position and projected income and a statement and explanation of the principal assumptions underlying such projections), and, as soon as available, significant revisions, if any, of such budget and projections with respect to such fiscal year (collectively, the "Projections"), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections are based on reasonable estimates, information and assumptions and that such Responsible Officer has no reason to believe that such Projections are incorrect or misleading in any material respect; (d) no later than 10 Business Days prior to the effectiveness thereof, copies of substantially final drafts of any proposed amendment, supplement, waiver or other modification with respect to the Senior Subordinated Note Indenture (other than any such amendments or supplements which are administrative or corrective in nature, in which case final copies of which shall be delivered within five days after the effectiveness thereof); (e) within five days after the same are sent, copies of all financial statements and reports that the Borrower sends to the holders of any class of its debt securities or public equity securities and, promptly after the same are filed, copies of all financial statements and reports that the Borrower may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; and (f) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be. 4 Maintenance of Existence; Compliance. (a) (i) Continue to engage in business of the same general type as now conducted by it, (ii) preserve, renew and keep in full force and effect its corporate existence and (iii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 7.4 or in connection with the dissolution of any Subsidiary with de minimis assets and except, in the case of clause (iii) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (b) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 54 49 5 Maintenance of Property; Insurance. (a) Keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted and (b) maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business. 6 Inspection of Property; Books and Records; Discussions. (a) Keep proper books of records and account in which proper entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities and (b) permit, upon two Business Days' prior notice to the chief financial officer or other Responsible Officer of the Borrower (except when a Default or Event of Default has occurred and is continuing, in which case, no notice shall be required), representatives of the Administrative Agent or any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its independent certified public accountants; provided that all such visits and inspections shall be coordinated through the Administrative Agent; provided, further, that such visits and inspections (i) shall be at the expense of the Borrower (A) upon the occurrence and during the continuance of an Event of Default and (B) in respect of up to two visits a year by the Administrative Agent and (ii) shall otherwise be at the expense of the Administrative Agent or the relevant Lender, as the case may be. 7 Notices. Promptly give notice to the Administrative Agent and each Lender of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Subsidiaries or (ii) litigation, investigation or proceeding that may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, that in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect; (c) any litigation or proceeding affecting the Borrower or any of its Subsidiaries in which the amount involved is $1,000,000 or more and not believed by the Borrower to be covered by insurance or in which injunctive or similar relief is sought; (d) (i) any release or discharge by the Borrower or any Subsidiary of any Materials of Environmental Concern required to be reported under Environmental Laws to any Governmental Authority; (ii) any condition, circumstance, occurrence or event that could result in a material liability under Environmental Laws or could result in the imposition of any lien or other restriction on the title, ownership or transferability of any Property; and (iii) any proposed action to be taken by the Borrower or any Subsidiary that 55 50 could subject the Borrower or any Subsidiary to any additional or different requirements or liabilities under Environmental Law that could reasonably be expected to result in a Material Adverse Effect; (e) the following events, as soon as possible and in any event within 30 days after the Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan; and (f) any development or event that has had or could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this Section 6.7 shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower or the relevant Subsidiary proposes to take with respect thereto. 8 Environmental Laws. Except as could not in the aggregate reasonably be expected to result in a Material Adverse Effect: (a) comply with, and use reasonable efforts to ensure compliance by all tenants and subtenants, if any, with, all applicable Environmental Laws, and obtain and comply with and maintain, and use reasonable efforts to ensure that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws; and (b) conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws. 9 Additional Collateral, etc. (a) With respect to any property acquired after the Closing Date by the Borrower or any of its Subsidiaries (other than (x) any property described in paragraph (b), (c) or (d) below and (y) any property subject to a Lien expressly permitted by Section 7.3(g) or 7.3(i)) as to which the Administrative Agent, for the benefit of the Lenders, does not have a perfected Lien, promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement or such other documents as the Administrative Agent deems necessary or reasonably advisable to grant to the Administrative Agent, for the benefit of the Lenders, a security interest in such property and (ii) take all actions necessary or reasonably advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in such property, subject to the Liens permitted 56 51 pursuant to Section 7.3, including without limitation, the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may otherwise be reasonably requested by the Administrative Agent. (a) With respect to any fee interest in any real property having a value (together with improvements thereof) of at least $1,000,000 acquired after the Closing Date by the Borrower or any of its Subsidiaries (other than any such real property subject to a Lien expressly permitted by Section 7.3(g) or 7.3(i)), promptly (i) execute and deliver a first priority Mortgage, subject to the Liens permitted pursuant to Section 7.3, in favor of the Administrative Agent, for the benefit of the Lenders, covering such real property, (ii) if requested by the Administrative Agent, provide the Lenders with (x) title and extended coverage insurance covering such real property in an amount at least equal to the purchase price of such real property (or such other amount as shall be reasonably specified by the Administrative Agent) as well as, to the extent reasonably practicable in the judgment of the Administrative Agent, a current ALTA survey thereof, together with a surveyor's certificate and (y) any consents or estoppels reasonably deemed necessary or advisable by the Administrative Agent in connection with such mortgage or deed of trust, each of the foregoing in form and substance reasonably satisfactory to the Administrative Agent and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. (b) With respect to any new Subsidiary (other than an Excluded Foreign Subsidiary) created or acquired after the Closing Date by the Borrower (which, for the purposes of this paragraph (c), shall include any existing Subsidiary that ceases to be an Excluded Foreign Subsidiary), the Borrower or any of its Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by the Borrower or any of its Subsidiaries, (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the Borrower or such Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a party to the Guarantee and Collateral Agreement and (B) to take such actions necessary or reasonably advisable to grant to the Administrative Agent for the benefit of the Lenders a perfected first priority security interest, subject to the Liens permitted pursuant to Section 7.3, in the Collateral described in the Guarantee and Collateral Agreement with respect to such new Subsidiary, including, without limitation, the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent, and (iv) if reasonably requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. 57 52 (c) With respect to any new Excluded Foreign Subsidiary created or acquired after the Closing Date by the Borrower or any of its Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by the Borrower or any of its Subsidiaries (provided that in no event shall more than 65% of the total outstanding Capital Stock of any such new Subsidiary be required to be so pledged or, following any change in applicable law, such greater or lesser percentage which would not result in adverse tax consequences), (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the Borrower or such Subsidiary, as the case may be, and take such other action as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the Administrative Agent's security interest therein, and (iii) if reasonably requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. 7. NEGATIVE COVENANTS The Borrower hereby agrees that, so long as the Revolving Commitments remain in effect, any Letter of Credit remains outstanding or any Loan or other amount is owing to any Lender or the Administrative Agent hereunder, the Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: 1 Financial Condition Covenants. (a) Consolidated Total Leverage Ratio. Permit the Consolidated Total Leverage Ratio as at the last day of any period of four consecutive fiscal quarters of the Borrower ending on or about any date occurring during the periods set forth below to exceed the ratio set forth below opposite such period:
Consolidated Total Period Leverage Ratio ----------------------------------------------- -------------------- June 30, 1998 - June 30, 1999 5.75 to 1.00 September 30, 1999 - June 30, 2000 5.50 to 1.00 September 30, 2000 - June 30, 2001 5.25 to 1.00 September 30, 2001 - June 30, 2002 5.00 to 1.00 September 30, 2002 - Revolving Termination Date 4.75 to 1.00
(b) Consolidated Senior Leverage Ratio. Permit the Consolidated Senior Leverage Ratio as at the last day of any period of four consecutive fiscal quarters of the Borrower 58 53 ending on or about any date occurring during the periods set forth below to exceed the ratio set forth below opposite such period:
Consolidated Senior Period Leverage Ratio ----------------------------------------------- --------------------- June 30, 1998 - June 30, 2000 3.00 to 1.00 September 30, 2000 - June 30, 2002 2.75 to 1.00 September 30, 2002 - Revolving Termination Date 2.50 to 1.00
(c) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending on or about any date occurring during the periods set forth below to be less than the ratio set forth below opposite such period:
Consolidated Interest Period Coverage Ratio ----------------------------------------------- ----------------------- June 30, 1998 - June 30, 1999 1.75 to 1.00 September 30, 1999 - June 30, 2001 2.00 to 1.00 September 30, 2001 - June 30, 2002 2.25 to 1.00 September 30, 2002 - Revolving Termination Date 2.50 to 1.00
2 Indebtedness and Preferred Stock. Create, incur, assume or suffer to exist (in each case, to "Incur") any Indebtedness or issue any Preferred Stock, except: (a) Indebtedness of any Loan Party pursuant to any Loan Document; (b) Indebtedness of the Borrower to any Subsidiary and of any Wholly Owned Subsidiary Guarantor to the Borrower or any other Subsidiary; (c) Indebtedness incurred to finance, contemporaneously therewith, the acquisition of fixed or capital assets and Capital Lease Obligations in an aggregate principal amount not to exceed $7,500,000 at any one time outstanding; (d) Indebtedness outstanding on the date hereof and listed on Schedule 7.2(d) and any refinancings, refundings, renewals or extensions thereof (without increasing, or shortening the maturity of, the principal amount thereof); (e) Guarantee Obligations Incurred in the ordinary course of business by the Borrower or any of its Subsidiaries of obligations of any Wholly Owned Subsidiary Guarantor; 59 54 (f) (i) Indebtedness of the Borrower in respect of the Senior Subordinated Notes in an aggregate principal amount not to exceed $125,000,000 and (ii) Guarantee Obligations of any Subsidiary Guarantor in respect of such Indebtedness, provided that such Guarantee Obligations are subordinated to the same extent as the obligations of the Borrower in respect of the Senior Subordinated Notes; (g) Indebtedness of the Borrower or any of its Subsidiaries Incurred to finance the Purchase Price of any Permitted Acquisition permitted by Section 7.8(g) (including, without limitation any assumed Indebtedness or any Indebtedness of a Subsidiary acquired in any such Permitted Acquisition so long as the Borrower complies with the provisions of Section 6.9(c)), in an aggregate principal amount (for the Borrower and all Subsidiaries) not to exceed $7,500,000 at any one time outstanding, provided that such Indebtedness is Incurred substantially simultaneously with such Permitted Acquisition; (h) the Borrower may issue Preferred Stock so long as such Preferred Stock is not mandatorily redeemable by the Borrower and is not convertible into debt obligations of the Borrower or any of its Subsidiaries, in each case, during the term of this Agreement, the dividends payable with respect thereto would not be in violation of Section 7.9, and is otherwise on terms and conditions satisfactory to the Administrative Agent; and (i) additional Indebtedness of the Borrower or any of its Subsidiaries in an aggregate principal amount (for the Borrower and all Subsidiaries) not to exceed $5,000,000 at any one time outstanding. 3 Liens. Create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired, except for: (a) Liens for taxes, assessments and other governmental charges not yet due or that are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business that, in the aggregate, are not substantial in amount and that do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; (c) pledges or deposits in connection with workers' compensation, unemployment insurance, social security and other similar legislation; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; 60 55 (e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not substantial in amount and that do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; (f) Liens in existence on the date hereof listed on Schedule 7.3(f), securing Indebtedness permitted by Section 7.2(d), provided that no such Lien is spread to cover any additional property after the Closing Date and that the principal amount of Indebtedness secured thereby is not increased; (g) Liens securing Indebtedness of the Borrower or any other Subsidiary incurred pursuant to Section 7.2(c) (and Liens associated with any immaterial intangibles related to the assets financed with such Indebtedness), provided that (i) such Liens shall be created substantially simultaneously with the acquisition or lease of the assets financed thereby, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (iii) the principal amount of Indebtedness secured thereby is not increased; (h) Liens created pursuant to the Security Documents; (i) any interest or title of a lessor under any lease entered into by the Borrower or any other Subsidiary in the ordinary course of its business and covering only the assets so leased; (j) deposits of money securing statutory obligations of the Borrower or any Subsidiary; (k) Liens arising by reason of any judgment, decree or order of any court or other Governmental Authority, if appropriate legal proceedings which may have been duly initiated for the review of such judgment, decree or order, are being diligently prosecuted and shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired and the amount of all such judgments, decrees and orders are in an aggregate amount not to exceed $1,000,000 at any one time outstanding; (l) deposits securing, or in lieu of, surety, appeal or customs bonds in proceedings to which the Borrower or any Subsidiary is a party; (m) cash deposits to secure the performance of the Borrower under any hedging agreements with respect to resin in the ordinary course of business for legitimate hedging purposes; and 61 56 (n) Liens not otherwise permitted by this Section 7.3 so long as the aggregate outstanding principal amount of the obligations secured thereby does not exceed (as to the Borrower and all Subsidiaries) $2,500,000 at any one time. 4 Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of, all or substantially all of its property or business, except: (a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any Wholly Owned Subsidiary Guarantor or into any Person which contemporaneously with such merger or consolidation is to become a Wholly Owned Subsidiary Guarantor (provided that the Wholly Owned Subsidiary Guarantor shall be the continuing or surviving corporation); and (b) any Subsidiary of the Borrower may Dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any Wholly Owned Subsidiary Guarantor or to the extent permitted by Section 7.5. 5 Disposition of Property. Dispose of any of its property (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person, except: (a) the Disposition of obsolete or worn out property in the ordinary course of business; (b) the sale of inventory in the ordinary course of business; (c) Dispositions permitted by Section 7.4(b); (d) the sale or issuance of any Subsidiary's Capital Stock to the Borrower or any Wholly Owned Subsidiary Guarantor; (e) the Dispositions set forth on Schedule 7.5; and (f) the Disposition of other property having a fair market value not to exceed $10,000,000 in the aggregate during the term of this Agreement. 62 57 6 Restricted Payments. Declare or pay any dividend (other than dividends payable solely in common stock of the Person making such dividend) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Capital Stock of the Borrower or any Subsidiary, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary (collectively, "Restricted Payments"); provided, that (i) any Subsidiary may make Restricted Payments to the Borrower or any Wholly Owned Subsidiary Guarantor, (ii) the Borrower may repurchase shares of its common stock or rights, options or units in respect thereof, from its officers and directors for an aggregate purchase price not to exceed $1,000,000 in any fiscal year, (iii) so long as no Default or Event of Default has occurred and is continuing, the Borrower may, at any time after January 1, 1999, otherwise repurchase shares of its common stock so long as (A) there are no Revolving Extensions of Credit outstanding at the time of such repurchase (other than outstanding L/C Obligations which have not become Reimbursement Obligations) and (B) after giving effect to such repurchase, Consolidated Net Worth at such time shall be an amount at least equal to the sum of (x) $52,000,000, (y) the aggregate amount of any Preferred Stock permitted to be issued pursuant to Section 7.2(h) which has been issued prior to the date of such repurchase and (z) 25% of the cumulative amount of any Consolidated Net Income since the Closing Date reflected on the financial statements of the Borrower which have been delivered pursuant to Section 6.1(a) on or prior to the date of such repurchase and (iv) so long as no Default or Event of Default has occurred and is continuing, the Borrower may make Restricted Payments up to $2,000,000 in any fiscal year with respect to Preferred Stock which has been issued in accordance with Section 7.2(h). 7 Capital Expenditures. Make or commit to make (by way of the acquisition of securities of a Person or otherwise) any Capital Expenditure, except Capital Expenditures of the Borrower and its Subsidiaries in the ordinary course of business not exceeding $15,000,000 in any fiscal year; provided, that (i) up to $5,000,000 of any such amount referred to above, if not so expended in the fiscal year for which it is permitted, may be carried over for expenditure in the next succeeding fiscal year and (ii) Capital Expenditures made pursuant to this clause (a) during any fiscal year shall be deemed made, first, in respect of amounts carried over from the prior fiscal year pursuant to subclause (i) above and, second, in respect of amounts permitted for such fiscal year as provided above. 8 Investments. Make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other securities of, or any assets constituting all or a material part of a business unit of, or make any other investment in, any Person (all of the foregoing, "Investments"), except: (a) extensions of trade credit in the ordinary course of business; (b) Investments in Cash Equivalents; (c) Guarantee Obligations permitted by Section 7.2; 63 58 (d) loans and advances to employees of the Borrower or any of its Subsidiaries in the ordinary course of business (including, without limitation, for travel, entertainment and relocation expenses) in an aggregate amount for the Borrower and its Subsidiaries not to exceed $100,000 with respect to any one employee and $500,000 in the aggregate at any one time outstanding; (e) Investments by the Borrower or any of its Subsidiaries in the Borrower or any Person that, prior to such investment, is a Wholly Owned Subsidiary Guarantor; (f) Investments by Seymour Housewares Corporation ("Seymour") in or to Seymour S.A. de C.V. (the "Mexican Subsidiary") in such amounts as are necessary to fund the working capital requirements of the Mexican Subsidiary in the ordinary course of business and to maintain level capital expenditure requirements of the Mexican Subsidiary; provided, that Seymour shall not permit cash or Cash Equivalents in excess of such immediate needs to be accumulated or held by the Mexican Subsidiary; (g) any Acquisition of any Person or business, either through the purchase of the assets (including the goodwill) of such Person or business or the purchase of 100% of the Capital Stock of such Person, if each of the following conditions is satisfied: (i) the Borrower would have been in compliance as of the last day (such day relating to any Acquisition, the "Related Test Date") of the most recently completed fiscal quarter for which financial statements are available, on a pro forma basis, with each of the financial covenants contained in Section 7.1 as if such Acquisition had been made on the first day of the Reference Period ending on the Related Test Date for such Acquisition, and if the Purchase Price for such Acquisition is greater than $10,000,000, the Borrower shall deliver to the Lenders 10 days prior to the consummation of such Acquisition a certificate of its chief financial officer, supported by detailed calculations, demonstrating such pro forma compliance; (ii) no Default or Event of Default has occurred and is continuing, or would occur after giving effect to such Acquisition (including, without limitation, under Section 7.1); (iii) such Acquisition shall be in compliance with Section 7.14; and (iv) any such Acquisition shall have been approved by the Board of Directors or such comparable governing body of the Person or business being acquired (all such Acquisitions, the "Permitted Acquisitions"); and (h) other Investments by the Borrower or any of its Subsidiaries in an aggregate amount (for the Borrower and all Subsidiaries) not to exceed $7,500,000 during the term of this Agreement. 9 Optional Payments and Modifications of Debt Instruments, etc. (a) Make or offer to make any payment, prepayment, repurchase or redemption of or otherwise defease or segregate funds (any such event or combination thereof referred to herein as a "Take-Out") with respect to the Senior Subordinated Notes (other than scheduled interest payments required to be made in cash); provided, that the Borrower may Take Out the Senior Subordinated Notes with 64 59 the proceeds of any issuance of Capital Stock by the Borrower (to the extent the issuance of such Capital Stock is permitted under Section 7.2), (b) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the Senior Subordinated Notes (other than any such amendment, modification, waiver or other change that (x) (i) would extend the maturity or reduce the amount of any payment of principal thereof or reduce the rate or extend the date for payment of interest thereon and (ii) does not involve the payment of a consent fee or (y) is administrative or corrective in nature and is not adverse to the interests of the Lenders) or (c) designate any Indebtedness (other than obligations of the Loan Parties pursuant to the Loan Documents) as "Designated Senior Indebtedness" for the purposes of the Senior Subordinated Note Indenture. 10 Transactions with Affiliates. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate (other than the Borrower or any Wholly Owned Subsidiary Guarantor) unless such transaction is (a) otherwise permitted under this Agreement, (b) in the ordinary course of business of the Borrower or such Subsidiary, as the case may be, and (c) upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person that is not an Affiliate; provided, that the Borrower and its Subsidiaries may (i) enter into transactions with Selfix Europe L.L.C. in the ordinary course of business and consistent in character with past practice, (ii) make loans and advances to employees permitted under Section 7.8(d), (iii) pay directors' fees to members of the Borrower's board of directors who are not employees of the Borrower, (iv) issue securities in connection with the Borrower's stock option plan to the extent such plan has been approved by the board of directors of the Borrower and (v) in the case of any Subsidiary, make payments to the Borrower pursuant to a tax sharing agreement. 11 Changes in Fiscal Periods. Permit the fiscal year of the Borrower to end on a day other than the last Saturday in December or change the Borrower's method of determining fiscal quarters. 12 Negative Pledge Clauses. Enter into or suffer to exist or become effective any agreement that prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired, other than (a) this Agreement and the other Loan Documents and (b) any agreements governing any purchase money Liens or Capital Lease Obligations otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby). 13 Clauses Restricting Subsidiary Distributions. Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary of the Borrower to (a) pay dividends or make any other distributions in respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any other Subsidiary of the Borrower, (b) make loans or advances to the Borrower or any other Subsidiary 65 60 of the Borrower or (c) transfer any of its assets to the Borrower or any other Subsidiary of the Borrower, except for such encumbrances or restrictions existing under or by reason of (i) any restrictions existing under the Loan Documents and (ii) any restrictions with respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection with the Disposition of all or substantially all of the Capital Stock or assets of such Subsidiary. 14 Lines of Business. Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement or that are reasonably related thereto. 8. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) the Borrower shall fail to pay any principal of any Loan or Reimbursement Obligation when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan or Reimbursement Obligation, or any other amount payable hereunder or under any other Loan Document, within five days after any such interest or other amount becomes due in accordance with the terms hereof; or (b) any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made; or (c) (i) any Loan Party shall default in the observance or performance of any agreement contained in clause (i) or (ii) of Section 6.4(a) (with respect to the Borrower only), Section 6.7(a) or Section 7 of this Agreement or (ii) an "Event of Default" under and as defined in any Mortgage shall have occurred and be continuing; or (d) any Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after notice from the Administrative Agent or the Required Lenders; or (e) the Borrower or any of its Subsidiaries shall (i) default in making any payment of any principal of any Indebtedness (including, without limitation, any Guarantee Obligation, but excluding the Loans) on the scheduled or original due date with respect thereto; or (ii) default in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) default in the observance or 66 61 performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating to such Indebtedness, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided, that a default, event or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $1,000,000; or (f) (i) the Borrower or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Borrower or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Borrower or any of its Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single 67 62 Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could, in the sole judgment of the Required Lenders, reasonably be expected to have a Material Adverse Effect; or (h) one or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $1,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or (i) any of the Security Documents shall cease, for any reason, to be in full force and effect, or any Loan Party or any Affiliate of any Loan Party shall so assert, or any Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or (j) the guarantee contained in Section 2 of the Guarantee and Collateral Agreement shall cease, for any reason, to be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall so assert; or (k) (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than the Permitted Investors shall become, or obtain rights (whether by means or warrants, options or otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 25% of the outstanding common stock of the Borrower; (ii) the board of directors of the Borrower shall cease to consist of a majority of Continuing Directors; or (iii) a Specified Change of Control shall occur; or (l) the Senior Subordinated Notes or the guarantees thereof shall cease, for any reason, to be validly subordinated to the Obligations or the obligations of the Subsidiary Guarantors under the Guarantee and Collateral Agreement, as the case may be, as provided in the Senior Subordinated Note Indenture, or any Loan Party, any Affiliate of any Loan Party, the trustee in respect of the Senior Subordinated Notes or the holders of at least 25% in aggregate principal amount of the Senior Subordinated Notes shall so assert; 68 63 then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Borrower, automatically the Revolving Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) unless and to the extent previously cured or waived, with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Revolving Commitments to be terminated forthwith, whereupon the Revolving Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to this paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under the other Loan Documents. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Borrower hereunder and under the other Loan Documents shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower (or such other Person as may be lawfully entitled thereto). Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrower. 69 64 9. THE ADMINISTRATIVE AGENT 1 Appointment. Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. 2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. 3 Exculpatory Provisions. Neither the Administrative Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable to any Lender for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party a party thereto to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party. 4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel 70 65 (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan 71 66 Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 7 Indemnification. The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Aggregate Exposure Percentages in effect on the date on which indemnification is sought under this Section 9.7 (or, if indemnification is sought after the date upon which the Revolving Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with such Aggregate Exposure Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of, the Revolving Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the Administrative Agent's gross negligence or willful misconduct. The Administrative Agent shall have the right to deduct any amount owed to it by any Lender under this Section from any payment made by it to such Lender hereunder. The agreements in this Section 9.7 shall survive the payment of the Loans and all other amounts payable hereunder. 8 Administrative Agent in Its Individual Capacity. The Administrative Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Loan Party as though the Administrative Agent was not the Administrative Agent. With respect to its Loans made or renewed by it and with respect to any Letter of Credit issued or participated in by it, the Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity. 9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 10 days' notice to the Lenders and the Borrower. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless an Event of Default under Section 8(a) 72 67 or Section 8(f) with respect to the Borrower shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is 10 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents. 10 Authorization to Release Liens. The Administrative Agent is hereby irrevocably authorized by each of the Lenders to release any Lien covering any property of the Borrower or any of its Subsidiaries that is the subject of a Disposition or to release the guarantee of any Subsidiary Guarantor which is the subject of a fundamental change permitted by Section 7.4, in either case, that is permitted by this Agreement or that has been consented to in accordance with Section 10.1. 73 68 MISCELLANEOUS 1 Amendments and Waivers. Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 10.1. The Required Lenders and each Loan Party party to the relevant Loan Document may, or, with the written consent of the Required Lenders, the Administrative Agent and each Loan Party party to the relevant Loan Document may, from time to time, (a) enter into written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) forgive or reduce the principal amount or extend the final scheduled date of maturity of any Loan, reduce the stated rate of any interest or fee payable hereunder, or increase the amount or extend the expiration date of any Lender's Revolving Commitment, in each case without the consent of each Lender directly affected thereby; (ii) amend, modify or waive any provision of this Section 10.1 or reduce any percentage specified in the definition of Required Lenders, consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, release all or substantially all of the Collateral or release all or substantially all of the Subsidiary Guarantors from their obligations under the Guarantee and Collateral Agreement, in each case without the written consent of all Lenders; (iii) amend, modify or waive any provision of Section 9 without the written consent of the Administrative Agent; (iv) amend, modify or waive any provision of Section 2.3 or 2.4 without the written consent of the Swingline Lender; or (v) amend, modify or waive any provision of Section 3 without the written consent of each of the Issuing Lenders. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows in the case of the Borrower and the Administrative Agent, and as set forth in an administrative questionnaire delivered to the Administrative Agent in the case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto: 74 69 The Borrower: Home Products International, Inc. 4501 West 47th Street Chicago, Illinois 60632 Attention: James E. Winslow, Executive Vice President and Chief Financial Officer Telecopy: (773) 890-0523 Telephone: (773) 890-8904 The Administrative Agent: The Chase Manhattan Bank The Loan and Agency Services Group One Chase Manhattan Plaza 8th Floor New York, New York 10081 Attention: Margaret Swales Telecopy: (212) 552-5662 Telephone: (212) 552-7472 with a copy to: The Chase Manhattan Bank 10 South Lasalle Street 23rd Floor Chicago, Illinois 60603 Attention: Jonathan Twichell Telecopy: (312) 807-4550 Telephone: (312) 807-4038 in the case of Letters of Credit, with a copy to: Chase Manhattan Bank Delaware Corporate Banking Department 1201 Market Street Wilmington, Delaware 19801 Attention: Michael Handago Telecopy: (302) 428-3390 Telephone: (302) 428-3311
provided that any notice, request or demand to or upon the Administrative Agent or the Lenders shall not be effective until received. 3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or 75 70 privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans and other extensions of credit hereunder. 5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent and filing and recording fees and expenses, with statements with respect to the foregoing to be submitted to the Borrower prior to the Closing Date (in the case of amounts to be paid on the Closing Date) and from time to time thereafter on a quarterly basis or such other periodic basis as the Administrative Agent shall deem appropriate, (b) to pay or reimburse each Lender and the Administrative Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including, without limitation, the fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to each Lender and of counsel to the Administrative Agent, (c) to pay, indemnify, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, that may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and the Administrative Agent and their respective officers, directors, employees, affiliates, agents and controlling persons (each, an "Indemnitee") harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents, including, without limitation, any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower or any of its Subsidiaries or any of the Properties (all the foregoing in this clause (d), collectively, the "Indemnified Liabilities"), provided, that the Borrower shall have no obligation hereunder to any Indemnitee (x) with respect to Indemnified Liabilities to the extent such Indemnified Liabilities resulted from the gross negligence or willful misconduct of such Indemnitee, (y) with respect to any proceeding initiated by the Administrative Agent against any Lender or by any Lender against the Administrative Agent or any other Lender or (z) to the extent arising in connection with any action by or on behalf of the Borrower against such 76 71 Indemnitee where the Borrower is found to be the prevailing party pursuant to a final and nonappealable decision of a court of competent jurisdiction. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries to so waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them might have by statute or otherwise against any Indemnitee. The agreements in this Section 10.5 shall survive repayment of the Loans and all other amounts payable hereunder. 6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Administrative Agent, all future holders of the Loans and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (a) Any Lender may, without the consent of the Borrower, in accordance with applicable law, at any time sell to one or more banks, financial institutions or other entities (each, a "Participant") participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. In no event shall any Participant under any such participation have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Loans or any fees payable hereunder, or postpone the date of the final maturity of the Loans, in each case to the extent subject to such participation. The Borrower agrees that if amounts outstanding under this Agreement and the Loans are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in Section 10.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 with respect to its participation in the Revolving Commitments and the Loans outstanding from time to time as if it was a Lender; provided that, in the case of Section 2.16, such Participant shall have complied with the requirements of said Section and provided, further, that no Participant shall be entitled to receive any greater amount 77 72 pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (b) Any Lender (an "Assignor") may, in accordance with applicable law, at any time and from time to time assign to any Lender or any affiliate thereof or, with the consent of the Borrower and the Administrative Agent (which, in each case, shall not be unreasonably withheld or delayed), to an additional bank, financial institution or other entity (an "Assignee") all or any part of its rights and obligations under this Agreement pursuant to an Assignment and Acceptance, substantially in the form of Exhibit E, executed by such Assignee, such Assignor and any other Person whose consent is required pursuant to this Section 10.6(c), and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that no such assignment to an Assignee (other than any Lender or any affiliate thereof) shall be in an aggregate principal amount of less than $5,000,000 (other than in the case of an assignment of all of a Lender's interests under this Agreement), unless otherwise agreed by the Borrower and the Administrative Agent. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment and/or Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of an Assignor's rights and obligations under this Agreement, such Assignor shall cease to be a party hereto). Notwithstanding any provision of this Section 10.6, the consent of the Borrower shall not be required for any assignment that occurs when an Event of Default pursuant to Section 8(f) shall have occurred and be continuing with respect to the Borrower. (c) The Administrative Agent shall maintain at its address referred to in Section 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Revolving Commitment of, and the principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, each other Loan Party, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of the Loans and any Notes evidencing the Loans recorded therein for all purposes of this Agreement. Any assignment of any Loan, whether or not evidenced by a Note, shall be effective only upon appropriate entries with respect thereto being made in the Register (and each Note shall expressly so provide). Any assignment or transfer of all or part of a Loan evidenced by a Note shall be registered on the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Loan, accompanied by a duly executed Assignment and Acceptance, and thereupon one or more new Notes shall be issued to the designated Assignee. (d) Upon its receipt of an Assignment and Acceptance executed by an Assignor, an Assignee and any other Person whose consent is required by Section 10.6(c), together with 78 73 payment to the Administrative Agent of a registration and processing fee of $4,000, the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) record the information contained therein in the Register on the effective date determined pursuant thereto. (e) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section 10.6 concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. (f) The Borrower agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (f) above. 7 Adjustments; Set-off. (a) If any Lender (a "Benefitted Lender") shall at any time receive any payment of all or part of the Obligations owing to it, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 8(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of the Obligations owing to such other Lender, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of the Obligations owing to each such other Lender, or shall provide such other Lenders with the benefits of any such collateral, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. (a) In addition to any rights and remedies of the Lenders provided by law, each Lender shall upon the occurrence and during the continuance of an Event of Default have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise), to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any Affiliate, branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application. Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken 79 74 together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. 9 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10 Integration. This Agreement and the other Loan Documents represent the agreement of the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. 11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 12 Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in Section 10.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; 80 75 (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section 10.12 any special, exemplary, punitive or consequential damages. 13 Acknowledgements. The Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between Administrative Agent and Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. 14 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 81 76 15 Confidentiality. Each of the Administrative Agent and each Lender agrees to keep confidential all non-public information provided to it by any Loan Party pursuant to this Agreement that is designated by such Loan Party as confidential; provided that nothing herein shall prevent the Administrative Agent or any Lender from disclosing any such information (a) to the Administrative Agent, any other Lender or any affiliate of any Lender, (b) to any Transferee or prospective Transferee that agrees to comply with the provisions of this Section 10.15, (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates that agree to comply with this Section 10.15, (d) upon the request or demand of any Governmental Authority, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, in which case the Administrative Agent or such Lender shall give notice of such order to the Borrower, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) that has been publicly disclosed, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender, or (i) in connection with the exercise of any remedy hereunder or under any other Loan Document. 82 77 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. HOME PRODUCTS INTERNATIONAL, INC. By: -------------------------------------- Name: Title: THE CHASE MANHATTAN BANK, as Administrative Agent and as a Lender By:---------------------------------------- Name: Title: 83 Annex A PRICING GRID FOR REVOLVING LOANS, SWINGLINE LOANS, AND COMMITMENT FEES
Consolidated Total Applicable Margin Applicable Margin Leverage Ratio for Eurodollar Loans for ABR Loans Commitment Fee Rate Greater than or equal to 4.75 to 1.00 2.00% 1.00% .50% Less than 4.75 to 1.00 and greater than or equal to 3.75 to 1.00 1.75% .75% .50% Less than 3.75 to 1.00 1.50% .50% .375%
Changes in the Applicable Margin with respect to Revolving Loans or Swingline Loans or in the Commitment Fee Rate resulting from changes in the Consolidated Total Leverage Ratio shall become effective on the date (the "Adjustment Date") on which financial statements are delivered to the Lenders pursuant to Section 6.1 (but in any event not later than the 45th day after the end of each of the first three quarterly periods of each fiscal year or the 90th day after the end of each fiscal year, as the case may be) and shall remain in effect until the next change to be effected pursuant to this paragraph. If any financial statements referred to above are not delivered within the time periods specified above, then, until such financial statements are delivered, if the Administrative Agent or the Required Lenders so determine, the Consolidated Total Leverage Ratio as at the end of the fiscal period that would have been covered thereby shall for the purposes of this definition be deemed to be greater than 4.75 to 1.00. In addition, at all times while an Event of Default shall have occurred and be continuing and the Administrative Agent or the Required Lenders so determine, the Consolidated Total Leverage Ratio shall for the purposes of this definition be deemed to be greater than 4.75 to 1.00. Each determination of the Consolidated Total Leverage Ratio pursuant to this definition shall be made with respect to the period of four consecutive fiscal quarters of the Borrower ending at the end of the period covered by the relevant financial statements. EX-12.1.1 15 STATEMENT REGARDING COMPUTATION 1 EXHIBIT 12.1.1 HOME PRODUCTS INTERNATIONAL, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES FOR THE FIVE YEARS ENDED DECEMBER 27, 1997 AND THE THIRTEEN WEEKS ENDED MARCH 28, 1998
THIRTEEN WEEKS YEAR ENDED ENDED ------------------------------------------------------------------------ ----------- DECEMBER 25, DECEMBER 31, DECEMBER 30, DECEMBER 28, DECEMBER 27, MARCH 28, 1993 1994 1995 1996 1997 1998 ------------ ------------ ------------ ------------ ------------ ----------- (DOLLARS IN THOUSANDS) EARNINGS: Earnings (loss) before interest, income taxes, extraordinary charge, and cumulative effect of change in accounting principles $ 3,119 $ (4,783) $ (3,387) $ 1,513 $ 12,818 $ 5,150 Portion of rent expense representing interest 105 133 127 118 395 151 ------- -------- -------- ------- -------- ------- Total earnings $ 3,224 $ (4,650) $ (3,260) $ 1,631 $ 13,213 $ 5,301 ======= ======== ======== ======= ======== ======= FIXED CHARGES: Interest expense $ 1,066 $ 999 $ 896 $ 707 $ 5,152 $ 3,006 Capitalized interest - - - - - - Portion of rent expense representing interest 105 133 127 118 395 151 ------- -------- -------- ------- -------- ------- Total fixed charges $ 1,171 $ 1,132 $ 1,023 $ 825 $ 5,547 $ 3,157 ======= ======== ======== ======= ======== ======= RATIO OF EARNINGS TO FIXED CHARGES: 2.8 - (a) - (a) 2.0 2.4 1.7 ======= ======== ======== ======= ======== =======
(a) The 1994 and 1995 coverage deficiencies were $5.8 million and $4.3 million, respectively. EX-23.1.1 16 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.1.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports included in this registration statement and to the incorporation by reference in this registration statement of our reports dated February 6, 1998 included in the Company's Form 10-K for the year ended December 27, 1997 and to all references to our Firm included in this registration statement. ARTHUR ANDERSEN, LLP Chicago, Illinois June 8, 1998 EX-23.1.2 17 CONSENT OF GRANT THORTON LLP 1 EXHIBIT 23.1.2 CONSENT OF INDEPENDENT ACCOUNTANTS We have issued our report dated February 9, 1996 accompanying the consolidated financial statements of Home Products International, Inc. (formerly "Selfix, Inc.") ended December 30, 1995. We consent to the use of the above report in the Registration Statement of Home Products International, Inc. (formerly "Selfix, Inc.") on Form S-4 and to the use of our name as it appears under the caption "Experts." GRANT THORNTON LLP Chicago, Illinois June 8, 1998 EX-23.1.3 18 CONSENT OF ERNST & YOUNG LLP 1 EXHIBIT 23.1.3 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated August 15, 1997 (except Note 11, as to which the date is December 30, 1997), with respect to the consolidated financial statements of Seymour Sales Corporation and subsidiaries in the Registration Statement (Form S-4) and the related Prospectus of Home Products International, Inc. for the registration of $125,000,000 of its 9 5/8 % Senior Subordinated Notes due 2008. Ernst & Young LLP Indianapolis, Indiana June 5, 1998 EX-25.1.1 19 STATEMENT OF ELIGIBLITY OF TRUSTEE 1 EXHIBIT 25.1.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM T-1 STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ----------------------- LASALLE NATIONAL BANK (Exact name of trustee as specified in its charter) 36-0884183 (I.R.S. Employer Identification No.) 135 South LaSalle Street, Chicago, Illinois 60603 (Address of principal executive offices) (Zip Code) ----------------------- M. ROBERT K. QUINN Group Senior Vice President General Counsel and Secretary Telephone: (312) 904-2010 135 South LaSalle Street Chicago, Illinois 60603 (Name, address and telephone number of agent for service) ----------------------- HOME PRODUCTS INTERNATIONAL, INC. (Exact name of obligor as specified in its charter) Delaware 36-4147027 (State or other jurisdiction (I.R.S. Employer incorporation or organization) Identification No.) 4501 West 47th Street Chicago, Illinois 60632 (Address of Principal Executive Offices) (Zip Code) ----------------------- $125,000,000 9 5/8% Senior Subordinated Notes Due 2008 (Title of the indenture securities) 2 ITEM 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. 1. Comptroller of the Currency, Washington D.C. 2. Federal Deposit Insurance Corporation, Washington, D.C. 3. The Board of Governors of the Federal Reserve Systems, Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS. If the obligor or any underwriter for the obligor is an affiliate of the trustee, describe each such affiliation. Neither the obligor nor any underwriter for the obligor is an affiliate of the trustee. ITEM 3. VOTING SECURITIES OF THE TRUSTEE. Furnish the following information as to each class of voting securities of the trustee: Not applicable ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES. If the trustee is a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the obligor are outstanding, furnish the following information: (a) Title of the securities outstanding under each other indenture. Not applicable (b) A brief statement of the facts relied upon as a basis for the claim that no conflicting interest within the meaning of Section 310(b)(1) of the Act arises as a result of the trusteeship under such other indenture, including a statement as to how the indenture securities will rank as compared with the securities issued under such other indenture. Not applicable 3 ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR UNDERWRITERS. If the trustee or any of the directors or executive officers of the trustee is a director, officer, partner, employee, appointee, or representative of the obligor or of any underwriter for the obligor, identify each such person having any such connection and state the nature of each such connection. Not applicable ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS. Furnish the following information as to the voting securities of the trustee owned beneficially by the obligor and each director, partner and executive officer of the obligor. Not applicable ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR OFFICIALS. Furnish the following information as to the voting securities of the trustee owned beneficially by each underwriter for the obligor and each director, partner, and executive officer of each such underwriter. Not applicable ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE. Furnish the following information as to securities of the obligor owned beneficially or held as collateral security for obligations in default by the trustee: Not applicable ITEM 9. SECURITIES OF THE UNDERWRITER OWNED OR HELD BY THE TRUSTEE. If the trustee owns beneficially or holds as collateral security for obligations in default any securities of an underwriter for the obligor, furnish the following information as to each class of securities of such underwriter any of which are so owned or held by the trustee. Not applicable ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR. If the trustee owns beneficially or holds as collateral security for obligations in default voting securities of a person who, to the knowledge of the trustee (1) owns 10 percent or more of the voting securities of the obligor or (2) is an affiliate, other than a subsidiary, of the obligor, furnish the following information as to the voting securities of such person. Not applicable 4 ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR. If the trustee owns beneficially or holds as collateral security for obligations in default any securities of a person who, to the knowledge of the trustee, owns 50 percent or more of the voting securities of the obligor, furnish the following information as to each class of securities of such person any of which are so owned or held by the trustee. Not applicable ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE. If the obligor is indebted to the trustee, furnish the following information. Not applicable ITEM 13. DEFAULTS BY THE OBLIGOR. a) State whether there is or has been a default with respect to the securities under this indenture. Explain the nature of any such default. Not applicable b) If the trustee is a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the obligor are outstanding, or is trustee for more than one outstanding series of securities under the indenture, state whether there has been a default under any such indenture or series, identify the indenture or series affected, and explain the nature of any such default. Not applicable ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS. If any underwriter is an affiliate of the trustee, describe each such affiliation. Not applicable ITEM 15. FOREIGN TRUSTEE. Identify the order or rule pursuant to which the foreign trustee is authorized to act as sole trustee under indentures qualified or to be qualified. Not applicable ITEM 16. LIST OF EXHIBITS. List below all exhibits filed as part of this statement of eligibility and qualification. 1. A copy of the Articles of Association of LaSalle National Bank now in effect. 2. A copy of the certificate of authority to commence business. 3. A copy of the authorization to exercise corporate trust powers. 4. A copy of the existing By-Laws of LaSalle National Bank. 5 5. Not applicable. 6. The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939. 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. 6 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, LaSalle National Bank, a corporation organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago, State of Illinois, on the 21st day of April, 1997. LASALLE NATIONAL BANK By: /s/ Sarah H. Webb ----------------- Sarah H. Webb FirstVice President 7 EXHIBIT 1 ARTICLES OF ASSOCIATION LA SALLE NATIONAL BANK (LOGO) LA SALLE NATIONAL BANK CHICAGO, ILLINOIS 8 (LOGO) LaSalle National Bank ARTICLES OF ASSOCIATION FIRST. The title of this association, which shall carry on the business of banking under the laws of the United States shall be "LaSalle National Bank." SECOND. The place where the main banking house or office of this association shall be located, its operations of discount and deposit carried on, and its general business conducted, shall be Chicago, County of Cook, State of Illinois. THIRD. The Board of Directors of this association shall consist of such number of its shareholders, not less than five nor more than twenty-five, as from time to time shall be determined by a majority of the votes to which all of its shareholders are at the time entitled. A majority of the Board of Directors shall be necessary to constitute a quorum for the transaction of business. The Board of Directors, by vote of a majority of the full board, may, between annual meetings of shareholders increase the membership of the Board where the number of directors last elected by shareholders was 15 or less, by not more than two members, and where the number of directors last elected by shareholders was 16 or more, by not more than four members and by a like vote appoint qualified persons to fill the vacancies created thereby; provided that the number of Directors shall at no time exceed twenty-five. FOURTH. The regular annual meeting of the shareholders of this association shall be held at its main banking house, or other convenient place duly authorized by the board of directors on such day of each year as is specified therefor in the bylaws. FIFTH. The amount of capital stock which this association is authorized to issue shall be Twenty Million Dollars ($20,000,000.00) divided into 2,000,000 shares of common capital stock of the par value of $10.00 each; but said capital stock may be increased or decreased from time to time, in accordance with the provisions of the laws of the United States. If the capital stock is increased by the sale of additional shares thereof, other than to key officers and employees of the association upon the exercise of options granted pursuant to the terms of a stock option plan then in effect, as to which sales all pre-emptive rights are waived, each shareholder shall be entitled to subscribe for such additional shares in proportion to the number of shares of said capital stock owned by him at the time the increase is authorized by the shareholders, unless another time subsequent to the date of the shareholders' meeting is specified in a resolution adopted by the shareholders at the time the increase is authorized. The board of directors shall have the power to prescribe a reasonable period of time within which the pre-emptive rights to subscribe to the new shares of capital stock may be exercised. The association, at any time and from time to time, may authorize and issue debt obligations, whether or not subordinated, without the approval of the shareholders. SIXTH. The board of directors shall appoint one of its members president of this association, who shall be chairman of the board, but the board of directors may appoint a director in lieu of the president to be chairman of the board, who shall perform such duties as may be designated by the board of directors. The board of directors shall have the power to appoint one or more vice presidents, a cashier and such other officers as may be required to transact the business of this association; to fix the salaries to be paid to all officers of this association; and to dismiss such officers, or any of them. 9 The board of directors shall have the power to define the duties of officers and employees of this association, to require bonds from them, and to fix the penalty thereof; to regulate the manner in which directors shall be elected or appointed, and to appoint judges of the election; to make all bylaws that it may be lawful for them to make for the general regulation of the business of this association and the management of its affairs; and generally to do and perform all acts that it may be lawful for a board of directors to do and perform. SEVENTH. This association shall have succession from the date of its organization certificate until such time as it be dissolved by act of its shareholders in accordance with the provisions of the banking laws of the United States, or until its franchise becomes forfeited by reason of violation of law, or until terminated by either a general or a special act of Congress, or until its affairs be placed in the hands of a receiver and finally wound up by him. EIGHTH. The board of directors of this association, or any three or more shareholders owning, in the aggregate, not less than ten percentum of the stock of this association, may call a special meeting of shareholders at any time: Provided, however, that, unless otherwise provided by law, not less than ten days prior to the date fixed for any such meeting, a notice of the time, place, and purpose of the meeting shall be given by first-class mail, postage prepaid, to all shareholders of record of this association at their respective addresses as shown upon the books of the association. These articles of association may be amended at any regular or special meeting of the shareholders by the affirmative vote of the shareholders owning at least a majority of the stock of this association, subject to the provisions of the banking laws of the United States. The notice of any shareholders' meeting, at which an amendment to the articles of association of this association is to be considered, shall be given as herein-above set forth. NINTH. Any person, his heirs, executors, or administrators, may be indemnified or reimbursed by the association for reasonable expenses actually incurred in connection with any action, suit, or proceeding, civil or criminal, to which he or they shall be made a party by reason of his being or having been a director, officer, or employee of the association or of any firm, corporation, or organization which he served in any such capacity at the request of the association: Provided, however, that no person shall be so indemnified or reimbursed in relation to any matter in such action, suit, or proceeding as to which he shall finally be adjudged to have been guilty of or liable for negligence or wilful misconduct in the performance of his duties to the association: And, provided further, that no person shall be so indemnified or reimbursed in relation to any matter in such action, suit, or proceeding which has been made the subject of a compromise settlement except with the approval of a court of competent jurisdiction, or the holders of record of a majority of the outstanding shares of the association, or the board of directors, acting by vote of directors not parties to the same or substantially the same action, suit, or proceeding, constituting a majority of the whole number of the directors. The foregoing right of indemnification or reimbursement shall not be exclusive of other rights to which such person, his heirs, executors, or administrators, may be entitled as a matter of law. ******** May 17, 1982 Form No. 181, Rev 5/17/82 GW 10 EXHIBIT 2 CERTIFICATE OF AUTHORITY TO COMMENCE BUSINESS 11 STATE OF ILLINOIS AUDITOR'S OFFICE NO. 333 (LOGO) NATIONAL BANK TRUST CERTIFICATE Springfield, FEBRUARY 15th 1928 I, OSCAR NELSON, Auditor of Public Accounts of the State of Illinois, do hereby certify that the NATIONAL BUILDERS BANK OF CHICAGO located at CHICAGO, County of COOK and State of Illinois, a corporation organized under and by authority of the statutes of the United States governing National Banks and authority granted by the Federal Reserve Act for the purpose of accepting and executing trusts, has this day deposited in this office, securities in the sum of TWO HUNDRED THOUSAND Dollars, $200,000.00 of the character designated by Section 6 of the Act of the Legislature of the State of Illinois entitled "An Act to provide for and regulate the administration of trusts by trust companies," The said deposit is made for the benefit of the creditors of said NATIONAL BUILDERS BANK OF CHICAGO under and by virtue of the provisions of the Act above referred to and the said securities are now held by me in this office in my official capacity as such Auditor of Public Accounts, for the uses and purposes aforesaid. I further certify that by virtue of the Acts aforesaid, the NATIONAL BUILDERS BANK OF CHICAGO is hereby authorized to accept and execute trusts and receive deposits of trust funds under the provisions and limitations of "An Act to provide for and regulate the administration of trusts in Illinois. IN TESTIMONY WHEREOF, I hereunto subscribe my name and (SEAL) affix the seal of my office, the day and year first above written. /s/ Oscar Nelson --------------------------- AUDITOR OF PUBLIC ACCOUNTS. STATE OF ILLINOIS. 12 NO. 13146. TREASURY DEPARTMENT (LOGO) OFFICE OF COMPTROLLER OF THE CURRENCY Washington, D.C., NOVEMBER 29, 1927. WHEREAS, by satisfactory evidence presented to the undersigned, it has been made to appear that "NATIONAL BUILDERS BANK OF CHICAGO" in the CITY of CHICAGO in the County of COOK and State of ILLINOIS has complied with all the provisions of the Statutes of the United States, required to be complied with before an association shall be authorized to commence the business of Banking; NOW THEREFORE I, J.W. MCINTOSH, Comptroller of the Currency, do hereby certify that "NATIONAL BUILDERS BANK OF CHICAGO" in the CITY of CHICAGO in the County of COOK and State of ILLINOIS is authorized to commence the business of Banking as provided in Section Fifty one hundred and sixty nine of the Revised Statutes of the United States. IN TESTIMONY WHEREOF witness my hand and Seal of (SEAL) (SEAL) office this TWENTY-NINTH day of NOVEMBER, 1927. /s/ J.W. McIntosh --------------------------- Comptroller of the Currency 13 CERTIFICATE OF CHANGE OF CORPORATE TITLE (LOGO) NO. 13146. TREASURY DEPARTMENT OFFICE OF THE COMPTROLLER OF THE CURRENCY WASHINGTON, D.C., MAY 1, 1940. WHEREAS, by satisfactory evidence presented to me, it appears that under authority of sections 2, 3, and 4, of the Act of Congress approved May 1, 1886, entitled "An Act to enable national banking associations to increase their capital stock and to change their names or location," shareholders owning two-thirds of the stock of the national banking association heretofore known as-- "NATIONAL BUILDERS BANK OF CHICAGO," located in CHICAGO, County of COOK, State of ILLINOIS, have voted to change the name of said association to-- "LASALLE NATIONAL BANK," and have complied with all the provisions of the said Act relative to national banking associations changing their name. NOW, THEREFORE, IT IS HEREBY CERTIFIED, that the name of the said association has been changed to-- "LASALLE NATIONAL BANK," and that such change of name is hereby approved under authority conferred by said Act. (SEAL) IN TESTIMONY WHEREOF, witness my hand and seal of office this FIRST day of MAY, 1940. /s/ ----------------------------------- ACTING Comptroller of the Currency. 14 EXHIBIT 3 AUTHORIZATION TO EXERCISE CORPORATE TRUST POWERS 15 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM [LETTERHEAD] WASHINGTON May 9, 1940 LaSalle National Bank, Chicago, Illinois. Gentlemen: The Board of Governors of the Federal Reserve System has been officially advised by the Comptroller of the Currency that on May 1, 1940, National Builders Bank of Chicago, Chicago, Illinois, changed its title to LaSalle National Bank, and accordingly there is enclosed herewith a certificate showing that LaSalle National Bank has authority to exercise the fiduciary powers enumerated therein. Kindly acknowledge receipt of this certificate. Very truly yours, S. R. Carpenter -------------------------- S. R. Carpenter, Assistant Secretary. Enclosure 16 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON I, S. R. Carpenter, Assistant Secretary of the Board of Governors of the Federal Reserve System (formerly known as the Federal Reserve Board), do hereby certify that it appears from the records of the Board of Governors of the Federal Reserve System that: (1) Pursuant to the authority vested in the Federal Reserve Board by an Act of Congress approved December 23, 1913, known as the Federal Reserve Act, as amended, the Federal Reserve Board on December 8, 1927, granted to National Builders Bank of Chicago, Chicago, Illinois, the right to act, when not in contravention of State or local law, as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies or other corporations which come into competition with national banks are permitted to act under the laws of the State of Illinois; (2) Under the provisions of an Act of Congress approved May 1, 1886, National Builders Bank of Chicago, Chicago, Illinois, on May 1, 1940, changed its title to LaSalle National Bank; and (3) By virtue of the foregoing, LaSalle National Bank, Chicago, Illinois, has authority to act, when not in contravention of State or local law, as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies or other corporations which come into competition with national banks are permitted to act under the laws of the State of Illinois, subject to regulations prescribed by the Board of Governors of the Federal Reserve System. IN WITNESS WHEREOF, I have hereunto subscribed my name and caused the seal of the Board of Governors of the Federal Reserve System to be affixed at the City of Washington in the District of Columbia. /s/ S. R. Carpenter -------------------- Assistant Secretary. Dated May 9, 1940 17 EXHIBIT 4 BYLAWS OF LA SALLE NATIONAL BANK CHICAGO, ILLINOIS LA SALLE NATIONAL BANK (LOGO) Organized Under the National Banking Laws of the United States 18 BYLAWS of the LA SALLE NATIONAL BANK (a National Banking Association which association is herein referred to as the "bank") ARTICLE I MEETINGS OF SHAREHOLDERS SECTION 1.1. ANNUAL MEETING. The regular annual meeting of the shareholders for the election of directors and the transaction of whatever other business may properly come before the meeting, shall be held at the main office of the Bank, 135 South LaSalle Street, Chicago, Illinois, or such other place as the Board of Directors may designate, at 9:00 A.M., on the third Wednesday of March of each year. Notice of such meeting shall be mailed, postage prepaid, at least ten days prior to the date thereof, addressed to each shareholder at his address appearing on the books of the Bank. If for any cause, an election of directors is not made on the said day, the Board of Directors shall order the election to be held on some subsequent day as soon thereafter as practicable, according to the provisions of law; and notice thereof shall be given in the manner herein provided for the annual meeting. SECTION 1.2. SPECIAL MEETINGS. Except as otherwise specifically provided by statute, special meetings of the shareholders may be called for any purpose at anytime by the board of directors or by any three or more shareholders owning, in the aggregate, not less than ten percent of the stock of the bank. Every such special meeting, unless otherwise provided by law, shall be called by mailing, postage pre-paid, not less than ten days prior to the date fixed for such meeting, to each shareholder at his address appearing on the books of the bank, a notice stating the purpose of the meeting. SECTION 1.3. NOMINATIONS FOR DIRECTOR. Nominations for election to the board of directors may be made by the board of directors or by any shareholder of any outstanding class of capital stock of the bank entitled to vote for the election of directors. Nominations, other than those made by or on behalf of the existing management of the bank, shall be made in writing and shall be delivered or mailed to the president of the bank and to the Comptroller of the Currency, Washington, D.C., not less than 14 days nor more than 50 days prior to any meeting of shareholders called for the election of directors, provided, however, that if less than 21 days' notice of the meeting is given to the shareholders, such nomination shall be mailed or delivered to the president of the bank and to the Comptroller of the Currency not later than the close of business on the seventh day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known to the notifying shareholder: (a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the total number of shares of capital stock of each proposed nominee; (d) the name and address of the notifying shareholder; and (e) the number of shares of capital stock of the bank owned by the notifying shareholder. Nominations not made in accordance herewith, may, in his discretion, be disregarded by the chairman of the meeting, and upon his instructions, the vote tellers may disregard all votes cast for each such nominee. SECTION 1.4. JUDGES OF ELECTION. Every election of directors shall be managed by three judges, who shall be appointed by the board of directors prior lo the time of said election. The 19 judges of election shall hold and conduct the election at which they are appointed to serve; and after the election, they shall file with the cashier a certificate under their hands, certifying the result thereof and the names of the directors elected. The judges of election. at the request of the chairman of the meeting, shall act as tellers of any other vote by ballot taken at such meeting, and shall certify the result thereof. SECTION 1.5. PROXIES. Shareholders may vote at any meeting of the shareholders by proxies duly authorized in writing, but no officer or employee of this bank shall act as proxy. Proxies shall be valid only for one meeting, to be specified therein, and any adjournments of such meeting. Proxies shall be dated and shall be filed with the records of the meeting. SECTION 1.6. QUORUM. A majority of the outstanding capital stock, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, unless otherwise provided by law; but less than a quorum may adjourn any meeting, from time to time, and the meeting may be held, as adjourned, without further notice. A majority of the votes cast shall decide every question or matter submitted to the shareholders at any meeting, unless otherwise provided by law or by the articles of association. ARTICLE II DIRECTORS SECTION 2.1. BOARD OF DIRECTORS. The board of directors (hereinafter referred to as the "board"), shall have power to manage and administer the business affairs of the bank. Except as expressly limited by law, all corporate powers of the bank shall be vested in and may be exercised by said board. SECTION 2.2. NUMBER. The board shall consist of not less than five or more than twenty-five shareholders, the exact number within such minimum and maximum limits to be fixed and determined from time to time by resolution of a majority of the full board or by resolution of the shareholders at any meeting thereof; provided, however, that a majority of the full board may not increase the number of directors by more than two if the number of directors last elected by shareholders was fifteen or less and by not more than four where the number of directors last elected by shareholders was sixteen or more, provided that in no event shall the number of directors exceed twenty-five. SECTION 2.3. ORGANIZATION MEETING. The cashier, upon receiving the certificate of the judges, of the result of any election, shall notify the directors-elect of their election and of the time at which they are required to meet at the main office of the bank for the purpose of organizing the new board and electing and appointing officers of the bank for the succeeding year. Such meeting shall be appointed to be held on the day of election or as soon thereafter as practicable, and, in any event, within thirty days thereof. If, at the time fixed for such meeting, there shall not be a quorum present the directors present may adjourn the meeting, from time to time, until a quorum is obtained. SECTION 2.4 REGULAR MEETINGS. The regular meetings of the board shall be held, without notice, on the third Wednesday of each month at the main office. When any regular meeting of the board falls upon a holiday, the meeting shall be held on the next banking business day unless the board shall designate some other day. SECTION 2.5 SPECIAL MEETINGS. Special meetings of the board may be called by the 20 chairman of the board, the president, or at the request of three or more directors. Each member of the board shall be given notice stating the time and place, by telegram, letter or in person, of each such special meeting. SECTION 2.6. QUORUM. A majority of the directors shall constitute a quorum at any meeting, except when otherwise provided by law; but a less number may adjourn any meeting from time to time, and the meeting may be held, as adjourned, without further notice. SECTION 2.7. VACANCIES. When any vacancy occurs among the directors, the remaining members of the board, in accordance with the laws of the United States, may appoint a director to fill such vacancy at any regular meeting of the board, or at a special meeting called for that purpose. SECTION 2.8. RETIREMENT POLICY. A retirement policy adopted by the board of directors shall be applicable to directors who are not active officers of the bank. ARTICLE III COMMITTEES OF THE BOARD SECTION 3.1. EXECUTIVE COMMITTEE. There shall be an executive committee of the board. The members of the executive committee shall be chosen by the board from time to time, shall hold office during its pleasure, and shall consist of the chairman of the board, the chairman of the executive committee selected by the board, who may but need not be the same person designated to be president, and the president, ex officio, and not less than seven additional members of the board who shall not be active officers of the bank. It shall be the duty of this committee to exercise such powers and perform such duties in respect to the making of loans and discounts as shall from time to time be specified by resolution of the board. During such periods as the board shall not be in session, the executive committee shall have and may exercise all the powers of the board except such as are by law or by these bylaws required to be exercised only by the board. The executive committee may make rules for holding and conducting its meetings and keep in the minute book of the bank a report of all action taken which shall be submitted for approval at each regular meeting of the board and the action of the board shall be recorded in the minutes of that meeting. A quorum of the executive committee shall consist of not less than five of its members, at least three of whom shall not be active officers of the bank. The chairman of the board, or in his absence in the order named if present, the chairman of the executive committee or the president, may designate any director who is not an active officer of the bank, or a designated member, to serve as a member of the executive committee at any specified meeting. Vacancies in the executive committee at any time existing may be filled by appointment by the board. The board may at anytime revise or change the membership and chairmanship of the executive committee and make new or additional appointments thereto. The chairman of the executive committee shall be ex officio a member of all committees except the examining committee and the trust audit committee, and shall have such other duties as may from time to time be assigned him by the board. SECTION 3.2. OFFICERS' COMPENSATION COMMITTEE. There shall be an officers' compensation committee of the board. The members of the officers' compensation committee shall consist of the members ex officio provided for in other sections of these bylaws and not less than three additional non-officer members of the board who shall be appointed by the board each year at its first meeting after the directors have been elected and qualified. It shall be the duty of this committee to study the compensation of all officers of the bank and from time to time report their recommendations to the board; and such other duties, if any, as may from time to time be assigned to it by the board. A majority of the committee, including at least two non-officer members, shall be necessary for the committee to keep records of its action. 21 SECTION 3.3. EXAMINING COMMITTEE. There shall be an examining committee of the board. The members of the examining committee shall consist of the members ex officio provided for in other sections of these bylaws, but exclusive of any active officer of the bank and not less than three additional non-officer members of the board who shall be appointed by the board each year at its first meeting after the directors have been elected and qualified. It shall be the duty of this committee to make an examination at least twice each year into the affairs of the bank or to cause the examinations to be made by accountants (who may be the bank's own accountants) responsible only to the board in such examinations, and to report the result of such examinations in writing to the board at the next regular meeting thereafter, or it may, at its sole discretion, submit the reports of the national bank examiner or of the Chicago Clearing House Association examination, with or without additional comments by the committee itself, for, and in lieu of its personal examinations. Such reports shall state whether the bank is in sound condition, whether adequate internal audit controls and procedures are being maintained and shall recommend to the board such changes in the manner of doing business or conducting the affairs of the bank as shall be deemed advisable. SECTION 3.4. OTHER COMMITTEES. The board may appoint, from time to time, from its own members, other committees of one or more persons, for such purposes and with such powers as the board may determine. ARTICLE IV OFFICERS AND EMPLOYEES SECTION 4.1. CHAIRMAN OF THE BOARD. The board shall appoint one of its members to be chairman of the board. The chairman of the board shall supervise the carrying out of the policies adopted or approved by the board. He shall have general executive powers, as well as the specific powers conferred by these bylaws. He shall be ex officio a member of all committees, except the examining committee and the trust audit committee. He shall have general supervision and direction of the business, affairs and personnel of the bank. He shall also have and may exercise such further powers and duties as from time to time may be conferred upon, or assigned to him by the board. SECTION 4. 2. VICE CHAIRMAN OF THE BOARD. The board may appoint one of its members to be vice chairman of the board. He shall perform such duties as may from time to time be assigned to him by the board. SECTION 4.3. PRESIDENT. The board shall appoint one of its members to be president of the bank. He shall be the chief executive officer and the chief administrative officer of the bank and in the absence of the chairman of the board, he shall preside at any meeting of the board at which he is present. The president shall have general executive powers, and shall have and may exercise any and all other powers and duties pertaining by law, regulation, or practice to the office of president, or imposed by these bylaws. He shall be ex officio a member of all committees, except the examining committee and trust audit committee. He shall have general supervision of the business, affairs and personnel of the bank and in the absence of the chairman of the board, shall exercise the powers and perform the duties of the chairman of the board. He shall also have and may exercise such further powers and duties as from time to time may be conferred upon or assigned to him by the board. 22 SECTION 4.4. SENIOR OFFICERS. The board may appoint one or more executive vice presidents and one or more senior vice presidents. Each such senior officer shall have such powers and duties as may be assigned to him by the board, the chairman of the board, or the president. SECTION 4.5. VICE PRESIDENT. The board may appoint one or more vice presidents. Each vice president shall have such powers and duties as may be assigned to him by the board, the chairman of the board, or the president. SECTION 4.6. CASHIER. The board shall appoint a cashier who shall have such powers and duties as may be assigned to him by the board, the chairman of the board, or the president. The cashier shall be custodian of the corporate seal, records, documents and papers of the bank. He shall provide for keeping of proper records of all transactions of the bank. SECTION 4.7. SECRETARY. The board shall appoint a secretary who shall be secretary of the bank. He shall also perform such duties as may be assigned to him from time to time by the board. The board may appoint a secretary of the board who shall keep accurate minutes of all meetings. He shall attend to the giving of all notices; he shall also perform such other duties as may be assigned to him from time to time by the board. SECTION 4.8. OTHER OFFICERS. The board may appoint one or more assistant vice presidents, one or more trust officers, one or more assistant secretaries, one or more assistant cashiers, and such other officers and attorneys-in-fact as from time to time may appear to the board to be required or desirable to transact the business of the bank. Such officers, respectively, shall exercise such powers and perform such duties as pertain to their several offices or as may be conferred upon or assigned to them by the board the chairman of the board or the president. SECTION 4.9. CLERKS AND AGENTS. The chairman of the board, the president, or any other active officer of the bank authorized by the chairman of the board, or the president, may appoint and dismiss all or any paying tellers receiving tellers note tellers, vault custodians, bookkeepers and other clerks, agents and employees as they may deem advisable for the prompt and orderly transaction of the business of the bank, define their duties, fix the salaries to be paid them and the conditions of their employment. SECTION 4.10. RESPONSIBILITY FOR MONEYS, ETC. Each of the active officers and clerks of this bank shall be responsible for all moneys, funds valuables and property of every kind and description that may from time to time be entrusted to his care or placed in his hands by the board or others, or that otherwise may come into his possession as an active officer or clerk of this bank. SECTION 4.11. SURETY BONDS. All the active officers and clerks of this bank may be covered by one of the blanket form bonds customarily written by the surety companies, drawn for such an amount, and executed by such surety company, as the board may from time to time require, and duly approve; or at the discretion of the board, all such active officers and clerks shall, each for himself, give such bond, with such security, and in such denominations as the board may from time to time require and direct. All bonds approved by the board shall assure the faithful and honest discharge of the respective duties of such active officer or clerk and shall provide that such active officer or clerk shall faithfully apply and account for all moneys, funds, valuables and property of every kind and description that may from time to time come into his hands or be entrusted to his care, and pay over and deliver the same to the order of the board or to such other person or persons as may be authorized to demand and receive the same. SECTION 4.12. TERM OF OFFICE - OFFICER DIRECTOR. The chairman of the board, the vice chairman of the board and the president, together with any other active officers who may be 23 duly elected members of the board, shall hold their respective offices for the current year for which the board (of which they shall be members) was elected and until their successors are appointed, unless they shall resign, be disqualified, or be removed; and any vacancy occurring in the office of the chairman of the board, the vice chairman of the board, the president, or in the board, shall, if required by these bylaws, be filled by the remaining members. SECTION 4.13. TERM OF OFFICE - OFFICER. The executive vice presidents, the senior vice presidents, the vice presidents, the assistant vice presidents, the cashier, the secretary, the trust officers and all other officers and attorneys-in-fact who are not duly elected members of the board, shall be appointed to hold their offices, respectively, during the pleasure of the board. ARTICLE V TRUST DEPARTMENT SECTION 5.1. TRUST DEPARTMENT. There shall be a department of the bank known as the trust department which shall perform the fiduciary responsibilities of the bank. SECTION 5.2. TRUST OFFICER. There shall be a senior vice president and trust officer, or vice president and trust officer of this bank, who shall be designated as the managing officer of the trust department and whose duties shall be to manage, supervise and direct all the activities of the trust department. He shall do, or cause to be done, all things necessary or proper in carrying on the business of the trust department in accordance with provisions of law and regulations. He shall act pursuant to opinion of counsel where such opinion is deemed necessary. Opinions of counsel shall be retained on file in connection with all important matters pertaining to fiduciary activities. The trust officer shall be responsible for all assets and documents held by the bank in connection with fiduciary matters. The board may appoint such other officers of the trust department as it may deem necessary, with such duties as may be assigned to them by the board, the chairman of the board, or the president. SECTION 5.3. TRUST INVESTMENT COMMITTEE. There shall be appointed by the board a trust investment committee of this bank composed of not less than four members, including members ex officio provided for in other sections of these bylaws, who shall be capable and experienced officers or directors of the bank. All investments of funds held in a fiduciary capacity shall be made, retained or disposed of only with the approval of the trust investment committee; and the committee shall keep minutes of all its meetings, showing the disposition of all matters considered and passed upon by it. The committee shall, promptly after the acceptance of an account for which the bank has investment responsibilities, review the assets thereof, to determine the advisability of retaining or disposing of such assets. The committee shall conduct a similar review at least once during each calendar year thereafter and within fifteen months of the last such review. A report of all such reviews, together with the action taken as a result thereof, shall be noted in the minutes of the committee. Three members of the trust investment committee shall constitute a quorum, and any action approved by a majority of those present shall constitute the action of the committee. SECTION 5.4. TRUST AUDIT COMMITTEE. The board shall appoint a committee of not less than three directors, including members ex officio provided for in other sections of these bylaws, exclusive of any active officers of the bank, which shall at least once during each calendar year and within fifteen months of the last such audit make suitable audits of the trust department, or cause suitable audits to be made, by auditors responsible only to the board, and at such time shall ascertain whether the department has been administered in accordance with law, Regulation 9, and sound fiduciary principles. Notwithstanding the provisions of this Section, the board at any time may assign to 24 the Examining Committee, in addition to the duties of the Examining Committee set forth in Section 3.3 of these bylaws, all of the duties of the Trust Audit Committee and during such time as the Examining Committee is performing the duties of both committees, the Trust Audit Committee shall cease to function as a committee of this board. The board at any time may reassign the duties provided for in this Section to the Trust Audit Committee. SECTION 5.5. TRUST DEPARTMENT FILES. There shall be maintained in the trust department, files containing all fiduciary records necessary to assure that its fiduciary responsibilities have been properly undertaken and discharged. SECTION 5.6. TRUST INVESTMENTS. Funds held in a fiduciary capacity shall be invested in accordance with the instrument establishing the fiduciary relationship and local law. Where such instrument does not specify the character and class of investments to be made and does not vest in the bank a discretion in the matter, fund shield pursuant to such instrument shall be invested in investments in which corporate fiduciaries may invest under local law. ARTICLE VI STOCK AND STOCK CERTIFICATES SECTION 6.1. TRANSFERS. Shares of capital stock shall be transferable on the books of the bank and a transfer book shall be kept in which all transfers of stock shall be recorded. Every person becoming a shareholder be such transfer shall in proportion to his shares, succeed to all rights and liabilities of the prior holder of such shares. SECTION 6.2. STOCK CERTIFICATES. Certificates of capital stock shall bear the signature of any one of, the chairman of the board, or the president (which may be engraved, printed or impressed) and shall be signed manually or by facsimile process by the secretary, assistant secretary, cashier, assistant cashier, or any other officer appointed by the board for that purpose, to be known as an authorized officer and the seal of the bank shall be engraven thereon. Each certificate shall recite on its face that the stock represented thereby is transferable, properly endorsed, only on the books of the bank. ARTICLE VII CORPORATE SEAL SECTION 7.1. CORPORATE SEAL. The chairman of the board, the president, the cashier, the secretary or any assistant cashier or assistant secretary, or other officer thereunto designated by the board, shall have authority to affix the corporate seal to any document requiring such seal, and to attest the same. Such seal shall be substantially in the form set forth herein. ARTICLE VIII INDEMNIFYING OFFICERS AND DIRECTORS SECTION 8.1. INDEMNIFYING OFFICERS AND DIRECTORS. Any person, his heirs, executors or administrators, may be indemnified or reimbursed by the bank for reasonable expenses actually incurred in connection with any action, suit or proceeding, civil or criminal, to which he or 25 they shall be made a party by reason of his being or having been a director, officer or employee of the bank or of any firm, corporation or organization which he served in any such capacity at the request of the bank; provided, however, that no person shall be so indemnified or reimbursed in relation to any matter in such action, suit or proceeding as to which he shall finally be adjudged to have been guilty of or liable for negligence or willful misconduct in the performance of his duties to the bank; and, provided further, that no person shall be so indemnified or reimbursed in relation to any matter in such action, suit or proceeding which has been made the subject of a compromise settlement except with the approval of a court of competent jurisdiction, or the holders of record of a majority of the outstanding shares of the bank, or the board, acting by vote of directors not parties to the same or substantially the same action suit or proceeding, constituting a majority of the whole number of the directors. The foregoing right of indemnification or reimbursement shall not be exclusive of other rights to which such person, his heirs, executors or administrators, may be entitled as a matter of law. ARTICLE IX MISCELLANEOUS PROVISIONS SECTION 9.1. FISCAL YEAR. The fiscal year of the bank shall be the calendar year. SECTION 9.2. EXECUTION OF INSTRUMENTS. All agreements, indentures mortgages, deeds, conveyances transfers certificates declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, proxies and other instruments or documents may be signed, executed, acknowledged, verified, delivered or accepted for the bank by the chairman of the board, or the vice chairman of the board, or the president, or any executive vice president, or any senior vice president, or any vice president, or the secretary or the cashier, or, if in connection with the exercise of fiduciary powers of the bank by any of said officers or by any officer in the trust department. Any such instruments may also be signed, executed, acknowledged, verified, delivered or accepted for the bank in such other manner and by such other officers as the board may from time to time direct. The provisions of this Section 9.2 are supplementary to any other provisions of these bylaws. SECTION 9.3. RECORDS. The articles of association, the bylaws, and the proceedings of all meetings of the shareholders and of the board shall be recorded in appropriate minute books provided for the purpose; where these bylaws so provide, the proceedings of standing committees of the board shall be recorded in appropriate minute books provided for the purpose. ARTICLE X EMERGENCIES SECTION 10.1. CONTINUATION OF BUSINESS. In the event of a state of emergency of sufficient severity to interfere with the conduct and management of the affairs of this bank, the officers and employees will continue to conduct the affairs of the bank under such guidance from the directors as may be available except as to matters which by statute require specific approval of the board of directors and subject to conformance with any governmental directives during the emergency. SECTION 10.2. DESIGNATION OF PLACE OF BUSINESS. The offices of the bank at which its business shall be conducted shall be the main office thereof located at 135 South LaSalle Street, Chicago, Illinois, and any other legally authorized location which may be leased or acquired by this bank to carry on its business. During an emergency resulting in any authorized place of business of 26 this bank being unable to function, the business ordinarily conducted at such location shall be relocated elsewhere in suitable quarters, in addition to or in lieu of the locations heretofore mentioned, as may be designated by the board of directors or by the executive committee or by such persons as are then, in accordance with resolutions adopted from time to time by the board of directors dealing with the exercise of authority in the time of such emergency, conducting the affairs of this bank. Any temporarily relocated place of business of this bank shall be returned to its legally authorized location as soon as practicable and such temporary place of business shall then be discontinued. ARTICLE XI BYLAWS SECTION 11.1 INSPECTION. A copy of the bylaws with all amendments thereto, shall at all times be kept in a convenient place at the main office of the bank and shall be open for inspection to all shareholders, during banking hours. SECTION 11.2 AMENDMENTS. The bylaws may be amended, altered or repealed, at any regular meeting of the board, by a vote of a majority of the whole number of the directors. *** I........................................... hereby certify that I am the................................ Cashier/Secretary of LaSalle National Bank, Chicago, Illinois and that the foregoing is a true and correct copy of the bylaws of this bank as amended and that the same are in full force and effect ............. day of...................19........ ............................... Cashier/Secretary. December 15, 1982 (SEAL) 27 EXHIBIT 5 NOT APPLICABLE 28 EXHIBIT 6 LaSalle National Bank hereby consents in accordance with the provisions of Section 321(b) of the Trust Indenture Act of 1939, that reports of examinations by Federal, State, Territorial and District authorities may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. LA SALLE NATIONAL BANK By: /s/ Sarah H. Webb ---------------------- Sarah H. Webb First Vice President 29 EXHIBIT 7 Latest Report of Condition of Trustee published pursuant to law or the requirement of its surviving or examining authority. 30 EXHIBIT 8 NOT APPLICABLE 31 EXHIBIT 9 NOT APPLICABLE EX-99.1.1 20 FORM OF LETTER OF TRANSMITTAL 1 EXHIBIT 99.1.1 LETTER OF TRANSMITTAL HOME PRODUCTS INTERNATIONAL, INC. OFFER TO EXCHANGE ALL 9 5/8% SENIOR SUBORDINATED NOTES DUE 2008 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ALL OUTSTANDING 9 5/8% SENIOR SUBORDINATED NOTES DUE 2008 PURSUANT TO THE PROSPECTUS DATED THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON UNLESS EXTENDED (THE "EXPIRATION DATE"). The Exchange Agent for the Exchange Offer is: LASALLE NATIONAL BANK By Hand, Registered or Certified Mail or Overnight Courier: LaSalle National Bank 135 South LaSalle Street Room 1825 Chicago, Illinois 60603 Attention: Sarah Webb By Facsimile: (312) 904-2236 Attention: Sarah Webb Confirm by Telephone: (312) 904-2444 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE VALID DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. The undersigned hereby acknowledges receipt of the Prospectus dated , 1998 (as it may be amended or supplemented from time to time, the "Prospectus") of Home Products International, Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal, which together constitute the Company's offer (the "Exchange Offer") to exchange an aggregate of up to $125,000,000 principal amount of its 9 5/8% Senior Subordinated Notes due 2008 (the "New Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which the Prospectus is a part, for an identical principal amount of its outstanding 9 5/8% Senior Subordinated Notes due 2008 (the "Old Notes"). The term "Expiration Date" shall mean 5:00 p.m., New York City time on , 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. Capitalized terms used but not defined herein have the meaning given to them in the Prospectus. This Letter of Transmittal is to be used (i) if certificates of Old Notes are to be forwarded herewith, (ii) if delivery of Old Notes is to be made by book-entry transfer to an account maintained by the Exchange Agent at The Depository Trust Company (the "Depository") or "DTC") pursuant to the procedures set forth in "The Exchange Offer-Procedures for Tendering Old Notes" in the Prospectus or (iii) if tender of the Old 2 Notes is to be made according to the guaranteed delivery procedures described in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures." Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available, (ii) who cannot deliver their Old Notes, this Letter of Transmittal or any other documents required by this Letter of Transmittal to the Exchange Agent on or prior to the Expiration Date of (iii) who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Old Notes according to the guaranteed delivery procedures set forth herein. See Instruction 2. YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT. NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY List below the Old Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, list the certificate numbers and principal amount on a separate signed schedule and attach that schedule to this Letter of Transmittal. See Instruction 4. ALL TENDERING HOLDERS COMPLETE THIS BOX: - ----------------------------------------------------------------------------------------------------------------- DESCRIPTION OF OLD NOTES TENDERED - ----------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER (FILL IN, IF BLANK) OLD NOTES TENDERED - ----------------------------------------------------------------------------------------------------------------- CERTIFICATE OR AGGREGATE PRINCIPAL REGISTRATION AMOUNT REPRESENTED PRINCIPAL AMOUNT NUMBER(S)* BY OLD NOTES TENDERED** ------------------------------------------------------------------------ $ $ ======================================================================== TOTAL AMOUNT TENDERED: $ $ - ----------------------------------------------------------------------------------------------------------------- * Need not be completed by book-entry holders. Such holders should check the appropriate box below and provide the requested information. ** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount represented by such Old Notes. All tenders must be in integral multiples of $1,000. - -----------------------------------------------------------------------------------------------------------------
The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. Holders who wish to tender their Old Notes must complete this letter in its entirety. (THE FOLLOWING BOXES ARE TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY.) [ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT AT DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution: DTC Account Number: --------------------------------------------------------------------------- Transaction Code Number: --------------------------------------------------------------------------- 3 [ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): --------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: --------------------------------------------------------------------------- Name of Eligible Institution Which Guaranteed Delivery: --------------------------------------------------- If Guaranteed Deliver is to be made by book-entry transfer: DTC Account Number: --------------------------------------------------------------------------- Transaction Code Number: --------------------------------------------------------------------------- [ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED OLD NOTES FOR YOUR OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: --------------------------------------------------------------------------- Address: --------------------------------------------------------------------------- --------------------------------------------------------------------------- Telephone Number and Contact Person: ---------------------------------------------------------------------- Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the above described principal amount of Old Notes in exchange for an identical principal amount of New Notes. Subject to, and effective upon, the acceptance for exchange of the Old Notes tendered herewith, the undersigned hereby exchanges, assigns and transfers to or upon the order of the Company all right, title and interest in and to such Old Notes as are being tendered herewith, including all rights to accrued and unpaid interest thereon as of the Expiration Date. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its agent and attorney-in-fact (with full knowledge that the Exchange Agent is also acting as agent of the Company in connection with the Exchange Offer) to cause the Old Notes to be assigned, transferred and exchanged. THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, ASSIGN AND TRANSFER THE OLD NOTES TENDERED HEREBY AND TO ACQUIRE NEW NOTES ISSUABLE UPON THE EXCHANGE OF SUCH TENDERED OLD NOTES, AND THAT, WHEN THE OLD NOTES ARE ACCEPTED FOR EXCHANGE, THE COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES 4 TENDERED HEREBY. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER. The undersigned understands that tenders of Old Notes pursuant to any one of the procedures described in "Terms of the Exchange Offer -- Procedures for Tendering Old Notes" in the Prospectus and in the instructions herein will, upon the Company's acceptance for exchange of such tendered Old Notes, constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of tendered Old Notes or transfer ownership of such Old Notes on the account books maintained by a book-entry transfer facility. The undersigned further agrees that acceptance of any tendered Old Notes by the Company and the issuance of New Notes in exchange therefor shall constitute performance in full by the Company of its obligations under the Registration Rights Agreement and that the Company shall have no further obligations or liabilities thereunder for the registration of the Old Notes or the New Notes. The Exchange Offer is not conditioned upon any principal amount of Old Notes being tendered for exchange. However, the Exchange Offer is subject to certain conditions set forth in the Prospectus under the caption "Terms of the Exchange Offer -- Conditions." The undersigned recognizes that as a result of these conditions (which may be waived, in whole or in part, by the Company), as more particularly set forth in the Prospectus, the Company may not be required to exchange any of the Old Notes tendered hereby and, in such event, the Old Notes not exchanged will be returned to the undersigned at the address shown below the signature of the undersigned. The name(s) and addressee(s) of the registered holder(s) of the Old Notes tendered hereby should be printed above, if they are not already set forth above, as they appear on the Certificates representing such Old Notes. The Certificate number(s) and the Old Notes that the undersigned wishes to tender should be indicated in the appropriate boxes above. The undersigned acknowledges that this Exchange Offer is being made in reliance on the position of the staff of the Securities and Exchange Commission (the "Commission") as set forth in certain interpretive letters addressed to third parties in other transactions substantially similar to the Exchange Offer, which lead the Company to believe that New Notes issued pursuant to the Exchange Offer to a holder in exchange for Old Notes may be offered for resale, resold and otherwise transferred by a holder (other than (i) a broker-dealer who purchased Old Notes directly from the Company for resale pursuant to Rule 144A or any other available exemption under the Securities Act, (ii) an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act or (iii) a broker-dealer who acquired the Old Securities as a result of market-making or other trading activities) without further compliance with the registration and prospectus delivery provisions of the Securities Act, provided, that such holder is acquiring the New Notes in the ordinary course of business and is not participating, and has no arrangement or understanding with any person to participate, in the distribution of the New Notes. Accordingly, the undersigned represents that (i) it is not an "affiliate" of the Company as defined in Rule 405 of the Securities Act, (ii) it is not a broker-dealer that acquired Old Notes directly from the Company in order to resell them pursuant to Rule 144A of the Securities Act or any other available exemption under the Securities Act, (iii) it will acquire the New Notes in the ordinary course of business and (iv) it is not participating, and does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of the New Notes. The undersigned acknowledges that if it is unable to make these representations to the Company, it will not be able to rely on the interpretations of the staff of the Commission described above and therefore will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such Old Notes unless such sale is made pursuant to an exemption from such requirements. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes, it represents that it acquired the Old Notes for its own account as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes; however, by so 5 acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of Section 2(11) of the Securities Act. Failure to comply with any of the above-mentioned requirements could result in the undersigned or any such other person incurring liability under the Securities Act for which such persons are not indemnified by the Company. Unless otherwise indicated in the box entitled "Special Exchange Instructions" or the box entitled "Special Delivery Instructions" in this Letter of Transmittal, certificates for all New Notes delivered in exchange for tendered Old Notes, and any Old Notes delivered herewith but not exchanged, will be registered in the name of the undersigned and shall be delivered to the undersigned at the address shown below the signature of the undersigned. If a New Note is to be issued to a person other than the person(s) signing this Letter of Transmittal, or if the New Note is to be mailed to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal at an address different than the address shown on this letter of Transmittal, the appropriate boxes of this Letter of Transmittal should be completed. If Old Notes are surrendered by holder(s) that have completed either the box entitled "Special Exchange Instructions" or the box entitled "Special Delivery Instructions" in this Letter of Transmittal, signature(s) on this Letter of Transmittal must be guaranteed by an Eligible Institution (as defined in Instruction 2). All authority herein conferred or agreed to be conferred in this Letter of Transmittal shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, legal representatives, successors and assigns of the undersigned. Tendered Old Notes may be withdrawn in accordance with Instruction 3 hereto at any time prior to the Expiration Date. THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES TENDERED" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS SET FORTH IN SUCH BOX. 6 REGISTERED HOLDERS OF OLD NOTES SIGN HERE (IN ADDITION, COMPLETE SUBSTITUTE FORM W-9 BELOW) PLEASE SIGN HERE PLEASE SIGN HERE - ------------------------------------------------ ------------------------------------------------ Authorized Signature of Registered Holder Authorized Signature of Registered Holder
Must be signed by registered holder(s) exactly as name(s) appear(s) on the Old Notes or on a security position listing as the owner of the Old Notes or by person(s) authorized to become registered holder(s) by properly completed bond powers transmitted herewith. See Instruction 4. If signature is by attorney-in-fact, trustee, executor, administrator, guardian, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information: Name: ------------------------------------------ Name: ------------------------------------------ Title: ----------------------------------------- Title: ----------------------------------------- Address: --------------------------------------- Address: --------------------------------------- - ------------------------------------------------ ------------------------------------------------ Telephone Number: ------------------------------ Telephone Number: ------------------------------ Dated: ----------------------------------------- Dated: ----------------------------------------- - ------------------------------------------------ ------------------------------------------------ Taxpayer Identification or Social Security Taxpayer Identification or Social Security Number Number
7 SIGNATURE GUARANTEE (IF REQUIRED -- SEE INSTRUCTION 4) Signature(s) Guaranteed by an Eligible Institution: ----------------------------- (Authorized Signature) Date: --------------------------------------------------------------------------- Name of Eligible Institution Guaranteeing Signature: --------------------------------------------------------- Address: ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Capacity (full title): ---------------------------------------------------------- Telephone Number: --------------------------------------------------------------- SPECIAL EXCHANGE INSTRUCTIONS (SEE INSTRUCTIONS 4 AND 5) To be completed ONLY if the New Notes or any Old Notes that are not tendered or not accepted are to be issued in the name of someone other than the undersigned. Issue: [ ] New Notes to: [ ] Old Notes to: Name(s) ------------------------------------------------- Address ------------------------------------------------- - -------------------------------------------------------- Telephone Number: --------------------------------------- Book-Entry Transfer Facility Account: ------------------- - -------------------------------------------------------- - -------------------------------------------------------- (Tax Identification or Social Security Number) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 4 AND 5) To be completed ONLY if the New Notes or any Old Notes that are not tendered or not accepted are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown above under "Description of Old Notes Tendered." Mail: [ ] New Notes to: [ ] Old Notes to: Name(s) ------------------------------------------------ Address ------------------------------------------------ - ------------------------------------------------------- Telephone Number: -------------------------------------- - ------------------------------------------------------- (Tax Identification or Social Security Number) 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. Delivery of This Letter of Transmittal and Certificates. All physically delivered Old Notes or confirmation of any book-entry transfer to the Exchange Agent's account at DTC, as well as a properly completed and duly executed copy of this Letter of Transmittal (or facsimile thereof), and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at any of its addresses set forth herein on or prior to the Expiration Date. The method of delivery of this Letter of Transmittal, the Old Notes and all other required documents is at the election and risk of the holder. Instead of delivery by mail, it is recommended that holders use an overnight or hand delivery service. Except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent. Any beneficial holder whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender Old Notes in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on such beneficial holder's behalf. If such beneficial holder wishes to tender directly, such beneficial holder must, prior to completing and executing the Letter of Transmittal and tendering Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such beneficial holder's own name or obtain a properly completed bond power from the registered holder. Beneficial holders should be aware that the transfer of registered ownership may make considerable time. Delivery to an address other than as set forth herein, or instructions via a facsimile number other than the ones set forth herein, will not constitute a valid delivery. The Company expressly reserves the right, at any time or from time to time, to extend the Expiration Date by complying with certain conditions set forth in the Prospectus. LETTERS OF TRANSMITTAL SHOULD NOT BE SENT TO THE COMPANY OR TO DTC 2. Guaranteed Delivery Procedures. Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available, (ii) who cannot delivery their Old Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date or (iii) who cannot complete the procedures for book-entry transfers on a timely basis, may effect a tender if: a. the tender is made through a 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 (an "Eligible Institution"); b. prior to the Expiration Date, the Exchange Agent receives from such holder and the 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 of the Old Notes, the certificate or registration number(s) of the tendered Old Notes, and the principal amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that, at least within four (4) New York Stock Exchange trading days after the Expiration Date, the tendered Old Notes, a duly executed Letter of Transmittal (or facsimile thereof) and any other required documents will be deposited by the Eligible Institution with the Exchange Agent; and c. a properly completed and duly executed Letter of Transmittal (or facsimile thereof), any other required documents and tendered Old Notes in proper form for transfer (or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at DTC) must be received by the Exchange Agent at least within four (4) New York Stock Exchange trading days after the Expiration Date. 9 Any holder who wishes to tender Old Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery relating to such Old Notes prior to the Expiration Date. Failure to complete the guaranteed delivery procedures outlined above will not, of itself, affect the validity or effect a revocation of any Letter of Transmittal form properly completed and executed by a holder who attempted to use the guaranteed delivery procedures. 3. Partial Tenders; Withdrawals. Tenders of Old Notes will be accepted only in integral multiples of $1,000 principal amount at maturity. If less than the entire principal amount of Old Notes evidenced by a submitted certificate is tendered, the tendering holder should fill in the principal amount tendered in the column entitled "Principal Amount Tendered" of the box entitled "Description of Old Notes Tendered." A newly issued Old Note for the principal amount of Old Notes submitted but not tendered will be sent to such holder, unless the appropriate boxes on this Letter of Transmittal are completed, as soon as practicable after the Expiration Date. All Old Notes delivered to the Exchange Agent will be deemed to have been tendered in full unless otherwise indicated. Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date, after which tenders of Old Notes are irrevocable. To withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent by 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 Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the certificate or registration number(s) and principal amount of such Old Notes, or, in the case of Old Notes transferred by book-entry transfer, the name and number of the account at DTC to be credited), (iii) be signed by the Depositor in the same manner as the original signature on this Letter of Transmittal (including any required signature guarantees) or be accompanied by a bond power in the name of the person withdrawing the tender, in satisfactory form as determined by the Company in its sole discretion, duly executed by the registered holder, with the signature thereon guaranteed by a Eligible Institution together with the other documents required upon transfer by the Indenture, (iv) specify the name in which such Old Notes are to be registered, if different from that of the Depositor, pursuant to such documents of transfer and (v) include a statement that such holder is withdrawing his election to have such Old Notes exchanged. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Any Old 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 promptly as practicable after withdrawal. 4. Signature on This Letter of Transmittal; Written Instruments and Endorsements; Guarantee of Signatures. If this Letter of Transmittal is signed by the registered holder(s) of the Old Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the certificates without alteration or enlargement or any change whatsoever. If this Letter of Transmittal is signed by a participant in DTC, the signature must correspond with the name as it appears on the security position listing as the owner of the Old Notes. If any of the Old Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If a number of Old Notes registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of Old Notes. Signatures on this Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution unless the Old Notes tendered hereby are tendered (i) by a registered holder who has not completed the box entitled "Special Exchange Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. 10 If this Letter of Transmittal is signed by the registered holder or holders of Old Notes (which term, for the purposes described herein, shall include a participant in DTC whose name appears on a security listing as the owner of the Old Notes) listed and tendered hereby, no endorsements of the tendered Old Notes or separate written instruments of transfer or exchange are required. In any other case, the registered holder (or acting holder) must either properly endorse the Old Notes or transmit properly completed bond powers with this Letter of Transmittal (in either case executed exactly as the name(s) of the registered holder(s) appear(s) on the Old Notes, and, with respect to a participant in DTC whose name appears on a security position listing as the owner of Old Notes, exactly as the name of the participant appears on such security position listing), with the signature on the Old Notes or bond power guaranteed by an Eligible Institution (except where the Old Notes are tendered for the account of an Eligible Institution). If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by attorneys-in-fact, trustees, executors, administrators, guardians, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority so to act must be submitted. 5. Special Exchange and Delivery Instructions. Tendering holders should indicate, in the applicable box, the name and address (or account at DTC) in which the New Notes or Old Notes for principal amounts not tendered or not accepted for exchange are to be issued and delivered (or deposited), if different from the names and addresses or accounts of the person signing this Letter of Transmittal. In the case of issuance in a different name, the taxpayer identification number of social security number of the person named must also be indicated and the tendering holder should complete the applicable box. If no instructions are given, the New Notes (and any Old Notes not tendered or not accepted) will be issued in the name of and delivered to the acting holder of the Old Notes or deposited at such holder's account at the Depository. 6. Transfer Taxes. The Company shall pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates representing New Notes or Old Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Notes tendered, or if tendered Old Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 6, it will not be necessary for transfer stamps to be affixed to the Old Notes listed in the Letter of Transmittal. 7. Waiver of Conditions. The Company reserves the absolute right to waive, in whole or in part, any of the specified conditions to the Exchange Offer set forth in the Prospectus. 8. Mutilated, Lost, Stolen or Destroyed Notes. Any holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 9. Requests for Assistance or Additional Copies. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal may be directed to the Exchange Agent at the address and telephone number set forth above. 10. Validity and Form. All questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Old Notes not properly tendered or any Old Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the absolute right 11 to waive any irregularities or conditions of tender as to particular Old Notes either before or after the Expiration Date (including the right to waive the ineligibility of any holder who seeks to tender Old Notes in the Exchange Offer). The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Old Notes, nor shall any of them incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost to such holder by the Exchange Agent to the tendering holders of Old Notes, unless otherwise provided herein, as soon as practicable following the Expiration Date. 11. Important Tax Information. Under U.S. federal income tax law, a holder tendering Old Notes is required to provide the Exchange Agent with such holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below. If such holder is an individual, the TIN is the holder's social security number. The Certificate of Awaiting Taxpayer Identification Number should be completed if the tendering holder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future. If the Exchange Agent is not provided with the correct TIN, the holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such holder with respect to tendered Old Notes may be subject to back up withholding. Certain holders (including, among others, all domestic corporations and certain foreign individuals and foreign entities) are not subject to these backup withholding and reporting requirements. Such a holder who satisfies one or more of the conditions set forth in Part 2 of the Substitute Form W-9 should execute the certification following such Part 2. In order for a foreign holder to qualify as an exempt recipient, that holder must submit to the Exchange Agent a properly completed Internal Revenue Service Form W-9, signed under penalties of perjury, attesting to that holder's exempt status. A copy of such form is attached to this Letter of Transmittal. If backup withholding applies, the Exchange Agent is required to withhold 31% of any amounts otherwise payable to the holder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. To prevent backup withholding on payments that are made to a holder with respect to Old Notes tendered for exchange, the holder is required to notify the Exchange Agent of its, his or her correct TIN by completing the form herein certifying that the TIN provided on Substitute Form W-9 is correct (or that such holder is awaiting a TIN) and that (i) such holder is exempt, (ii) such holder has not been notified by the Internal Revenue Service that it, he or she is subject to backup withholding as a result of failure to report all interest or dividends or (iii) the Internal Revenue Service has notified such holder that it, he or she is no longer subject to backup withholding. Each holder is required to give the Exchange Agent the social security number or employer identification number of the record holder(s) of the Old Notes. If Old Notes are in more than one name or are not in the name of the actual holder, consult the instructions on Internal Revenue Service Form W-9, which are attached to this Letter of Transmittal, for additional guidance on which number to report. If the tendering holder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, write "Applied For" in the space for the TIN on Substitute Form W-9, sign and date the form and the Certificate of Awaiting Taxpayer Identification Number and return them to the Exchange Agent. If such certificate is completed and the Exchange Agent is not provided with the TIN within 60 days, the Exchange Agent will withhold 31% of all payments made thereafter until a TIN is provided to the Exchange Agent. 12 IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. 13 TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS: PAYOR'S NAME HOME PRODUCTS INTERNATIONAL, INC.
- --------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN ON THE SOCIAL SECURITY NUMBER OR FORM W-9 LINE AT RIGHT AND CERTIFY BY SIGNING AND EMPLOYER IDENTIFICATION NUMBER DATING BELOW. ------------------------------ ---------------------------------------------------------------------------------- DEPARTMENT OF THE TREASURY PART 2 -- CERTIFICATION -- Under penalties of perjury, I certify that: INTERNAL REVENUE SERVICE (1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me): (2) I am not subject to backup withholding either because: (a) I am exempt from backup withholding; (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends; or (c) the IRS has notified me that I am no longer subject to backup withholding; and PAYOR'S REQUEST FOR TAXPAYER'S (3) Any other information provided on this form is true and correct. IDENTIFICATION NUMBER (TIN) CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of under reporting interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding. ---------------------------------------------------------------------------------- SIGNATURE ------------------------------------------ PART 3 -- DAT Awaiting ------------------------------------------------- TIN [ ] - ---------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9 - -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Services Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future, I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all payments made to me on account of the Exchange Notes shall be retained until I provide a taxpayer identification number to the Exchange Agent and that, if I do not provide my taxpayer identification number within 60 days, such retain amounts shall be remitted to the Internal Revenue Service as backup withholding and 31% of all reportable payments made to me thereafter will be withheld and remitted to the Internal Revenue Service until I provide a taxpayer identification number. SIGNATURE DATE -------------------------------------- --------------------------- - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----