<PAGE> 1
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* *
* AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 1994 *
* *
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Registration No. 33-_____
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SECURITIES AND EXCHANGE COMMISSION
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
WAXMAN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
5074
(Primary Standard Industrial Classification Code Number)
34-0899894
(I.R.S. Employer Identification Number)
24460 Aurora Road
Bedford Heights, Ohio 44146
(216) 439-1830
(Address, including zip code, and telephone number,
including area code, of registrant's principal offices)
--------------
ARMOND WAXMAN
24460 Aurora Road
Bedford Heights, Ohio 44146
(216) 439-1830
(Name, address, including zip code, and telephone number,
including area code, of agents for service)
Copies to:
-------------
SCOTT M. ZIMMERMAN, ESQ.
Shereff, Friedman, Hoffman & Goodman
919 Third Avenue
New York, New York 10022
(212) 758-9500
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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following
box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Class of Amount Offering Price Aggregate Offering Amount of
Securities To be Registered To be Registered Per Note(1) Price(1) Registration Fee
--------------------------- ---------------- ------------------ ------------------ ----------------
<S> <C> <C> <C> <C>
Senior Secured Deferred Coupon $51,345,833 100% $51,345,833 $17,705.46
Notes of Waxman Industries,
Inc.
<FN>
(1) Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(f) under the Securities Act of 1933, on the basis of
the accreted value of the deferred coupon notes to be received by the
registrant pursuant to the Exchange Offer described herein on the estimated
date of exchange, August 15, 1994.
</TABLE>
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said section 8(a),
may determine.
<PAGE> 2
WAXMAN INDUSTRIES, INC.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND HEADING PROSPECTUS CAPTION OR LOCATION
-------------------------------- ------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Available Information; Inside Front Cover and
Prospectus Outside Back Cover Pages of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Prospectus Summary; Selected Financial Data;
Charges, and Other Information Risk Factors; Consolidated Financial Statements
4. Terms of the Transaction Prospectus Summary; Use of Proceeds; The
Exchange Offer; Certain Federal Income Tax
Considerations; Description of Notes
5. Pro Forma Financial Information Not Applicable
6. Material Contacts with the Company Being Not Applicable
Acquired
7. Additional Information Required for Reoffering Not Applicable
Persons and Parties Deemed to be Underwriters
8. Interests of Named Experts and Counsel Legal Matters; Experts
9. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liabilities
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3 Registrants Not Applicable
11. Incorporation of Certain Information by Not Applicable
Reference
12. Information With Respect to S-2 or S-3 Not Applicable
Registrants
13. Incorporation of Certain Information by Not Applicable
Reference
14. Information With Respect to Registrants Other Outside Front Cover Page of Prospectus;
Than S-3 or S-2 Registrants Available Information; Prospectus Summary; Risk
Factors; Selected Financial Data; Management's
Discussion and Analysis of Financial Condition
and Results of Operations; Business; Management;
Principal Stockholders; Recent Securities
Offering and Related Matters; Consolidated
Financial Statements
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3 Companies Not Applicable
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
16. Information With Respect to S-2 or S-3 Not Applicable
Companies
17. Information With Respect to Companies Other Not Applicable
Than S-3 or S-2 Companies
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Not Applicable
Authorizations are to be Solicited
19. Information if Proxies, Consents or Management;
Authorizations are not to be Solicited, or in Principal
an Exchange Offer Stockholders
</TABLE>
i
<PAGE> 4
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* *
* 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 SUCH *
* STATE. *
* *
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* *
* SUBJECT TO COMPLETION: PRELIMINARY PROSPECTUS DATED JUNE 20, 1994 *
* *
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PROSPECTUS
OFFER FOR ANY AND ALL OUTSTANDING
SERIES A 12 3/4% SENIOR SECURED DEFERRED COUPON NOTES DUE 2004
IN EXCHANGE FOR
SERIES B 12 3/4% SENIOR SECURED DEFERRED COUPON NOTES DUE 2004
OF
WAXMAN INDUSTRIES, INC.
THE EXCHANGE OFFER WILL EXPIRE AT MIDNIGHT,
NEW YORK CITY TIME, ON JULY __, 1994, UNLESS EXTENDED.
Waxman Industries, Inc., a Delaware corporation (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 issue an aggregate principal amount of up
to $92,797,000 at maturity of Series B 12 3/4% Senior Secured Deferred Coupon
Notes due 2004 (the "New Notes") of the Company in exchange for a like
principal amount at maturity of the issued and outstanding Series A 12 3/4%
Senior Secured Deferred Coupon Notes due 2004 (the "Old Notes" and, together
with the New Notes, the "Notes") of the Company from the holders (the
"Holders") thereof.
The Old Notes were originally issued by the Company in a private placement to
certain institutional investors. The Old Notes are eligible for trading in the
Private Offering, Resales and Trading through Automated Linkages ("Portal")
market and are eligible for resale pursuant to Rule 144A under the Securities
Act of 1933, as amended (the "Act"). The Common Stock, par value $.01 per
share, of the Company ("Common Stock"), is traded on the New York Stock
Exchange, Inc. (the "NYSE") under the symbol "WAX". On June 14, 1994, the last
reported sales price per share of Common Stock, as reported by the NYSE, was
$2.00.
The terms of the New Notes are identical in all material respects to the Old
Notes, except for certain transfer restrictions and registration rights
relating to the Old Notes. The terms of the Notes are governed by the
Indenture, dated as of May 20, 1994, between the Company and The Huntington
National Bank, as Trustee (the "Trustee"), and all amendments and supplements
thereto (the "Indenture"). The Notes are secured by all of the capital stock
of Waxman USA Inc., a Delaware corporation and wholly owned subsidiary of the
Company ("Waxman USA"), and by all of the capital stock of the future direct
subsidiaries of the Company. See "Description of Notes -- Security."
The New Notes and the Old Notes remaining after the Exchange Offer mature on
June 1, 2004. The New Notes will be issued at a discount to their aggregate
principal amount at maturity. Interest will not accrue on the New Notes and
the Old Notes remaining after the Exchange Offer prior to June 1, 1999.
Thereafter, interest on the Notes will be payable semiannually at the rate of
12 3/4% per annum until maturity. The Notes are redeemable at the option of
the Company at any time on or after June 1, 1999 at the redemption prices set
forth therein. See "Description of Notes -- Redemption."
Upon a Public Equity Offering (as defined herein), up to $25.0 million
principal amount at maturity of Notes may, until June 1, 1997, be redeemed at
the option of the Company at 112.75% of the Accreted Value (as defined herein)
thereof with the net proceeds of such Public Equity Offering; provided,
however, that not less than $65.0 million aggregate principal amount at
maturity of the Notes remains outstanding upon the completion of such
redemption. In the event of a Change of Control (as defined herein), the
Company will be obligated to make an offer to purchase all outstanding Notes at
a redemption price of 101% of the Accreted Value thereof, plus accrued and
unpaid interest, if any. See "Description of the Notes -- Redemption."
The offer and sale of the New Notes are being registered under the
Registration Statement of which this Prospectus forms a part in order to
satisfy certain obligations of the Company contained in the Registration Rights
Agreement, dated as of May 20, 1994, among the Company and the Trustee, on
behalf of the original purchasers of the Old Notes (the "Debt Registration
Rights Agreement"). Based on interpretations by the Staff of the Securities
and Exchange Commission (the "Commission") set forth in certain "no-action"
letters issued to third parties and unrelated to the Company and the Exchange
Offer, the Company believes that
<PAGE> 5
New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may
be offered for resale, resold and otherwise transferred by Holders thereof
(other than any such Holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Act), without compliance with the registration
and prospectus delivery provisions of the Act, provided that such New Notes are
acquired in the ordinary course of such Holders' business and such Holders have
no intention, nor any arrangement with any person, to participate in the
distribution of such New Notes. A broker-dealer holding Old Notes may
participate in the Exchange Offer provided that it acquired the Old Notes for
its own account as a result of market-making or other trading activities. Each
broker-dealer that receives New 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 New 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 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 New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. For a
period of 180 days after the Expiration Date (as defined herein), the Company
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
The Company will accept for exchange Old Notes validly tendered prior to
Midnight, New York City time, on July __, 1994, unless extended by the Company
in its sole discretion (the "Expiration Date"). Tenders of Old Notes may be
withdrawn at any time prior to the Expiration Date. The Exchange Offer is
subject to certain customary conditions. See "The Exchange Offer -- Certain
Conditions to the Exchange Offer."
The Company will not receive any proceeds from the Exchange Offer. Pursuant
to the Debt Registration Rights Agreement, the Company will pay all the
expenses incident to the Exchange Offer. The Exchange Offer is not conditioned
upon any minimum principal amount of Old Notes being tendered for exchange.
Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date. In the event the Company terminates the
Exchange Offer and does not accept for exchange any Old Notes, the Company will
promptly return the Old Notes to the Holders thereof. See "The Exchange
Offer."
_________________________________________
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE NOTES HAVE NOT BEEN AND WILL NOT BE QUALIFIED FOR SALE UNDER THE
SECURITIES LAWS OF CANADA OR ANY PROVINCE OR TERRITORY OF CANADA. THE NOTES
ARE NOT BEING OFFERED FOR SALE AND MAY NOT BE OFFERED OR SOLD, DIRECTLY OR
INDIRECTLY, IN CANADA, OR TO ANY RESIDENT THEREOF, IN VIOLATION OF THE
SECURITIES LAWS OF CANADA OR ANY PROVINCE OR TERRITORY OF CANADA.
THIS DOCUMENT MAY NOT BE PASSED ON IN THE UNITED KINGDOM TO ANY PERSON UNLESS
THAT PERSON IS OF A KIND DESCRIBED IN ARTICLE 9(3) OF THE FINANCIAL SERVICES
ACT 1986 (INVESTMENT ADVERTISEMENTS) (EXEMPTIONS) ORDER 1988 OR IS A PERSON TO
WHOM THIS DOCUMENT MAY OTHERWISE LAWFULLY BE ISSUED OR PASSED ON.
<PAGE> 6
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B WITH THE STATE OF NEW HAMPSHIRE NOR
THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN
THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT
ANY DOCUMENT FILED UNDER CHAPTER 421-B IS TRUE, COMPLETE AND NOT MISLEADING.
NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE
FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN
ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL
TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO
BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
______________________________________________
THE DATE OF THIS PROSPECTUS IS _____ __, 1994.
<PAGE> 7
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-4 (together
with all amendments thereto referred to herein as the "Registration Statement")
under the Act, with the Commission covering the securities being offered by
this Prospectus. This Prospectus does not contain all the information set
forth or incorporated by reference in the Registration Statement and the
exhibits and schedules relating thereto, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the securities offered by
this Prospectus, reference is made to the Registration Statement and the
exhibits and schedules thereto which are on file at the offices of the
Commission and may be obtained upon payment of the fee prescribed by the
Commission, or may be examined without charge at the offices of the Commission.
Statements contained in this Prospectus as to the contents of any contract or
other documents referred to are not necessarily complete, and are qualified in
all respects by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports, proxy statements and other
information with the Commission. The Registration Statement, as well as such
periodic reports, proxy statements and other information, 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; Suite 1400, Northwest
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661; and 7 World
Trade Center, New York, New York 10048. Copies of such material can also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company's
common stock is listed on the NYSE. Reports, proxy statements and other
information may also be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 1005.
- ii -
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Background of Exchange Offer;
Recent Securities Offering and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
The Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii
Consequences of Exchanging Old Notes
Pursuant to the Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Summary Description of the New Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consequences of Failure to Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Security for the Notes; Value of the Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Reliance on Operations of Subsidiaries; Structural Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Restrictions Imposed by Terms of Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Control by Principal Stockholders; Certain Anti-Takeover Effects . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Deficiency of Earnings to Fixed Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Foreign Sourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Reliance on Key Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Lack of Public Market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Original Issue Discount Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . 10
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 10
Nine Months Ended March 31, 1994 Versus March 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Fiscal 1993 Versus Fiscal 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Fiscal 1992 Versus Fiscal 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Business Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Barnett . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Consumer Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Other Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Import Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Environmental Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Directors and Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
- iii -
<PAGE> 9
<TABLE>
<S> <C>
Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Stock Option and SAR Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Stock Option and SAR Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
RECENT SECURITIES OFFERING AND RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
THE EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Purpose of Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Terms of the Exchange Offer; Period for Tendering Old Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Procedures for Tendering Old Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Acceptance of Old Notes for Exchange; Delivery of New Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Book-Entry Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Guaranteed Delivery Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Withdrawal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Certain Conditions to the Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Consequences of Failure to Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
DESCRIPTION OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Maturity, Interest and Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Ranking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Provision of Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Consolidation, Merger, Conveyance, Transfer or Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Satisfaction and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Regarding the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Holding and Disposition of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Backup Withholding and Information Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
</TABLE>
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<PAGE> 10
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. REFERENCES IN THIS
PROSPECTUS TO A PARTICULAR FISCAL YEAR REFER TO THE 12-MONTH PERIOD ENDED ON
JUNE 30 IN THAT YEAR. UNLESS THE CONTEXT OTHERWISE INDICATES, ALL REFERENCES
TO THE "COMPANY" ARE TO THE CONTINUING OPERATIONS OF WAXMAN INDUSTRIES, INC.
AND ITS SUBSIDIARIES AND DIVISIONS AND TO THE BUSINESS CONDUCTED THROUGH SUCH
SUBSIDIARIES AND DIVISIONS.
THE COMPANY
The Company believes it is one of the leading suppliers of plumbing
products to the home repair and remodeling market in the United States. The
Company conducts its business in the United States primarily through its
wholly-owned subsidiaries, Barnett Inc. ("Barnett") and Waxman Consumer
Products Group Inc. ("Consumer Products"). The Company distributes plumbing,
electrical and hardware products, in both packaged and bulk form, to over
45,000 customers in the United States, including do-it-yourself ("D-I-Y")
retailers, mass merchandisers, smaller independent retailers and plumbing and
electrical repair and remodeling contractors. The Company's consolidated net
sales (excluding sales from discontinued operations) were $204.8 million in
fiscal 1993.
The Company's domestic business is conducted primarily through Barnett
and Consumer Products. Through their nationwide network of warehouses and
distribution centers, Barnett and Consumer Products provide their customers
with a single source for an extensive line of competitively priced quality
products. The Company's strategy of being a low-cost supplier is facilitated
by its purchase of a significant portion of its products from low-cost foreign
sources. Barnett's marketing strategy is directed predominantly to repair and
remodeling contractors and independent retailers, as compared to Consumer
Products' strategy of focusing on mass merchandisers and larger D-I-Y
retailers.
Based on management's experience and knowledge of the industry, the
Company believes that Barnett is the only national mail order and telemarketing
operation distributing plumbing, electrical and hardware products in the United
States. Barnett's marketing strategy is comprised of frequent catalog and
promotional mailings, supported by 24-hour telemarketing operations. Barnett
has averaged 15% net sales growth per annum during the period from fiscal 1991
to fiscal 1993 through (i) the expansion of its warehouse network to increase
its market penetration, (ii) the introduction of new product offerings and
(iii) the introduction of an additional catalog targeted at a new customer
base. Barnett's net sales were $82.9 million in fiscal 1993.
Consumer Products markets and distributes its products to a wide variety
of retailers, primarily national and regional warehouse home centers, home
improvement centers and mass merchandisers. An integral element of Consumer
Products' marketing strategy of serving as a single source supplier is offering
mass merchandisers and D-I-Y retailers innovative comprehensive marketing and
merchandising programs designed to improve their profitability, efficiently
manage shelf space, reduce inventory levels and maximize floor stock turnover.
Consumer Products' customers currently include national retailers such as
Kmart, Builders Square, Home Depot and Wal-Mart, as well as large regional
D-I-Y retailers. According to the most recent rankings of the largest D-I-Y
retailers published by National Home Center News, an industry trade
publication, Consumer Products' customers include 16 of the 25 largest D-I-Y
retailers in the United States. Management believes that Consumer Products is
the only supplier to the D-I-Y market that carries a complete line of plumbing,
electrical and floor protective hardware products, in both package and bulk
form. Consumer Products' net sales were $67.5 million in fiscal 1993 and have
remained generally consistent since fiscal 1991.
The Company, through its smaller domestic operations, also distributes a
full line of security hardware products and copper tubing, brass fittings and
other related products. Net sales from these other operations were $48.1
million in fiscal 1993.
The Company's business strategy is designed to capitalize on the growth
prospects for Barnett and Consumer Products. The Company's current strategy
includes the following elements:
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<PAGE> 11
- EXPANSION OF BARNETT. Since its acquisition in 1984, Barnett's
revenues and operating income have grown at compound annual rates
of 11.3% and 11.1% respectively. The Company intends to continue
to expand Barnett's national warehouse network and expects to
open as many as two additional warehouses during the remainder of
calendar 1994 and up to four new warehouses during each of the
next several fiscal years. Barnett also intends to continue
expanding its product offerings, allowing its customers to
utilize its catalogs as a means of one-stop shopping for many of
their needs. In an effort to further increase profitability,
Barnett is also increasing the number of higher margin product
offerings bearing its proprietary trade names and trademarks.
- ENHANCE COMPETITIVE POSITION OF CONSUMER PRODUCTS. During the
past 24 months, Consumer Products has restructured its sales and
marketing functions in order to better serve the needs of its
existing and potential customers. Consumer Products' strategy is
to achieve consistent growth by expanding its business with
existing customers and by developing new products and new
customers. In order to increase business with existing
customers, Consumer Products is focusing on developing strategic
alliances with its customers. Consumer Products seeks to (i)
introduce new products within existing categories, as well as new
product categories, (ii) improve customer service, (iii)
introduce full service marketing programs and (iv) achieve higher
profitability for both the retailer and Consumer Products.
The Reorganization described below was an important element of this
strategy because it lowered the Company's cash interest expense, permitting the
Company to reinvest a greater portion of its cash flow in its domestic
businesses; stabilized the Company's capital structure by, among other things,
eliminating the impact of the adverse operating results of the Company's
discontinued Canadian operations on the Company's domestic operations; and
generally provided the Company with greater operating and financial
flexibility.
DISCONTINUED OPERATIONS
Effective March 31, 1994, the Company adopted a plan to dispose of its
Canadian subsidiary, Ideal Plumbing Group, Inc. ("Ideal"). Unlike the
Company's United States operations which supply products to customers in the
home repair and remodeling market through mass retailers, Ideal primarily
served customers in the Canadian new construction market through independent
contractors. Accordingly, Ideal is reported as a discontinued operation at
March 31, 1994 and the consolidated financial statements and financial
information contained herein as of such date have been reclassified to report
separately Ideal's net assets and results of operations. Prior period
consolidated financial statements and financial information have been
reclassified to conform to the current period presentation.
At the time the plan of disposition was adopted, the Company expected
that the disposition would be accomplished through a sale of the business to a
group of investors which included members of Ideal's management. Such
transaction would have required the consent of the lenders under Ideal's
Canadian bank credit agreements as borrowings under such credit agreements were
collateralized by all of the assets and capital stock of Ideal. The bank
considered the management group's acquisition proposal; however, the proposal
was subsequently rejected. On May 5, 1994, without advance notice, the bank
filed an involuntary bankruptcy petition against Ideal citing defaults under
the bank credit agreements (borrowings under these agreements are non-recourse
to Waxman Industries, Inc.). The Company has not contested the bank's efforts
to effect the orderly disposition of Ideal. On May 30, 1994, Ideal was
declared bankrupt by the Canadian courts and, as a result, the Company's
ownership and control of Ideal effectively ceased on such date.
The Company's principal executive offices are located at 24460 Aurora
Road, Bedford Heights, Ohio 44146, Telephone (216) 439-1830.
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<PAGE> 12
BACKGROUND OF EXCHANGE OFFER;
RECENT SECURITIES OFFERING AND RELATED MATTERS
On May 20, 1994, the Company issued Series A 12 3/4% Senior Secured
Deferred Coupon Notes Due 2004 having an initial accreted value of $50,000,000
(the "Old Notes") together with warrants (the "Warrants") to purchase 2,950,000
shares of common stock, par value $.01 per share, of the Company ("Common
Stock") in exchange for $50,000,000 aggregate principal amount of the Company's
outstanding 13 3/4% Senior Subordinated Notes due June 1, 1994 (the "Senior
Subordinated Notes") pursuant to a private exchange offer (the "Private
Exchange Offer") which was a part of a series of interrelated transactions (the
"Reorganization"). In addition to the Private Exchange Offer, the components
of the Reorganization included (i) the solicitation of the consents of the
holders of the Senior Subordinated Notes to certain waivers of and the adoption
of certain amendments to the indenture governing the Senior Subordinated Notes
(the "Senior Subordinated Consent Solicitation"), (ii) the establishment of a
$55 million revolving credit facility (the "Domestic Credit Facility") and a
$15 million term loan (the "Domestic Term Loan"; and together with the Domestic
Credit Facility, the "Debt Financing"), (iii) the solicitation of the consents
of the holders of the Senior Secured Notes to certain waivers of and the
adoption of certain amendments to the indenture governing the Senior Secured
Notes (the "12 1/4% Consent Solicitation") and (iv) the repayment of the
borrowings under the Company's then existing domestic revolving credit
facilities (including $27.6 under the Company's then existing working capital
credit facility and $1.2 million under the $5.0 million revolving credit
facility of Barnett (the "Barnett Financing")).
In connection with the Reorganization, the Company restructured (the
"Corporate Restructuring") its domestic operations such that after giving
effect thereto the Company became a holding company whose only material assets
are the capital stock of its subsidiaries. As part of the Corporate
Restructuring, the Company formed (a) Waxman USA Inc. ("Waxman USA"), as a
holding company for the subsidiaries that comprise and support the Company's
domestic operations, (b) Waxman Consumer Products Group Inc., a wholly owned
subsidiary of Waxman USA, to own and operate Waxman Industries' Consumer
Products Group Division (the "Consumer Products Division"; all references
herein to "Consumer Products" shall include the Consumer Products Division and
Waxman Consumer Products Group Inc., unless the context otherwise requires),
and (c) WOC Inc. ("WOC"), a wholly owned subsidiary of Waxman USA, to own and
operate Waxman USA's domestic subsidiaries, other than Barnett and Consumer
Products. On May 20, 1994, the Company effected the Corporate Restructuring by
(i) contributing the capital stock of Barnett to Waxman USA, (ii) contributing
the assets and liabilities of the Consumer Products Division to Consumer
Products, (iii) contributing the assets and liabilities of its Madison
Equipment Division to WOC, (iv) contributing the assets and liabilities of its
Medal Distributing Division to WOC, (v) merging U.S. Lock Corporation ("U.S.
Lock") and LeRan Copper & Brass, Inc. ("LeRan"), each a wholly owned subsidiary
of the Company, into WOC, (vi) contributing the capital stock of TWI,
International, Inc. ("TWI") to Waxman USA and (vii) contributing the capital
stock of Western American Manufacturing, Inc. ("WAMI") to TWI.
The Old Notes were issued pursuant to exemptions from, or transactions
not subject to, the registration requirements of the Act and applicable state
securities laws. The Company structured the offering of the Old Notes and
Warrants as a private placement in order to consummate such offering on a more
expeditious basis than would have been possible had the offering and sale been
registered under the Act. The original purchasers of the Old Notes, as a
condition to their purchase of the Old Notes and Warrants, required the Company
to enter into a registration rights agreement pursuant to which the Company
agreed, among other things, to promptly commence the Exchange Offer following
the offering of the Old Notes. The Company has prepared and filed the
Registration Statement of which this Prospectus forms a part with the
Commission pursuant to such registration rights agreement. The original
purchasers of the Warrants, as a condition to their purchase of the Warrants
and Old Notes, also required the Company to enter into a registration rights
agreement pursuant to which the Company agreed, among other things, to file
promptly a registration statement under the Act to permit such original
purchasers to offer and sell under the Act the Warrants and shares of Common
Stock issuable upon exercise of the Warrants. The Company has prepared and
filed a registration statement with the Commission pursuant to such
registration rights agreement. See "Recent Securities Offering and Related
Matters -- Registration Rights Agreements."
- vii -
<PAGE> 13
See "Recent Securities Offering and Related Matters" for a discussion of
the offering of Old Notes, the agreements referred to above and additional
related agreements. See "Description of Notes" for a discussion of the terms
of the Notes.
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Securities Offered . . . . . . . . . . . . . . . . . . Up to $92,797,000 principal amount at maturity of
Series B 123/4% Senior Secured Deferred Coupon Notes
(the "New Notes" and, collectively with the Old Notes,
the "Notes"). The terms of the New Notes and the Old
Notes are identical in all material respects, except for
certain transfer restrictions and registration rights
relating to the Old Notes.
The Exchange Offer . . . . . . . . . . . . . . . . . . The New Notes are being offered in exchange for a like
principal amount at maturity of Old Notes. The issuance
of the New Notes is intended to satisfy obligations of
the Company contained in the Registration Rights
Agreement, dated as of May 20, 1994, by and among the
Company and the Trustee, on behalf of the original
purchasers of the Old Notes. For procedures for
tendering, see "The Exchange Offer."
Tenders, Expiration Date;
Withdrawal . . . . . . . . . . . . . . . . . . . . . The Exchange Offer will expire at Midnight, New York
City time, on July __, 1994, or such later date and time
to which it is extended (the "Expiration Date"). The
tender of Old Notes pursuant to the Exchange Offer may
be withdrawn at any time prior to the Expiration Date.
Any Old Notes not accepted for exchange for any reason
will be returned without expense to the tendering holder
thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
Conditions of the
Exchange Offer . . . . . . . . . . . . . . . . . . . The Exchange Offer is subject to customary conditions,
any or all of which may be waived by the Company in its
sole discretion. See "The Exchange Offer -- Certain
Conditions to the Exchange Offer."
Interest on the New
Notes and Old Notes . . . . . . . . . . . . . . . . . Interest will not accrue on the Notes prior to June 1,
1999. Thereafter, interest on the Notes will be payable
semiannually at the rate of 123/4% per annum until
maturity. See "Description of Notes -- Interest.
Acceptance of Old Notes and
Delivery of New Notes . . . . . . . . . . . . . . . . The Company will accept for exchange Old Notes which are
properly tendered in the Exchange Offer prior to
Midnight, New York City time, on the Expiration Date.
The New Notes issued pursuant to the Exchange Offer will
be delivered promptly following the Expiration Date.
See "The Exchange Offer -- Terms of the Exchange Offer;
Period for Tendering Old Notes."
</TABLE>
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<PAGE> 14
<TABLE>
<S> <C>
Federal Income Tax
Consequences . . . . . . . . . . . . . . . . . . . . The exchange pursuant to the Exchange Offer will not
result in any income, gain or loss to the holders of the
Notes (the "Holders") or the Company for federal income
tax purposes. See "Certain Federal Income Tax
Considerations."
Use of Proceeds . . . . . . . . . . . . . . . . . . . . There will be no proceeds to the Company from the
exchange pursuant to the Exchange Offer.
Exchange Agent . . . . . . . . . . . . . . . . . . . . . The Huntington National Bank is serving as Exchange
Agent in connection with the Exchange Offer.
</TABLE>
CONSEQUENCES OF EXCHANGING OLD NOTES
PURSUANT TO THE EXCHANGE OFFER
Based on interpretations of the Staff of the Commission set forth in
certain "no-action" letters issued to third parties and unrelated to the
Company and the Exchange Offer, the Company believes that Holders of Old Notes
(other than any Holder who is an "affiliate" of the Company within the meaning
of Rule 405 under the Act) who exchange their Old Notes for New Notes pursuant
to the Exchange Offer may offer such New Notes for resale, resell such New
Notes, and otherwise transfer such New Notes without compliance with the
registration and prospectus delivery provisions of the Act; provided such New
Notes are acquired in the ordinary course of the Holder's business and such
Holder has no intention, nor any arrangement with any person, to participate in
a distribution of such New Notes. A broker-dealer holding Old Notes may
participate in the Exchange Offer provided that it acquired the Old Notes for
its own account as a result of market-making or other trading activities. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution." To comply with the securities laws of certain
jurisdictions, it may be necessary to qualify for sale or register the New
Notes prior to offering or selling such New Notes. The Company does not
currently intend to register or qualify the sale of the New Notes in any such
jurisdiction. If a Holder of Old Notes does not exchange such Old Notes for
New Notes pursuant to the Exchange Offer, such Old Notes will continue to be
subject to the restrictions on transfer contained in the legend thereon. In
general, the Old Notes may not be offered or sold, unless registered under the
Act except pursuant to an exemption from, or in a transaction not subject to,
the Act and applicable state securities laws. See "The Exchange Offer --
Purpose of the Exchange Offer and -- Consequences of Failure to Exchange."
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all
material respects, except for certain transfer restrictions and registration
rights relating to the Old Notes. The terms of the Notes are governed by the
Indenture, dated as of May 20, 1994, between the Company and The Huntington
National Bank, as Trustee, and all amendments or supplements thereto (the
"Indenture").
<TABLE>
<S> <C>
Securities Offered . . . . . . . . . . . . . . . . . . $92,797,000 aggregate principal amount at maturity
(having an initial Accreted Value of approximately $50
million) of Series B 123/4% Senior Secured Deferred
Coupon Notes Due 2004.
Interest Payments . . . . . . . . . . . . . . . . . . Commencing June 1, 1999, interest on the New Notes will
accrue at the rate of 123/4% per annum, payable semi-
annually, commencing December 1, 1999.
</TABLE>
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<PAGE> 15
<TABLE>
<S> <C>
Maturity Date . . . . . . . . . . . . . . . . . . . . . June 1, 2004.
Original Issue Discount . . . . . . . . . . . . . . . . For federal income tax purposes, the New Notes will be
treated as having been issued with "original issue
discount" equal to the difference between the issue
price of New Notes and the sum of all cash payments
(whether denominated as principal or interest) to be
made thereon. Each holder of a New Note must include in
gross income for federal income tax purposes a portion
of such original issue discount for each day during each
taxable year in which a Note is held even though
interest does not begin to accrue until June 1, 1999,
and no cash interest payments will be received prior to
December 1, 1999. See "Certain Federal Income Tax
Consequences."
Optional Redemption . . . . . . . . . . . . . . . . . . The New Notes will be redeemable, in whole or in part,
at the option of the Company on or after June 1, 1999,
at the redemption prices set forth herein, plus accrued
interest.
Optional Redemption Upon
a Public Equity Offering . . . . . . . . . . . . . . Until June 1, 1997, upon a Public Equity Offering up to
$25.0 million principal amount at maturity of New Notes
may be redeemed at the option of the Company at 112.75%
of the Accreted Value thereof with the net proceeds of
such Public Equity Offering, provided, however, that not
less than $65.0 million aggregate principal amount at
maturity of the New Notes remains outstanding upon the
completion of such redemption.
Change of Control . . . . . . . . . . . . . . . . . . . . In the event of a Change of Control, the Company is
obligated to make an offer to purchase all outstanding
New Notes at 101% of the Accreted Value thereof plus
accrued and unpaid interest, if any.
Asset Sale Proceeds . . . . . . . . . . . . . . . . . . . The Company is obligated in certain circumstances to
make an offer to purchase New Notes at a redemption
price of 100% of the Accreted Value thereof plus accrued
and unpaid interest, if any, with the net cash proceeds
of certain sales or other dispositions of assets.
Ranking . . . . . . . . . . . . . . . . . . . . . . . . . The New Notes will be senior obligations of the company
ranking senior in right of payment to the Company's
subordinated indebtedness, including the Senior
Subordinated Notes and the Convertible Debentures, and
PARI PASSU in right of payment with all unsubordinated
indebtedness of the Company.
Security . . . . . . . . . . . . . . . . . . . . . . . . The New Notes will be secured by a lien on and security
interest in all of the issued and outstanding capital
stock of Waxman USA and all future direct domestic
subsidiaries of the Company other than those that relate
to the business conducted by Ideal and 65% of the issued
and outstanding capital stock of the current and future
direct foreign subsidiaries of the Company (and the
domestic holding
</TABLE>
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<PAGE> 16
<TABLE>
<S> <C>
companies thereof) other than those
that relate to the business conducted by Ideal.
Certain Covenants . . . . . . . . . . . . . . . . . . . . The Indenture contains certain covenants that, among
other things, limit the ability of the Company and its
subsidiaries to incur additional indebtedness, transfer
or sell assets, pay dividends, make certain other
restricted payments and investments, create liens or
enter into sale lease-back transactions, transactions
with affiliates and mergers.
</TABLE>
For more complete information regarding the Notes, see "Description of Notes."
RISK FACTORS
Holders of Old Notes should carefully consider the specific factors set
forth under "Risk Factors," as well as the other information and data included
in this Prospectus.
- xi -
<PAGE> 17
RISK FACTORS
Holders of Old Notes should consider carefully all of the information
set forth in this Prospectus and, in particular, should evaluate the following
risks before tendering their Old Notes in the Exchange Offer, although the risk
factors set forth below (other than the first risk factor) are generally
applicable to the Old Notes, as well as the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE. Holders of Old Notes who do not
exchange their Old Notes for New Notes pursuant to the Exchange Offer will
continue to be subject to the restrictions on transfer of such Old Notes as set
forth in the legend thereon as a consequence of the issuance of the Old Notes
pursuant to exemptions from, or in transactions not subject to, the
registration requirements of the Act and applicable state securities laws. In
general, the Old Notes may not be offered or sold, unless registered under the
Act, except pursuant to an exemption from, or in a transaction not subject to,
the Act and applicable state securities laws. The Company does not currently
anticipate that it will register the offer and sale of the Old Notes under the
Act. Based on interpretations by the Staff of the Commission, set forth in
certain "no-action" letters issued to third parties and unrelated to the
Company and the Exchange Offer, the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold or otherwise transferred by Holders thereof (other than by any
such Holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Act) without compliance with the registration and prospectus
delivery provisions of the Act provided that such New Notes are acquired in the
ordinary course of such Holders' business and such Holders have no intention,
nor any arrangement with any person, to participate in the distribution of such
New Notes. A broker-dealer holding Old Notes may participate in the Exchange
Offer provided that it acquired the Old Notes for its own account as a result
of market-making or other trading activities. Each broker-dealer that receives
New 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 New
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 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 New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. For a period of 180 days after the
Expiration Date (as defined herein), the Company will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution." However, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdictions or an
exemption from registration or qualification is available and is complied with.
The Company does not currently intend to register or qualify the sale of the
New Notes in any such jurisdiction.
LEVERAGE. The Company has a high degree of leverage. At March 31,
1994, the outstanding consolidated indebtedness (excluding trade payables and
accrued liabilities) of the Company's continuing operations was $175.2 million.
On a pro forma basis, at March 31, 1994, after giving effect to the
Reorganization, the outstanding amount of such indebtedness (excluding trade
payables and accrued liabilities) would have been approximately $186.4 million.
This high degree of leverage may have important consequences, including the
following: (i) the ability of the Company to obtain additional financing in the
future for working capital, capital expenditures, debt service requirements or
other purposes may be impaired; (ii) a substantial portion of the Company's
cash flow from operations will be required to satisfy debt service obligations;
(iii) the Company may be more highly leveraged than companies with which it
competes, which may place it at a competitive disadvantage; and (iv) the
Company's high degree of leverage may make it more vulnerable in the event of a
downturn in its business and may limit its ability to capitalize on business
opportunities. Although the Company believes that its operating cash flow as
well as amounts available under the Domestic Credit Facility will be sufficient
to fund working capital, capital expenditures and debt service requirements for
the next 24 months, the Company's ability to satisfy its obligations will be
dependent upon its future performance, which is subject to prevailing economic
conditions and financial, business and other factors, including factors beyond
the Company's control.
SECURITY FOR THE NOTES; VALUE OF THE COLLATERAL. The Old Notes are, and
the New Notes will be, secured by a pledge of all of the outstanding shares of
capital stock of Waxman USA and the future direct domestic subsidiaries of the
Company and 65% of the capital stock of the future direct foreign subsidiaries
of the Company, and the
- 1 -
<PAGE> 18
domestic holding companies of such foreign subsidiaries. Since none of such
subsidiaries has publicly traded securities, the value of their capital stock
will not be readily ascertainable and will depend upon the market value of the
assets and business of such subsidiaries. There can be no assurance that the
proceeds from the sale or sales of the capital stock pledged to secure the
Notes would be sufficient to satisfy any amounts due thereunder.
The rights of the Trustee to foreclose upon and dispose of the pledged
collateral is likely to be significantly impaired by applicable bankruptcy law
if a bankruptcy proceeding were to be commenced by or against the Company,
prior to the Trustee's having disposed of the pledged collateral. Under Title
XI of the United States Code (the "Bankruptcy Code"), a secured creditor, such
as the Trustee, is prohibited from disposing of security upon foreclosure in a
bankruptcy case, even though the debtor is in default under the applicable debt
instruments, without bankruptcy court approval. Moreover, in general, the
Bankruptcy Code prohibits the bankruptcy court from giving such permission if
the secured creditor is given "adequate protection." The meaning of the term
"adequate protection" may vary according to circumstances, but it is intended
in general to protect the value of the secured creditor's interest in the
collateral and may include cash payments or the granting of additional
security, if and at such times as the court in its discretion determines, for
any diminution in the value of the collateral as a result of the stay of
disposition during the pendency of the bankruptcy case. In view of the lack of
a precise definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, it is impossible to predict how
long payments under the Notes could be delayed following commencement of a
bankruptcy case, whether or when the Trustee could dispose of the pledged
collateral or whether or to what extent holders of the Notes would be
compensated for any delay in payment or loss of value of the pledged collateral
through the requirement of "adequate protection."
If there was an event of default under the Indenture which resulted in a
foreclosure upon the collateral, such foreclosure would constitute an event of
default under the Domestic Credit Facility and the Domestic Term Loan, which
are secured by a pledge of substantially all of the assets of Barnett, Consumer
Products and WOC (collectively, the "Operating Companies") and 65% of the
capital stock of the Company's foreign subsidiaries, and the indenture
governing the Senior Secured Notes (the "Senior Secured Indenture") which are
secured by all of the capital stock of the Operating Companies. In addition,
the Company currently intends to undertake a further debt financing at the
Waxman USA level in the near future. It is currently expected that the
proceeds of such debt financing would be utilized to repay, among other things,
the Senior Secured Notes. The Company expects that the performance of Waxman
USA's obligations under the agreements governing such Waxman USA debt financing
(the "Waxman USA Debt Instruments") will be secured by a pledge of the capital
stock of the Operating Companies. The Company also expects that an event of
default under the Indenture which resulted in a foreclosure would likely
constitute a change of control or an event of default under the Waxman USA Debt
Instruments. Upon an event of default under the Domestic Credit Facility, the
Domestic Term Loan or the Waxman USA Debt Instruments or the Senior Secured
Indenture, as the case may be, (which event of default could also result in an
event of default under the Indenture), the holders of such debt would be
permitted to accelerate such debt and to enforce their security interest in
substantially all of the assets or the capital stock of the Operating
Companies. There can be no assurance that the assets or capital stock of the
Operating Companies would be sufficient to repay in full borrowings under the
Domestic Credit Facility, the Domestic Term Loan or the Senior Secured
Indenture or the Waxman USA Debt Instruments, as the case may be, if they
became due, thereby diminishing or eliminating the value of the shares of
capital stock securing the Notes. In addition, any enforcement (including
foreclosure) of the security interests securing the Domestic Credit Facility,
the Domestic Term Loan or the Senior Secured Indenture or the Waxman USA Debt
Instruments, as the case may be, or any other indebtedness of Waxman USA or the
Operating Companies could have a material adverse effect on the market price of
the capital stock of such subsidiaries and on the ability of the Trustee to
realize value through sales of the collateral pledged to secure Notes.
If there were an event of default under the Senior Secured Indenture or
the Waxman USA Debt Instruments, as the case may be, and the holders of such
debt instruments were to foreclose upon the collateral, such foreclosure would
constitute an event of default permitting acceleration under the Domestic
Credit Facility and the Domestic Term Loan thereby permitting the holders of
such debt to enforce their security interest in substantially all the assets of
the Operating Companies. There can be no assurance that the assets of the
Operating Companies would be sufficient to repay in full borrowings under the
Domestic Credit Facility and the Domestic Term Loan if they became due, thereby
diminishing or eliminating the value of the shares of capital stock of the
Operating Companies
- 2 -
<PAGE> 19
securing the Senior Secured Indenture or the Waxman USA Debt Instruments, as
the case may be. In addition, any enforcement (including foreclosure) of the
security interests securing the Domestic Credit Facility and the Domestic Term
Loan or any other indebtedness of the Operating Companies could have a material
adverse effect on the ability of the holders of the Senior Secured Indenture or
the Waxman USA Debt Instruments, as the case may be, to realize value through
sales of the collateral pledged to secure such indebtedness.
RELIANCE ON OPERATIONS OF SUBSIDIARIES; STRUCTURAL SUBORDINATION. The
Company is a holding company whose only material assets are the capital stock
of its subsidiaries, including, indirectly, all of its operating subsidiaries.
The Company conducts no business other than the provision of management
services to its subsidiaries, and is dependent on distributions from its
domestic subsidiaries in order to meet its debt service obligations including
its payment obligations with respect to the Senior Subordinated Notes and the
Notes. There can be no assurance that any such distributions will be adequate
to fund the required payments under the Company's debt obligations. In
addition, certain of the instruments evidencing the Debt Financing, the
Company's other debt obligations and applicable state laws will impose
significant restrictions on the payment of dividends and the making of loans by
the Company's subsidiaries to the Company (other than certain permitted
exceptions, including payments made pursuant to an intercorporate agreement and
a tax sharing agreement). If an initial public offering of the capital stock
of any of the Company's subsidiaries is consummated, the ability of such
subsidiaries to pay dividends would be diminished to the extent of any such
capital stock sold to the public and the ability of the Company's subsidiaries
to make loans to the Company would be limited to the extent that such
transactions would have to be fair to the holders of such capital stock.
The Company derives substantially all of its operating income from
wholly-owned subsidiaries. As a result of this holding company structure, the
creditors of the Company, including the holders of the Senior Subordinated
Notes and Notes, are structurally subordinated to all creditors of such
subsidiaries with respect to the assets and capital stock of such subsidiaries,
including the lenders pursuant to the Debt Financing, the holders of the Senior
Secured Notes or the Waxman USA Debt Instruments, as the case may be, and trade
creditors. Accordingly, in the event of a dissolution, bankruptcy or
reorganization of the Company, the holders of the Senior Subordinated Notes and
the Notes will not be entitled to receive amounts from the Company's
subsidiaries until after payment in full of all creditors of the subsidiaries
of the Company. All of the Debt Financing is at the subsidiary level. In
addition, Waxman USA is guaranteeing the obligations of the Company under the
Senior Secured Notes and the capital stock of Consumer Products and WOC and 65%
of the capital stock of TWI are being pledged to the holders of Senior Secured
Notes. Thus, in effect, the Notes are structurally subordinated to the Senior
Secured Notes. Although the Company expects to refinance the Senior Secured
Notes with the Waxman USA Debt Instruments, there can be no assurance that it
will be able to consummate such refinancing.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS. The terms and conditions
of the instruments evidencing the Debt Financing, as well as other indebtedness
of the Company impose restrictions that affect, among other things, the ability
of the Company and/or its subsidiaries to incur debt, pay dividends, make
acquisitions, create liens, sell assets and make certain investments. The
breach of any of the foregoing covenants would result in a default under the
applicable debt instrument permitting the holders of indebtedness outstanding
thereunder, subject to applicable grace periods, to accelerate such
indebtedness. Any such acceleration may cause a cross-default under the
instruments evidencing other indebtedness of the Company, and there can be no
assurance that the Company would have sufficient funds to repay or assets to
satisfy such obligations.
CONTROL BY PRINCIPAL STOCKHOLDERS; CERTAIN ANTI-TAKEOVER EFFECTS.
Approximately 16.7% of the outstanding shares of the Company's common stock,
par value $.01 per share, and 80.1% of the outstanding shares of the Company's
Class B common stock are held by Melvin and Armond Waxman, brothers and
respectively, the Chairman of the Board and Co-Chief Executive Officer and the
President and Co-Chief Executive Officer of the Company (the "Principal
Stockholders"). These holdings represent 61.1% of the outstanding voting power
of the Company. Consequently, the Principal Stockholders have sufficient
voting power to elect the entire Board of Directors of the Company and, in
general, to determine the outcome of any corporate transaction or other matter
submitted to the stockholders for approval, including any merger,
consolidation, sale of all or substantially all of the Company's assets or
"going private" transactions, and to prevent or cause a change in control of
the Company. In addition, Messrs. Melvin and Armond Waxman may have an
interest in pursuing transactions, including
- 3 -
<PAGE> 20
transactions with affiliates, that in their judgment could enhance the value of
the Company's capital stock, even though such transactions might involve risks
to the holders of the Notes. In addition, certain provisions in the Company's
Certificate of Incorporation, By-laws and debt instruments may be deemed to
have the effect of discouraging a third party from pursuing a non-negotiated
takeover of the Company and preventing certain changes in control.
DEFICIENCY OF EARNINGS TO FIXED CHARGES. In fiscal 1993, 1992 and 1991
and the nine months ended March 31, 1994 and 1993, the Company's earnings (as
defined in footnote 2 to Selected Financial Data) were insufficient to cover
its fixed charges by $15.7 million, $5.1 million, $2.8 million, $1.3 million
and $3.0 million, respectively. There can be no assurance that the
deficiencies experienced in the past will not reoccur.
FOREIGN SOURCING. In fiscal 1993, products manufactured outside of the
United States accounted for approximately 21% of the total product purchases
made by the Company's continuing operations. Foreign sourcing involves a
number of risks, including the availability of letters of credit, maintenance
of quality standards, work stoppages, transportation delays and interruptions,
political and economic disruptions, foreign currency fluctuations,
expropriation, nationalization, the imposition of tariffs and import and export
controls and changes in governmental policies (including United States' policy
toward the foreign country where the products are produced), which could have
an adverse effect on the Company's business. The occurrence of certain of
these factors would delay or prevent the delivery of goods ordered by the
Company's customers, and such delay or inability to meet delivery requirements
would have an adverse effect on the Company's results of operations and could
have an adverse effect on the Company's relationships with its customers. In
addition, the loss of a foreign manufacturer could have a short-term adverse
effect on the Company's business until alternative supply arrangements were
secured.
RELIANCE ON KEY CUSTOMERS. During fiscal 1993, Kmart and its
subsidiaries, Consumer Products' largest customer, accounted for approximately
12% of the Company's continuing operations' net sales. During the same period,
Consumer Products' ten largest customers accounted for approximately 23% of the
Company's continuing operations' net sales. The loss of or a substantial
decrease in the business of Consumer Products' largest customers could have a
material adverse effect on the Company's continuing operations.
LACK OF PUBLIC MARKET. The New Notes are new securities for which there
currently is no market. Although Citicorp Securities, Inc. and Merrill Lynch
have informed the Company that they currently intend to make a market in the
New Notes, they are not obligated to do so, and any such market making may be
discontinued at any time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New Notes.
The Company does not intend to apply for listing of the New Notes on any
securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System.
ORIGINAL ISSUE DISCOUNT CONSEQUENCES. Each New Note will be issued at
an original issue discount and holders of New Notes will be required to
recognize the original issue discount as ordinary income in advance of the
receipt of the cash payments to which the income is attributable, regardless of
their method of accounting. The tax basis of each New Note in the hands of the
holder thereof will be increased by the amount of any original issue discount
on the New Note that is included in the Holder's gross income and decreased by
the amount of any payments received by the Holder. See "Certain Federal Income
Tax Consequences--Original Issue Discount."
Under the Indenture, in the event of an acceleration of the maturity of
Notes prior to June 1, 1999, Holders of Notes will be entitled to recover an
amount equal to the Accreted Amount of such Notes, which amount will be less
than the face amount of such Notes. See "Description of the Notes--Events of
Default."
If a bankruptcy case were commenced by or against the Company under the
Bankruptcy Code, the claim of a Holder of Notes with respect to the principal
amount thereof may be limited to an amount equal to the sum of (i) the issue
price of Notes and (ii) the portion of the original issue discount which is not
deemed to constitute "unmatured interest" for purposes of the Bankruptcy Code.
Accordingly, even assuming sufficient funds were available, the claims of
Holders of Notes may entitle them to less than the amount to which they would
otherwise have been entitled under the Indenture. In addition, there can be no
assurance that a bankruptcy court would compute the accrual of interest by the
same method as that used for the calculation of original issue discount under
- 4 -
<PAGE> 21
federal income tax law and, accordingly, a Holder may be required to recognize
gain or loss in the event of a court ordered distribution.
- 5 -
<PAGE> 22
SELECTED FINANCIAL DATA
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
The selected historical financial data for the fiscal years 1989
through 1993 are derived from the Company's audited consolidated financial
statements. The historical information as of and for the nine month periods
ended March 31, 1993 and 1994 is unaudited, but in the Company's opinion
reflects all adjustments (consisting only of normal recurring adjustments)
which are necessary to present fairly the Company's financial position and
results of operations as of such dates and for such periods. Results for the
nine months ended March 31, 1994 are not necessarily indicative of the results
to be expected for the fiscal year ending June 30, 1994. Effective March 31,
1994, the Company adopted a plan to dispose of its Canadian subsidiary, Ideal.
Accordingly, Ideal is reported as a discontinued operation at March 31, 1994,
and the prior period consolidated financial statements have been reclassified
to conform to the current period presentation.
- 6 -
<PAGE> 23
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
------------------- ---------
1989 1990 1991 1992 1993 1993 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1):
Net sales $194,585 $186,315 $186,327 $197,738 $204,778 $153,957 $160,245
Cost of sales 128,038 120,976 121,397 127,115 137,244 102,035 104,180
-------- -------- -------- -------- -------- -------- --------
Gross profit 66,547 65,338 64,930 70,623 67,534 51,922 56,065
Operating expenses 48,479 49,452 50,263 51,824 56,081 39,729 41,769
Restructuring and other
nonrecurring charges -- -- -- 3,900 6,762 -- --
-------- -------- -------- -------- -------- -------- --------
Operating income (loss) 18,068 15,886 14,667 14,899 4,691 12,193 14,296
Interest expense, net 8,136 12,796 17,462 20,025 20,365 15,242 15,635
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes,
extraordinary charges and
cumulative effect of accounting
change 9,932 3,090 (2,795) (5,126) (15,674) (3,049) (1,339)
Provision (benefit) for income taxes 3,794 958 (680) (768) 216 (1,429) --
-------- -------- -------- -------- -------- -------- --------
Income (loss) from continuing operations
before extraordinary charges
and cumulative effect of
accounting change 6,138 2,132 (2,115) (4,358) (15,890) (1,620) (1,339)
Discontinued Operations - Ideal
Income (loss) from discontinued
operations, net of taxes 1,183 4,656 4,343 1,146 (11,240) 1,300 (3,249)
Loss on disposal, without
tax benefit -- -- -- -- -- -- (38,343)
-------- -------- -------- -------- --------- ------- --------
Income (loss) before extraordinary
charges and cumulative effect of
accounting change 7,321 6,788 2,228 (3,212) (27,130) (320) (42,931)
Extraordinary charges, early
repayment of debt -- (320) -- (1,186) -- -- (6,625)
Cumulative effect of accounting change -- -- -- -- (2,110) (2,110) --
-------- -------- -------- -------- -------- ------- --------
Net income (loss) $ 7,321 $ 6,468 $ 2,228 $ (4,398) $(29,240) $(2,430) $(49,556)
======== ======== ======== ======== ======== ======= ========
</TABLE>
- 7 -
<PAGE> 24
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Primary earnings per share:
Income (loss) from continuing
operations before extraordinary
charges and cumulative effect
of accounting change $ .67 $ .22 $ (.22) $ (.44) $ (1.36) $ (.14) $ (.11)
Discontinued Operations:
Income (loss) from discontinued
operations .13 .48 .45 .11 (.97) .11 (.28)
Loss on disposal -- -- -- -- -- -- (3.29)
Extraordinary charge -- (.03) -- (.12) -- -- (.57)
Cumulative effect of accounting change -- -- -- -- (.18) (.18) --
-------- -------- -------- -------- -------- ------- -------
Net income (loss) $ .80 $ .67 $ .23 $ (.45) $ (2.51) $ (.21) $ (4.25)
======== ======== ======== ======== ======== ======= =======
Cash dividends per share:
Common stock $ .10 $ .12 $ .12 $ .12 $ .08 $ .06 $ --
Class B common stock .08 .11 .12 .12 .08 .06 --
Ratio of earnings to fixed charges(2) 2.0x 1.2x -- -- -- -- --
OTHER DATA(1):
EBITDA(3) $ 21,581 $ 20,299 $ 19,407 $ 24,523 $19,551 $17,242 $19,237
Depreciation and amortization 3,513 4,413 4,740 5,724 8,099 5,049 4,940
Capital expenditures 3,453 2,806 1,110 3,193 1,336 791 2,280
Cash interest expense 8,938 14,303 18,377 20,203 19,536 14,627 15,011
Ratio of EBITDA to cash interest
expense(4) 2.41x 1.42x 1.06x 1.21x 1.00x 1.18x 1.28x
BALANCE SHEET DATA (AT END OF PERIOD)(1):
Working capital $117,777 $136,989 $133,654 $135,886 $119,187 $133,862 $ 79,457
Total assets(5) 235,485 249,892 236,437 237,481 197,051 222,733 174,677
Total debt 178,976 177,118 167,274 151,000 164,403 158,994 175,206
Stockholders' equity (deficit) (5) 26,934 39,242 38,066 40,827 7,496 37,258 (37,949)
</TABLE>
- 8 -
<PAGE> 25
WAXMAN INDUSTRIES
NOTES TO SELECTED FINANCIAL DATA
(1) Data relating to continuing operations reflects the acquisition of
Western American Manufacturing, Inc. in November 1990, which was
accounted for as a purchase. Discontinued operations data relates to
Ideal which was acquired in May 1989 and accounted for as a purchase.
(2) For purposes of calculating this ratio, "earnings" consist of income
(loss) from continuing operations before income taxes,
extraordinary charges and cumulative effect of accounting change and
fixed charges, and "fixed charges" consist of interest expense,
including the interest portion of rental obligations on capitalized
and operating leases (which is deemed by the Company to be one-third
of all of its rental obligations with respect to operating leases).
Fiscal 1991 earnings were insufficient to cover fixed charges by $2.8
million. Fiscal 1992 earnings were insufficient to cover fixed
charges by $5.1 million. Fiscal 1993 earnings were insufficient to
cover fixed charges by $15.7 million. Earnings for the nine months
ended March 31, 1993 and 1994 were insufficient to cover fixed charges
by $3.0 million and $1.3 million, respectively.
(3) EBITDA represents income (loss) from continuing operations before
income taxes, extraordinary charges and cumulative effect of
accounting change plus interest expense, nonrecurring charges (which
were primarily non-cash), depreciation and amortization. The Company
has included EBITDA data (which is not a measure of financial
performance under generally accepted accounting principles) because
such data is used by certain investors to measure the ability to
service debt. EBITDA is not presented herein as an alternative to net
income, as an indicator of the Company's operating performance, or to
cash flows, as a measure of liquidity, but rather to provide
additional information relating to the Company's ability to service
its debt.
(4) For purposes of calculating this ratio, cash interest expense does not
include amortization of deferred financing costs.
(5) Certain March 31, 1993 Balance Sheet Data has been restated for the
cumulative effect of an accounting change.
- 9 -
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL.
The Company operates in a single business segment--the distribution of
plumbing, electrical and hardware products. The Company's business is
conducted in the United States primarily through Barnett and Consumer Products.
The Company's recent operating results have been adversely affected by
restructuring as well as several other nonrecurring charges. In fiscal 1993,
the Company recorded $6.8 million of restructuring and other nonrecurring
charges as well as $1.2 million of charges included in operating expenses which
the Company believes are nonrecurring. In fiscal 1992, the Company recorded
$3.9 million of restructuring and other nonrecurring charges.
The fiscal 1993 restructuring charge consists of $4.6 million related
to the expected losses in connection with the disposal of three small operating
units. The decision to dispose of the three entities was based in part on the
Company's strategy to refocus and build on its core businesses in the U.S.
(i.e., Consumer Products and Barnett). The Company completed the sale of one
of these operating units in October 1993. The Company was unable to come to
terms with the prospective buyer of the other two entities and the consummation
of a sale of these businesses is not expected to occur in the foreseeable
future, if at all. The remainder of the restructuring charge includes $1.6
million of costs incurred to consolidate administrative functions and transfer
two of Consumer Products' domestic packaging facilities to Mexico in order to
take advantage of that country's lower labor costs and $0.6 million related to
the Company's decision not to proceed with the securities offering of Barnett
in fiscal 1993. In addition, fiscal 1993 operating expenses include $1.2
million of accelerated amortization relating to certain warehouse start-up and
catalog costs to conform with prevailing industry practice. The change to
accelerated amortization was made during the fourth quarter of fiscal 1993 and
applied retroactively to July 1, 1992. The $1.2 million of accelerated
amortization, which is included in selling, general and administrative expense,
is primarily the result of the introduction of a new catalog, and in
management's opinion, is not indicative of the expected impact of accelerated
amortization on future operating results.
The fiscal 1992 restructuring charge consisted of a $3.9 million
capital loss realized upon the sale of the Company's portfolio of debt
securities.
Effective March 31, 1994, the Company adopted a plan to dispose of its
Canadian subsidiary, Ideal. Unlike the Company's U.S. operations which supply
products to customers in the home repair and remodeling market through mass
retailers, Ideal primarily serves customers in the Canadian new construction
market through independent contractors. This action was prompted by a number of
factors which had adversely affected Ideal's results of operations over the
past several years and more recently had resulted in severe liquidity problems
and jeopardized Ideal's ability to continue conducting its operations. At the
time the plan of disposition was adopted, the Company expected that the
disposition would be accomplished through a sale of the business to a group of
investors which included members of Ideal's management. Such transaction would
have required the consent of Ideal's Canadian banks as borrowings under its
bank credit agreements were collateralized by all of the assets and capital
stock of Ideal. The bank considered the management group's acquisition
proposal; however, the proposal was subsequently rejected. On May 5, 1994,
without advance notice, Ideal's Canadian bank filed an involuntary bankruptcy
petition against Ideal citing defaults under the bank credit agreements
(borrowings under
- 10 -
<PAGE> 27
these agreements are non-recourse to Waxman Industries). The Company has not
contested the bank's efforts to effect the orderly disposition of Ideal. On
May 30, 1994, Ideal was declared bankrupt by the Canadian court and, as a
result, the Company's ownership and control of Ideal effectively ceased on such
date. The estimated loss on disposal totals $38.3 million, without tax
benefits, and represents a complete write-off of the Company's investment in
Ideal. See Notes 3 and 12 to Notes to Consolidated Financial Statements.
At March 31, 1994, Ideal is reported as a discontinued operation and
the Company's consolidated financial statements have been reclassified to
report separately Ideal's net assets and results of operations. Prior period
consolidated financial statements have been reclassified to conform to the
current period presentation.
The following table sets forth certain items reflected in the
Company's Consolidated Statements of Income expressed as a percentage of net
sales.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
-----------------------
NINE MONTHS ENDED
YEARS ENDED JUNE 30, MARCH 31,
-------------------- ---------
1993 1992 1991 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross profit 33.0% 35.7% 34.8% 35.0% 33.7%
Operating expenses 27.4 26.2 27.0 26.1 25.8
Restructuring and other
nonrecurring charges 3.3 2.0 -- -- --
Operating income (loss) 2.3 7.5 7.9 8.9 7.9
Interest expense, net 9.9 10.1 9.4 9.7 9.9
Income (loss) from continuing
operations before income
taxes, extraordinary charge
and cumulative effect of
accounting change (7.6) (2.6) (1.5) (0.8) (2.0)
Income (loss) before extraordinary
charge and cumulative effect
of accounting change (13.2) (1.6) 1.2 (26.8) (0.2)
Net income (loss) (14.3) (2.2) 1.2 (30.9) (1.6)
</TABLE>
NINE MONTHS ENDED MARCH 31, 1994 VERSUS MARCH 31, 1993
NET SALES.
Net sales from the Company's continuing operations for the 1994 third
quarter totaled $52.3 million, compared with $48.6 million in the 1993 third
quarter, an increase of 7.7%. Net sales for the 1994 nine month period
increased 4.1%, from $154.0 million to $160.2 million. The Company's net
sales were adversely affected by the sale of H. Belanger Plumbing Accessories
(Belanger) in October 1993. Net sales increased 6.5% and 11.6% for the nine
months and three months ended March 31, 1994, respectively, after excluding the
impact of Belanger. The net sales increases are primarily the result of the
continued growth of Barnett. Barnett's net sales increased 16.5% from $20.6
million in the 1993 third quarter to $24.0 million in the 1994 third quarter
and 14.2% from $61.2 million in the 1993 nine month period to $69.9 million in
the 1994 nine month period. New product introductions accounted for $2.2
million and $5.0 million of the increases for the 1994 third quarter and
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<PAGE> 28
nine month period, respectively. The remainder of Barnett's increases were the
result of opening additional mail order warehouses, as well as the growth of
Barnett's existing customer base. Barnett opened two additional warehouses
during the 1994 nine month period, increasing the total number of warehouses to
28. Also contributing to the increases in net sales were higher net sales from
Consumer Products. Consumer Product's net sales increased 9.8% from $15.7
million in the 1993 third quarter to $17.2 million in the 1994 third quarter
and 4.5% from $50.9 million in the 1993 nine month period to $53.2 million in
the 1994 nine month period. The increase in Consumer Product's net sales is
primarily the result of the sale of additional product lines to several of its
existing customers.
GROSS PROFIT.
The Company's gross margins increased from 34.5% for the 1993 third
quarter to 35.5% for the 1994 third quarter and increased from 33.7% in the
1993 nine month period to 35.0% in the 1994 nine month period. The increase in
the Company's gross margins is primarily a result of improved margins at
Barnett. Barnett's gross margins have been favorably impacted by increased
sales of higher margin proprietary branded products. The favorable impact of
Barnett's margins was offset, in part, by lower gross margins at Consumer
Products. Consumer Products' margins declined as a result of proportionately
lower sales of higher margin packaged products, as well as competitive
pressures within its market.
OPERATING EXPENSES.
The Company's operating expenses increased 9.9% for the 1994 third
quarter from $12.9 million in the 1993 third quarter to $14.1 million in the
1994 third quarter and 5.1% for the 1994 nine month period from $39.7 million
in the 1993 nine month period to $41.8 million in the 1994 nine month period.
These increases were due primarily to increases in operating expenses for
Barnett. Barnett's operating expenses increased approximately $0.9 million in
the 1994 third quarter and $2.5 million in the 1994 nine month period. These
increases primarily related to higher catalog costs as well as the opening of
new mail order warehouses during the 1994 nine month period.
OPERATING INCOME.
The Company's operating income totaled $4.4 million or 8.4% of net
sales and $3.9 million or 8.0% of net sales for the 1994 and 1993 third
quarters, respectively. For the 1994 and 1993 nine month periods, operating
income totaled $14.3 million or 8.9% of net sales and $12.2 million or 7.9% of
net sales, respectively.
The Company's operating income increased 13.1% and 17.3% for the 1994
third quarter and nine month period, respectively, as compared with the
comparable prior year periods. Excluding the impact of Belanger, which was
sold in October 1993, operating income increased 14.9% and 18.8%, respectively.
The improved operating income was the result of higher gross margins offset, in
part, by increased operating expenses.
INTEREST EXPENSE.
The Company's interest expense totaled $5.3 million for the 1994 third
quarter, compared with $5.1 million for the 1993 third quarter. Interest
expense totaled $15.6 million for the 1994 nine month period, compared with
$15.2 million for the 1993 nine month period. Average borrowings outstanding
increased from $158.7 million and $158.1 million in the 1993 third quarter and
nine month periods, respectively, to $172.4 million and $168.5 million for the
same periods in the current year. The increase in average borrowings
outstanding is due to increased working capital needs relating to the growth of
the Company's operations. The
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<PAGE> 29
weighted average interest rate decreased from 12.6% in both the 1993 third
quarter and nine month period, respectively, to 12.0% and 12.1% in each of the
same periods in the current fiscal year.
INCOME TAXES.
In accordance with the provisions of SFAS 109, the Company is unable
to benefit losses in the current year. The Company has $11.5 million of
available domestic net operating loss carryforwards which expire in 2008, the
benefit of which has been reduced 100% by a valuation allowance. The Company
will continue to evaluate the valuation allowance and to the extent that the
Company is able to recognize tax benefits in the future, such recognition will
favorably affect future results of operations. See Note 5 for a discussion of
anticipated additional net operating losses which would result from the
disposition of Ideal.
LOSS FROM CONTINUING OPERATIONS.
The Company's loss from continuing operations for the 1994 third
quarter totaled $0.9 million compared with a loss of $0.7 million in the 1993
third quarter. For the 1994 nine month period, the loss from continuing
operations totaled $1.3 million compared with a loss of $1.6 million in the
1993 nine month period. The increase in the loss from continuing operations in
the current year periods is due to the Company's inability to tax benefit
losses in the current year.
DISCONTINUED OPERATIONS.
The Company's net loss from discontinued operations for the 1994 third
quarter totaled $4.2 million, compared with a net loss of $0.2 million in the
1993 third quarter. For the 1994 nine month period, the net loss from
discontinued operations totaled $3.2 million, compared with net income of $1.3
million in the 1993 nine month period. The Company recognized a loss on the
disposal of Ideal of approximately $38.3 million in the 1994 third quarter.
EXTRAORDINARY CHARGE.
The Company recognized a $6.6 million extraordinary charge, without
tax benefit, in the 1994 third quarter as a result of the refinancing of the
$50 million of Subordinated Notes as well as borrowings under the domestic bank
credit facilities. The extraordinary charge included the fees paid upon the
exchange of the Subordinated Notes along with the accelerated amortization of
unamortized debt discount and issuance costs.
NET LOSS.
The Company's net loss (including those relating to Ideal) for the
1994 third quarter totaled $50.2 million, compared with a loss of $0.9 million
in the 1993 third quarter. For the 1994 nine month period, the net loss
totaled $49.6 million compared with a net loss of $2.4 million in the 1993 nine
month period. The 1993 nine month period includes a $2.1 million charge for
the cumulative effect of a change in accounting for warehouse and catalog
costs, which was made during the fourth quarter of fiscal 1993 and was applied
retroactively to July 1, 1992.
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FISCAL 1993 VERSUS FISCAL 1992
NET SALES.
The Company's net sales from continuing operations for fiscal 1993
totaled $204.8 million compared with $197.7 million in fiscal 1992, an increase
of 3.6%. Barnett's net sales increased 14.9% from $72.1 million in fiscal 1992
to $82.9 million in fiscal 1993. New product introductions accounted for $5.6
million of this increase. In addition, the new catalog of maintenance products
introduced in January 1992 generated approximately $2.2 million in incremental
sales. The remainder of Barnett's increase was the result of the opening of
additional mail order warehouses, as well as the growth of Barnett's existing
customer base. Barnett opened three additional mail order warehouses during
fiscal 1993, increasing the total number of warehouses to 26. The increase
from Barnett was offset, in part, by lower net sales from Consumer Products.
Consumer Products' net sales totaled $67.5 million in fiscal 1993 compared with
$70.0 million in fiscal 1992, a decrease of 3.6%. Management believes that the
change in the domestic operations' net sales is primarily the result of changes
in volume.
GROSS PROFIT.
The Company's gross margin was 33.0% in fiscal 1993 compared with
35.7% in fiscal 1992. Barnett's gross margin declined approximately one-half
of one percentage point and Consumer Products' gross margin declined
approximately four percentage points. The majority of Consumer Products'
decline in margin is attributable to proportionately lower sales of higher
margin packaged products as well as competitive pressures within its markets.
OPERATING EXPENSES.
The Company's operating expenses totaled $56.1 million or 27.4% of net
sales, in fiscal 1993 compared with $51.8 million, or 26.2% of net sales, in
fiscal 1992, an increase of $4.3 million, or 8.2%. Approximately $1.2 million
of this increase relates to accelerated amortization of certain warehouse
start-up and catalog costs during fiscal 1993 to conform with prevailing
industry practice. This change was made during the fourth quarter and was
applied retroactively to July 1, 1992. The effect of this change on fiscal
1993 results was to increase amortization expense by $1.2 million. This
increase is primarily the result of the introduction of a new catalog, and in
management's opinion, is not indicative of the expected impact of accelerated
amortization on future operating results. The cumulative effect of this change
on prior years totaled $2.1 million and is reported separately in the income
statement, without tax benefit, as a change in accounting. Excluding the
impact of this item, operating expenses were up 6.7% primarily due to increases
at Barnett. Barnett's operating expenses (excluding the accelerated
amortization) increased approximately $2.1 million or 13.4%, which is less than
Barnett's 14.9% increase in net sales between the years. Approximately $1.3
million of Barnett's increase in operating expenses is related to the opening
of new mail order warehouses. Consumer Products' operating expenses increased
approximately $0.4 million between years.
RESTRUCTURING AND OTHER NON-RECURRING CHARGES.
As discussed above, the Company recorded several nonrecurring charges
during fiscal 1993 including an $6.8 million restructuring charge. Fiscal 1992
results include a $3.9 million restructuring charge which represented a capital
loss realized upon the sale of the Company's portfolio of debt securities.
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<PAGE> 31
OPERATING INCOME.
The Company's operating income totaled $4.7 million in fiscal 1993
compared with $14.9 million in fiscal 1992, a decrease of 68.5%. Current year
results were negatively impacted by the $4.2 million restructuring charge
described above, and the $1.2 million of accelerated amortization described
above. The remainder of the decrease was primarily attributable to a $2.5
million decline of Consumer Products' gross margin.
INTEREST EXPENSE.
The Company's net interest expense totaled $20.4 million for fiscal
year 1993 compared with $20.0 million for fiscal year 1992, an increase of
1.7%. Average borrowings outstanding totaled $159.1 million in fiscal 1993, as
compared with $159.7 million in fiscal 1992. Weighted average borrowings in
fiscal 1992 included amounts which the Company borrowed under a domestic term
loan which were invested in highly liquid short-term securities and used for
working capital purposes until the Company obtained its revolving credit
facility in September 1991. Excluding the impact of these borrowings, average
borrowings for fiscal 1992 were $156.4 million. The weighted average interest
rate for fiscal year 1993 was 12.9% compared with 13.2% in the prior year.
LOSS FROM CONTINUING OPERATIONS.
The Company's fiscal 1993 loss from continuing operations totaled
$15.9 million compared with a loss of $4.4 million in fiscal 1992.
DISCONTINUED OPERATIONS.
The Company's fiscal 1993 net loss from discontinued operations
totaled $11.2 million compared with net income of $1.1 million in fiscal 1992.
NET INCOME (LOSS).
The Company's fiscal 1993 net loss totaled $29.2 million and includes
a $2.1 million charge for the cumulative effect of the change in accounting
discussed above. The net loss for fiscal 1992 was $4.4 million and included a
$1.2 million extraordinary charge for the early repayment of debt. The Company
has not been able to benefit from any of its current year losses for tax
purposes. As a result, it has available $11.5 million of domestic net
operating loss carryforwards to offset future tax provisions. See "Impact of
New Accounting Standards" for a discussion of the new accounting standard for
income taxes and the impact it will have on the Company.
FISCAL 1992 VERSUS FISCAL 1991
NET SALES.
The Company's net sales from continuing operations for fiscal 1992
totaled $197.7 million compared with $186.3 million in fiscal 1991, an increase
of 6.1%. Barnett's net sales increased 15.4% from $62.5 million in fiscal 1991
to $72.1 million in fiscal 1992. New product introductions accounted for $5.9
million of this increase. In addition, the new catalog of maintenance products
introduced in January 1992 generated approximately $1.1 million of net sales in
fiscal 1992. The remainder of Barnett's increase was the result of the opening
of additional mail order warehouses, as well as the growth of Barnett's
existing customer base. During fiscal 1992, Barnett opened four additional
mail order warehouses bringing its total number of warehouses to 23.
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<PAGE> 32
Consumer Products' net sales in fiscal 1992 totaled $70.0 million, an increase
of 1.9% over fiscal 1991 sales of $68.7 million.
GROSS PROFIT.
The Company's gross margin was 35.7% in fiscal 1992 compared with
34.8% in fiscal 1991. Barnett's gross margin increased approximately one-third
of one percentage point as a result of a more profitable product mix and the
use of more economical sources of purchased materials. Consumer Products'
gross margin remained constant between years.
OPERATING EXPENSES.
The Company's operating expenses totaled $51.8 million, or 26.2% of
net sales, in fiscal 1992 compared with $50.3 million, or 27.0% of net sales,
in fiscal 1991, an increase of $1.5 million, or 3.1%. Barnett's operating
expenses increased approximately $2.2 million of which approximately $0.7
million is related to the opening of new mail order warehouses.
RESTRUCTURING AND OTHER NONRECURRING CHARGES.
During the fourth quarter of fiscal 1992, the Company's results were
affected by nonrecurring charges totaling $3.9 million, which represents a
capital loss realized upon the sale of the Company's portfolio of debt
securities.
OPERATING INCOME.
The Company's operating income was $14.9 million in fiscal 1992
compared with $14.7 million in fiscal 1991, an increase of 1.6%. Such increase
was primarily the result of the higher net sales and gross profit levels.
INTEREST EXPENSE.
Net interest expense totaled $20.0 million for fiscal 1992 compared
with $17.5 million for fiscal 1991. Average borrowings outstanding totaled
$159.7 million in fiscal 1992 compared with $153.3 million in the prior year.
The increase in average borrowings relates primarily to borrowings for
short-term working capital needs. In addition, borrowings for fiscal 1992
include amounts borrowed under the Company's domestic term loan which were
invested in highly liquid short-term securities during the first quarter of the
fiscal year. The amounts invested were subsequently used in connection with
the repayment of the domestic term loan. Excluding the impact of these
borrowings, average borrowings for fiscal 1992 were $156.4 million. The
weighted average interest rate for fiscal 1992 increased to 13.2% from 12.3% in
the prior year primarily due to the issuance of the Senior Secured Notes in
September 1991, the proceeds of which were used to retire borrowings under the
Company's then existing credit facilities.
LOSS FROM CONTINUING OPERATIONS.
The Company's fiscal 1992 loss from continuing operations totaled $4.4
million compared with income of $0.6 million in fiscal 1991.
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<PAGE> 33
DISCONTINUED OPERATIONS.
The Company's fiscal 1992 net income from discontinued operations
totaled $1.1 million compared with net income of $2.8 million in fiscal 1991.
EXTRAORDINARY CHARGE.
During the fourth quarter of fiscal 1992, the Company repurchased
certain debt securities and incurred an extraordinary charge which totaled $1.2
million (net of the applicable income tax benefit). The extraordinary charge
included the market premium paid and the accelerated amortization of
unamortized debt discount and issuance costs.
NET INCOME (LOSS).
The Company's fiscal 1992 net loss totaled $4.4 million and included a
$1.2 million extraordinary charge for the early repayment of debt. Net income
for fiscal 1991 was $2.2 million.
LIQUIDITY AND CAPITAL RESOURCES
On May 20, 1994, the Company completed a financial restructuring which
was undertaken to modify the Company's capital structure to facilitate the
growth of its domestic businesses by reducing cash interest expense and
increasing the Company's liquidity. See Note 12 to Notes to Consolidated
Financial Statements.
As part of the restructuring, the Company exchanged $50 million of its
Senior Subordinated Notes for $50 million initial accreted value of Deferred
Coupon Notes. Approximately $48.8 million of the Senior Subordinated Notes
remain outstanding. The Deferred Coupon Notes have no cash interest
requirements until June 1, 1999. As a result of the exchange, the Company's
cash interest requirements have been reduced by approximately $6.9 million
annually for five years. In addition, the $50 million of Senior Subordinated
Notes exchanged can be used to satisfy the Company's mandatory redemption
requirements with respect to such issue and, as such, the $20 million mandatory
redemption payments due on June 1, 1996 and 1997 have been satisfied and the
mandatory redemption payment due on June 1, 1998 has been reduced to $8.8
million. The Company does, however, continue to have annual mandatory
redemption payments of $17.0 million commencing on September 1, 1996 with
respect to the Senior Secured Notes.
As part of the Reorganization, the Operating Companies entered into a
$55 million, four-year, secured credit facility with an affiliate of Citibank,
N.A., as agent for certain financial institutions. The Domestic Credit
Facility, which has an initial term of three years, will be extended for an
additional year if the Senior Secured Notes have been redeemed within 33 months
after the initial borrowing under the Domestic Credit Facility. The Domestic
Credit Facility is subject to borrowing base formulas. Borrowings under the
Domestic Credit Facility bears interest at (1) the per annum rate of 1.5% plus
the highest of (a) the prime rate of Citibank N.A., (b) the federal funds rate
plus 0.5% and (c) a formula with respect to three month certificates of deposit
of major United States money market banks or (ii) LIBOR plus 3.0%. These rates
will be increased by 0.5% until such time as the Domestic Term Loan, discussed
below, has been repaid in full. These rates will be reduced by up to 0.5% if
Waxman USA achieves certain performance criteria based on the ratio of EBITDA
to fixed charges. The facility includes a letter of credit subfacility of $20
million. The Domestic Credit Facility is secured by the accounts receivable,
inventory, certain general intangibles and unencumbered fixed assets of the
Operating Companies and 65% of the capital stock of one subsidiary of TWI and
100% of the capital stock of another such subsidiary. In addition, the facility
requires the Operating Companies to maintain cash collateral accounts into
which all available funds will be deposited and applied to service the facility
on a daily basis. The Domestic Credit Facility prohibits dividends and
distributions by the Operating Companies except in certain limited instances.
The Domestic Credit Facility contains customary negative, affirmative and
financial covenants and conditions. On the date hereof, availability under the
Domestic Credit Facility is approximately $__ million.
The Domestic Credit Agreement contains customary events of default,
including the following: (1) any Operating Company shall fail to make any
payment of principal or interest or any other amount due under the agreements
related to the Domestic Credit Facility or fail to perform any covenant (after
the expiration of any applicable grace period) thereunder, or any
representation or warranty made in connection therewith shall prove to have
been incorrect in any material respect when made or deemed made; (ii) the
Company or any of its subsidiaries (other than Ideal Holding Group and its
subsidiaries) shall fail to pay any indebtedness having a principal amount of
$5,000,000 or more; or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such indebtedness, if the
effect of such event or condition is to accelerate, or to permit the
acceleration of (after the expiration of any applicable period of grace), the
maturity of such indebtedness; or any such indebtedness shall become or be
delcared to be due and payable, or required to be repaid (other than by a
regularly scheduled required prepayment), or the Company or any of its
subsidiaries (other than Ideal Holding Group and its subsidiaries) shall be
required to repurchase or offer to repurchase such indebtedness, prior to the
stated maturity thereof; (iii) certain events of bankruptcy with respect to the
Company or any of its subsidiaries (other than Ideal Holding Group and its
subsidiaries); (iv) there shall occur any Change of Control (as defined in the
Domestic Credit Facility); (v) there shall occur a Material Adverse Change (as
defined in the Domestic Credit Facility) or an event which would have a
Material Adverse Effect (as defined in the Domestic Credit Agreement).
As part of the Reorganization, the Operating Companies entered into a
$15.0 million three-year term loan with Citibank, N.A., as agent. The Domestic
Term Loan bears interest at a rate per annum equal to 2.0% over the interest
rate under the Domestic Credit Facility and is secured by a junior lien on the
collateral under the Domestic Credit Facility. A one-time fee of 1.0% of the
principal amount outstanding under the Domestic Term Loan will be payable if
such loan is not repaid within 6 months after May 20, 1994. Principal payments
on the Domestic Term Loan of $1.0 million each will be required quarterly
commencing at the end of the third quarter following May 20, 1994. The Domestic
Term Loan will be required to be prepaid if Waxman USA completes a financing
sufficient to retire the Subordinated Notes, the Senior Secured Notes and the
Domestic Term Loan. The Domestic Term Loan contains negative, affirmative and
financial covenants, conditions and events of default substantially the same as
those under the Domestic Credit Facility.
See Note 12 to Notes to Consolidated Financial Statements for a more
complete discussion of the new domestic credit facility and domestic term loan.
On June 17, 1994, the Company purchased $1.875 million of its $2.03
million outstanding 9.5% Convertible Subordinated Debentures due 2007
pursuant to its offer to purchase made on April 28, 1994.
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<PAGE> 34
The Company does not have any commitments to make substantial capital
expenditures. However, the Company does expect to open 3 to 4 Barnett
warehouses over the next twelve months. The average cost to open a Barnett
warehouse is approximately $0.5 million.
The Company expects to incur approximately $0.5 million of costs
relating to the disposition of Ideal.
As a result of the issuance of the Deferred Coupon Notes which reduces
cash interest requirements by approximately $6.9 million annually until June 1,
1999, the Company believes that funds generated from operations along with
funds available under the Company's revolving credit facility will be
sufficient to satisfy the Company's liquidity requirements for the next
twenty-four months.
DISCUSSION OF CASH FLOWS
For the 1994 nine month period, the Company's continuing operations
generated $1.2 million of cash flow from operations which included a use of
$3.1 million of cash for increased working capital. The Company's working
capital levels have increased in response to its higher net sales levels. Cash
flow used for investments totaled $2.6 million. During October 1993, the
Company generated approximately $3.0 million of cash from the sale of Belanger.
Capital expenditures totaled approximately $2.3 million in the 1994 nine month
period. Changes in other assets increased approximately $3.3 million as a
result of costs associated with the refinancing. Financing activities
generated approximately $9.5 million of cash flow as the Company increased
amounts outstanding under its revolving credit facilities.
IMPACT OF NEW ACCOUNTING STANDARDS
In February 1992, the Financial Accounting Standards Board (the FASB)
issued SFAS No. 109, "Accounting for Income Taxes." The Company will adopt
SFAS No. 109 during the first quarter of its fiscal year ending June 30, 1994.
SFAS No. 109 will require the Company to recognize income tax benefits for loss
carryforwards which have not previously been recorded. The tax benefits
recognized must be reduced by a valuation allowance in certain circumstances.
The Company does not anticipate that a benefit will be recognized upon the
initial adoption of SFAS No. 109 or that its adoption will have a material
effect upon its results of operations or financial position. However, to the
extent that the Company is able to recognize tax benefits in the future, such
recognition will favorably effect future results of operations. The FASB has
also issued SFAS No. 106, "Employers' Accounting for Postretirement Benefits
other than Pensions" and SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." The Company does not currently maintain any
postretirement or postemployment benefit plans or programs which would be
subject to such accounting standards.
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<PAGE> 35
BUSINESS
GENERAL
The Company believes that it is one of the leading suppliers of
plumbing products to the home repair and remodeling market in the United
States. The Company distributes plumbing, electrical and hardware products, in
both packaged and bulk form, to D-I-Y retailers, mass merchandisers, smaller
independent retailers and plumbing, electrical repair and remodeling
contractors.
The Company's business is conducted through its indirect wholly owned
subsidiaries, Barnett, Consumer Products, WOC and TWI. Through their
nationwide network of warehouses and distribution centers, Barnett and Consumer
Products provide their customers with a single source for an extensive line of
competitively priced, quality products. The Company's strategy of being a
low-cost supplier is facilitated by its purchase of a significant portion of
its products from low-cost foreign sources. Barnett's marketing strategy is
directed predominantly to contractors and independent retailers, as compared to
Consumer Products' strategy of focusing on mass merchandisers and larger D-I-Y
retailers. The Company's continuing operations' consolidated net sales were
$204.8 million in fiscal 1993.
BUSINESS STRATEGY
During the 1980's, the Company achieved significant revenue increases
through a combination of internal growth and strategic acquisitions of
businesses that marketed similar or complementary product lines. During the
1990's, the Company has initiated steps and is continuing to focus on
integrating the acquired businesses and improving operating efficiencies. The
Company's current strategy includes the following elements:
- EXPANSION OF BARNETT. Since its acquisition in 1984,
Barnett's revenues and operating income have grown at compound
annual rates of 11.3% and 11.1%, respectively, as a result of
(i) the expansion of its warehouse network, (ii) the
introduction of new product offerings and (iii) the
introduction in January 1992 of an additional catalog targeted
at a new customer base. The Company intends to continue to
expand Barnett's national warehouse network and expects to
open as many as two additional warehouses during the remainder
of calendar 1994 and up to four new warehouses during each of
the next several fiscal years. Barnett also intends to
continue expanding its product offerings, allowing its
customers to utilize its catalogs as a means of one-stop
shopping for many of their needs. In an effort to further
increase profitability, Barnett is also increasing the number
of higher margin product offerings bearing its proprietary
trade names and trademarks.
- ENHANCE COMPETITIVE POSITION OF CONSUMER PRODUCTS. During the
past 24 months, Consumer Products has restructured its sales
and marketing functions in order to better serve the needs of
its existing and potential customers. Consumer Products'
strategy is to achieve consistent growth by expanding its
business with existing customers and by developing new
products and new customers. In order to increase business
with existing customers, Consumer Products is focusing on
developing strategic alliances with its customers. Consumer
Products seeks to (i) introduce new products within existing
categories, as well as new product categories, (ii) improve
customer service, (iii) introduce full service marketing
programs and (iv) achieve higher profitability for both the
retailer and Consumer Products. Management believes that
Consumer Products is well positioned to benefit from the trend
among many large retailers to consolidate their purchases
among fewer vendors.
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<PAGE> 36
BARNETT
Barnett markets over 8,000 products to more than 32,000 active
customers through comprehensive quarterly catalogs, supplemented by monthly
promotional flyers and supported by telemarketing operations. Barnett services
its customers, who are primarily plumbing and electrical contractors serving
the repair and remodeling markets and independent retailers, through its
growing, nationwide network of 28 mail order warehouses. Barnett also
distributes a specialized quarterly catalog of maintenance products (also
supplemented by monthly promotional flyers) that is directed only to customers
responsible for the maintenance of hotels, motels, office buildings, healthcare
facilities and apartment complexes. The Company believes that this marketing
strategy effectively positions Barnett to continue to expand its customer base
and increase sales to existing customers. In fiscal 1993, Barnett's largest
customer accounted for less than 2% of Waxman USA's net sales and its top-ten
customers accounted for less than 6% of Waxman USA's net sales. Barnett's
average sale is $350. Barnett's net sales were approximately $83 million in
fiscal 1993.
Barnett was acquired by the Company in 1984. Since the acquisition,
Barnett has increased its number of warehouses from three to 28 and the number
of items in its catalog from 2,000 to 8,000. During this period, the number of
active accounts serviced by Barnett increased from 6,000 to over 32,000.
Barnett has added ten warehouses during the last three full fiscal years, two
warehouses to date in calendar 1994 and, subject to the availability of funds,
intends to open as many as two additional warehouses during the remainder of
calendar 1994. Thereafter, Barnett plans to open up to four warehouses
annually for the next several years. Barnett has been able to maintain its
overall operating margins throughout its expansion.
Based on management's experience and knowledge of the industry, the
Company believes, in the absence of any applicable statistics, that Barnett is
the only national mail order and telemarketing operation distributing plumbing,
electrical and hardware products in the United States. The Company believes
that Barnett has significant advantages over its regional and national
competitors. Due to its size and volume of purchases, Barnett is able to
obtain purchase terms which are more favorable than those available to its
competition, enabling it to offer prices which are generally lower than those
available from its competitors. In addition to Barnett's competitive pricing
strategy, by offering over 8,000 products, Barnett is able to provide its
customers with a single source of supply for all of their needs.
MARKETING AND DISTRIBUTION
Barnett markets its products nationwide principally through regular
catalog and promotional mailings to existing and potential customers, supported
by telemarketing operations providing 24-hour-a-day, toll-free ordering and an
expanding network of 28 warehouses allowing for delivery to customers generally
within one day of the receipt of an order. The telemarketing operations are
utilized to make telephonic sales presentations to certain potential customers
only after these customers have received written promotional materials.
Barnett's telemarketing operations (as well as all other administrative
functions) are centralized at Barnett's Jacksonville, Florida headquarters.
CATALOGS
Barnett's in-house art department produces the design and layout for
its catalogs and promotional mailings, including the quarterly catalog, the
monthly promotional flyers and Barnett's catalog of maintenance products.
Barnett's catalogs are indexed and illustrated, provide simplified pricing and
highlight new product offerings.
- 20 -
<PAGE> 37
Barnett mails its principal catalog, containing plumbing, electrical
and hardware products, to over 32,000 active customers, including hardware and
building supply stores, lumberyards and plumbing, electrical repair and
remodeling contractors. The quarterly catalog is supplemented by monthly
promotional flyers mailed to approximately 180,000 active and potential
customers. In 1992, Barnett introduced a new semi-annual catalog of
maintenance products designed to appeal to customers responsible for the
maintenance of hotels, motels, healthcare facilities, office buildings and
apartment complexes. Since the maintenance catalog was introduced in 1992,
Barnett has added approximately 6,000 new maintenance accounts.
Barnett makes its initial contact with potential customers primarily
through promotional flyers. Barnett obtains the names of prospective customers
through the rental of mailing lists from outside marketing information services
and other sources. Barnett uses sophisticated proprietary information systems
to analyze the results of individual catalog and promotional flyer mailings and
uses the information derived from these mailings to target future mailings.
Barnett updates its mailing lists frequently to delete inactive customers.
TELEMARKETING
Barnett's telemarketing operations have been designed to make ordering
its products as convenient and efficient as possible. Barnett offers its
customers a nationwide toll-free telephone number which accepts orders on a
24-hour-a-day basis. Calls are handled by members of Barnett's well-trained
staff of 42 telemarketers who utilize Barnett's proprietary, on-line order
processing system. This system provides the telemarketing staff with access to
information about products, pricing and promotions which enables them to better
serve the customer. Barnett's telemarketing staff handles approximately 1,600
incoming calls per day.
After an order is received, a computer credit check is performed and
if credit is approved, the order is transmitted to the warehouse located
nearest the customer and is shipped within 24 hours.
In addition to receiving incoming calls, Barnett's telemarketing
operations are also utilized to make telephonic sales presentations to
potential customers who have received promotional flyers from Barnett. Also,
for several months prior to the opening of new mail order warehouses, Barnett
utilizes its telemarketing operations to generate awareness of Barnett, its
product offerings and the upcoming opening of new mail order warehouses located
near the target customers.
Barnett's telemarketing operations and information systems provide its
management with current market information such as customer purchasing patterns
and purchases, competitive pricing data, and potential new products. This
information allows Barnett to quickly react to and capitalize on business
opportunities.
WAREHOUSES
Barnett currently has four warehouses in Texas, three in Florida and
two in each of Pennsylvania, New York and California. The remaining 15
warehouses are dispersed among an equal number of states. Barnett's warehouses
are located in areas meeting certain criteria for overall population and
potential customers. Typical warehouses have approximately 15,000 to 18,000
square feet of space of which up to 600 square feet are devoted to
over-the-counter sales. Barnett has initiated a program to enlarge product
displays in the counter area of the warehouses in order to display the breadth
of its expanding product line.
Barnett's experience indicates that customers prefer to order from
local suppliers and that many local tradespeople prefer to pick up their orders
in person rather than to have them delivered. Therefore, Barnett intends to
continue the expansion of its warehouse network in order to reduce the distance
between it and the
- 21 -
<PAGE> 38
customer. For the year ended June 30, 1993, approximately 23% of Barnett's net
sales were picked up by Barnett's customers.
The factors considered in site selection include the number of
prospective customers in the local target area, the existing sales volume in
such area and the availability and cost of warehouse space, as well as other
demographic information. From its experience in opening 25 new warehouses
since its acquisition by the Company, Barnett has gained substantial expertise
in warehouse site selection, negotiating leases, reconfiguring space to suit
its needs, and stocking and opening new warehouses. The average investment
required to open a warehouse is approximately $500,000, including approximately
$250,000 for inventory.
PRODUCTS
Barnett markets an extensive line of over 8,000 plumbing, electrical
and hardware products, many of which are sold under its proprietary trade names
and trademarks. This extensive line of products allows Barnett to serve as a
single source supplier for many of its customers. Since the beginning of the
current fiscal year, Barnett has added approximately 1,100 new products,
including a new line of builders' hardware and light bulbs. Many of these
products are higher margin products bearing Barnett's proprietary trade names
and trademarks. Barnett tracks sales of new products the first year they are
offered and new products that fail to meet specified sales criteria are
discontinued. Barnett believes that its customers respond favorably to the
introduction of new product lines in areas that allow the customers to realize
additional cost savings and to utilize Barnett's catalogs as a means of
one-stop shopping for many of their needs.
In an effort to further increase profitability and to further enhance
Barnett's reputation as a leading supplier of plumbing, electrical and hardware
products, Barnett is presently increasing the number of its higher margin
product offerings bearing its proprietary trade names and trademarks.
Proprietary products offer customers high quality, lower cost alternatives to
the brand name products Barnett sells. Barnett's catalogs and monthly
promotional flyers emphasize the comparative value of such items. Barnett's
products are generally covered by a one year warranty, and returns (which
require prior authorization from Barnett) have historically been immaterial in
amount.
The following is a discussion of Barnett's principal product groups:
PLUMBING PRODUCTS. Barnett's plumbing products include faucets and
faucet parts, sinks, disposals, vanities and cabinets, tub and shower
accessories, and toilets and toilet tank repair items. Barnett's plumbing
products are sold under its proprietary trademarks PremierTM and RegentTM.
Barnett also sells branded products of leading plumbing manufacturers.
ELECTRICAL PRODUCTS. Barnett's electrical products include such items
as light bulbs, light fixtures, circuit panels and breakers, switches and
receptacles, wiring devices, chimes and bells, telephone and audio/video
accessories and various appliance repair items. Certain of Barnett's
electrical products are sold under its own proprietary trademarks, such as
PremierTM light bulbs, and the proprietary trademarks of leading manufacturers
of electrical supplies.
HARDWARE PRODUCTS. Barnett sells a broad range of hardware products,
including hand tools and power tools, patio and closet door repair accessories,
window hardware, paint supplies, fasteners, safety equipment, cleaning supplies
and garden hoses and sprinklers.
- 22 -
<PAGE> 39
CONSUMER PRODUCTS
Consumer Products markets and distributes approximately 9,000 products
to a wide variety of retailers, primarily D-I-Y warehouse home centers, home
improvement centers, mass merchandisers, hardware stores and lumberyards.
Representative of Consumer Products' large national retailers are Kmart,
Builders Square and Wal-Mart. Representative of Consumer Products' large
regional D-I-Y retailers are Channel Home Centers and Fred Meyer Inc. According
to rankings of the largest D-I-Y retailers published in NATIONAL HOME CENTER
NEWS, an industry trade publication, Consumer Products' customers include 16 of
the 25 largest D-I-Y retailers in the United States. Consumer Products works
closely with its customers to develop comprehensive marketing and merchandising
programs designed to improve their profitability, efficiently manage shelf
space, reduce inventory levels and maximize floor stock turnover. Management
believes that Consumer Products is the only supplier to the D-I-Y market that
carries a complete line of plumbing, electrical and floor protective hardware
products, in both packaged and bulk form. Consumer Products also offers
certain of its customers the option of private label programs. The Company
believes that Consumer Products will also benefit from the continued growth of
the D-I-Y market which, according to DO-IT-YOURSELF RETAILING, an industry
trade publication, is expected to expand at a compound annual rate of
approximately 6% over the next four years as well as from the expected growth
of existing customers, several of which have announced expansion plans. In
fiscal 1993, Kmart and its subsidiaries accounted for approximately 12% of the
Company's continuing operations' net sales. No other customer was responsible
for more than 2% of the Company's continuing operations' net sales in fiscal
1993. Consumer Products' top ten customers accounted for approximately 24% of
the Company's continuing operations net sales in fiscal 1993.
During the 1980's, Consumer Products significantly expanded its
business through a combination of internal growth and strategic acquisitions.
The Company's acquisition strategy focused on businesses which marketed similar
or complementary product lines to customers or markets not previously served or
through channels not previously utilized by the Company. In recent years,
Consumer Products has integrated the acquired businesses to enhance the
Company's purchasing power, improving operating efficiencies and enabling
Consumer Products to cross-sell a broader range of products to a larger
customer base. These improvements have enabled Consumer Products to withstand
financial downturns suffered by several important regional retailers to whom
Consumer Products sells its products and to significantly increase its sales to
several national retailers. Consumer Products' net sales were approximately
$67.5 million in fiscal 1993.
In recent years, the rapid growth of large mass merchandisers and
D-I-Y retailers has contributed to a significant consolidation of the United
States retail industry and the formation of large, dominant, product specific
and multi-category retailers. These retailers demand suppliers who can offer a
broad range of quality products and can provide strong marketing and
merchandising support. Due to the consolidation in the D-I-Y retail industry,
a substantial portion of Consumer Products' net sales are generated by a small
number of customers. During the past 18 months, Consumer Products has
restructured its sales and marketing functions in order to better position
itself to meet the demands of the retailers. Management believes that its
strategy of developing new products and forming strategic alliances with its
customers will enable Consumer Products to effectively compete and achieve
consistent growth. Consumer Products supplies products to its customers
pursuant to individual purchase orders and has no long-term written contract
with its customers.
MARKETING AND DISTRIBUTION
Consumer Products' marketing strategy includes offering mass
merchandisers and D-I-Y retailers a comprehensive merchandising program which
includes design, layout and setup of selling areas. Sales and service
personnel assist the retailer in determining the proper product mix in addition
to designing department layouts to effectively display products and optimally
utilize available floor and shelf space. Consumer Products supplies
- 23 -
<PAGE> 40
point-of-purchase displays for both bulk and packaged products, including
color-coded product category signs and color-coordinated bin labels to help
identify products, and backup tags to signify products that require reordering.
Consumer Products also offers certain of its customers the option of private
label programs for their plumbing and floor care products. In-house design,
assembly and packaging capabilities enable Consumer Products to react quickly
and effectively to service its customers' changing needs. In addition,
Consumer Products' products are packaged and designed for ease of use, with
"how to" instructions included to simplify installation, even for the
uninitiated D-I-Y consumer.
Consumer Products' sales and service representatives visit stores
regularly to take reorders and recommend program improvements. These
representatives also file reports with Consumer Products, enabling it to stay
abreast of changing consumer demand and identify developing trends. In
addition, Consumer Products has identified a growing trend among retailers to
purchase on a "just-in-time" basis in order to reduce their inventory levels
and increase returns on investment. In order to support its customers'
"just-in-time" requirements, Consumer Products has significantly improved its
EDI capabilities.
Consumer Products operates and distributes its products through four
strategically located distribution facilities in Cleveland, Ohio, Lancaster,
Pennsylvania, Dallas, Texas and Reno, Nevada.
PRODUCTS
The following is a discussion of the principal product groups:
PLUMBING PRODUCTS. Consumer Products' plumbing products include
valves and fittings, rubber products, repair kits and tubular products such as
traps and elbows. Many of Consumer Products' plumbing products are sold under
the proprietary trade names PlumbcraftR, PlumbKingR, PlumblineTM and KFR. In
addition, Consumer Products offers certain of its customers the option of
private label programs. Consumer Products also offers proprietary lines of
faucets under the trade name PremierR, as well as a line of shower and bath
accessories under the proprietary trade name Spray SensationsTM.
ELECTRICAL PRODUCTS. Consumer Products' electrical products include
items such as plugs, adapters, outlets, wire, circuit breakers and various
tools and test equipment. Consumer Products sells many of its electrical
products under the proprietary trade name ElectracraftR. Consumer Products
also sells a line of outdoor weatherproof electrical products, a full line of
ceiling fan accessories, a line of telephone accessories and connecting
devices, a line of audio and video accessories and lamp and light fixture
replacement parts and replacement glassware.
FLOOR PROTECTIVE HARDWARE PRODUCTS. Consumer Products' floor
protective hardware products include casters, doorstops and other floor,
furniture and wall protective items. Consumer Products markets a complete line
of floor protective hardware products under the proprietary trade name KFR and
also under private labels.
OTHER OPERATIONS
The Company has several other operations which are conducted through
WOC and TWI. These operations in the aggregate generated net sales of $48.0
million in fiscal 1993, which accounted for approximately 23.5% of the net
sales from the Company's continuing operations during the period. The most
significant of these operations are U.S. Lock, a supplier of security hardware
products, and LeRan, a supplier of copper tubing and specialty plumbing
products. U.S. Lock and LeRan, as well as Madison Equipment and Medal
Distributing, are operated as separate divisions of WOC. TWI includes the
foreign sourcing operations which support the Company's continuing operations.
- 24 -
<PAGE> 41
U.S. LOCK
U.S. Lock, which was acquired by the Company in 1988, carries a full
line of security hardware products, including locksets, door closers and
locksmith tools. Many of these products are sold under the U.S. Lock(R) and
LegendTM trademarks. U.S. Lock markets and distributes its products primarily
to locksmiths through a telemarketing sales team. U.S. Lock's telemarketing
effort is supplemented with a catalog that is mailed annually to 6,000 existing
customers and promotional flyers. Since its acquisition by the Company, U.S.
Lock has increased its number of warehouses from one to four, three of which
are shared with Barnett. Shared facilities allow the Company to realize
additional efficiencies by consolidating space requirements and reducing
personnel costs.
LERAN
LeRan, which was acquired by the Company in 1985, is a supplier of
copper tubing and fittings, brass valves and fittings, malleable fittings and
related products. Its customers include liquid petroleum gas dealers,
lumberyards, plumbing and mechanical contractors and D-I-Y retailers. LeRan
markets its products primarily through salesmen and outside service
representative organizations. These efforts are supported by a catalog, which
is mailed semiannually to 7,000 existing customers, monthly promotional flyers
and a telemarketing program. LeRan currently services its customers from four
regional warehouses, two of which are shared with Barnett.
OTHER OPERATIONS
WOC's other operations also include its Madison Equipment division, a
supplier of electrical products, and its Medal Distributing division, a
supplier of hardware products.
PURCHASING, PACKAGING AND ASSEMBLY
Products bearing the Company's proprietary trade names and trademarks
are assembled and packaged in its Taiwan, Mainland China and Mexico facilities.
The products packaged in Taiwan and China are purchased locally in bulk and,
after assembly and packaging, are shipped to the Company's various distribution
centers in the United States. The Company also outsources the packaging of
certain products. For the year ended June 30, 1993, products purchased
overseas, primarily from Taiwan, accounted for approximately 22.9% of the total
product purchases made by the Company's continuing operations.
TWI, through its subsidiaries, operates the Taiwan and Mainland China
facilities, which assemble and package plumbing and electrical products. In
addition, the facility in Mainland China manufactures and packages plastic
floor protective hardware. The Company believes that these facilities give it
competitive advantages, in terms of cost and flexibility in sourcing. Both
labor and physical plant costs are significantly below those in the United
States.
During fiscal 1991, the Company purchased WAMI, a small manufacturer
of plumbing pipe nipples in Tijuana, Mexico. Pipe nipples are short lengths of
pipe from 1/2 of an inch to 6 feet long, threaded at each end. As a result of
this acquisition, the Company is now vertically integrated in the manufacture
and distribution of pipe nipples. Since the acquisition, in order to take
advantage of lower labor costs, the Company has relocated certain of its United
States packaging operations to TWI's WAMI subsidiary in Mexico.
<PAGE> 42
Substantially all of the other products purchased by Waxman USA are
manufactured for it by third parties. Waxman USA estimates that it purchases
products and materials from over approximately 1,300 suppliers and is not
dependent on any single unaffiliated supplier for any of its requirements.
The following table sets forth the approximate percentage of net sales
attributable to the Company's principal product groups:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Plumbing 74% 73% 71%
Electrical 10 9 10
Hardware 16 18 19
---- ---- ----
Total Net Sales 100% 100% 100%
=== === ===
</TABLE>
IMPORT RESTRICTIONS
Under current United States government regulations all products
manufactured offshore are subject to import restrictions. The Company
currently imports goods from Mexico under the preferential import regulations
commonly known as "807' and as direct imports from China and Taiwan. The "807'
arrangement permits an importer who purchases raw materials in the United
States and then ships the raw materials to an offshore factory for assembly, to
reimport the goods, without quota restriction and to pay a duty only on the
value added in the offshore factory.
Where the Company chooses to directly import goods purchased outside
of the United States, the Company may be subject to import quota restrictions,
depending on the country in which assembly takes place. These restrictions may
limit the amount of goods of a particular category that a country may export to
the United States. If the Company cannot obtain the necessary quota, the
Company will not be able to import the goods into the United States. Export
visas for the goods purchased offshore by the Company are readily available.
The above arrangements, both 807 and quota restrictions, may be
superseded by more favorable regulations with respect to Mexico under the North
American Free Trade Agreement ("NAFTA"), or may be limited by revision or
cancelled at any time by the United States government. The Company does not
believe that its relative competitive position will be adversely affected by
NAFTA. As a result of the passage of NAFTA, importation from Mexico will
become more competitive in the near future relative to importation from other
exporting countries.
COMPETITION
Waxman USA faces significant competition from different competitors
within each of its product lines, although it has no competitor offering the
range of products in all of the product lines that Waxman USA offers. Waxman
USA believes that its buying power, extensive inventory, emphasis on customer
service and merchandising programs have contributed to its ability to compete
successfully in its various markets. In the areas of electrical and hardware
supplies, Waxman USA faces significant competition from smaller companies which
specialize in particular types of products and larger companies which
manufacture their own products and have greater financial resources than Waxman
USA. Barnett's mail order business competes principally with local
distributors of plumbing, electrical and hardware products. Waxman USA
believes that competition in sales to both mail order customers and retailers
is primarily based on price, product quality and selection, as well as
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<PAGE> 43
customer service, which includes speed of responses for mail order customers
and packaging and merchandising for retailers.
EMPLOYEES
As of March 31, 1994, the Company's continuing operations employed
1,245 persons, 300 of whom were clerical and administrative personnel, 145 of
whom were sales service representatives and 800 of whom were either production
or warehouse personnel. Approximately 8% of the employees of the Company's
continuing operations are represented by collective bargaining units. The
Company considers its relations with its employees, including those represented
by collective bargaining units, to be satisfactory.
TRADEMARKS
Several of the trademarks and trade names used by the Company are
considered to have significant value in its business. See "Business-
- -Barnett--Products," "--Consumer Products--Products" and "--Other Operations."
PROPERTIES
The following table sets forth, as of March 31, 1994, certain
information with respect to the Company's principal physical properties:
<TABLE>
<CAPTION>
APPROXIMATE LEASE
SQUARE EXPIRATION
LOCATION FEET PURPOSE DATE
-------- ---- ------- ----
<S> <C> <C> <C>
24460 Aurora Road 21,000 Corporate Office Owned
Bedford Hts., OH
24455 Aurora Road 125,000 Consumer Products Corporate Office and Warehouse 6/30/02
Bedford Hts., OH(1)
330 Vine Street 80,000 Consumer Products Office and Warehouse 2/28/96
Sharon, PA
2029 McKenzie Drive 60,000 Consumer Products Office and Warehouse 5/31/94
Dallas, TX(2)
945 Spice Island Drive 71,000 Consumer Products Office and Warehouse 7/31/98
Sparks, NV(3)
1842 Colonial Village Lane 72,000 Consumer Products Office and Warehouse 5/31/00
Lancaster, PA
3333 Lenox Avenue 60,000 Barnett Corporate Office and Warehouse 10/31/03
Jacksonville, FL
300 Jay Street 56,000 LeRan Corporate Office and Warehouse Owned
Coldwater, MI
</TABLE>
- 26 -
<PAGE> 44
<TABLE>
<S> <C> <C> <C>
No. 10, 7th Road 56,000 Office, Packaging, and Warehouse Owned
Industrial Park
Taichung, Taiwan
Republic of China
</TABLE>
(1) Aurora Investment Co., a partnership owned by Melvin and Armond Waxman
together with certain other members of their families, is the owner
and lessor of this property. The Company has the option to renew the
leases for a five-year term at the market rate at the time of renewal.
(2) The Company has the option to renew the lease for a two-year term.
In addition to the properties shown in the table, the Company owns 15
warehouses and leases 55 warehouses ranging in size from 6,000 to 50,000 square
feet (of these properties, Barnett leases 27 warehouses and Consumer Products
leases six warehouses).
The Company believes that its facilities are suitable for its
operations and provide the Company with adequate capacity.
LEGAL PROCEEDINGS
The Company is subject to various legal proceedings and claims that
arise in the ordinary course of business. In the opinion of management, the
amount of any ultimate liability with respect to these actions will not affect
materially the financial position of the Company.
ENVIRONMENTAL REGULATIONS
The Company is subject to certain federal, state and local
environmental laws and regulations. The Company believes that it is in
material compliance with such laws and regulations applicable to it. To the
extent any subsidiaries of Waxman Industries are not in compliance with such
laws and regulations, Waxman Industries, as well as such subsidiaries, may be
liable for such non-compliance. However, in any event, the Company is not
aware of any such liabilities which could have a natural adverse effect on it
or any of its subsidiaries.
RECENT DEVELOPMENTS
BELANGER SALE. In October 1993, the Company completed the sale of all
of the capital stock of one of its Canadian operations, H. Belanger Plumbing
Accessories, Ltd. ("Belanger") to a group led by the management of Belanger in
exchange for cash and a promissory note. Belanger, based in Montreal, is
engaged in the distribution of plumbing specialty products, including bulk and
packaged products to plumbing and hardware wholesalers and retailers. During
fiscal 1993, Belanger had net sales of U.S. $6.3 million.
DISCONTINUED OPERATIONS. Effective March 31, 1994, the Company
adopted a plan to dispose of its Canadian subsidiary, Ideal. Unlike the
Company's United States operations which supply products to customers in the
home repair and remodeling market through mass retailers, Ideal primarily
served customers in the Canadian new construction market through independent
contractors. Accordingly, Ideal is reported as a discontinued operation at
March 31, 1994 and the consolidated financial statements and financial
information contained herein as of such date have been reclassified to report
separately Ideal's
- 27 -
<PAGE> 45
net assets and results of operations. Prior period consolidated financial
statements and financial information have been reclassified to conform to the
current period presentation.
At the time the plan of disposition was adopted, the Company expected
that the disposition would be accomplished through a sale of the business to a
group of investors which included members of Ideal's management. Such
transaction would have required the consent of the lenders under Ideal's
Canadian bank credit agreements as borrowings under such credit agreements were
collateralized by all of the assets and capital stock of Ideal. The bank
considered the management group's acquisition proposal; however, the proposal
was subsequently rejected. On May 5, 1994, without advance notice, the bank
filed an involuntary bankruptcy petition against Ideal citing defaults under
the bank credit agreements (borrowings under these agreements are non-recourse
to Waxman Industries, Inc.). The Company has not contested the bank's efforts
to effect the orderly disposition of Ideal. On May 30, 1994, Ideal was
declared bankrupt by the Canadian courts and, as a result, the Company's
ownership and control of Ideal effectively ceased on such date.
- 28 -
<PAGE> 46
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The members of the Board of Directors, executive officers and key
employees of the Company and their respective ages and positions are as
follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Melvin Waxman 59 Chairman of the Board and Co-Chief Executive
Officer
Armond Waxman 55 President, Co-Chief Executive Officer, Treasurer
and Director
John S. Peters 45 Senior Vice President, Operations
William R. Pray 46 Senior Vice President
Laurence S. Waxman 37 Senior Vice President
Neal R. Restivo 34 Vice President, Finance and Chief Financial
Officer
Irving Z. Friedman 61 Director
Samuel J. Krasney 68 Director
Judy Robins 45 Director
</TABLE>
Set forth below is a biographical description of each director,
executive officer and key employee of the Company mentioned above.
Mr. Melvin Waxman was elected Co-Chief Executive Officer of the
Company in May 1988. Mr. Waxman has been a Chief Executive Officer of the
Company for over 20 years and has been a director of the Company since 1962.
Mr. Waxman has been Chairman of the Board of the Company since August 1976.
Melvin Waxman and Armond Waxman are brothers.
Mr. Armond Waxman was elected Co-Chief Executive Officer of the
Company in May 1988. Mr. Waxman has been the President and Treasurer of the
Company since August 1976. Mr. Waxman has been a director of the Company since
1962 and was Chief Operating Officer of the Company from August 1976 to May
1988. Armond Waxman and Melvin Waxman are brothers.
Mr. Peters was elected to the position of Senior Vice
President, Operations of the Company in April 1988, after serving as Vice
President, Operations of the Company since February 1985. Prior to that Mr.
Peters had been Vice President, Personnel/Administration of the Company since
February 1979.
Mr. Pray was elected Senior Vice President of the Company in February
1991 and is also President of Barnett, a position he has held since 1987. Mr.
Pray joined Barnett in 1979 as Vice President of Sales and Marketing.
Mr. Laurence Waxman was elected Senior Vice President of the Company
in November 1993 and is also President of the Consumer Group Division, a
position he has held since 1988. Mr. Waxman joined the Company in 1981. Mr.
Laurence Waxman is the son of Melvin Waxman.
- 29 -
<PAGE> 47
Mr. Restivo was elected Vice President, Finance and Chief Financial
Officer of the Company in November 1993, after serving as Vice President,
Corporate Controller since November 1990, and as Corporate Controller of the
Company since November 1989. From August 1982 until November 1989, Mr. Restivo
was employed by the public accounting firm of Arthur Andersen & Co., where he
was an audit manager since 1988.
Mr. Friedman has been a director of the Company since 1989. Mr.
Friedman has been a certified public accountant with the firm of Krasney Polk
Friedman & Fishman for more than five years.
Mr. Krasney has been a director of the Company since 1977. In
September 1993, Mr. Krasney retired from his position of Chairman of the Board,
President and Chief Executive Officer of Banner Aerospace, Inc., a distributor
of parts in the aviation aftermarket, a position he had held since June 1990.
In September 1993, Mr. Krasney also retired from The Fairchild Corporation
(formerly Banner Industries, Inc.) where he had been Vice Chairman of the Board
since 1985. Fairchild is a manufacturer and distributor of fasteners to the
aerospace industry and industrial products for the plastic injection molding
industry and other industrial markets and is a furnisher of telecommunication
services to office buildings. Mr. Krasney is also a director of FabriCenters
of America, Inc.
Mrs. Robins has been a director of the Company since 1980. Mrs.
Robins has owned and operated an interior design business for more than five
years. Mrs. Robins is the sister of Melvin and Armond Waxman. Mrs. Robins'
husband is the Secretary of the Company.
BOARD OF DIRECTORS
The number of directors on the Board of the Company is presently fixed
at five. Directors are elected at the annual meeting of stockholders and hold
office for one year and until their successors are elected. the Company has an
Executive Committee, Audit Committee, Compensation Committee and Stock Option
Committee. Messrs. Melvin and Armond Waxman and Krasney serve on the Executive
Committee, Messrs. Friedman and Krasney serve on the Audit Committee and the
Stock Option Committee and Mrs. Robins and Messrs. Krasney and Friedman serve
on the Compensation Committee.
DIRECTOR REMUNERATION
Each director who is not an employee of the Company received a fee of
$3,000 per fiscal quarter for services as a director during fiscal 1993 plus a
fee of $1,000 plus traveling expenses for each Board meeting he or she
attended. In addition to the foregoing compensation, each director who is not
an employee of the Company received options during fiscal 1993 to purchase
10,000 shares of the Company's Common Stock at a price of $4.25 per share.
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid for services
rendered during fiscal 1993 to the Co-Chief Executive Officers and the three
other most highly compensated executive officers of the Company in the fiscal
years indicated:
- 30 -
<PAGE> 48
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term Compensation
----------------------
All Other
Awards Payouts Compensation
------ -------
Annual Compensation(1) Restricted LTIP
Year Salary($) Bonus($)(2) Stock($) Options(#) Payouts($) ($)(3)(4)
---- --------- ----------- -------- ---------- ---------- ---------
Name and Principal
------------------
Position
--------
<S> <C> <C> <C> <C> <C> <C> <C>
Melvin Waxman 1993 365,000 100,000 __ 250,000 __ 65,293
Chairman of the Board 1992 400,000 125,000 __ __ __ __
and Co-Chief Executive 1991 400,000 125,000 __ __ __ __
Officer
Armond Waxman 1993 378,942 100,000 __ 250,000 __ 50,464
President and Co-Chief 1992 400,000 125,000 __ __ __ __
Executive Officer 1991 400,000 125,000 __ __ __ __
Jerome C. Jacques(5) 1993 192,067 45,000 __ 50,000 __ 16,175
Senior Vice President 1992 200,000 50,000 __ 12,500 __ __
-- Finance and Chief 1991 200,000 50,000 __ __ __ __
Financial Officer
William R. Pray 1993 200,000 45,000 __ 25,000 __ 14,789
Senior Vice President 1992 173,000 50,000 __ 7,500 __ __
1991 171,000 38,000 __ 10,000 __ __
John S. Peters 1993 132,644 25,000 __ 45,000 __ 14,137
Senior Vice President 1992 125,000 25,000 __ 7,500 __ __
-- Operations 1991 125,000 25,000 __ __ __ __
<FN>
(1) Certain executive officers received compensation in fiscal 1991, 1992
and 1993 in the form of perquisites, the amount of which does not
exceed reporting thresholds.
(2) Messrs. Pray and Peters received their bonuses under the Company's
Profit Incentive Plan.
(3) In accordance with the transitional provisions applicable to the rules
of the Securities and Exchange Commission, disclosure of All Other
Compensation is not required for 1991 and 1992.
(4) Includes Company contributions to the Company's Profit-Sharing
Retirement Plan and premiums on split-dollar life insurance policies.
Profit Sharing Plan contributions were as follows: $2,289 each for
Messrs. Melvin and Armond Waxman, and Pray, $1,637 for Mr. Peters and
$2,289 for Mr. Jacques. Premiums on split-dollar life insurance
policies were as follows: $63,004 for Melvin Waxman, $48,175 for
Armond Waxman, $12,500 each for Messrs. Pray and Peters and $13,886
for Mr. Jacques.
(5) Mr. Jacques' employment with the Company was terminated in November
1993.
</TABLE>
- 32 -
<PAGE> 49
EMPLOYMENT AGREEMENTS
Mr. Peters entered into an employment agreement with the Company which
became effective as of January 1, 1992 and terminates on December 31, 1995.
Pursuant to such employment agreement, Mr. Peters is to serve as Senior Vice
President, Operations of the Company, and is also to serve in such substitute
or further offices or positions with the Company or any subsidiary or affiliate
of the Company as shall, from time to time, be assigned by the Board of
Directors of the Company. Mr. Peters' employment agreement provides for a
minimum annual salary of $125,000, which salary will be reviewed annually by
the Company. Increases in salary and the granting of bonuses to Mr. Peters
will be determined by the Company, in its sole discretion, based on such
individual's performance and contributions to the success of the Company, his
responsibilities and duties and the salaries of other senior executives of the
Company. The employment agreement also contains provisions which restrict Mr.
Peters from competing with the Company during the term of the agreement and for
two years following the termination thereof.
Mr. Pray has an employment agreement with Barnett and the Company
which became effective as of July 1, 1990 and which terminates on June 30,
2000. Pursuant to this employment agreement, Mr. Pray is to serve as President
of Barnett and provide services to Barnett in such managerial areas as Mr. Pray
served in the past and such additional duties as shall be assigned to Mr. Pray
by the Co-Chief Executive Officers of the Company. Mr. Pray's employment
agreement provides for a minimum annual salary of $165,000 for the first year
of the employment agreement and provides that for each year thereafter the
minimum annual salary will be increased by eight percent of the prior year's
salary or any salary amount separately agreed to in writing by Mr. Pray,
Barnett and the Company. Mr. Pray is also eligible to receive additional
discretionary bonuses as may from time to time be determined in the sole
discretion of the Board of Directors of the Company. The employment agreement
also contains provisions which restrict Mr. Pray from competing with the
Company during the term of the agreement and for two years following the
termination thereof.
- 33 -
<PAGE> 50
STOCK OPTION AND SAR GRANTS
The following table sets forth the information noted for all grants of
stock options made by the Company during fiscal 1993 to each of the executive
officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
OPTIONS/SAR(1) GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-----------------
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
OPTIONS GRANTED TO EXERCISE PRICE APPRECIATION FOR
GRANTED EMPLOYEES IN PRICE EXPIRATION OPTION TERM(2)
NAME (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- --- ----------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Melvin Waxman 100,000 9.6 5.00 Sept 1997 138,000 305,500
150,000 14.4 4.25 Feb 2003 400,988 1,016,175
Armond Waxman 100,000 9.6 5.00 Sept 1997 138,000 305,500
150,000 14.4 4.25 Feb 2003 400,988 1,016,175
Jerome C. Jacques(3) 25,000 2.4 5.00 Sept 1997 34,500 76,375
25,000 2.4 4.25 Feb 2003 66,831 169,362
William R. Pray 25,000 2.4 5.00 Sept 1997 34,500 76,375
John S. Peters 20,000 1.9 5.00 Sept 1997 27,600 61,100
25,000 2.4 4.25 Feb 2003 66,831 169,362
<FN>
(1) There were no SARs granted to any of the executive officers named in
this table in fiscal 1993.
(2) The potential realizable values represent future opportunity and have
not been reduced to present value in 1993 dollars. The dollar amounts
included in these columns are the result of calculations at assumed
rates set by the Securities and Exchange Commission for illustration
purposes, and these rates are not intended to be a forecast of the
Common Stock price and are not necessarily indicative of the values
that may be realized by the named executive officer.
(3) All of the options granted to Mr. Jacques have terminated as a result
of the termination of his employment with the Company.
</TABLE>
- 34 -
<PAGE> 51
STOCK OPTION AND SAR EXERCISES
The following table sets forth the information noted for all exercises
of stock options and SARs during fiscal 1993 by each of the executive officers
named in the Summary Compensation Table:
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF UNEXERCISED VALUE OF
SHARES OPTIONS AT FISCAL UNEXERCISED
ACQUIRED YEAR-END(#) IN-THE-MONEY
ON VALUE EXERCISABLE/ OPTIONS AT
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE YEAR-END($)
---- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Melvin Waxman -- -- 30,000/270,000 --
Armond Waxman -- -- 30,000/270,000 --
Jerome C. Jacques(1) -- -- 29,500/63,000 --
William R. Pray -- -- 13,000/37,000 --
John S. Peters -- -- 9,000/51,000 --
<FN>
(1) All of the options granted to Mr. Jacques have terminated as a result
of the termination of his employment with the Company.
</TABLE>
- 35 -
<PAGE> 52
PRINCIPAL STOCKHOLDERS
CAPITAL STOCK
The following table sets forth, as of June 1, 1994 (except as noted in
footnote 7 below), the number of shares beneficially owned by each director, by
the directors and executive officers of the Company as a group and by each
holder of at least five percent of Common Stock, and the respective percentage
ownership of the outstanding Common Stock and Class B Common Stock and voting
power held by each such holder and group. The mailing address for Messrs.
Melvin and Armond Waxman is the executive office of the Company.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
BENEFICIALLY OWNED OWNERSHIP PERCENTAGE
------------------------ ---------------------- OF
CLASS B CLASS B AGGREGATE
NAME OF COMMON COMMON COMMON COMMON VOTING
BENEFICIAL OWNER STOCK STOCK STOCK STOCK POWER
- ---------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Melvin Waxman(1) 970,782 1,011,932 10.2% 45.4% 34.9%
Armond Waxman(2) 862,607 826,082 9.1 37.1 28.7
Samuel J. Krasney(3) 17,250 6,750 * * *
Judy Robins(4) 77,250 78,750 * 3.5 2.7
Irving Z. Friedman(5) 10,500 -- * -- *
Directors and officers
as a group (10
individuals)(6) 2,052,914 1,978,766 21.2 88.8 68.3
Weiss, Peck & Greer(7) 1,182,500 -- 12.5 -- 3.7
One New York Plaza
New York, NY 10004
</TABLE>
* less than 1%
(1) Includes (i) 100 shares of Common Stock owned by a member of Mr.
Melvin Waxman's immediate family, as to which shares Mr. Waxman
disclaims beneficial interest and (ii) 97,500 shares of Common Stock
which Mr. Waxman has the right to acquire within 60 days upon the
exercise of stock options.
(2) Includes (i) 55,825 shares of Common Stock and 55,800 shares of the
Class B Common Stock owned by members of Mr. Armond Waxman's immediate
family, as to which shares Mr. Waxman disclaims beneficial interest
and (ii) 97,500 shares of Common Stock which Mr. Waxman has the right
to acquire within 60 days upon the exercise of stock options.
(3) Includes (i) 4,500 shares of Common Stock and 4,500 shares of the
Class B Common Stock owned by Mr. Krasney's wife, as to which shares
Mr. Krasney disclaims beneficial interest and (ii) 10,500 shares of
Common Stock which Mr. Krasney has the right to acquire within 60 days
upon the exercise of stock options.
- 36 -
<PAGE> 53
(4) Includes 10,500 shares of Common Stock which Mrs. Robins has the
right to acquire within 60 days upon the exercise of stock options.
(5) Consists of 10,500 shares of Common Stock which Mr. Friedman has the
right to acquire within 60 days upon the exercise of stock options.
(6) Includes 278,500 shares of Common Stock which the directors and
officers of the Company have the right to acquire within 60 days upon
the exercise of stock options.
(7) The information set forth in the table with respect to Weiss, Peck &
Greer was obtained from Amendment No. 2 to a Statement on Schedule
13G, dated February 11, 1994, filed with the Commission. Such
statement reflects Weiss, Peck & Greer's beneficial ownership as of
December 31, 1993.
RECENT SECURITIES OFFERING AND RELATED MATTERS
THE REORGANIZATION
On May 20, 1994, as part of the Reorganization, the Company issued the
Old Notes together with the Warrants in exchange for $50,000,000 aggregate
principal amount of the Company's outstanding Senior Subordinated Notes
pursuant to the Private Exchange Offer. In addition to the Private Exchange
Offer, the components of the Reorganization included (i) the Senior
Subordinated Consent Solicitation, (ii) the Debt Financing, (iii) the 12 1/4%
Consent Solicitation and (iv) the repayment of the borrowings under the
Company's then existing domestic revolving credit facilities (including $27.7
under the Company's then existing working capital credit facility and $2.5
million under the $5.0 million revolving credit facility of Barnett (the
"Barnett Financing")).
In connection with the Reorganization, the Company completed the
Corporate Restructuring. As part of the Corporate Restructuring, the Company
formed (a) Waxman USA, as a holding company for the subsidiaries that comprise
and support the Company's domestic operations, (b) Consumer Products, a wholly
owned subsidiary of Waxman USA, to own and operate the Consumer Products
Division, and (c) WOC, a wholly owned subsidiary of Waxman USA, to own and
operate Waxman USA's domestic subsidiaries, other than Barnett and Consumer
Products. On May 20, 1994, the Company restructured its operations by (i)
contributing the capital stock of Barnett to Waxman USA, (ii) contributing the
assets and liabilities of the Consumer Products Division to Consumer Products,
(iii) contributing the assets and liabilities of its Madison Equipment Division
to WOC, (iv) contributing the assets and liabilities of its Medal Distributing
Division to WOC, (v) merging U.S. Lock and LeRan, each a wholly owned
subsidiary of the Company, into WOC, (vi) contributing the capital stock of TWI
to Waxman USA and (vii) contributing the capital stock of WAMI to TWI.
REGISTRATION RIGHTS AGREEMENTS
Pursuant to the Debt Registration Rights Agreement, the Company has
agreed to use its best efforts to register the Exchange Offer under the Act,
and pursuant to a Registration Rights Agreement dated May 20, 1994, among the
Company and the Exchange Agent, on behalf of the original purchasers of the
Warrants (the "Equity Registration Rights Agreement"), the Company has agreed
to use its best
- 37 -
<PAGE> 54
efforts to register the offer and sale of the Warrants and shares of Common
Stock underlying the Warrants under the Act.
Pursuant to the Debt Registration Rights Agreement, the Company has
agreed to use its best efforts (i) to file, within 30 days of the issuance of
the Old Notes, a registration statement under the Act with respect to an
exchange offer whereby securities substantially identical to the Old Notes
would be offered for exchange with the Old Notes in order to permit the
original purchasers of the Old Notes to offer and sell the New Notes under the
Act and (ii) to cause such registration statement to become effective within
120 days of the date of issuance of the Old Notes. Upon the registration
statement being declared effective, the Company will offer the New Notes in
exchange for surrender of the Old Notes. The Company has agreed to keep the
Exchange Offer pursuant to the registration statement open for not less than 30
days (or longer if required by applicable law) after the date notice of such
offer is mailed to the holders of the Old Notes. In the event that the Company
or the holders of 25% in aggregate principal amount of the Old Notes reasonably
determine in good faith that because of any change in law or applicable
interpretations of the Staff of the Commission the Company is not permitted to
effect the Exchange Offer, or if for any other reason the Exchange Offer is not
consummated within 180 days of the date of the Debt Registration Rights
Agreement or if a holder of the Old Notes is not permitted, because of a change
in law or interpretations of the Staff of the Commission, to participate in the
Exchange Offer, the Company will, at its cost, (a) as promptly as practicable,
file a shelf registration statement covering resales of the Old Notes, (b) use
its best efforts to cause such shelf registration statement to be declared
effective under the Securities Act and (c) use its best efforts to keep
continuously effective such shelf registration statement until three years
after the issuance of the Old Notes or such shorter period ending when all of
the Old Notes eligible for sale thereunder have been sold thereunder. In the
event that the registration statement is not filed or effective by, or
continuously effective through, the dates referred to above or the Commission
shall have issued a stop order suspending the effectiveness of the registration
statement or any shelf registration statement with respect to the Old Notes at
a time when such registration statement or shelf registration statement, as the
case may be, is required to be kept effective by the Company or the prospectus
contained in any such registration statement or shelf registration statement,
as amended or supplemented, shall (x) not contain current information required
by the Securities Act and the rules and regulations promulgated thereunder or
(y) contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, the Company has agreed to pay, or cause to be paid, as liquidated
damages and not as a penalty to each holder of Old Notes, an amount equal to
$0.05 per week per $1,000 of Accreted Value of Old Notes held by such holder,
for each week during the 90-day period beginning on the date referred to above
or the date of the order suspending effectiveness or the date on which the
prospectus shall not contain such current information or shall contain any such
untrue statement or omit to state any such material fact. Such liquidated
damages shall be increased by $0.05 per week per $1,000 of Accreted Value of
Old Notes at the beginning of each subsequent 90-day period up to a maximum
aggregate amount of $0.20 per week per $1,000 of Accreted Value of Old Notes.
The Company has agreed to pay all expenses incident to the Company's
performance of or compliance with the Debt Registration Rights Agreement,
including the reasonable fees and expenses of counsel to the original
purchasers of the Old Notes but excluding any underwriting fees, discounts or
commissions attributable to the sale of the Notes. Each of the Company and the
Trustee, on behalf of the original purchasers of the Old Notes, pursuant to the
Debt Registration Rights Agreement, have agreed to indemnify the other party,
its officers, directors and controlling persons in respect of certain
- 38 -
<PAGE> 55
liabilities and expenses arising, under certain circumstances, out of any
registration of the Old Notes pursuant to the Debt Registration Rights
Agreement. The Company has prepared and filed the Registration Statement of
which this Prospectus forms a part pursuant to the Debt Registration Rights
Agreement.
Pursuant to the Equity Registration Rights Agreement, the Company has
agreed to use its best efforts (i) to file, within 30 days of the issuance of
the Warrants, a registration statement (the "Equity Registration Statement")
under the Act to permit the original purchasers of the Warrants to offer and
sell under the Act the Warrants and shares of Common Stock underlying the
Warrants ("Warrant Shares"), (ii) to cause such Equity Registration Statement
to become effective within 120 days of the date of issuance of the Warrants and
(iii) to maintain such effectiveness for a period of three years or such
shorter period ending when all of the Warrants and Warrant Shares have been
sold pursuant to the Equity Registration Statement or the date three years
after all Warrants have been exercised. The period beginning on the date the
Equity Registration Statement is first declared effective by the Commission and
ending on the date which is three years after the expiration of the Warrants
or, if earlier, the date on which all Warrants and Warrant Shares have been
sold pursuant to the Equity Registration Statement or the date three years
after all Warrants have been exercised, is referred to herein as the
"Effectiveness Period." In the event that the Equity Registration Statement is
not filed or effective by, or continuously effective through, the dates
referred to above or prior to the end of the Effectiveness Period, the
Commission shall have issued a stop order suspending the effectiveness of the
Equity Registration Statement or the prospectus contained in the Equity
Registration Statement, as amended or supplemented, shall (x) not contain
current information required by the Securities Act and the rules and
regulations promulgated thereunder or (y) contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they are made, not misleading, the Company has agreed to pay, or
cause to be paid, as liquidated damages and not as a penalty, to each holder of
a Warrant or Warrant Share, an amount equal to $0.0025 per week per Warrant or
Warrant Share, as the case my be, for each week beginning on such date and
ending 90 days thereafter. Such liquidated damages shall be increased by
$0.0025 per week per Warrant or Warrant Share, as the case may be, at the
beginning of each subsequent 90-day period up to a maximum aggregate amount of
$0.01 per week per Warrant or Warrant Share, as the case may be. The Company
has agreed to pay all expenses incident to the Company's performance of or
compliance with the Equity Registration Rights Agreement, including the
reasonable fees and expenses of counsel to the original purchasers of the
Warrants but excluding any underwriting fees, discounts or commissions
attributable to the sale of the Warrants or Warrant Shares. Each of the
Company and the Warrant Agent, on behalf of the original purchasers of the
Warrants, pursuant to the Equity Registration Rights Agreement, have agreed to
indemnify the other party, its officers, directors and controlling persons in
respect of certain liabilities and expenses arising, under certain
circumstances, out of any registration of the Warrants and Warrant Shares
pursuant to the Equity Registration Rights Agreement. [The Company has
prepared and filed the Equity Registration Statement with the Commission
pursuant to the Equity Registration Rights Agreement.]
- 39 -
<PAGE> 56
THE EXCHANGE OFFER
PURPOSE OF EXCHANGE OFFER
The outstanding Old Notes in the aggregate principal amount at
maturity of $92,797,000 were originally issued on May 20, 1994. The offer and
sale of the Old Notes was not registered under the Act in reliance upon the
exemption therefrom provided by Section 4(2) of the Act. The Old Notes may not
be reoffered, resold, or transferred other than pursuant to an effective
registration statement filed pursuant to the Act or unless an exemption from
the registration requirements of the Act is available.
Pursuant to Rule 144 promulgated under Act, the Old Notes may
generally be resold, subject to certain conditions specified in the Rule, (a)
commencing two years after the date of original issuance, in an amount up to,
for any three-month period, the greater of 1% of the principal amount at
maturity of the Old Notes then outstanding or the average weekly trading volume
of the Old Notes during the four calendar weeks immediately preceding the
filing of the required notice of sale with the Commission, and (b) commencing
three years after the date of original issuance, in any amount and otherwise
without restriction by a Holder who is not, and has not been for the preceding
three months, an affiliate of the Company. Following the Exchange Offer, the
calculation of the amount of permissible sales under Rule 144 may depend on the
combined amount of outstanding Old Notes and New Notes, and the trading volume
of the Old Notes and the New Notes together. Additionally, under certain
circumstances, an exemption from the registration requirements of the Act may
be available for the resale of the Old Notes to "Qualified Institutional
Buyers" under Rule 144A promulgated thereunder. Certain other exemptions may
also be available under other provisions of the federal securities laws for the
resale of the Old Notes.
In connection with the original sale of the Old Notes, the Company
entered into the Debt Registration Rights Agreement, pursuant to which the
Company agreed to file with the Commission a registration statement covering
the exchange by the Company of the New Notes for the Old Notes in a transaction
designed to provide certain Holders of Old Notes with an opportunity to acquire
New Notes which, unlike the Old Notes, may be offered for resale, resold and
otherwise transferred without compliance with the registration and prospectus
delivery requirements of the Act. Holders who are unable or choose not to
exchange their Old Notes pursuant to this Exchange Offer will continue to hold
securities that are subject to restrictions on transfer pursuant to the Act.
The Company has no obligation to provide for the registration under the Act of
Old Notes outstanding after the expiration of the Exchange Offer. Such Holders
should consult their own legal counsel for advice as to any restrictions that
might apply to the resale of their Old Notes. The New Notes otherwise will be
identical in all material respects (including interest rate, maturity and
restrictive covenants) to the Old Notes for which they may be exchanged
pursuant to this Exchange Offer.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal (which together
constitute the Exchange Offer), the Company will accept for exchange Old Notes
which are properly tendered on or prior to the Expiration Date and not
withdrawn as permitted below. As used herein, the term "Expiration Date" means
Midnight, New York City time, on July __, 1994; provided, however, that if the
Company, in its sole discretion, has
- 40 -
<PAGE> 57
extended the period of time during which the Exchange Offer is open, the term
"Expiration Date" means the latest time and date to which the Exchange Offer is
extended.
As of the date of this Prospectus, $92,797,000 aggregate principal
amount at maturity of Old Notes were outstanding. This Prospectus, together
with the Letter of Transmittal, is first being sent on or about June __, 1994,
to all Holders of Old Notes known to the Company. The Company's obligation to
accept Old Notes for exchange pursuant to the Exchange Offer is subject to
certain conditions as set forth under "-- Certain Conditions to the Exchange
Offer" below.
The Company expressly reserves the right, at any time or from time to
time, to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the Holders thereof. During any such
extension, all Old Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company. Any Old Notes
not accepted for exchange for any reason will be returned without expense to
the tendering Holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Old Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified below under "-- Certain Conditions to the Exchange
Offer." The Company will give oral or written notice of any extension,
amendment, non-acceptance or termination to the Holders of the Old Notes as
promptly as practicable, such notice in the case of any extension to be issued
by means of a press release or other public announcement no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a Holder thereof as set
forth below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering Holder and the Company upon the terms and
subject to the conditions set forth in the Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a Holder who wishes to
tender Old Notes for exchange pursuant to the Exchange Offer must transmit a
properly completed and duly executed Letter of Transmittal, including all other
documents required by such Letter of Transmittal, to The Huntington National
Bank (the "Exchange Agent") at one of the addresses set forth below under
"Exchange Agent" on or prior to the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal, or (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the Holder must comply with the guaranteed delivery
procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME
- 41 -
<PAGE> 58
SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD
NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed unless the Old Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered Holder of the Old
Notes who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined below). 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 guarantees must be by a firm which
is a member of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc. or by a commercial bank or
trust company having an office or correspondent in the United States
(collectively, "Eligible Institutions"). If Old Notes are registered in the
name of a person other than a signer of the Letter of Transmittal, the Old
Notes surrendered for exchange must be endorsed by, or be accompanied by a
written instrument or instruments of transfer or exchange, in satisfactory form
as determined by the Company in its sole discretion, duly executed by the
registered Holder with the signature thereon guaranteed by an Eligible
Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to
waive any defects or irregularities or conditions of the Exchange Offer as to
any 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 interpretation of the terms and conditions
of the Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of 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 any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur
any liability for failure to give such notification.
If the New Notes are to be issued, or untendered Old Notes are to be
reissued, to a person other than the Holder thereof, the Old Notes surrendered
for exchange must be properly endorsed or accompanied by appropriate bond
powers in satisfactory form as determined by the Exchange Agent in its sole
discretion. If Old Notes are registered in the name of the person other than a
signer of the Letter of Transmittal, the Old Notes surrendered for exchange
must be properly endorsed or accompanied by appropriate bond powers in
satisfactory form as determined by the Exchange Agent in its sole discretion,
duly executed by the registered Holder with the signature thereon guaranteed by
an Eligible Institution.
If the Letter of Transmittal or any Old Notes or powers of attorney
are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived
- 42 -
<PAGE> 59
by the Company, proper evidence satisfactory to the Exchange Agent of their
authority to so act must be submitted.
Tenders must be made in round number multiples of the principal amount
of $1,000. Subject to the foregoing, tendering Holders of Old Notes may tender
less than the aggregate principal amounts represented by the Old Notes
deposited with the Company provided they appropriately indicate this fact on
the Letter of Transmittal accompanying the tendered Old Notes. If less than
all of the Old Notes evidenced by a submitted certificate are to be tendered, a
reissued certificate representing the untendered Old Notes, together with a
certificate representing the New Notes, will be sent to such tendering Holder,
unless otherwise provided in the appropriate box on the Letter of Transmittal.
By tendering, each Holder will represent to the Company that, among
other things, the New Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the Holder, that neither the Holder nor
any such other person has an intention to, or an arrangement or understanding
with any person, to participate in the distribution of such New Notes and that
neither the Holder nor any such other person is an "affiliate," as defined
under Rule 405 of the Act, of the Company. A broker-dealer holding Old Notes
may participate in the Exchange Offer provided that it acquired the Old Notes
for its own account as a result of market-making or other trading activities.
Each broker-dealer that receives New 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 New 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 the Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will accept, promptly after the Expiration Date, all Old
Notes properly tendered and will issue the New Notes promptly after acceptance
of the Old Notes. See "-- Certain Conditions to the Exchange Offer" below.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted properly tendered Old Notes for exchange when, as and if the Company
has given oral or written notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the Holder of such Old Note
will receive a New Note having a principal amount at maturity equal to that of
the surrendered Old Note. Original Issue Discount on the New Notes will accrue
from May 20, 1994, the date of original issuance of the Old Notes. The New
Notes will not bear interest prior to June 1, 1999.
In all cases, issuance of New Notes for Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility, a properly completed and duly executed Letter
of Transmittal and all other required documents. If any tendered Old Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer (including, without limitation, the determination that the
tendering Holder is an affiliate of the Company or is not acquiring the New
Notes in the ordinary course of business with no arrangement or understanding
with any person to participate
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<PAGE> 60
in the distribution of the New Notes) or if Old Notes are submitted for a
greater principal amount than the Holder desires to exchange, such unaccepted
or non-exchanged Old Notes will be returned without expense to the tendering
Holder thereof (or, in the case of Old Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described below, such non-exchanged Old
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration or termination of the
Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent, if requested by the Company, will make a request
to establish an account with respect to the Old Notes at the Book- Entry
Transfer Facility for purposes of the Exchange Offer within two business days
after the date of this Prospectus, and any financial institution that is a
participant in the Book-Entry Transfer Facility's systems may make book-entry
delivery of Old Notes by causing the Book- Entry Transfer Facility to transfer
such Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
transfer. However, although delivery of Old Notes may be effected through
book-entry transfer at the Book-Entry Transfer Facility, the Letter of
Transmittal or facsimile thereof, with any required signature guarantees and
any other required documents, must, in any case, be transmitted to and received
by the Exchange Agent at one of the addresses set forth below under "Exchange
Agent" on or prior to the Expiration Date or the guaranteed delivery procedures
described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Notes desires to tender such Old
Notes and the Old Notes are not immediately available, or time will not permit
such holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the
Exchange Agent received from such Eligible Institution a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the Holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within five New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and all other documents required by the Letter of Transmittal, are
received by the Exchange Agent within five NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
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<PAGE> 61
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must
be received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which
such Old Notes are registered, if different from that of the withdrawing
Holder. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates, the withdrawing Holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at the Book- Entry Transfer
Facility to be credited with the withdrawn Old Notes and otherwise comply with
the procedures of such facility. 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 Old Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the Holder thereof without cost to such Holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Old Notes) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "-- Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Notes in exchange
for, any Old Notes and may terminate or amend the Exchange Offer, if at any
time before the acceptance of such Old Notes for exchange or the exchange of
the New Notes for such Old Notes, any of the following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to
restrain or prohibit the making or consummation of the Exchange Offer
or any other transaction contemplated by the Exchange Offer, or
assessing or seeking any damages as a result thereof or in connection
therewith, or (ii) resulting in a material delay in the ability of the
Company to accept for exchange or exchange some or all of the Old
Notes pursuant to the Exchange Offer, or any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any
of the transactions contemplated by the Exchange Offer by any
government or governmental authority, domestic
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<PAGE> 62
or foreign, or any action shall have been taken, proposed or
threatened, by any government, governmental authority, agency or
court, domestic or foreign, that in the sole judgment of the Company
might directly or indirectly result in any of the consequences
referred to in clauses (i) or (ii) above or, in the sole judgment of
the Company, might result in the holders of New Notes having
obligations with respect to resales and transfers of New Notes which
are greater than those described in the interpretation of the
Commission referred to on the cover page of this Prospectus, or would
otherwise make it inadvisable to proceed with the Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or
general limitation on prices for, or trading in, securities on any
national securities exchange or in the over-the-counter market, (ii)
any limitation by any governmental agency or authority which may
adversely affect the ability of the Company to complete the
transactions contemplated by the Exchange Offer, (iii) a declaration
of a banking moratorium or any suspension of payments in respect of
banks in the United States or any limitation by any governmental
agency or authority which adversely affects the extension of credit or
(iv) a commencement of war, armed hostilities or other similar
international calamity directly or indirectly involving the United
States, or, in the case of any of the foregoing existing at the time
of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties,
assets, liabilities, financial condition, operations, results of
operations or prospects of the Company and its subsidiaries taken as a
whole that, in the sole judgment of the Company, is or may be adverse
to the Company, or the Company shall have become aware of facts that,
in the sole judgment of the Company, have or may have adverse
significance with respect to the value of the Old Notes or the New
Notes;
which, in the sole judgment of the Company in any case, and regardless of the
circumstances (including any action by the Company) giving rise to any such
condition, makes it inadvisable to proceed with the Exchange Offer and/or with
such acceptance for exchange or with such exchange.
The foregoing conditions are for the sole benefit of the Company and
may be asserted by the Company regardless of the circumstances giving rise to
any such condition or may be waived by the Company in whole or in part at any
time and from time to time in its sole discretion. The failure by the Company
at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order shall be threatened or in effect with respect to
the Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939 (the
"TIA").
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<PAGE> 63
EXCHANGE AGENT
The Huntington National Bank has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters of Transmittal should be directed
to the Exchange Agent at one of the addresses set forth below. 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:
THE HUNTINGTON NATIONAL BANK
<TABLE>
<S> <C> <C>
BY MAIL/OVERNIGHT COURIER: BY FACSIMILE TRANSMISSION: BY HAND:
(216) 344-6584 IN CLEVELAND, OHIO:
The Huntington National Bank Confirm by Telephone: The Huntington National Bank
917 Euclid Avenue (216) 344-6662 917 Euclid Avenue
Cleveland, Ohio 44115 Cleveland, Ohio 44115
Attention: Corporate Trust CM23 Attention: Corporate Trust CM23
IN NEW YORK, NEW YORK:
The Huntington National Bank
In care of The Bank of New York
Drop Window Services
101 Barclay Street
New York, New York 10286
</TABLE>
DELIVERY OF LETTERS OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer, and will not make any payment to brokers,
dealers, or others soliciting acceptances of the Exchange Offer.
The estimated cash expenses to be incurred in connection with the
Exchange Offer will be paid by the Company and are estimated in the aggregate
to be $240,000.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct the Company to register New Notes in the name of, or request that Old
Notes not tendered or not accepted in the Exchange Offer be returned to,
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<PAGE> 64
a person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Act and
applicable state securities laws. In general, the Old Notes may not be offered
or sold, unless registered under the Act, except pursuant to an exemption from,
or in a transaction not subject to, the Act and applicable state securities
laws. The Company has no obligation to, and does not currently anticipate that
it will, register the offer and sale of the Old Notes under the Act. Based on
interpretations by the Staff of the Commission, set forth in certain "no-
action" letters issued to third parties and unrelated to the Company and the
Exchange Offer, the Company believes that New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold or
otherwise transferred by Holders thereof (other than any such Holder which is
an "affiliate" of the Company within the meaning of Rule 405 under the Act)
without compliance with the registration and prospectus delivery provisions of
the Act provided that such New Notes are acquired in the ordinary course of
such Holders' business and such Holders have no intention, nor any arrangement
with any person, to participate in the distribution of such New Notes. If any
Holder has any arrangement or understanding with respect to the distribution of
the New Notes to be acquired pursuant to the Exchange Offer, such Holder (i)
could not rely on the applicable interpretations of the Staff of the Commission
enunciated in Exxon Capital Holdings Corporation (available April 13, 1989) or
similar letters and (ii) must comply with the registration and prospectus
delivery requirements of the Act in connection with any resale transaction. A
broker-dealer holding Old Notes may participate in the Exchange Offer provided
that it acquired the Old Notes for its own account as a result of market-making
or other trading activities. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where such Old Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus meeting the
requirements of the Act in connection with any resale of such New Notes since
such broker-dealer may be considered a statutory underwriter. Such prospectus
may be the prospectus relating to the Exchange Offer only if it contains a plan
of distribution with respect to such resale transactions (but need not name the
broker-dealer or disclose the amount of New Notes held by the broker-dealer).
See "Plan of Distribution." In addition, to comply with the securities laws of
certain jurisdictions, if applicable, the New Notes may not be offered or sold
unless they have been registered or qualified for sale in such jurisdiction or
an exemption from registration or qualification is available and is complied
with. The Company does not currently intend to register or qualify the sale of
the New Notes in any such jurisdictions.
DESCRIPTION OF THE NOTES
The Old Notes have been, and the New Notes will be, issued under the
indenture dated as of May 20, 1994 (the "Indenture") between the Company and
the Trustee. 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
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<PAGE> 65
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."
GENERAL
The New Notes will be issued only in registered form, without coupons,
in denominations of $1,000 and integral multiples of $1,000. Principal of,
premium, if any, and interest on the Notes will be payable, and the Notes will
be transferable, at the corporate trust office or agency of the Trustee in the
City of New York maintained for such purposes at the offices of its agent, Bank
of New York, 101 Barclay Street, New York, New York 10286. 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.
MATURITY, INTEREST AND PRINCIPAL
The New Notes will be issued at a discount to their aggregate
principal amount. Interest will not accrue on the Notes prior to June 1, 1999.
Thereafter interest on the Notes will accrue at the rate of 12 3/4% per annum
and will be payable in cash semi-annually on June 1 and December 1, commencing
on December 1, 1999 to holders of record on the immediately preceding May 15
and November 15. Interest on the Notes will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from June 1,
1999. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months. Interest on overdue principal and (to the extent
permitted by law) on overdue installments of interest will accrue at the rate
of interest borne by the Notes.
REDEMPTION
Optional Redemption. The Notes will be redeemable, in whole or in
part, at the option of the Company, at any time on or after June 1, 1999, at
the redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest to the redemption date, if redeemed
during the 12-month period beginning on June 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1999 106.375%
2000 104.250
2001 102.125
2002 and thereafter 100.000%
</TABLE>
In addition, at any time prior to June 1, 1997, the Company may use
all or any portion of the net cash proceeds of one or more Public Equity
Offerings to redeem Notes in an aggregate principal amount at maturity not to
exceed $25,000,000 at a redemption price equal to 112.75% of the Accreted
Value; provided that not less than $65,000,000 aggregate principal amount at
maturity of the Notes
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<PAGE> 66
remains outstanding upon the completion of such redemption. Any such
redemption will be required to occur on or prior to 60 days after the receipt
of the proceeds of any such Public Equity Offering.
SELECTION AND NOTICE. In the event that less than all of the Notes
are to be redeemed at any time, selection of Notes for redemption will be made
by the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not listed on a national securities exchange, on a pro rata basis, by lot or by
such method as the Trustee shall deem fair and appropriate, provided, however,
that no Notes of $1,000 or less shall be redeemed in part. Notice of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof
upon cancellation of the original Note. On and after the redemption date, any
interest will cease to accrue on Notes or portions thereof called for
redemption.
CHANGE OF CONTROL
In the event of a Change of Control (the date of such occurrence being
the "Change of Control Date"), the Company shall notify the holders in writing
of such occurrence and shall make an offer to purchase (the "Change of Control
Offer"), on a business day (the "Change of Control Purchase Date") not later
than 60 days following the Change of Control Date, all Notes then outstanding
at a purchase price equal to 101% of the Accreted Value thereof plus accrued
and unpaid interest, if any. Notice of a Change of Control Offer shall be
mailed by the Company to the holders not less than 25 days nor more than 45
days before the Change of Control Purchase Date. The Change of Control Offer
is required to remain open for at least 20 business days and until the close of
business on the business day next preceding the Change of Control Purchase
Date.
The Company will comply with any tender offer rules under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which may
then be applicable, including, but not limited to, Rule 14e-1, in connection
with any Change of Control Offer required to be made by the Company to
repurchase the Notes as a result of a Change of Control.
RANKING
The indebtedness of the Company evidenced by the Notes will rank
senior in right of payment to all subordinated indebtedness of the Company,
including the Senior Subordinated Notes and the Convertible Debentures, and
will rank pari passu in right of payment with all other existing or future
unsubordinated indebtedness of the Company.
SECURITY
The Company will pledge to the Trustee for the benefit of the holders
of the Notes the Capital Stock of all its current and future directly owned
domestic Subsidiaries, other than Ideal Holding Group or any other Subsidiary
that relates to the business conducted by Ideal and 65% of the Capital Stock of
all its future directly owned foreign Subsidiaries and the domestic holding
companies of such foreign
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<PAGE> 67
Subsidiaries, other than any Subsidiary that relates to the business conducted
by Ideal. Such pledge will secure the payment and performance when due of all
of the obligations of the Company under the Indenture and the Notes.
So long as no Event of Default shall have occurred and be continuing,
and subject to certain terms and conditions in the Indenture, the Company will
be entitled to receive all cash dividends, interest and other payments made
upon or with respect to the collateral pledged by it and to exercise any voting
and other consensual rights pertaining to the collateral pledged by it. Upon
the occurrence and during the continuance of an Event of Default, (a) all
rights of the Company to exercise such voting or other consensual rights will
cease, and all such rights will become vested in the Trustee, which shall have
the sole right to exercise such voting and other consensual rights, and (b) all
rights of the Company to receive all dividends made upon or with respect to the
pledged collateral will cease and such dividends shall be paid to the Trustee.
Upon the occurrence and during the continuance of an Event of Default,
the Trustee shall foreclose upon the pledged collateral in accordance with
instructions received from holders of a majority of the aggregate principal
amount of outstanding Notes, or in the absence of such instructions, in such
manner as the Trustee deems appropriate, in each case, as provided in the
Indenture. All funds received by the Trustee upon any foreclosure shall be
distributed by the Trustee in accordance with the provisions of the Indenture.
Upon the full and final payment and performance of all obligations of the
Company under the Indenture and the Notes, the pledged collateral shall be
released. In addition, in the event that the Capital Stock of any Subsidiary
of the Company is sold and the Net Cash Proceeds from any such sale are applied
in accordance with the terms of the Indenture, any Lien in favor of the Trustee
on the assets sold shall be released; PROVIDED, that the Trustee shall have
received from the Company an Officers' Certificate that such Net Cash Proceeds
have been so applied.
The rights of the Trustee to foreclose upon and dispose of the pledged
collateral is likely to be significantly impaired by applicable bankruptcy law
if a bankruptcy proceeding were to be commenced by or against the Company prior
to the Trustee's having disposed of the pledged collateral. Under Title XI of
the United States Code (the "Bankruptcy Code"), a secured creditor such as the
Trustee is prohibited from disposing of security upon foreclosure in a
bankruptcy case, even though the debtor is in default under the applicable debt
instruments, without bankruptcy court approval. Moreover, in general, the
Bankruptcy Code prohibits the bankruptcy court from giving such approval if the
secured creditor is given "adequate protection." The meaning of the term
"adequate protection" may vary according to circumstances, but it is intended
in general to protect the value of the secured creditor's interest in the
collateral and may include cash payments or the granting of additional
security, if and at such times as the court in its discretion determines, for
any diminution in the value of the collateral as a result of the stay of
disposition during the pendency of the bankruptcy case. In view of the lack of
a precise definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, it is impossible to predict how
long payments under the Notes could be delayed following commencement of a
bankruptcy case, whether or when the Trustee could dispose of the pledged
collateral or whether or to what extent holders of the Notes would be
compensated for any delay in payment or loss of value of the pledged collateral
through the requirement of "adequate protection."
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<PAGE> 68
PROVISION OF FINANCIAL INFORMATION
Pursuant to the Indenture, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Company will submit for filing with the Commission such annual reports,
quarterly reports and other documents and distribute or cause to be distributed
to holders of the Notes copies of such annual reports, quarterly reports and
other documents that the Company would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Company
were so subject. Such annual reports will contain consolidated financial
statements and notes thereto, together with an opinion thereon expressed by an
independent public accounting firm, and management's discussion and analysis of
financial condition and results of operations and such quarterly reports will
contain unaudited condensed consolidated financial statements for the first
three quarters of each fiscal year.
CERTAIN COVENANTS
Set forth below are certain covenants which are contained in the
Indenture.
LIMITATION ON ADDITIONAL INDEBTEDNESS. The Indenture will provide
that the Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume, issue,
guarantee or in any manner become liable for or with respect to the payment of,
any Attributable Indebtedness or Indebtedness (including any Acquired
Indebtedness) except for (each of which shall be given independent effect):
(a) Indebtedness of the Company under the Notes and the
Indenture;
(b) Indebtedness of Subsidiaries of Waxman USA outstanding
from time to time pursuant to the Domestic Credit Facility and/or any
other credit arrangement not to exceed at any one time an amount (the
"Permitted Amount") equal to, when added to the principal amount of
Indebtedness of Subsidiaries of Waxman USA outstanding pursuant to
clause (k) below, (A) the sum of 85% of the net book value of the
accounts receivable and 50% of the net book value of the inventory of
the Subsidiaries of Waxman USA, in each case calculated on a
consolidated basis in accordance with GAAP minus (B) the amount of
Indebtedness pursuant to the Domestic Credit Facility and/or such
other credit arrangement prepaid with the Net Cash Proceeds from an
Asset Sale pursuant to the provisions described below under
"Disposition of Proceeds of Asset Sales";
(c) Indebtedness of the Company and those Subsidiaries of the
Company which are in existence on the Issue Date, which Indebtedness
is outstanding on the Issue Date;
(d) Indebtedness of Waxman USA if, immediately after giving
pro forma effect to the incurrence thereof, the Consolidated Interest
Coverage Ratio of Waxman USA would be equal to or greater than 2.00:1
if such Indebtedness is incurred on or prior to June 1, 1996 or equal
to or greater than 2.25:1 if such Indebtedness is incurred thereafter;
(e) Indebtedness of the Company if, immediately after giving
pro forma effect to the incurrence thereof, the Consolidated Interest
Coverage Ratio of the Company would be equal
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<PAGE> 69
to or greater than 2.00:1 if such Indebtedness is incurred on or prior
to June 1, 1996 or equal to or greater than 2.25:1 if such
Indebtedness is incurred thereafter;
(f) Indebtedness of a Subsidiary of the Company (other than
Ideal Holding Group and its Subsidiaries) issued to and held by the
Company or a Wholly-Owned Subsidiary of the Company or Indebtedness of
the Company to a Wholly-Owned Subsidiary of the Company in respect of
intercompany advances or transactions;
(g) Indebtedness represented by Interest Rate Protection
Obligations and Currency Hedging Agreements of Ideal Holding Group and
Subsidiaries of Waxman USA or Ideal Holding Group with respect to
Indebtedness of Ideal Holding Group and Subsidiaries of Waxman USA or
Ideal Holding Group (which Indebtedness is otherwise permitted to be
incurred under this covenant) to the extent the notional principal
amount of such Interest Rate Protection Obligations or Currency
Hedging Agreements, as the case may be, does not exceed the principal
amount of the Indebtedness to which such Interest Rate Protection
Obligations or Currency Hedging Agreements, as the case may be,
relate;
(h) working capital Indebtedness of Ideal Holding Group or
its Subsidiaries outstanding from time to time pursuant to the
Canadian Credit Agreement not to exceed at any one time an amount
equal to the sum of 85% of the net book value of the accounts
receivable and 50% of the net book value of the inventory of Ideal, in
each case calculated on a consolidated basis in accordance with GAAP
minus the amount of Indebtedness pursuant to the Canadian Credit
Agreement prepaid with the Net Cash Proceeds from a Company Asset Sale
pursuant to the provisions described under "Disposition of Proceeds of
Asset Sales"; term loan Indebtedness of Ideal Holding Group or its
Subsidiaries outstanding pursuant to the Canadian Credit Agreement,
not to exceed Cdn.$24.5 million outstanding at any one time; and other
Permitted Ideal Indebtedness of Ideal Holding Group or its
Subsidiaries not to exceed $10,000,000 outstanding at any one time;
(i) Indebtedness of Subsidiaries of Waxman USA pursuant to
the Domestic Term Loan not to exceed $15,000,000 principal amount
outstanding at any one time;
(j) any replacements, renewals, refinancings and extensions
of Indebtedness incurred under clauses (a), (c), (d) and (e) above,
provided that (i) except with respect to Permitted Waxman USA
Indebtedness, any such replacement, renewal, refinancing and extension
(w) shall not provide for any mandatory redemption, amortization or
sinking fund requirement in an amount greater than or at a time prior
to the amounts and times specified in the Indebtedness being replaced,
renewed, refinanced or extended, and (x) shall be contractually
subordinated to the Notes at least to the extent, if at all, that the
Indebtedness being replaced, renewed, refinanced or extended is
subordinated to the Notes, (ii) except with respect to Permitted
Waxman USA Indebtedness, any such Indebtedness of any Person must be
replaced, renewed, refinanced or extended with Indebtedness incurred
by such Person or, except with respect to any such Indebtedness of
Ideal Holding Group or a Subsidiary of Ideal Holding Group, by the
Company and (iii) the principal amount of Indebtedness incurred
pursuant to this clause (j) (or, if such Indebtedness provides for an
amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration of the maturity thereof, the
original issue price
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of such Indebtedness) shall not exceed the sum of the principal amount
(or, with respect to Indebtedness which provides for an amount less
than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof, the accreted
value thereof) of Indebtedness so replaced, renewed, refinanced or
extended, plus accrued interest, the amount of any premium required to
be paid in connection with such replacement, renewal, refinancing or
extension pursuant to the terms of such Indebtedness or the amount of
any premium reasonably determined by the Company as necessary to
accomplish such replacement, renewal, refinancing or extension by
means of a tender offer or privately negotiated purchase and the
amount of fees and expenses incurred in connection therewith; and
(k) in addition to the items referred to in clauses (a)
through (j) above, (x) Indebtedness and Attributable Indebtedness of
Waxman USA, the Company or Subsidiaries of Waxman USA in an aggregate
principal amount not to exceed $5,000,000 at any one time outstanding,
provided that Indebtedness of Subsidiaries of Waxman USA shall not
exceed at any one time, when added to the principal amount of
Indebtedness outstanding pursuant to the preceding clause (b), the
Permitted Amount and (y) additional Indebtedness and Attributable
Indebtedness of Waxman USA or the Company in an aggregate principal
amount not to exceed $10,000,000 at any one time outstanding.
LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. The Indenture will
provide that the Company shall not make and shall not permit any of its
Subsidiaries to make any direct or indirect advance, loan, or other extension
of credit to (including any guarantee of a loan or other extension of credit)
or investment in, 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 otherwise), or purchase of Capital Stock, bonds,
notes, debentures or other similar instruments issued by, any other Person
(collectively, "Investments"), except: (i) Investments by the Company or a
Subsidiary of the Company in any Wholly-Owned Subsidiary of the Company other
than Ideal Holding Group or a Subsidiary of Ideal Holding Group (including any
such Investment pursuant to which a Person becomes a Wholly-Owned Subsidiary of
the Company); (ii) Investments in the Company or a Wholly-Owned Subsidiary of
the Company by any Subsidiary of the Company; (iii) Investments represented by
receivables created or acquired in the ordinary course of business or the
settlement of such receivables in the ordinary course of business; (iv)
Investments permitted to be made pursuant to the "Limitation on Restricted
Payments" covenant below; (v) Investments represented by advances to employees
of the Company or its Subsidiaries made in the ordinary course of business and
consistent with past business practices; and (vi) Permitted Investments.
LIMITATION ON RESTRICTED PAYMENTS. The Indenture will provide that
the Company shall not make, and shall not permit any of its Subsidiaries to
make, directly or indirectly, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Restricted
Payment;
(b) at the time of and after giving effect to such Restricted
Payment, the Company could incur at least $1.00 of Indebtedness
pursuant to clause (e) of the "Limitation on Additional Indebtedness"
covenant above; and
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(c) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Issue Date through and including the date of such Restricted
Payment does not exceed the sum of (1) 50% of the Company'
Consolidated Net Income (or in the event such Consolidated Net Income
shall be a deficit, minus 100% of such deficit) from and including
April 1, 1994 to and including the last day of the fiscal quarter
immediately preceding the date of such Restricted Payment (the "Base
Period"), (2) 100% of the aggregate Net Proceeds received by the
Company from the issue or sale, during the Base Period, of Capital
Stock (other than Disqualified Stock) of the Company or any
Indebtedness or other securities of the Company convertible into or
exercisable or exchangeable for Capital Stock (other than Disqualified
Stock) of the Company which has been so converted, exercised or
exchanged, as the case may be and (3) in the case of the disposition
of any Investment (other than an Investment which is a loan) made
after the Issue Date or the repayment or disposition of any loan made
after the Issue Date (other than any such Investment or loan made
pursuant to clauses (i), (ii), (iii), (v) and (vi) of the "Limitation
on Investments, Loans and Advances" covenant above) an amount equal
to, with respect to any such Investment (other than an Investment
which is a loan) the lesser of the net cash proceeds received on
disposition with respect to such Investment or the initial amount of
such Investment, in either case, less the cost of disposition of such
Investment and with respect to any such loan, an amount equal to any
cash received on account of (x) the repayment of principal on such
loan or (y) the disposition of such loan, less the cost of such
disposition and not to exceed the principal amount of such disposed of
loan. For purposes of determining the amount expended for Restricted
Payments, cash distributed shall be valued at the face amount thereof
and property other than cash shall be valued at its Fair Market Value.
The provisions of this covenant shall not prohibit (i) the payment of
any dividend within 60 days after the date of declaration thereof, if such
payment would comply with the provisions of the Indenture at the date of the
declaration of such payment and, other than with respect to this "Limitation on
Restricted Payments" covenant, at the date of such payment, (ii) the retirement
of any shares of Capital Stock of the Company or subordinated Indebtedness of
the Company by conversion into, or by an exchange for, shares of Capital Stock
of the Company that are not Disqualified Stock or out of the Net Proceeds of
the substantially concurrent sale (other than to a Subsidiary of the Company)
of other shares of Capital Stock (other than Disqualified Stock) of the
Company, (iii) the redemption or retirement of subordinated Indebtedness of the
Company in exchange for, by conversion into, or out of the Net Proceeds of, a
substantially concurrent sale of subordinated Indebtedness of the Company(other
than to a Subsidiary of the Company) that (x) is contractually subordinated in
right of payment to the Notes at least to the same extent that the Indebtedness
being redeemed or retired is subordinated to the Notes and (y) is permitted to
be incurred in accordance with the covenant described under "Limitation on
Additional Indebtedness" above, (iv) the redemption, repurchase, retirement or
other acquisition of any Senior Subordinated Notes (A) on the Issue Date in
exchange for the Notes and (B) after the Issue Date, out of the proceeds of
Permitted Waxman USA Indebtedness at a purchase price not in excess of the
percentage of principal amount thereof set forth in the indenture related
thereto, plus accrued interest, if any, to the date of redemption and (v) the
purchase or redemption of the Convertible Debentures at a purchase price not in
excess of 101.875% of the principal amount thereof, plus accrued interest, if
any, to the date of redemption.
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In determining the amount of Restricted Payments permissible under
clause (c) above, amounts expended pursuant to clauses (i) and (ii) above shall
be included as Restricted Payments.
LIMITATION ON LIENS. In addition to the restrictions described below
under "Impairment of Security Interest," the Indenture will provide that the
Company shall not, and shall not permit, cause or suffer any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien of any kind
upon any of its property or assets now owned or hereafter acquired by it,
unless the Notes are equally and ratably secured by such Lien simultaneously
with or prior to the creation, incurrence or assumption of such Lien, except
for:
(a) Liens existing as of the Issue Date;
(b) Permitted Liens;
(c) Liens on the assets and property of the Company and
Waxman USA to secure the payment of all or a part of the purchase
price of assets or property acquired in the ordinary course of
business after the Issue Date, provided that (i) the aggregate
principal amount of Indebtedness secured by such Liens shall not
exceed the lesser of cost or Fair Market Value of the assets or
property so acquired and shall not, in any event, when added to the
amount of Capitalized Lease Obligations and Attributable Indebtedness
permitted to be secured by clause (f) below, exceed $5,000,000, and
(ii) such Liens shall not encumber any assets or property of the
Company or its Subsidiaries other than the assets or property so
acquired and shall attach to such assets or property within 60 days of
the acquisition of such assets or property;
(d) Liens on the assets of Subsidiaries of Waxman USA
securing Indebtedness of Subsidiaries of Waxman USA;
(e) Liens on the assets and Capital Stock of Ideal Holding
Group and its Subsidiaries securing Indebtedness under the Canadian
Credit Agreement;
(f) Liens on the assets and property of the Company and
Waxman USA to secure Capitalized Lease Obligations and Attributable
Indebtedness, provided (i) such Liens do not extend to or cover any
property or assets of the Company or its Subsidiaries other than the
property or assets subject to such Capitalized Lease Obligations and
Attributable Indebtedness, and (ii) the amount of Capitalized Lease
Obligations and Attributable Indebtedness secured by such Liens shall
not, when added to the principal amount of Indebtedness permitted to
be secured by clause (c) above, exceed $5,000,000;
(g) leases and subleases of real property which do not
interfere with the ordinary conduct of the business of the Company or
any of its Subsidiaries, and which are made on customary and usual
terms applicable to similar properties;
(h) Liens securing Indebtedness which is incurred to
refinance Indebtedness which has been secured by a Lien permitted
under the Indenture and is permitted to be refinanced under
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the Indenture, provided that such Liens do not extend to or cover any
property or assets of the Company or any of its Subsidiaries not
securing the Indebtedness so refinanced;
(i) Liens on (x) the assets or property of a Subsidiary of
Waxman USA existing at the time such Subsidiary became a Subsidiary of
Waxman USA and not incurred as a result of (or in connection with or
anticipation of) such Subsidiary becoming a Subsidiary of Waxman USA,
provided that such Liens do not extend to or cover any property or
assets of the Company or any of its Subsidiaries (other than the
property or assets of the Subsidiary so acquired that are subject to
such Lien) and (y) assets existing at the time such assets were
acquired by the Company, Waxman USA or a Subsidiary of Waxman USA and
not incurred as a result of (or in connection with or anticipation of)
the acquisition of such assets, provided that such Liens do not extend
to or cover any property or assets of the Company or any of its
Subsidiaries (other than the assets so acquired); and
(j) Liens on the Capital Stock of Subsidiaries of Waxman USA
to secure the Permitted Waxman USA Indebtedness and/or the Senior
Secured Notes.
Notwithstanding the foregoing, Liens shall be permitted by the
previous clauses (a) through (j) only to the extent that any Indebtedness
secured by such Liens is incurred pursuant to and in accordance with the
provisions of the Indenture.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Indenture will provide that the Company shall not, and shall
not permit any Subsidiary of the Company to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective or enter into any
agreement with any Person that would cause any consensual encumbrance or
restriction of any kind on the ability of any Subsidiary of the Company to (a)
pay dividends, in cash or otherwise, or make any other distributions on its
Capital Stock or any other interest or participation in, or measured by, its
profits owned by, or pay any Indebtedness owed to, the Company or a Subsidiary
of the Company, (b) make any loans or advances to the Company or any Subsidiary
of the Company or (c) transfer any of its properties or assets to the Company
or to any Subsidiary of the Company, except, in each case, for such
encumbrances or restrictions existing under or contemplated by or by reason of
(i) any restrictions existing under the Domestic Credit Facility, the Domestic
Term Loan, the Canadian Credit Agreement and the Senior Secured Indenture as in
effect on the Issue Date, (ii) any restrictions existing under the instruments
evidencing Permitted Waxman USA Indebtedness provided that any such
restrictions permit dividends or distributions up to the Company to satisfy
interest payments on the Notes so long as and to the extent that no default or
event of default occurs thereunder before or after the payment of any such
dividend or distribution, (iii) instruments evidencing indebtedness outstanding
on the Issue Date, (iv) any restrictions existing under any agreement that
refinances, replaces, amends or extends an agreement containing a restriction
permitted by clause (i), (ii) or (iii) above; provided that the terms and
conditions of any such restrictions are not materially less favorable to the
holders of the Notes than those under or pursuant to the agreement being
replaced, amended or extended or the agreement evidencing the Indebtedness
refinanced, and (v) customary non-assignment or sublease provisions of any
agreement of the Company or its Subsidiaries.
DISPOSITION OF PROCEEDS OF ASSET SALES. The Indenture will provide
that the Company shall not, and shall not permit any of its Subsidiaries to,
make any Asset Sale unless (i) such Asset Sale is for
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Fair Market Value and (ii) the net proceeds therefrom consist of at least 75%
cash or Cash Equivalents (with Indebtedness of the Company or its Subsidiaries
assumed by the purchaser being counted as cash for such purposes if the Company
and its Subsidiaries are permanently released from all liability therefor).
The Company shall or shall cause its Subsidiaries to, within five days
of receipt of any Net Cash Proceeds received from an Asset Sale involving the
sale, transfer or other disposition of the Capital Stock of any Person which is
pledged or required to be pledged pursuant to the provisions of the Indenture
to the Trustee for the benefit of the holders of the Notes ("Pledged Collateral
Net Cash Proceeds"), to the extent such Pledged Collateral Net Cash Proceeds
are not to be used to redeem Notes pursuant to and in accordance with the
provisions set forth above in the second paragraph under "Redemption--Optional
Redemption," designate such Pledged Collateral Net Cash Proceeds as Excess
Proceeds subject to disposition as provided below.
The Company shall or shall cause its Subsidiaries to, within 360 days
of receipt of any Net Cash Proceeds from an Asset Sale (other than any Pledged
Collateral Net Cash Proceeds which shall be disposed of as provided in the
previous paragraph), (x) with respect to any such Net Cash Proceeds from an
Asset Sale involving property or assets of Ideal Holding Group or a Subsidiary
of Ideal Holding Group or the Capital Stock of Ideal Holding Group or a
Subsidiary of Ideal Holding Group, apply such Net Cash Proceeds to reduce
amounts owing under the Canadian Credit Agreement and with respect to any other
Net Cash Proceeds, apply such Net Cash Proceeds to permanently prepay
Indebtedness of the Company which ranks pari passu with the Notes (including
any repurchase of Notes through open market purchases or otherwise) or
Indebtedness of a Subsidiary of the Company, other than Ideal Holding Group and
its Subsidiaries (including any repurchase of Permitted Waxman USA Indebtedness
through open market purchases or otherwise), (y) apply such Net Cash Proceeds
to acquire or construct assets in lines of business related to the Company and
its Subsidiaries' businesses as in existence on the Issue Date, provided that
only Net Cash Proceeds from an Asset Sale involving property or assets of Ideal
Holding Group or a Subsidiary of Ideal Holding Group may be applied to acquire
or construct assets of Ideal Holding Group or a Subsidiary of Ideal Holding
Group or (z) to the extent such Net Cash Proceeds are not applied as provided
in the previous clauses (x) and (y), designate such Net Cash Proceeds as
"Excess Proceeds" subject to disposition as provided below.
When the aggregate amount of unutilized Excess Proceeds equals or
exceeds $5.0 million, the Company shall make an offer to repurchase ("the Asset
Sale Offer") an aggregate principal amount of Notes equal to such Excess
Proceeds at a price in cash equal to 100% of the Accreted Value thereof, plus
accrued and unpaid interest, if any. Upon completion of such offer to
repurchase, the amount of Excess Proceeds shall be reset to zero and any
unutilized Excess Proceeds may be utilized by the Company for any purpose. If
the aggregate principal amount of Notes tendered exceeds the amount of Excess
Proceeds, the Notes tendered will be purchased on a pro rata basis.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that an Asset Sale occurs and the
Company is required to repurchase Notes as described above. The Company shall,
subject to the provisions described herein, be required to repurchase all Notes
validly tendered into any Asset Sale Offer and not withdrawn. Any Asset Sale
Offer is required to remain open for at least 20 business days.
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IMPAIRMENT OF SECURITY INTEREST. The Indenture will provide that the
Company shall not, and shall not permit any of its Subsidiaries to, take or
omit to take any action which action or omission might or would have the result
of affecting or impairing the security interest in favor of the Trustee, on
behalf of itself and the holders of the Notes, with respect to the collateral
required to be pledged under the Indenture, and the Company shall not create,
otherwise incur or suffer to exist, in favor of any Person (other than the
Trustee on behalf of itself and the holders of the Notes), any interest
whatsoever in such collateral.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Indenture will
provide that the Company shall not, and shall not permit, cause, or suffer any
Subsidiary of the Company to, conduct any business or enter into any
transaction or series of transactions with or for the benefit of any of their
respective Affiliates (each an "Affiliate Transaction"), except in good faith
and on terms that are no less favorable to the Company or such Subsidiary, as
the case may be, than those that could have been obtained in a comparable
transaction on an arm's length basis from a Person not an Affiliate of the
Company or such Subsidiary. With respect to any Affiliate Transaction (and
each series of related Affiliate Transactions which are similar or part of a
common plan) involving aggregate payments or other market value in excess of
$1,000,000, the Company shall deliver an officer's certificate to the Trustee
certifying that such Affiliate Transaction (or series of related Affiliate
Transactions) complies with the foregoing provisions and that such Affiliate
Transaction (or series of Affiliate Transactions) was approved by a majority of
the Independent Directors of the Company and the Board of Directors of the
Company as a whole. Notwithstanding the foregoing, the restrictions set forth
in this covenant shall not apply to (x) customary directors' fees and
consulting fees, (y) transactions with or among the Company and its
Wholly-Owned Subsidiaries (other than Ideal Holding Group and its Subsidiaries)
or (z) loans or advances by the Company to Ideal Holding Group, Inc. or its
subsidiaries not to exceed Cdn. $450,000 aggregate principal amount outstanding
at any one time.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Indenture will
provide that the Company will not, and will not permit any of its Subsidiaries
to, enter into any arrangement with any Person providing for the leasing to the
Company or any such Subsidiary of any real or tangible personal property
(except for leases between or among the Company and any of its Subsidiaries)
which property or similar property has been or is to be sold or transferred by
the Company or such Subsidiary to such Person in contemplation of such leasing
(a "Sale/Leaseback Transaction"). The foregoing will not prohibit
Sale/Leaseback Transactions entered into by the Company, Waxman USA or
Subsidiaries of Waxman USA if (a) the Company, Waxman USA or such Subsidiary of
Waxman USA, as the case may be, would be entitled to incur Indebtedness in an
amount equal to the Attributable Indebtedness with respect to such arrangement
pursuant to the "Limitation on Additional Indebtedness" covenant, (b) the
Company, Waxman USA or such Subsidiary of Waxman USA, as the case may be, could
incur a Lien on the assets subject to such Sale/Leaseback Transaction pursuant
to the "Limitation on Liens" covenant if such Sale/Leaseback Transaction had
been a mortgage and (c) such net proceeds are deemed to be Net Cash Proceeds
for purposes of, and the Company, Waxman USA or such Subsidiary of Waxman USA,
as the case may be, otherwise complies with the provisions of, the "Disposition
of Proceeds of Asset Sales" covenant.
LIMITATION ON ISSUANCES AND SALES OF PREFERRED STOCK BY SUBSIDIARIES.
The Indenture will provide that the Company (i) will not permit any of its
Subsidiaries to issue any Preferred Stock (other than to the Company or a
Wholly-Owned Subsidiary of the Company) and (ii) will not permit any
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Person (other than the Company or a Wholly-Owned Subsidiary of the Company) to
own any Preferred Stock of any Subsidiary of the Company. Notwithstanding the
foregoing, Ideal Holding Group and its Subsidiaries may issue Preferred Stock
to Persons other than the Company or a Wholly-Owned Subsidiary of the Company
to the extent that Ideal Holding Group or such Subsidiary of Ideal Holding
Group, as the case may be, could incur Indebtedness in a principal amount equal
to the liquidation preference of such Preferred Stock pursuant to clause (h) of
"Limitation on Additional Indebtedness" above.
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
The Indenture will provide that the Company shall not consolidate with
or merge with or into or sell, assign, convey, lease, transfer or otherwise
dispose of all or substantially all of its properties and assets to any Person
or Persons in a single transaction or through a series of related transactions
or permit any of its Subsidiaries to do any of the foregoing, unless: (a) the
Company shall be the continuing Person or the Person formed by or surviving
such consolidation or merger or the Person to which such sale, lease,
conveyance, lease, transfer or other disposition is made (the "surviving
entity") shall be a corporation organized and validly existing under the laws
of the United States or any State thereof or the District of Columbia; (b) the
surviving entity shall expressly assume, by a supplemental indenture executed
and delivered to the Trustee, in form and substance reasonably satisfactory to
the Trustee, all of the obligations of the Company under the Notes and the
Indenture; (c) immediately before and immediately after giving effect to such
transaction, or series of transactions (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), no Default or Event of
Default shall have occurred and be continuing; (d) the Company or the surviving
entity (in the case of a merger or consolidation involving the Company or any
sale, assignment, conveyance, lease, transfer or other disposition of all or
substantially all of the Company's properties and assets) shall immediately
after giving effect to such transaction or series of transactions (including,
without limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions)
have a Consolidated Net Worth equal to or greater than the Consolidated Net
Worth of the Company immediately prior to such transaction or series of
transactions; (e) immediately after giving effect to such transaction or series
of transactions, the Company or the surviving entity (in the case of a merger
or consolidation involving the Company or any sale, assignment, conveyance,
lease, transfer or other disposition of all or substantially all of the
Company's properties and assets) could incur $1.00 of Indebtedness pursuant to
clause (e) of the "Limitation on Additional Indebtedness" covenant described
above; and (f) the Company or the surviving entity shall have delivered to the
Trustee an Officer's Certificate stating that such consolidation, merger, sale,
assignment, conveyance, lease, or transfer or other disposition and, if a
supplemental indenture is required in connection with such transaction or
series of transactions, such supplemental indenture complies with this covenant
and that all conditions precedent in the Indenture relating to the transaction
or series of transactions have been satisfied.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture:
(i) default in the payment of any interest on the Notes when
it becomes due and payable and continuance of any such default for a
period of 30 days; or
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(ii) default in the payment of the principal of, or premium,
if any, on the Notes when due (including a default in payment upon an
offer to purchase required to be made by the Indenture); or
(iii) default in the performance, or breach, of any covenant
in the Indenture (other than defaults specified in clause (i) or (ii)
above), and continuance of such default or breach for a period of 30
days after written notice to the Company by the Trustee or to the
Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the outstanding Notes; or
(iv) failure by the Company or any Subsidiary (a) to make
any payment when due with respect to any other Indebtedness under one
or more classes or issues of Indebtedness which one or more classes or
issues of Indebtedness are in an aggregate principal amount of
$5,000,000 or more (other than any such failure to make a payment with
respect to the Canadian Credit Agreement or any Permitted Ideal
Indebtedness) or (b) to perform any term, covenant, condition, or
provision of one or more classes or issues of Indebtedness which one
or more classes or issues of Indebtedness are in an aggregate
principal amount of $5,000,000 or more, which failure, in the case of
this clause (b), results in an acceleration of the maturity thereof
(other than any such failure which results in the acceleration of the
maturity of the Canadian Credit Agreement or any Permitted Ideal
Indebtedness); or
(v) one or more judgments, orders or decrees for the payment
of money in excess of $5,000,000, either individually or in an
aggregate amount, shall be entered against the Company or any of its
Subsidiaries (other than Ideal Holding Group and its Subsidiaries (but
only as long as the Canadian Credit Agreement and any Permitted Ideal
Indebtedness is non-recourse to, and credit support (other than
Permitted Credit Support) is not otherwise required to be provided by,
the Company or its Subsidiaries (other than Ideal Holding Group and
its Subsidiaries))) or any of their respective properties and shall
not be discharged and there shall have been a period of 60 days during
which a stay of enforcement of such judgment or order, by reason of
pending appeal or otherwise, shall not be in effect; or
(vi) certain events of bankruptcy or insolvency with respect
to the Company or any Material Subsidiary (other than Ideal Holding
Group and its Subsidiaries (but only as long as the Canadian Credit
Agreement and any Permitted Ideal Indebtedness is non-recourse to, and
credit support (other than Permitted Credit Support) is not otherwise
required to be provided by, the Company or its Subsidiaries (other
than Ideal Holding Group and its Subsidiaries))) shall have occurred;
or
(vii) the Indenture ceases to be in full force and effect or
ceases to give the Trustee, in any material respect, the Liens,
rights, powers and privileges purported to be created thereby.
If an Event of Default (other than an Event of Default specified in
clause (vi) above with respect to the Company) occurs and is continuing, then
the Trustee or the holders of at least 25% in aggregate principal amount of the
outstanding Notes may, by written notice, and the Trustee upon the request of
the holders of not less than 25% in aggregate principal amount of the
outstanding Notes shall, declare
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the Accreted Value plus accrued interest (if any) on all Notes on the date of
such declaration to be due and payable immediately (the "Default Amount").
Upon any such declaration, the Default Amount shall become due and payable
immediately. If an Event of Default specified in clause (vi) above with
respect to the Company occurs and is continuing, then the Default Amount shall
IPSO FACTO become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any holder.
After a declaration of acceleration, the holders of a majority in
aggregate principal amount of outstanding Notes may, by notice to the Trustee,
rescind such declaration of acceleration if all existing Events of Default have
been cured or waived, other than nonpayment of the Default Amount that has
become due solely as a result of such acceleration and if the rescission of
acceleration would not conflict with any judgment or decree. The holders of a
majority in aggregate principal amount of the outstanding Notes also have the
right to waive past defaults under the Indenture except a default in the
payment of the principal of, premium, if any, or interest on any Note, or in
respect of a covenant or a provision which cannot be modified or amended
without the consent of all holders.
No holder of any of the Notes has any right to institute any
proceeding with respect to the Indenture or any remedy thereunder, unless the
holders of at least 25% in aggregate principal amount of the outstanding Notes
have made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding, the Trustee has failed to institute such proceeding
within 15 days after receipt of such notice and the Trustee has not within such
15-day period received directions inconsistent with such written request by
holders of a majority in aggregate principal amount of the outstanding Notes.
Such limitations do not apply, however, to a suit instituted by a holder of a
Note for the enforcement of the payment of the principal of, premium, if any,
or accrued interest on, such Note on or after the respective due dates
expressed in such Note.
During the existence of an Event of Default, the Trustee is required
to exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent Person would
exercise under the circumstances in the conduct of such Person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
is not under any obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders unless such holders
shall have offered to such Trustee reasonable indemnity. Subject to certain
provisions concerning the rights of the Trustee, the holders of a majority in
aggregate principal amount of the outstanding Notes have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee.
DEFEASANCE
The Company may at any time terminate all of its obligations with
respect to the Notes ("defeasance"), except for certain obligations, including
those regarding any trust established for a defeasance and obligations to
register the transfer or exchange of the Notes, to replace mutilated,
destroyed, lost or stolen Notes and to maintain agencies in respect of Notes.
The Company may at any time terminate its obligations under certain covenants
set forth in the Indenture, some of which are described under "Certain
Covenants" above, and any omission to comply with such obligations shall not
constitute a Default or an Event of Default with respect to the Notes issued
under the Indenture
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("covenant defeasance"). In order to exercise either defeasance or covenant
defeasance, the Company must irrevocably deposit in trust with the Trustee, for
the benefit of the holders of the Notes, money or U.S. government obligations,
or a combination thereof, in such amounts as will be sufficient to pay the
principal of, and premium, if any, and accrued interest on the Notes to
redemption or maturity, as the case may be, and comply with certain other
conditions, including the delivery of opinions as to certain tax and bankruptcy
matters.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further
effect (except as to surviving rights or registration of transfer or exchange
of Notes) as to all outstanding Notes when either (a) all such Notes
theretofore authenticated and delivered (except lost, stolen or destroyed Notes
which have been replaced or paid and Notes for the payment of which money has
theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust)
have been delivered to the Trustee for cancellation and the Company has paid
all sums payable by it under the Indenture; or (b)(i) all such Notes not
theretofore delivered to the Trustee for cancellation have become due and
payable or have been called for redemption and the Company has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in trust
for the purpose an amount of money sufficient to pay and discharge the entire
indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, for principal, premium, if any, and accrued interest to the date
of such deposit or redemption, as the case may be; (ii) the Company has paid
all sums payable by it under the Indenture; and (iii) the Company has delivered
irrevocable instructions to the Trustee to apply the deposited money toward the
payment of the Notes at maturity or the redemption date, as the case may be.
In addition, the Company must deliver an Officers' Certificate and an Opinion
of Counsel stating that all conditions precedent to satisfaction and discharge
have been complied with.
AMENDMENTS AND WAIVERS
From time to time the Company, when authorized by resolution of its
Board of Directors, and the Trustee may, without the consent of the holders of
the Notes, amend, waive or supplement the Indenture or the Notes for certain
specified purposes, including, among other things, curing ambiguities, defects
or inconsistencies, maintaining the qualification of the Indenture under the
Trust Indenture Act, making any change that does not adversely affect the
rights of any holder or mortgaging, pledging, hypothecating or granting a
security interest in favor of the Trustee as additional security for the
payment and performance of the obligations under the Indenture, in any property
or assets, including any which is required to be mortgaged, pledged or
hypothecated, or in which a security interest is required to be granted, to the
Trustee. Other amendments and modifications of the Indenture or the Notes may
be made by the Company and the Trustee with the consent of the holders of not
less than a majority of the aggregate principal amount of the outstanding
Notes; provided, however, that no such modification or amendment may, without
the consent of the holder of each outstanding Note affected thereby, (i) reduce
the principal amount outstanding of, extend the fixed maturity of, or alter the
redemption provisions of, the Notes, (ii) change the currency in which any
Notes or any principal, premium or the accrued interest thereon is payable,
(iii) reduce the percentage in principal amount outstanding of Notes, holders
of which must consent to an amendment, supplement or waiver or consent to take
any action under the Indenture or the Notes, (iv) impair the right to institute
suit for the enforcement of any payment on or with respect to the Notes, (v)
waive a default in payment with
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respect to the Notes, (vi) reduce the rate or extend the time for payment of
interest on the Notes, (vii) affect the ranking or security of the Notes,
(viii) following the mailing of a Change of Control Offer, modify the
provisions of the Indenture with respect to such a Change of Control Offer in a
manner adverse to any holder or (ix) release any collateral, except in
compliance with the terms of the Indenture.
REGARDING THE TRUSTEE
The Huntington National Bank will serve as Trustee under the Indenture.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other capitalized terms used herein for which no
definition is provided.
"Accreted Value" means as of any date prior to June 1, 1999, an amount
per $1,000 principal amount of Notes that is equal to the sum of (a) the
initial offering price ($539.02 per $1,000 principal amount of Notes) of such
Notes and (b) the portion of the excess of the principal amount of such Notes
over such initial offering price which shall have been amortized through such
date, such amount to be so amortized on a daily basis and compounded
semi-annually on each June 1 and December 1, at the rate of 12 3/4% per annum
from June 1, 1994 through the date of determination computed on the basis of a
360-day year of twelve 30-day months and as of any date on or after June 1,
1999, the principal amount of each Note.
"Acquired Indebtedness" means with respect to any Person, Indebtedness
of another Person existing at the time such other Person becomes a Subsidiary
of such Person or is merged with or into such Person or a Subsidiary of or
assumed in connection with an Asset Acquisition by such Person or a Subsidiary
of such Person, including, without limitation, Indebtedness incurred in
connection with, or in anticipation of, such other Person becoming a Subsidiary
of such Person, the acquisition of such other Person or the merger with or into
such other Person.
"Affiliate" of any specified Person means any other Person which,
directly or indirectly, controls, is controlled by or is 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 Acquisition" means (i) any capital contribution (by means of
transfer of cash or other property to others or payment for property or
services for the account or use of others, or otherwise) to, or purchase or
acquisition of Capital Stock in, any other Person by the Company or any of its
Subsidiaries, in either case pursuant to which such Person shall become a
Subsidiary of the Company or any of its Subsidiaries or shall be merged with or
into the Company or any of its Subsidiaries or (ii) any acquisition by the
Company or any of its Subsidiaries of the assets of any Person which constitute
substantially all of the assets of an operating unit or business of such
Person.
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"Asset Sale" means with respect to any Person, any direct or indirect
sale, conveyance, transfer, lease or other disposition to any other Person
other than a Subsidiary of such Person (other than, with respect to any Asset
Sale by the Company, Ideal Holding Group or a Subsidiary of Ideal Holding
Group), in one transaction or a series of related transactions, of (i) any
Capital Stock of any Subsidiary of such Person (whether structured as a sale,
issuance or other disposition by such Person or a Subsidiary of such Person) or
(ii) any other property or asset of such Person or any Subsidiary of such
Person (other than cash or Cash Equivalents), in each case other than inventory
in the ordinary course of business and other than isolated transactions which
do not exceed $1,000,000 individually. With respect to the Company and its
Subsidiaries, the term "Asset Sale" shall not include (x) any disposition of
properties and assets of the Company or any Subsidiary that is governed under
and complies with the requirements set forth in "Consolidation, Merger,
Conveyance, Transfer or Lease" above, or (y) any sale by the Company of its
Capital Stock.
"Attributable Indebtedness" means, in respect of a Sale/Leaseback
Transaction, as at the time of determination, the present value (discounted at
the interest rate borne, or to be borne, as the case may be, by the Notes,
compounded annually) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been extended).
"Board Resolution" means with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person,
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Canadian Credit Agreement" means the credit agreement, dated as of
April 20, 1989, between Ideal and Bank of Montreal providing for working
capital and other financing, as the same may at any time be amended, amended
and restated, supplemented or otherwise modified, including any refinancing,
refunding, replacement or extension thereof which provides for working capital
and other financing, whether by the same or any other lender or group of
lenders provided that the Indebtedness represented by such Credit Agreement or
any such amendment, amendment and restatement, supplement or other modification
is non-recourse to, and credit support (other than Permitted Credit Support) is
not otherwise required to be provided by, the Company or its Subsidiaries
(other than Ideal Holding Group and its Subsidiaries).
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of such Person's capital stock, whether
outstanding on the Issue Date or issued after the Issue Date, and any and all
rights, warrants or options exchangeable for or convertible into such capital
stock.
"Capitalized Lease Obligation" means any obligation to pay rent or
other amounts under a lease of (or other agreement conveying the right to use)
any property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under GAAP, and, for
the purpose of the Indenture, the amount of such obligation at any date shall
be the capitalized amount thereof at such date, determined in accordance with
GAAP.
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"Cash Equivalents" means, at any time (i) any evidence of Indebtedness
with a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000; (iii) commercial
paper with a maturity of 180 days or less issued by a corporation (except an
Affiliate of the Company) organized under the laws of any state of the United
States or the District of Columbia and rated at least A-1 by Standard & Poor's
Corporation or at least P-1 by Moody's Investors Service, Inc.; and (iv)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued 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; provided, however, that the terms of such agreements
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions with Securities Dealers and Others, as adopted by the
Comptroller of the Currency.
"Change of Control" means (i) the direct or indirect, sale, lease,
exchange or other transfer of all or substantially all of the assets of the
Company to any Person or entity or group of Persons or entities acting in
concert as a partnership or other group (a "Group of Persons") other than
Permitted Holders, (ii) the merger or consolidation of the Company with or into
another corporation with the effect that the then existing shareholders of the
Company or their Affiliates, together with the Permitted Holders, hold less
than 50% of the Voting Power of the surviving corporation of such merger or the
corporation resulting from such consolidation and do not otherwise have the
right or ability by contract or otherwise to elect a majority of the Board of
Directors of such surviving corporation, (iii) the replacement of a majority of
the Board of Directors of the Company from the directors who constituted the
Board of Directors on the Issue Date, and such replacement shall not have been
approved by a majority of the Board of Directors of the Company then still in
office who either were (x) members of the Board of Directors on the Issue Date
or (y) whose election as a member of the Board of Directors was approved in the
manner provided in this clause (iii) or (iv) a Person or Group of Persons
shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, have become the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of securities of the
Company representing 35% or more of the Voting Power of the Company and, at
such time Permitted Holders are not the beneficial owners (as so defined) of a
greater percentage of such Voting Power and do not otherwise have the right or
ability by contract or otherwise to elect a majority of the Board of Directors
of the Company.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period increased
(to the extent deducted in determining Consolidated Net Income) by the sum of
the following for such period: (i) all income taxes paid or accrued according
to GAAP for such period (other than income taxes attributable to extraordinary,
unusual or non-recurring gains); (ii) Consolidated Interest Expense; (iii)
depreciation; (iv) amortization including, without limitation, amortization of
capitalized debt issuance costs; and (v) any other non-cash charges (excluding
any non-cash charge to the extent that it requires an accrual of or a reserve
for cash disbursements for any future period).
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"Consolidated Interest Coverage Ratio" means, with respect to any
Person, the ratio of (i) Consolidated Cash Flow of such Person for the four
full fiscal quarters for which financial statements are available that
immediately precede the date of the transaction or other circumstances giving
rise to the need to calculate the Consolidated Interest Coverage Ratio (the
"Transaction Date") to (ii) Consolidated Interest Expense of such Person and
the aggregate amount of dividends or other distributions declared or paid on
Capital Stock (other than Common Stock) of such Person and its Subsidiaries, in
each case for such four full fiscal quarter period. For purposes of this
definition, if the Transaction Date occurs prior to the date on which such
Person's consolidated financial statements for the four full fiscal quarters
subsequent to the Issue Date are first available, "Consolidated Cash Flow" and
the items referred to in the preceding clause (ii) shall be calculated on a pro
forma basis as if the Reorganization had taken place on the first day of such
four full fiscal quarter period for which financial statements are available
that immediately precede the Transaction Date. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
Cash Flow" and the items referred to in the preceding clause (ii) shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to (i) the incurrence or retirement of any Indebtedness of such
Person or any of its Subsidiaries at any time during the period (the "Reference
Period") (A) commencing on the first day of the four full fiscal quarter period
for which financial statements are available that precedes the Transaction Date
and (B) ending on and including the Transaction Date, including, without
limitation, the incurrence of the Indebtedness giving rise to the need to make
such calculation, as if such incurrence or retirement occurred on the first day
of the Reference Period; provided, that if such Person or any of its
Subsidiaries directly or indirectly guarantees Indebtedness of a third Person,
the above clause shall give effect to the incurrence of such guaranteed
Indebtedness as if such Person or Subsidiary had directly incurred such
guaranteed Indebtedness and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need
to make such calculation as a result of such Person or any of its Subsidiaries
(including any Person who becomes a Subsidiary as a result of the Asset
Acquisition) incurring Acquired Indebtedness) occurring during the Reference
Period and any retirement of Indebtedness in connection with such Asset Sales,
as if such Asset Sale or Asset Acquisition and/or retirement occurred on the
first day of the Reference Period. Furthermore, in calculating the denominator
(but not the numerator) of this "Consolidated Interest Coverage Ratio," (1)
interest on Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall
be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; (2) if
interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate based upon a factor of a prime or similar rate shall be deemed to
have been in effect; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Rate Protection Obligations, shall
be deemed to have accrued at the rate per annum resulting after giving effect
to the operation of such agreements.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (a) the cash and non-cash interest
expense of such Person and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP consistently applied (net of any
interest income), including, without limitation, (w) any amortization of debt
discount, (x) the net cost under Interest Rate Protection Obligations and
Currency Hedging Agreements insofar as they relate to interest, (y) the
interest portion of any deferred payment obligation and (z) all accrued
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interest, and (b) the aggregate amount of the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that (a) the Net Income of any Person (the "other Person")
in which the Person in question or one of its Subsidiaries has a joint interest
with a third party (which interest does not cause the Net Income of such other
Person to be consolidated into the Net Income of the Person in question in
accordance with GAAP) shall be included only to the extent of the amount of
dividends or distributions paid to the Person in question or the Subsidiary,
(b) the Net Income of any Subsidiary of the Person in question that is subject
to any restriction or limitation on the payment of dividends or the making of
other distributions shall be excluded to the extent of such restriction or
limitation, (c)(i) the Net Income (or loss) of any Person acquired in a pooling
of interests transaction for any period prior to the date of such acquisition
and (ii) any net gain or loss resulting from an Asset Sale by the Person in
question or any of its Subsidiaries shall be excluded, and (d) extraordinary
gains and losses and any one-time increase or decrease to Net Income recorded
because of the adoption of new accounting policies, practices or standards
required or permitted by generally accepted accounting principles shall be
excluded.
"Consolidated Net Worth" means, with respect to any Person at any date
of determination, the consolidated equity represented by the shares of such
Person's Capital Stock (other than Disqualified Stock) at such date, as
determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Consumer Products" means Waxman Consumer Products Group Inc., a
Delaware corporation.
"Convertible Debentures" means the 9 1/2% Convertible Subordinated
Debentures of the Company.
"Currency Hedging Obligations" means with respect to any Person, the
obligations and/or rights of such Person under currency hedging arrangements
designed to protect such Person against currency fluctuations.
"Default Amount" shall have the meaning set forth under "Events of Default."
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
maturity date of the Notes.
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"Domestic Credit Facility" means the credit agreement to be entered
into between Waxman USA, certain of the Subsidiaries of Waxman USA, the lenders
listed therein and Citicorp USA, Inc., as agent, providing for working capital
and other financing, as the same may at any time be amended, amended and
restated, supplemented or otherwise modified, including any refinancing,
refunding, replacement or extension thereof which provides for working capital
and other financings, whether by the same or any other lender or group of
lenders.
"Domestic Term Loan" means the term loan agreement to be entered into
between Waxman USA, certain of the Subsidiaries of Waxman USA and Citicorp USA
as the same may at any time be amended, amended and restated, supplemented or
otherwise modified, including any refinancing, refunding, replacement or
extension thereof whether by the same or any other lender or group of lenders
(including any Permitted Waxman USA Indebtedness).
"Fair Market Value" or "fair value" means, with respect to any asset
or property, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a willing buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. With
respect to any Person Fair Market Value shall be determined by the Board of
Directors of such Person (and with respect to the Company or a Subsidiary of
the Company, a majority of the Independent Directors of the Company) acting in
good faith and shall be evidenced by a Board Resolution delivered to the
Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the date of
determination.
"Ideal" means Ideal Plumbing Group Inc., a corporation organized and
existing under the laws of Quebec.
"Ideal Holding Group" means Ideal Holding Group, Inc., a Delaware
corporation.
"Indebtedness" means, with respect to any Person, without duplication,
(i) any liability, contingent or otherwise, of such Person (A) for borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of such Person or only to a portion thereof), (B) evidenced by a note,
debenture or similar instrument or letter of credit (including purchase money
obligations but excluding undrawn documentary letters of credit for trade
payables arising in the ordinary course of business) or (C) for the payment of
money relating to a Capitalized Lease Obligation or other obligation relating
to the deferred purchase price of property (other than trade payables or
accrued liabilities arising in the ordinary course of business); (ii) any
liability of others of the kind described in the preceding clause (i) which the
Person has guaranteed or which is otherwise its legal liability; (iii) any
obligation secured by a lien to which the property or assets of such Person are
subject, whether or not the obligations secured thereby shall have been assumed
by or shall otherwise be such Person's legal liability (the amount of such
obligation being deemed to be the lesser of the fair value of such property or
asset or the amount of the obligation so secured); and (iv) any and all
deferrals, renewals, extensions
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and refundings of, or amendments, modifications or supplements to, any
liability of the kind described in any of the preceding clauses (i), (ii) or
(iii).
"Independent Director" means any director that (i) is not and has not
been an officer or employee of the Company or any of its Affiliates, (ii) does
not have any relationship that, in the opinion of the Board of Directors of the
Company (exclusive of any such Independent Director), would interfere with
his/her exercise of independent judgment in carrying out the responsibilities
of director and (iii) with respect to any transaction or series of related
transactions, does not have any material direct or indirect financial interest
in or with respect to such transaction or series of related transactions.
"Interest Rate Protection Obligations" means the obligations and/or
rights of any Person pursuant to any arrangement with any other Person,
designed to protect such Person against fluctuations in interest rates,
whereby, directly or indirectly, such Person is entitled to receive from time
to time periodic payments calculated by applying either a floating or a fixed
rate of interest on a stated notional amount in exchange for periodic payments
made by such Person calculated by applying a fixed or a floating rate of
interest on the same notional amount and shall include without limitation,
interest rate swaps, caps, floors, collars and similar agreements.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means any mortgage, lien (statutory or other), pledge, security
interest, encumbrance, claim, hypothecation, assignment for security, deposit
arrangement or preference or other security agreement of any kind or nature
whatsoever. For purposes of the Indenture, a Person shall be deemed to own
subject to a Lien any property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement.
"Material Subsidiary" means, with respect to any Person, any
Subsidiary of such Person which would be a "significant subsidiary" pursuant to
Article 1-02 of Regulation S-X.
"Net Cash Proceeds" means, with respect to any Asset Sale the proceeds
thereof in the form of cash or Cash Equivalents, including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents net of (i) brokerage commissions and other reasonable fees and
expenses (including fees and expenses of counsel and investment bankers)
related to such Asset Sale; (ii) provisions for all taxes payable within one
year as a result of such Asset Sale; (iii) payments made to retire Indebtedness
secured by the assets subject to such Asset Sale to the extent required
pursuant to the terms of such Indebtedness; (iv) appropriate amounts to be
provided by the Company or any Subsidiary of the Company, as the case may be,
as a reserve, in accordance with GAAP, against any liabilities associated with
such Asset Sale and retained by the Company or any of its Subsidiaries, as the
case may be, after such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, provided, however, that the amount of any such reserve at such
time that such amount is no longer required to be provided as a reserve in
accordance with GAAP and is not applied to the liability for which such reserve
was established shall be deemed Net Cash Proceeds; and (v) any amount required
to be paid to any Person owning a beneficial interest in the property or assets
sold in an amount proportionate to such beneficial interest.
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"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by
the Company, the aggregate net cash proceeds received by the Company after
payment of expenses, commissions and the like incurred in connection therewith,
(b) in the case of the issuance of any Indebtedness by the Company, the
aggregate net cash proceeds received by the Company, after payment of expenses,
commissions and the like incurred in connection therewith or (c) in the case of
any exchange, exercise, conversion or surrender of outstanding securities of
any kind of the Company for or into shares of Capital Stock of the Company
which is not Disqualified Stock, the net cash proceeds received by the Company
upon such exchange, exercise, conversion or surrender (plus, with respect to
the issuance of any such securities after the Issue Date, the net cash proceeds
received by such Person upon the issuance of such securities), less any and all
payments made to the holders, e.g., on account of fractional shares, and less
all expenses, commissions and the like incurred by the Company in connection
therewith).
"Permitted Credit Support" means (x) any pledge of the Capital Stock
of Ideal Holding Group or a Subsidiary of Ideal Holding Group or (y) loans or
advances by the Company to Ideal Holding Group or its Subsidiaries not to
exceed Cdn.$450,000 aggregate principal amount outstanding at any one time.
"Permitted Holders" means Armond Waxman, Melvin Waxman, trusts for the
benefit of any of Armond Waxman, Melvin Waxman or members of their families,
the heirs of or administrators or executors for the respective estates of,
Armond Waxman or Melvin Waxman or any Person, entity or group of Persons
controlled by any of the foregoing.
"Permitted Ideal Indebtedness" means indebtedness which is
non-recourse to and for which credit support (other than Permitted Credit
Support) is not otherwise provided by the Company or its Subsidiaries (other
than Ideal Holding Group or any of its Subsidiaries).
"Permitted Investments" means (i) obligations of the United States
government due within one year; (ii) certificates of deposit or Eurodollar
deposits due within one year with a commercial bank having capital funds of at
least $500,000,000 or more; (iii) commercial paper rated at least A-1 by
Standard & Poor's Corporation or at least P-1 by Moody's Investors Service,
Inc.; (iv) debt of any state or political subdivision that is rated among the
two highest rating categories obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc. and is due within one year; (v)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued 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; provided, however, that the terms of such agreements
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions with Securities Dealers and Others, as adopted by the
Comptroller of the Currency; (vi) Investments represented by Interest Rate
Protection Obligations and Currency Hedging Agreements; and (vii) Investments
by the Company in Ideal Holding Group or a Subsidiary of Ideal Holding Group
not to exceed an aggregate of Cdn. $450,000 outstanding at any one time.
- 71 -
<PAGE> 88
"Permitted Liens" means, with respect to any Person, any Lien arising
by reason of (a) any judgment, decree or order of any court, so long as such
Lien is being contested in good faith and is adequately bonded, and any
appropriate legal proceedings which may have been duly initiated for the review
of such judgment, decree or order shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have expired;
(b) taxes, assessments, governmental charges or claims not yet delinquent or
which are being contested in good faith; (c) security for payment of workers'
compensation or other insurance or social security legislation; (d) security
for the performance of tenders, contracts (other than contracts for the payment
of money) or leases (excluding any Capitalized Lease Obligations); (e) deposits
to secure public or statutory obligations, or in lieu of surety, performance or
appeal bonds, entered into in the ordinary course of business; (f) Liens
arising by operation of law in favor of carriers, warehousemen, landlords,
mechanics, materialmen, laborers, employees or suppliers, incurred in the
ordinary course of business for sums which are not yet delinquent or are being
contested in good faith by negotiations or by appropriate proceedings which
suspend the collection thereof; (g) easements, rights-of-way, zoning and
similar covenants and restrictions and other similar encumbrances or title
defects which, in the aggregate, are not substantial in amount, and which 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 Company or any of its Subsidiaries and (h) Liens arising in the ordinary
course of business in favor of custom and revenue authorities to secure payment
of custom duties.
"Permitted Waxman USA Indebtedness" means Indebtedness of Waxman USA
the proceeds of which are used to refinance Senior Secured Notes, Senior
Subordinated Notes or the Domestic Term Loan (including the payment of any
related fees and expenses and the amount of accrued interest on such
Indebtedness refinanced and the amount of any premium required to be paid in
connection with the refinancing of such Indebtedness).
"Person" means any individual, corporation, partnership, joint stock
company, trust, unincorporated organization or government or agency or
political subdivision thereof.
"Public Equity Offering" means the offer and sale to the public of
shares of any class of the Capital Stock (other than Disqualified Stock) of the
Company or any Subsidiary of the Company pursuant to a registration statement
declared effective by the Commission after the Issue Date (or with respect to
the Capital Stock (other than Disqualified Stock) of Ideal Holding Group or a
Subsidiary of Ideal Holding Group, pursuant to a prospectus or other comparable
document declared effective or otherwise approved by comparable Canadian
provincial security authorities after the Issue Date) and pursuant to which the
Company or such Subsidiary, as the case may be, receives net cash proceeds of
not less than $15,000,000.
"Restricted Payment" means any of the following: (i) the declaration
or payment of any dividend or any other distribution on Capital Stock of the
Company or any Subsidiary of the Company or any payment made to the direct or
indirect holders (in their capacities as such) of Capital Stock of the Company
or any Subsidiary of the Company (other than (x) dividends or distributions
payable solely in Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to purchase Capital Stock (other than Disqualified
Stock), and (y) in the case of Subsidiaries of the Company, dividends or
distributions payable to the Company or to a Wholly-Owned Subsidiary of the
Company), (ii) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the
- 72 -
<PAGE> 89
Company or any of its Subsidiaries, (iii) the making of any principal payment
on, or the purchase, defeasance, repurchase, redemption or other acquisition or
retirement for value, prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, of any Indebtedness of the Company which is
subordinated in right of payment to the Notes (other than Indebtedness of the
Company acquired in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of
the date of acquisition) and (iv) the making of any Investment other than
pursuant to clause (i), (ii), (iii), (v) or (vi) of the "Limitation on
Investments, Loans and Advances" covenant above.
"Senior Secured Notes" means the Company's 12 1/4% Fixed Rate Senior
Secured Notes due September 1, 1998 and Floating Rate Senior Secured Notes due
September 1, 1998.
"Senior Subordinated Notes" means the 13 3/4% Senior Subordinated
Notes due June 1, 1999 of the Company.
"Subsidiary" means with respect to any Person (i) a corporation a
majority of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by one or more Subsidiaries of such Person or by such Person
and one or more Subsidiaries of such Person or (ii) any other Person (other
than a corporation) in which such Person, one or more Subsidiaries of such
Person or such Person and one or more Subsidiaries of such Person, directly or
indirectly, at the date of determination thereof, has at least a majority
ownership interest.
"Voting Power" means with respect to any Person, the power under
ordinary circumstances, pursuant to the ownership of shares of any class or
classes of Capital Stock, to elect at least a majority of the board of
directors, managers or trustee of such Person (irrespective of whether or not,
at the time, stock of any other class or classes shall have, or might have,
voting power by reason of the happening of any contingency).
"Waxman USA" means Waxman USA Inc., a Delaware corporation.
"Wholly-Owned Subsidiary" means with respect to any Person any
Subsidiary of such Person, 100% of the Capital Stock of which (other than
shares of Capital Stock representing any director's qualifying shares or
investments by foreign nationals mandated by applicable law) is owned by such
Person, by a Wholly-Owned Subsidiary of such Person or by such Person and one
or more Wholly-Owned Subsidiaries of such Person.
"WOC" means WOC Inc., a Delaware corporation.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of certain income tax consequences is based
on laws, regulations (including Treasury Regulations published in the Federal
Register on February 2, 1994 interpreting the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), that govern the inclusion of
original issue discount ("OID") in income), rulings and decisions now in
effect, all of which are subject to change, possibly on a retroactive basis.
The discussion does not cover all aspects of federal
- 73 -
<PAGE> 90
taxation that may be relevant to, or the actual tax effect that any of the
matters described herein will have on, particular holders, and does not address
state, local, foreign or other tax laws. Certain Holders (including insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign corporations, nonresident aliens, taxpayers subject to the alternative
minimum tax and persons in special situations such as those that hold the Old
Notes or New Notes as part of a straddle) may be subject to special rules not
discussed below. The description assumes that Holders of the New Notes will
hold the New Notes as "capital assets" (generally, property held for investment
purposes) within the meaning of Section 1221 of the Code. EACH HOLDER SHOULD
CONSULT ITS OWN TAX ADVISOR IN DETERMINING THE FEDERAL, STATE, LOCAL AND ANY
OTHER TAX CONSEQUENCES TO THE PARTICULAR HOLDER OF THE EXCHANGE OF OLD NOTES
FOR NEW NOTES AND THE OWNERSHIP AND DISPOSITION OF THE NEW NOTES.
EXCHANGE OF NOTES
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not be treated as an exchange or other taxable event for federal income
tax purposes because, under regulations proposed by the United States Treasury,
the New Notes should not be considered to differ materially in kind or extent
from the Old Notes. Rather, the New Notes received by a Holder should be
treated as a continuation of the Old Notes in the hands of such Holder. As a
result, there should be no federal income tax consequences to Holders who
exchange Old Notes for New Notes pursuant to the Exchange Offer and any such
Holder should have the same adjusted basis and holding period in the New Notes
as it had in the Old Notes immediately before the exchange.
HOLDING AND DISPOSITION OF NOTES
ORIGINAL ISSUE DISCOUNT
The Old Notes were issued on May 20, 1994 and have OID for U.S.
federal income tax purposes. Because the New Notes will be treated as a
continuation of the Old Notes, which were issued with OID, the New Notes will
have OID for U.S. federal income tax purposes, and Holders of the New Notes
will be required to recognize such OID as ordinary income in advance of the
receipt of the cash payments to which such income is attributable.
The total amount of OID with respect to a New Note will be equal to
the excess of the "stated redemption price at maturity" of such Note over its
"issue price." The "stated redemption price at maturity" of a New Note will be
equal to the sum of all payments required to be made thereunder. The Old Notes
and Warrants were issued in units consisting of $1,000 principal amount of Old
Notes and 59 Warrants. Although not free from doubt, it appears likely that
the Old Notes (and accordingly, the New Notes) will be treated as publicly
traded. As a result, the issue price of a unit will be the fair market value
of the unit on the first date that a substantial amount of the units were
issued. The "issue price" and initial tax basis of the New Notes will be equal
to the portion of the issue price of the unit allocated to the Old Note. The
issue price of each unit was allocated between the Warrants and the Old Notes.
The amounts so allocated represent the Company's belief as to the relative fair
market value of the Old Notes and the Warrants. The Internal Revenue Service
may take the position that these amounts do not accurately reflect the fair
market values of the Old Notes and Warrants. In such case,
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<PAGE> 91
the total amount of OID on the New Notes may be greater or less than the amount
of OID thereon based on the Company's allocation.
Each Holder of a New Note will be required to include in gross income
for any taxable year the sum of the daily portions of OID attributable to each
day during the taxable year on which such holder holds the New Note, including
the purchase date and excluding the disposition date. A daily portion is
determined by allocating to each day a ratable portion of the OID allocable to
the accrual period in which such day is included. The amount of OID allocable
to each full accrual period is the product of the adjusted issue price of the
New Note at the beginning of such accrual period and the yield to maturity of
the New Note (as determined by semi-annual compounding). The adjusted issue
price of a New Note at the beginning of an accrual period is equal to the issue
price of the New Note, increased by any OID accrued in prior accrual periods
and decreased by any cash payment received with respect to the New Note on or
before the first day of the accrual period.
A subsequent purchaser of a New Note also will be required to include
annual accruals of OID in gross income for federal income tax purposes in
accordance with the rules described above, but the amount of the OID or
ordinary income required to be reported may vary depending upon the amount paid
for the debt instrument by the subsequent purchaser. See "Market Discount" and
"Acquisition Premium" below. If an exchanging Holder purchased an Old Note at
an "acquisition premium" (generally defined as a purchase price in excess of
the Old Note's adjusted issue price on the Holder's date of purchase), the
amount of OID includible in the income of the Holder in each taxable year
generally will be reduced by the portion of the acquisition premium properly
allocable to such year.
DISPOSITION OF NEW NOTES. A Holder's tax basis in a New Note will be
increased by the amount of OID that is includible in such Holder's income. If
a New Note is redeemed, sold or otherwise disposed of, a Holder thereof
generally will recognize gain or loss equal to the difference between the
amount realized on the redemption, sale or other disposition of such New Note
and such Holder's adjusted basis in the New Note. Subject to the market
discount rules discussed below, such gain or loss will be capital gain or loss
and will be long-term capital gain or loss if, on the date of the sale, the
Holder has a holding period for the New Notes (which would include the holding
period of the Old Notes) of more than one year.
Under the market discount rules of the Code, an exchanging Holder
(other than a Holder who made the election described below) who purchased an
Old Note with "market discount" (generally defined as the amount by which the
adjusted issue price of the Old Note on the Holder's date of purchase exceeds
the Holder's purchase price) will be required to treat any gain recognized on
the redemption, sale or other disposition of the New Note received in the
exchange as ordinary income to the extent of the market discount that accrued
during the holding period of such New Note (which would include the holding
period of the Old Note). A Holder who has elected under applicable Code
provisions to include market discount in income annually as such discount
accrues will not, however, be required to treat any gain recognized as ordinary
income under these rules. Holders should consult their tax advisors as to the
portion of any gain that would be taxable as ordinary income under these
provisions.
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<PAGE> 92
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, payments of principal (including amounts in respect of
OID), premium, and any accrued interest with respect to a New Note, and the
proceeds of a sale of a New Note within the United States will be subject to
information reporting, and possibly to "backup withholding" at a rate of 31% if
the Holder fails to provide its taxpayer identification number on Service Form
W-9, or otherwise fails to establish an exemption from backup withholding.
The backup withholding and information reporting rules set forth above
are under review by the United States Treasury, and their application to the
New Notes could be changed prospectively by future regulations.
Each New Note will contain a legend stating that it has Original Issue
Discount and setting forth the issue date, the issue price, the amount of
Original Issue Discount and the yield to maturity thereon. The Company will
report annually to the Service and to each Holder (other than Holders not
subject to the information reporting requirements), the amount of Original
Issue Discount accrued with respect to such New Note and any interest paid with
respect to the Old Notes.
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange pursuant to
the Exchange Offer.
PLAN OF DISTRIBUTION
A broker-dealer holding Old Notes may participate in the Exchange
Offer provided that it acquired the Old Notes for its own account as a result
of market-making or other trading activities. Each broker-dealer that receives
New 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 New
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 New Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. For a period
of 180 days after the Expiration Date, the Company will make this Prospectus,
as amended or supplemented, available to any broker-dealer for use in
connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes
by broker-dealers. New 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 New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New 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 New Notes may be deemed to be an "underwriter" within the meaning of
the Act and any profit on any such resale of New Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under
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<PAGE> 93
the 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 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 other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Act.
LEGAL MATTERS
The legality of the Securities covered by this Prospectus has been
passed upon by Shereff, Friedman, Hoffman & Goodman, New York, New York,
counsel to the Company.
EXPERTS
The audited consolidated financial statements of the Company as of
June 30, 1992 and 1993 and for each of the three years in the period ended June
30, 1993 appearing in this Prospectus and elsewhere in this Registration
Statement have been audited by Arthur Andersen & Co., independent certified
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports.
Reference is made to said report which includes an explanatory
paragraph with respect to the change in method of accounting for certain
warehousing and catalog costs as discussed in Note 3 to the consolidated
financial statements.
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<PAGE> 94
<TABLE>
INDEX TO FINANCIAL STATEMENTS
<CAPTION>
Page
----
<S> <C>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
Unaudited Financial Statements:
Consolidated Balance Sheets as of March 31, 1994 and June 30, 1993 . . . . . . . . . . . F-2
Consolidated Statements of Income for the Nine and Three Months
Ended March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Cash Flows for the Nine Months Ended
March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Unaudited Consolidated Financial Statements . . . . . . . . . . . . . . . . . . F-7
Audited Financial Statements:
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . F-14
Consolidated Balance Sheets as of June 30, 1993 and 1992 . . . . . . . . . . . . . . . . F-15
Consolidated Statements of Income for the Years Ended
June 30, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-17
Consolidated Statements of Stockholders' Equity for the
Years Ended June 30, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . F-18
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-19
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . F-20
Unaudited Supplementary Financial Information . . . . . . . . . . . . . . . . . . . . . . F-32
</TABLE>
F-1
<PAGE> 95
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, 1994 and June 30, 1993
ASSETS
<CAPTION>
March 31, June 30,
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 529 $ 406
Accounts receivable, net 37,297 32,432
Inventories 77,929 69,728
Prepaid expenses 4,800 4,844
Net assets held for sale - 10,266
Net assets (liabilities) of discontinued operations (500) 29,156
-------- ------
Total current assets 120,055 146,832
-------- --------
PROPERTY AND EQUIPMENT:
Land 1,852 1,420
Buildings 11,816 11,172
Equipment 19,953 18,229
-------- --------
33,621 30,821
Less accumulated depreciation
and amortization (16,675) (14,361)
-------- --------
Property and equipment, net 16,946 16,460
-------- --------
COST OF BUSINESSES IN EXCESS OF
NET ASSETS ACQUIRED, NET 24,955 24,448
OTHER ASSETS 12,721 9,311
-------- --------
$174,677 $197,051
======== ========
<FN>
The accompanying Notes to Consolidated Financial Statments
are an integral part of these balance sheets.
</TABLE>
F-2
<PAGE> 96
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, 1994 and June 30, 1993
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
March 31, June 30,
1994 1993
-------- -------
(in thousands, except per share amounts)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 3,178 $ 2,493
Accounts payable 23,197 18,604
Accrued liabilities 14,223 6,548
-------- --------
Total current liabilities 40,598 27,645
-------- --------
LONG-TERM DEBT, NET OF CURRENT PORTION 32,602 22,567
SENIOR SECURED NOTES 38,646 38,563
SUBORDINATED DEBT 100,780 100,780
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferrrred stock, $.01 par value per share:
Authorized and unissued 2,000 shares - -
Common Stock, $.01 par value per share:
Authorized 22,000 shares; Issued 9,484
at March 31, 1994 and 9,424 at
June 30, 1993 95 94
Class B common stock $.01 par value
per share:
Authorized 6,000 shares; Issued
2,229 at March 31, 1994 and
2,238 at June 30, 1993 23 23
Paid-in capital 18,598 18,467
Retained deficit (55,993) (6,437)
-------- --------
(37,277) 12,147
Cumulative currency translation
adjustments (672) (4,651)
-------- --------
Total stockholders' equity (deficit) (37,949) 7,496
-------- --------
$174,677 $197,051
======== ========
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these balance sheets.
</TABLE>
F-3
<PAGE> 97
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except Per Share Data)
For the Nine Months and Three Months Ended March 31, 1994 and 1993
<CAPTION>
Nine Months Ended Three Months Ended
March 31, March 31,
1994 1993 1994 1993
------ ------- ------ ------
<S> <C> <C> <C> <C>
Net sales $ 160,245 $ 153,957 $ 52,311 $ 48,583
Cost of sales 104,180 102,035 33,761 31,810
------- ------- ------- ------
Gross profit 56,065 51,922 18,550 16,773
Operating expenses 41,769 39,729 14,137 12,868
------- ------- ------- ------
Operating income 14,296 12,193 4,413 3,905
Interest expense, net 15,635 15,242 5,293 5,089
------- ------- ------- ------
Loss from continuing operations before
income taxes, extraordinary charge and
cumulative effect of accounting change (1,339) (3,049) (880) (1,184)
Provision (benefit) for income taxes - (1,429) 61 (474)
------- ------- ------- ------
Loss from continuing operations before
extraordinary charge and cumulative
effect of accounting change (1,339) (1,620) (941) (710)
Discontinued Operations - Ideal
Income (loss) from discontinued
operations, net of taxes (3,249) 1,300 (4,250) (218)
Loss on disposal, without tax benefit (38,343) (38,343)
------- ------- ------- ------
Loss before extraordinary charge and
cumulative effect of accounting change (42,931) (320) (43,534) (928)
Extraordinary charge, early retirement
of debt, without tax benefit (6,625) - (6,625) -
Cumulative effect of change in accounting
for warehouse and catalog costs,
without tax benefit - (2,110) - -
------- ------- ------- ------
Net loss $ (49,556) $ (2,430) $ (50,159) $ (928)
======= ======= ======= ======
</TABLE>
..continued..
F-4
<PAGE> 98
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except Per Share Data)
For the Nine Months and Three Months Ended March 31, 1994 and 1993
<CAPTION>
Nine Months Ended Three Months Ended
March 31, March 31,
1994 1993 1994 1993
------ ------- ------ ------
<S> <C> <C> <C> <C>
Primary and fully diluted earnings
(loss) per share:
From continuing operations $ (.11) $ (.14) $ (.08) $ (.06)
Discontinued operations:
Income (loss) from discontinued operations (.28) .11 (.36) (.02)
Loss on disposal (3.29) - (3.28) -
Extraordinary charge (.57) - (.57) -
Cumulative effect of accounting change - (.18) - -
------ ------ ------ ------
Net loss $ (4.25) $ (.21) $ (4.29) $ (.08)
====== ====== ====== ======
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
</TABLE>
F-5
<PAGE> 99
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended March 31, 1994 and 1993
<CAPTION>
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
CASH FROM (USED FOR):
OPERATIONS
Loss from continuing operations $(1,339) $(1,620)
Adjustments to reconcile loss
from continuing operations:
Changes in assets and liabilities:
Depreciation and Amortization 5,573 5,696
Accounts receivable (1,026) (332)
Inventories ( 6,537) 1,336
Prepaid expenses 187 1,954
Accounts payable 3,261 (10,174)
Accrued liabilities 1,038 (549)
------- -------
Net cash from provided by (used for)
continuing operations 1,157 (3,689)
Earnings (loss) from discontinued operations (3,249) 1,300
Loss on disposal of discontinued operations (38,343) -
Other, net 3,979 (2,550)
Change in net assets of discontinued operations 29,656 300
------- -------
Net cash used for operating activities (6,800) (4,639)
------- -------
INVESTMENTS:
Proceeds from sale of business 3,006 -
Capital expenditures (2,280) (791)
Change in other assets (3,321) (1,811)
------ -------
Net cash used for investments (2,595) (2,602)
------- -------
FINANCING:
Net borrowings under credit agreements 9,848 8,348
Repayments of long-term debt (330) (453)
Dividends paid - (700)
-------- -------
Net cash from financing 9,518 7,195
------- -------
NET INCREASE (DECREASE) IN CASH 123 (46)
BALANCE, BEGINNING OF PERIOD 406 194
------- -------
BALANCE, END OF PERIOD $ 529 $ 148
======= =======
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
</TABLE>
F-6
<PAGE> 100
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994 and 1993
(in thousands, except per share amounts)
Management believes that the information furnished in the accompanying
consolidated financial statements reflects all adjustments (consisting only of
normal recurring adjustments) which are necessary for a fair presentation of
the Company's financial position and results of operations for the periods
presented. The results of operations for the nine months and three months
ended March 31, 1994 are not necessarily indicative of the results that may be
expected for the fiscal year ending June 30, 1994 or any other period. The
information reported in the consolidated financial statements and the notes
below should be read in conjunction with the Company's Annual Report on Form
10-K/A for the fiscal year ended June 30, 1993.
1. Business
--------
The Company believes that it is one of the leading suppliers of
plumbing products to the home repair and remodeling market in the
United States. The Company distributes plumbing, electrical and
hardware products, in both packaged and bulk form, to do-it-yourself
(D-I-Y) retailers, mass merchandisers, smaller independent retailers
and plumbing, electrical repair and remodeling contractors. The
Company performs ongoing credit evaluations of its customers'
financial condition. The Company's largest customer accounted for
approximately 12.3% and 11.5% of the Company's net sales from
continuing operations for the nine months ended March 31, 1994 and
1993, respectively.
2. Consolidation and Prior-Year Reclassification
---------------------------------------------
The accompanying consolidated financial statements include the
accounts of Waxman Industries, Inc. and its wholly-owned subsidiaries
(the Company). All significant intercompany transactions and balances
are eliminated in consolidation.
The accompanying June 30, 1993 balance sheet has been restated to
reflect the discontinued operations discussed in Note 3 and the
reclassification of certain debt amounts from current to long-term as
a result of the Company's successful solicitation of consents to
obtain waivers of certain covenant violations that existed at June 30,
1993 and the subsequent modification of certain of the Company's debt
agreements. See Note 6.
3. Discontinued Operations - Ideal
-------------------------------
Effective March 31, 1994, the Company adopted a plan to dispose of its
Canadian subsidiary, Ideal Plumbing Group, Inc. (Ideal). Unlike the
Company's U.S. operations which supply products to customers in the
home repair and remodeling market through mass retailers, Ideal
primarily serves customers in the Canadian new construction market
through independent contractors. Accordingly, Ideal is reported as a
discontinued operation at March 31, 1994 and the consolidated
financial statements have been reclassified to report separately
Ideal's net assets and results of operations. Prior period
consolidated financial statements have been reclassified to conform to
the current period presentation.
F-7
<PAGE> 101
At the time the plan of disposition was adopted, the Company expected
that the disposition would be accomplished through a sale of the business
to a group which included members of Ideal's management. Such
transaction would have required the consent of Ideal's Canadian bank as
borrowings under its bank credit agreements were collateralized by all of
the assets and capital stock of Ideal. The bank reviewed the management
group's acquisition proposal, however the proposal was subsequently
rejected. On May 5, 1994, without advance notice, the bank filed an
involuntary bankruptcy petition against Ideal citing defaults under the
bank credit agreements. (Borrowings under these agreements are
non-recourse to Waxman Industries, Inc.) As a result of this action, the
Company's control and ownership of Ideal is likely to be lost prior to
June 30, 1994.
The estimated loss on disposal totals $38.2 million, without tax benefit,
and represents a complete write-off of the Company's investment in Ideal.
The loss includes the estimated loss on disposal, a provision for
anticipated operating losses until disposal and provisions for other
estimated costs to be incurred in connection with the disposal, as well
as a $6.4 million foreign currency exchange loss which results from the
elimination of the currency translation adjustments relating to Ideal.
In accordance with SFAS No. 109, "Accounting for Income Taxes", any tax
benefits relating to the loss on disposal have been reduced 100% by a
valuation allowance. The Company will continue to evaluate the valuation
allowance and to the extent it is determined that such allowance is no
longer required, the tax benefit of such loss on disposal may be
recognized in the future.
Net assets of the discontinued operation at March 31, 1994 consist of
current assets and plant, property and equipment, current liabilities and
bank borrowings after deducting an allowance for the estimated loss on
disposal.
Summary operating results of the discontinued operation for the periods
presented are as follows:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March 31 March 31
------------------------ -----------------------
1994 1993 1994 1993
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Net sales $87,265 $118,455 $18,449 $31,371
Costs and expenses 90,261 115,960 22,597 31,793
------ ------- ------ ------
Income (loss) before
income taxes (2,996) 2,495 (4,148) (422)
Income taxes 253 1,195 102 (204)
------ ------- ------ ------
Net income (loss) $(3,249) $ 1,300 $(4,250) $ (218)
====== ======= ====== ======
</TABLE>
4. Earnings Per Share
------------------
Primary earnings per share have been computed based on the weighted
average number of shares and share equivalents outstanding, which
totaled 11,674 and 11,666 for the three and nine months ended March
31, 1994, respectively. The weighted average number of shares and
share equivalents outstanding totaled 11,662 for both the three and
nine months ended March 31, 1993. Share equivalents include the
Company's common stock purchase warrants. The conversion of the
Company's Convertible Subordinated
F-8
<PAGE> 102
Debentures due March 15, 2007 into shares of common stock was not
assumed in computing fully diluted earnings per share in either 1994 or
1993, as the effect would be antidilutive.
5. Income Taxes
------------
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109).
The adoption of SFAS 109 had no effect on the Company's financial
position or results of operations. In accordance with the provisions
of SFAS 109, the Company is unable to tax benefit losses in the current
period.
The Company currently has $11.5 million of available domestic net
operating loss carryforwards which expire in 2008. In addition, as a
result of the anticipated disposition of Ideal, the Company currently
estimates that it will have available additional net operating loss
carry forwards of approximately $30 million.
SFAS 109 requires the recognition of income tax benefits for loss
carryforwards which have not previously been recorded. The tax
benefits recognized must be reduced by a valuation allowance in certain
circumstances. Upon adoption of SFAS 109, the benefit of the Company's
net operating loss carryforwards was reduced 100% by a valuation
allowance. The Company will continue to evaluate the valuation
allowance and to the extent that the Company is able to recognize tax
benefits in the future, such recognition will favorably affect future
results of operations.
6. Debt:
----
A. Long-Term Debt
--------------
Long-term debt at March 31, 1994 consisted of the following:
<TABLE>
<S> <C>
Domestic revolving credit agreements $30,794
Other notes payable 4,986
-------
Subtotal - long-term debt 35,780
Less: current portion (3,178)
-------
Long-term debt, net $32,602
-------
</TABLE>
The Company has a secured revolving credit facility with two banks
which provides for availability of up to $30 million and expires on
December 31, 1995. At June 30, 1993, a "cross-default" provision
contained in the credit agreement would have been triggered, and
borrowings thereunder would have been subject to acceleration if, due
to a covenant violation related to the Senior Secured Notes (defined
below), such notes were accelerated. As discussed in B. below, the
Company has received consents from the requisite number of holders of
the Senior Secured Notes to waive such covenant violation.
In December 1993, Barnett Inc. (Barnett), a wholly-owned subsidiary of
the Company, entered into a secured revolving credit facility with a
domestic bank. The credit facility provides for availability of up to
$5 million and expires on May 31, 1994. Borrowings under this
facility are secured by substantially all of Barnett's assets.
Interest on the unpaid principal is based on the bank's prime rate
plus 1.5% or LIBOR plus 3%.
F-9
<PAGE> 103
In May 1994, both the domestic revolving credit facility and the
Barnett revolving credit facility were terminated by the Company, and
borrowings thereunder were refinanced as part of the Company's debt
restructuring. See Note 9. Borrowings under the Barnett revolving
credit facility at March 31, 1994 are classified as long-term debt as
they were subsequently refinanced using proceeds from long-term debt
obligations.
B. Senior Secured Notes
--------------------
In September 1991, the Company completed a private placement of Senior
Secured Notes due September 1, 1998 (the Senior Secured Notes). As of
June 30, 1993, the Company was not in compliance with the operating
cash flow covenant contained in the Senior Secured Note indenture. As
a result of the covenant violation, the trustee or the holders of 25%
of the Senior Secured Notes had the right, at their discretion, to
declare the Company to be in default under the indenture and cause the
amounts due under the Senior Secured Notes to be subject to
acceleration. In addition, as a result of the Company's 1993
operating results as well as the unfavorable impact of the decline in
the Canadian dollar on cumulative currency translation adjustments,
the Company's consolidated stockholders' equity at June 30, 1993 and
September 30, 1993 was below the minimum net worth requirement under
the Senior Secured Note indenture. Under the terms of the indenture,
the Company would have been required to offer to purchase $5 million
of the Senior Secured Notes every six months.
During November 1993, the Company completed a solicitation of consents
from the holders of the Senior Secured Notes to waive noncompliance
with the operating cash flow covenant and amend certain provisions of
the Senior Secured Note indenture. Effectiveness of the waiver and
amendments required the consent of holders of at least 66-2/3% of the
outstanding principal amount of the securities. The effect of the
consent was to cure the noncompliance with the operating cash flow
covenant as well as amend the net worth and certain other financial
covenants to relieve the Company of its obligation to offer to
purchase $5 million of Senior Secured Notes on May 30, 1994 and
provide that future compliance will not be negatively impacted by the
Company's fiscal 1993 operating results or fluctuations in foreign
currency on cumulative translation adjustments.
During May 1994, the Company received requisite consents from the
holders of the Senior Secured Notes to, among other things, permit the
completion of the Company's debt restructuring (see Note 9) and
eliminate any prospective defaults resulting from the adverse results
and events relating to the Company's discontinued Canadian operations.
See Note 9.
C. Senior Subordinated Notes
--------------------------
In June 1989, the Company issued $100 million principal amount of
13-3/4% Senior Subordinated Notes (the Subordinated Notes) due June 1,
1999. As a result of the Company's 1993 operating results as well as
the unfavorable impact of the decline in the Canadian dollar on
cumulative currency translation adjustments, the Company's
consolidated stockholders' equity at June 30, 1993 and September 30,
1993 was below the $15 million minimum net worth requirement under the
Subordinated Note indenture. Under the terms of the Subordinated Note
indenture, the Company would have been required to offer to purchase
$10 million of the Subordinated Notes every six months.
F-10
<PAGE> 104
During November 1993, the Company completed a solicitation of
consents from the holders of the Subordinated Notes to waive the
Company's obligation to offer to purchase on December 31, 1993 $10
million principal amount of the Subordinated Notes as well as amend
certain provisions of the Subordinated Note indenture. Effectiveness
of the waiver and amendments required the consent of holders of at
least 66-2/3% of the outstanding principal amount of the Subordinated
Notes. The effect of the consent was to relieve the Company of its
obligation to offer to purchase $10 million Subordinated Notes on
December 31, 1993 as well as amend the minimum net worth covenant to
provide that future compliance will not be negatively impacted by the
Company's cumulative currency translation adjustments.
During May 1994, the Company refinanced $50 million of the
Subordinated Notes. In addition, it received requisite consents from
the holders of the Subordinated Notes to, among other things, permit
the completion of the Company's debt restructuring and eliminate any
prospective defaults which result from the adverse results and events
relating to the Company's discontinued Canadian operations See Note
9.
D. Convertible Subordinated Debentures
-----------------------------------
In March 1987, the Company issued 6-1/4% Convertible Subordinated
Debentures (the Debentures) due March 15, 2007 of which approximately
$2 million remained outstanding as of December 31, 1993. As a result
of the Company's 1993 operating results, as well as the unfavorable
impact of the decline in the Canadian dollar on cumulative currency
translation adjustments, the Company's consolidated stockholders'
equity was below the minimum net worth requirement under the Debenture
indenture at both June 30, 1993 and September 30, 1993. As a result,
the Company would have been required to make a purchase offer at
December 31, 1993 for substantially all of the Debentures currently
outstanding. However, in December 1993, the Company commenced and
successfully completed a solicitation of consents from the holders of
the Debentures to defer until April 30, 1994 the Company's obligation
to offer to purchase $1.9 million of the Debentures. In connection
with the solicitation, the interest rate on the Debentures was
adjusted to 9.5% and the conversion price was reduced from $9.58 to
$3.25 per share.
On April 28, 1994, the Company made an offer to purchase $1.9 million
of the Debentures. If the offer is accepted, such purchase is
expected to be consummated on June 15, 1994.
7. Supplemental Cash Flow Information
----------------------------------
Cash payments during the nine months ended March 31, 1994 and 1993
included income taxes of $ 401 and $ 635, and interest of $12,769 and
$ 12,281 respectively.
8. Sale of Businesses
------------------
At June 30, 1993, net assets held for sale in the accompanying
consolidated balance sheets related to the proposed disposal of three
operating entities in which the Company had entered into letters of
intent with prospective buyers.
F-11
<PAGE> 105
During October 1993, the Company completed the sale of one of its
Canadian operations, H. Belanger Plumbing Accessories, Ltd.
(Belanger). The Company sold all of the capital stock of Belanger in
exchange for approximately U.S. $3 million in cash and a U.S. $0.3
million promissory note. The promissory note, which matures on
October 14, 1996, provides for three equal consecutive annual
payments. Interest is payable annually at a rate of 7%. The loss on
the sale of Belanger was approximately $3 million.
The Company was unable to come to terms with the prospective buyer of
the other two entities. At the present time, the Company is not
engaged in any other negotiations with respect to the sale of these
entities. As such, the consummation of a sale of these businesses is
not expected to occur in the foreseeable future, if at all.
Accordingly, these businesses are no longer reflected as net assets
held for sale in the consolidated balance sheet at March 31, 1994.
9. Subsequent Events - Debt Restructuring and Extraordinary Charge
---------------------------------------------------------------
A. Debt Restructuring
------------------
On May 20, 1994, the Company completed a restructuring of its debt
which included a refinancing of $50 million of its Subordinated Notes
as well as all borrowings under its existing domestic bank credit
facilities. As part of the restructuring, the Company exchanged $50
million of its Subordinated Notes for $50 million initial accreted
value of 12.75% Senior Secured Deferred Coupon Notes due 2004 (the
Deferred Coupon Notes) along with detachable warrants to purchase 2.95
million shares of the Company's common stock. The Deferred Coupon
Notes have no cash interest requirements until 1999. In addition, the
Operating Companies (as defined below) entered into a new $55 million,
four year, secured credit facility with an affiliate of Citibank,
N.A., as agent, which includes a $20 million letter of credit
subfacility. The domestic credit facility, which has an initial term
of three years will be extended for an additional year if the Senior
Secured Notes have been redeemed within 33 months after the initial
borrowing under the domestic credit facility. The domestic credit
facility will be subject to borrowing base formulas. Borrowings
under the domestic credit facility will bear interest at (i) the per
annum rate of 1.5% plus the highest of (a) the prime rate of Citibank,
N.A., (b) the federal funds rate plus 0.5% and (c) a formula with
respect to three month certificates of deposit of major United States
money market banks or (ii) LIBOR plus 3.0%. These rates will be
increased by 0.5% until such time as the domestic term loan, discussed
below, has been repaid in full. These rates will be decreased by 0.5%
if Waxman USA achieves certain performance criteria based on the ratio
of EBITDA to fixed charged. The facility will include a letter of
credit subfacility of $20 million. The domestic credit facility will
be secured by the accounts receivable, inventory, certain general
intangibles and unencumbered fixed assets of the Operating Companies
and 65% of the capital stock of one subsidiary of TWI. The Operating
Companies also entered into a $15.0 million three-year term loan with
Citibank, N.A., as agent. The domestic term loan will bear interest
at a rate per annum equal to 2.0% over the interest rate under the
domestic credit facility and will be secured by a junior lien on the
collateral under the domestic credit facility. A one-time fee of 1.0%
of the principal amount outstanding under the domestic term loan will
be payable if such loan is not repaid within 6 months after May 20,
1994. Principal payments on the domestic term loan of $1.0 million
each will be required quarterly commencing at the end of the third
quarter following May 20, 1994. The domestic term loan will be
required to be prepaid if Waxman USA completes a financing sufficient
to retire the Subordinated Notes, the Senior Secured Notes
F-12
<PAGE> 106
and the domestic term loan. The domestic term loan will contain
negative, affirmative and financial covenants, conditions and events
of default substantially the same as those under the domestic credit
facility. The initial borrowings under the revolving credit facility
(which totaled approximately $27.2 million) along with proceeds from
the domestic term loan were used to repay all borrowings under the
Company's existing domestic bank credit facilities as well as fees and
expenses associated with the restructuring.
B. Corporate Restructuring
-----------------------
The Company has restructured (the "Corporate Restructuring") its
domestic operations such that the Company will be a holding company
whose only material assets will be the capital stock of its
subsidiaries. As part of the Corporate Restructuring, the Company has
formed (a) Waxman USA Inc. ("Waxman USA"), as a holding company for
the subsidiaries that comprise and support the Company's domestic
operations, (b) Waxman Consumer Products Group Inc., a wholly owned
subsidiary of Waxman USA, to own and operate Waxman Industries'
Consumer Products Group Division, and (c) WOC Inc. ("WOC"), a wholly
owned subsidiary of Waxman USA, to own and operate Waxman USA's
domestic subsidiaries, other than Barnett and Consumer Products. On
May 20, 1994, the Company restructured its operation by (i)
contributing the capital stock of Barnett to Waxman USA, (ii)
contributing the assets and liabilities of the Consumer Products
Division to Consumer Products, (iii) contributing the assets and
liabilities of its Madison Equipment Division to WOC, (iv)
contributing the assets and liabilities of its Medal Distributing
Division to WOC, (v) merging U.S. Lock Corporation ("U.S. Lock") and
LeRan Copper & Brass, Inc. ("LeRan"), each a wholly owned subsidiary
of the Company, into WOC, (vi) contributing the capital stock of TWI,
International, Inc. ("TWI") to Waxman USA and (vii) contributing the
capital stock of Western American Manufacturing, Inc. ("WAMI") to TWI.
The Operating Companies consist of Barnett, Consumer Products and WOC.
C. Extraordinary Charge
--------------------
As a result of the refinancing of the $50 million of Subordinated
Notes as well as borrowings under the domestic bank credit facilities,
the Company incurred an extraordinary charge which totaled $6.6
million, without tax benefit, and included the fees paid upon the
exchange of the Subordinated Notes along with the accelerated
amortization of unamortized debt discount and issuance costs. The
Company has accrued for the extraordinary charge at March 31, 1994.
The $6.6 million extraordinary charge is included in accrued
liabilities in the accompanying balance sheet at March 31, 1994.
F-13
<PAGE> 107
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Waxman Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Waxman
Industries, Inc. (a Delaware corporation) and Subsidiaries (the Company) as of
June 30, 1993 and 1992, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended June 30, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Waxman Industries, Inc. and
Subsidiaries as of June 30, 1993 and 1992, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
1993, in conformity with generally accepted accounting principles.
As explained in Note 3 to the consolidated financial statements, effective July
1, 1992, the Company changed its method of accounting for certain warehousing
and catalog costs.
Arthur Andersen & Co.
Cleveland, Ohio,
May 20, 1994.
F-14
<PAGE> 108
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1993 AND 1992
ASSETS
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash $ 406,000 $ 194,000
Accounts receivable, net 32,432,000 36,235,000
Inventories 69,728,000 80,326,000
Prepaid expenses 4,844,000 7,810,000
Net assets of discontinued operations 29,156,000 50,632,000
Net assets held for sale 10,266,000 --
------------ ------------
Total current assets 146,832,000 175,197,000
------------ ------------
PROPERTY AND EQUIPMENT:
Land 1,420,000 1,441,000
Buildings 11,172,000 10,808,000
Equipment 18,229,000 19,848,000
------------ ------------
30,821,000 32,097,000
Less accumulated depreciation and amortization (14,361,000) (13,321,000)
------------ ------------
Property and equipment, net 16,460,000 18,776,000
------------ ------------
COST OF BUSINESSES IN EXCESS OF
NET ASSETS ACQUIRED, NET 24,448,000 28,199,000
OTHER ASSETS 9,311,000 15,309,000
----------- ------------
$197,051,000 $237,481,000
============ ============
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these balance sheets.
</TABLE>
F-15
<PAGE> 109
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1993 AND 1992
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 2,493,000 $ 2,107,000
Accounts payable 18,604,000 28,912,000
Accrued liabilities 6,548,000 8,292,000
------------- ------------
Total current liabilities 27,645,000 39,311,000
------------- ------------
LONG-TERM DEBT, NET OF CURRENT PORTION 22,567,000 9,663,000
SENIOR SECURED NOTES 38,563,000 38,451,000
SUBORDINATED DEBT 100,780,000 100,780,000
NET LONG-TERM LIABILITIES OF
DISCONTINUED OPERATIONS -- 8,449,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value per share:
Authorized and unissued 2,000,000 shares -- --
Common stock, $.01 par value per share:
Authorized 22,000,000 shares;
Issued 9,424,000 in 1993 and 9,411,000 in 1992 94,000 94,000
Class B common stock, $.01 par value per share:
Authorized 6,000,000 shares;
Issued 2,238,000 in 1993 and 2,251,000 in 1992 23,000 23,000
Paid-in capital 18,467,000 18,467,000
Retained earnings (deficit) (6,437,000) 23,735,000
------------ ------------
12,147,000 42,319,000
Cumulative currency translation adjustments (4,651,000) (1,492,000)
------------ ------------
Total stockholders' equity 7,496,000 40,827,000
------------ ------------
$197,051,000 $237,481,000
============ ============
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these balance sheets.
</TABLE>
F-16
<PAGE> 110
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 1993, 1992 AND 1991
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Net sales $ 204,778,000 $197,738,000 $186,327,000
Cost of sales 137,244,000 127,115,000 121,397,000
------------ ------------ ------------
Gross profit 67,534,000 70,623,000 64,930,000
Selling, general and administrative expenses 56,081,000 51,824,000 50,263,000
Restructuring and other nonrecurring charges 6,762,000 3,900,000 --
------------ ------------ ------------
Operating income 4,691,000 14,899,000 14,667,000
Interest expense (net of interest income
of $5,000, $978,000 and $1,335,000) 20,365,000 20,025,000 17,462,000
------------ ------------ ------------
Loss from continuing operations before
income taxes, extraordinary charge and
cumulative effect of accounting change (15,674,000) (5,126,000) (2,795,000)
Provision (benefit) for income taxes 216,000 (768,000) (680,000)
----------- ------------ -----------
Loss from continuing operations before
extraordinary charge and cumulative
effect of accounting change (15,890,000) (4,358,000) (2,115,000)
Income (loss) from discontinued
operations of Ideal, net of taxes (11,240,000) 1,146,000 4,343,000
----------- --------- ----------
Income (loss) before extraordinary charge and
cumulative effect of accounting change (27,130,000) (3,212,000) 2,228,000
Extraordinary charge, early retirement
of debt, net of tax benefit -- (1,186,000) --
Cumulative effect of change in accounting
for warehouse and catalog costs,
without tax benefit (2,110,000) -- --
----------- --------- ---------
Net income (loss) $(29,240,000) $(4,398,000) $2,228,000
=========== ========= =========
Primary and fully diluted earnings
(loss) per share:
From continuing operations (1.36) (.44) (.22)
Income (loss) from discontinued operations (.97) .11 .45
Extraordinary charge -- (.12) --
Cumulative effect of accounting change (.18) -- --
---------- --------- -------
Net income (loss) $ (2.51) $ (.45) $ .23
========== ========= =======
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements
</TABLE>
F-17
<PAGE> 111
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1993, 1992 AND 1991
<CAPTION>
CUMULATIVE
CLASS B CURRENCY
COMMON COMMON PAID-IN RETAINED TRANSLATION
STOCK STOCK CAPITAL EARNINGS ADJUSTMENTS
----- ----- ------- -------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1990 $ 76,000 $ 23,000 $ 9,590,000 $28,255,000 $ 1,298,000
Net income 2,228,000
Cash dividends:
-- $.12 per common share
and Class B share (1,149,000)
Common stock repurchase (4,000) (1,906,000)
Currency translation
adjustments (345,000)
--------- -------- ----------- ----------- -----------
BALANCE, JUNE 30, 1991 $ 72,000 $ 23,000 $ 7,684,000 $29,334,000 $ 953,000
Net loss (4,398,000)
Cash dividends:
-- $.12 per common share
and Class B share (1,201,000)
Issuance of common stock 22,000 9,763,000
Stock options exercised 20,000
Stock warrants issued 1,000,000
Currency translation
adjustments (2,445,000)
--------- -------- ----------- ----------- -----------
BALANCE, JUNE 30, 1992 $ 94,000 $ 23,000 $18,467,000 $23,735,000 $(1,492,000)
Net loss (29,240,000)
Cash dividends:
-- $.08 per common share
and Class B share (932,000)
Currency translation
adjustments (3,159,000)
--------- -------- ----------- ----------- -----------
BALANCE, JUNE 30, 1993 $ 94,000 $ 23,000 $18,467,000 $(6,437,000) $(4,651,000)
========= ======== =========== =========== ===========
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
</TABLE>
F-18
<PAGE> 112
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1993, 1992 AND 1991
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
CASH FROM (USED FOR):
OPERATIONS:
Loss from continuing operations $(15,890,000) $ (4,358,000) $ (2,115,000)
Adjustments to reconcile loss
from continuing operations to
net cash used for continuing operations:
Restructuring costs 6,762,000 -- --
Loss on sale of investments -- 3,900,000 --
Depreciation and amortization 8,932,000 6,525,000 5,160,000
Changes in assets and liabilities:
Accounts receivable (1,666,000) (1,841,000) (1,651,000)
Inventories 82,000 (15,664,000) 5,305,000
Prepaid expenses 2,276,000 (2,285,000) (1,754,000)
Accounts payable (8,337,000) 11,050,000 (6,503,000)
Accrued liabilities (1,691,000) (878,000) (1,250,000)
---------- ---------- ----------
Net cash used for continuing
operations (9,532,000) (3,551,000) (2,808,000)
Earnings (loss) from
discontinued operations (11,240,000) 1,146,000 4,343,000
Other, net (3,159,000) (2,444,000) (346,000)
Change in net assets of
discontinued operations 13,027,000 6,646,000 21,885,000
---------- --------- ----------
Net cash provided by (used for)
operating activities (10,904,000) 1,797,000 23,074,000
----------- --------- ----------
INVESTMENTS:
Capital expenditures (1,336,000) (3,193,000) (1,110,000)
Change in other assets (1,826,000) (5,922,000) (1,886,000)
Proceeds from sale of investments -- 4,386,000 4,500,000
Business acquisitions -- -- (1,773,000)
----------- ----------- ----------
Net cash used for investments (3,162,000) (4,729,000) (269,000)
----------- ----------- ----------
FINANCING:
Net borrowings (repayments) under
credit agreements 15,770,000 6,393,000 (9,311,000)
Repayments of long-term debt (560,000) (508,000) (537,000)
Repayment of domestic term loan -- (60,000,000) --
Proceeds from issuance of debt, net -- 48,500,000 --
Repurchase of debt -- (12,878,000) --
Proceeds from issuance of stock -- 9,805,000 --
Dividends paid (932,000) (1,201,000) (1,149,000)
Common stock repurchase -- -- (1,910,000)
------------ ------------ ------------
Net cash provided by
(used for) financing 14,278,000 (9,889,000) (12,907,000)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH 212,000 (12,821,000) 9,898,000
BALANCE, BEGINNING OF PERIOD 194,000 13,015,000 3,117,000
------------ ------------ ------------
BALANCE, END OF PERIOD $ 406,000 $ 194,000 $ 13,015,000
============ ============ ============
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
</TABLE>
F-19
<PAGE> 113
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1993, 1992 AND 1991
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. CONSOLIDATION AND BASIS OF PRESENTATION
The financial statements include the accounts of Waxman Industries,
Inc. and its wholly-owned subsidiaries (the Company). All significant
intercompany transactions and balances are eliminated in consolidation.
Certain 1992 and 1991 amounts have been reclassified to conform with the 1993
presentation.
The financial statements have been restated to reflect the
discontinued operations discussed in Note 12.
The Company operates in a single business segment - the distribution
of plumbing, electrical and hardware products. Substantially all of the
Company's business is conducted in the United States.
B. ACCOUNTS RECEIVABLE
Accounts receivable are presented net of allowances for doubtful
accounts of $1,124,000 and $1,112,000 at June 30, 1993 and 1992, respectively.
Bad debt expense totaled $695,000 in 1993, $562,000 in 1992 and $441,000 in
1991.
The Company sells plumbing, electrical and hardware products
throughout the United States to do-it-yourself retailers, mass merchandisers,
smaller independent retailers and plumbing, electrical repair and remodeling
contractors. The Company performs ongoing credit evaluations of its customers'
financial condition. In fiscal years 1993, 1992 and 1991, the Company's
largest customer accounted for approximately 12%, 11% and 8% of its net sales,
respectively. The Company's ten largest customers accounted for approximately
23% of net sales in 1993, 22% in 1992 and 21% in 1991 and approximately 26% and
22% of accounts receivable at June 30, 1993 and 1992, respectively.
C. INVENTORIES
At June 30, 1993 and 1992, inventories, consisting primarily of
finished goods, are carried at the lower of first-in, first-out (FIFO) cost or
market. The Company regularly evaluates its inventory carrying value, with
appropriate consideration given to any excess, slow-moving and/or nonsalable
inventories.
D. PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. For financial reporting
purposes, buildings and equipment are depreciated on a straight-line basis over
their estimated useful lives at annual depreciation rates ranging from 2 1/2%
to 30%. For income tax purposes, accelerated methods generally are used.
Depreciation expense totaled $2,690,000 in 1993, $2,665,000 in 1992 and
$2,524,000 in 1991.
E. COST OF BUSINESSES IN EXCESS OF NET ASSETS ACQUIRED
Cost of businesses in excess of the fair market value of net assets
acquired is being amortized primarily over 40 years, using the straight-line
method. Management has evaluated its accounting for goodwill, considering such
factors as historical profitability and current operating cash flows and
believes that the asset is realizable and the amortization period is
appropriate. Goodwill amortization expense totaled $725,000 in 1993, $756,000
in 1992 and $680,000 in 1991. The accumulated amortization of excess cost at
June 30, 1993 and 1992 was $3,572,000 and $3,255,000, respectively.
F. PER SHARE DATA
Primary earnings per share have been computed based on the weighted
average number of shares and share equivalents outstanding which totaled
11,662,000 in 1993,
F-20
<PAGE> 114
9,794,000 in 1992 and 9,570,000 in 1991. Share equivalents include the
Company's common stock purchase warrants (see Note 6). Fully diluted earnings
per share have been computed assuming the conversion of the 6 1/4% Convertible
Subordinated Debentures (the Debentures) into approximately 293,000 shares of
common stock in 1991 (after elimination of related interest expense, net of
income tax effect, which totaled $108,000 in 1991). The conversion of the
Debentures was not assumed in computing fully diluted earnings per share for
1993 and 1992 as the effect would be anti-dilutive.
G. FOREIGN CURRENCY TRANSLATION
All balance sheet accounts of foreign subsidiaries are translated at
the current exchange rate as of the end of the fiscal year. Income statement
items are translated at the average currency exchange rates during the year.
The resulting translation adjustment is recorded as a component of
stockholders' equity. Foreign currency transaction gains or losses are
included in the income statement as incurred and totaled $80,000 in 1993,
$73,000 in 1992 and $305,000 in 1991.
H. IMPACT OF NEW ACCOUNTING STANDARDS
In February 1992, the Financial Accounting Standards Board (the FASB)
issued SFAS No. 109, "Accounting for Income Taxes." The Company adopted SFAS
No. 109 during the first quarter of its fiscal year ending June 30, 1994. SFAS
No. 109 requires the Company to recognize income tax benefits for loss
carryforwards which have not previously been recorded. The tax benefits
recognized must be reduced by a valuation allowance in certain circumstances.
The Company did not recognize a benefit and such adoption did not have a
material impact on results of operations or financial position. However, to
the extent that the Company is able to recognize tax benefits in the future,
such recognition will favorably effect future results of operations. The FASB
has also issued SFAS No. 106, "Employers' Accounting for Postretirement
Benefits other than Pensions" and SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." The Company does not currently maintain any
postretirement or postemployment benefit plans or programs which would be
subject to such accounting standards.
2. RESULTS OF OPERATIONS:
As a result of the 1993 operating results, the Company was not in
compliance as of June 30, 1993, with certain financial covenants contained in
its domestic bank credit agreements and in the indentures governing its Senior
Subordinated Notes and Senior Secured Notes. In addition, the Company's
consolidated net worth decreased to a level that is expected to obligate the
Company to offer to repurchase a portion of its Senior Subordinated Notes
commencing December 31, 1993 and its Senior Secured Notes commencing May 30,
1994. On October 1, 1993, the Company entered into an amendment to its
domestic bank credit agreement which waived all covenant violations as of June
30, 1993, and amended certain of the financial covenants to provide that future
compliance will not be negatively impacted by the Company's fiscal 1993
operating results. During November, 1993, the Company obtained consents from
the holders of its Senior Subordinated Notes and Senior Secured Notes which
cured the financial covenant violations and relieved the Company of its
repurchase obligations with respect to such indebtedness. Each of these
situations is discussed in more detail in Notes 6 and 12.
Reference should be made to Note 12 which discusses the subsequent
disposition of the Canadian subsidiary, debt restructuring, corporate
restructuring and the sale of a business.
3. CHANGE IN ACCOUNTING:
During 1993, the Company accelerated its amortization of certain
warehouse start-up costs and catalog costs. This change was made during the
fourth quarter and was applied retroactively to July 1, 1992. The Company had
historically amortized such costs over a period not to exceed five years which,
in management's opinion, represented the period over which economic benefits
were received. The acceleration of amortization was made to conform with
prevailing industry practice. By accelerating amortization, certain costs
associated with the opening of new warehouse operations are amortized over a
period of twelve months commencing the month in which the warehouse opens.
Costs associated with the development and introduction of new catalogs are
amortized over the life of the catalog, not to exceed a period of one year.
F-21
<PAGE> 115
The cumulative effect of this change on prior years totaled
$2,110,000, or $.18 per share, and is reported separately in the 1993
consolidated income statement, without tax benefit. The effect of the change
in 1993 was to increase both the loss from continuing operations before
extraordinary charge and cumulative effect of accounting change and the net
loss by $1,191,000. This is primarily the result of the introduction of a new
catalog and, in management's opinion, is not necessarily indicative of the
expected impact of accelerated amortization on future years.
The following pro forma information reflects the Company's results for
fiscal years 1992 and 1991 as if the change had been retroactively applied:
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
Income (loss) from continuing operations
before extraordinary charge $(4,461,000) $ (2,249,000)
Net income (loss) (4,532,000) 2,125,000
Earnings (loss) per share:
Loss from continuing operations
before extraordinary charge $ (.45) $ (.24)
Net income (loss) (.46) .22
</TABLE>
4. RESTRUCTURING, NONRECURRING AND EXTRAORDINARY CHARGES:
During the fourth quarter of 1993, as a result of certain actions
taken as part of its strategy to refocus and build on its existing core
businesses in the U.S. the Company recorded an $6,762,000 restructuring charge.
The provision for restructuring charge consists of an estimate of the loss to
be incurred upon the sale of certain businesses, including anticipated
operating results through the projected disposal dates, and the write-off of
intangible assets. Below is a summary of components comprising the
restructuring charges as of June 30, 1993:
<TABLE>
<S> <C>
Estimated loss on disposal of businesses $4,600,000
Relocation and consolidation costs 1,544,000
Other 618,000
---------
$6,762,000
=========
</TABLE>
The disposal of businesses includes three operating entities in which
the Company has entered into letters of intent with prospective buyers. The
components of net assets held for sale included in the accompanying
consolidated balance sheets is comprised primarily of working capital items and
fixed assets, net of the reserve for the estimated loss on the disposals. All
amounts are included at net realizable value. (See Note 12).
During the fourth quarter of 1992, the Company recorded a $3,900,000
nonrecurring charge which represents a capital loss realized upon the sale of
the Company's portfolio of debt securities.
During 1992, the Company repurchased certain debt securities in open
market purchases (see Note 6). As a result, the Company incurred an
extraordinary charge which totaled $1,186,000 (net of applicable income tax
benefit of $611,000) and included the market premium paid along with the
accelerated amortization of unamortized debt discount and issuance costs.
F-22
<PAGE> 116
5. INCOME TAXES:
The components of income (loss) from continuing operations before
income taxes, extraordinary charges and cumulative effect of change in
accounting are as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Domestic $(13,442) $(6,179) $(3,581)
Foreign (2,232) 1,053 786
------- ------- ------
Total $(15,674) $(5,126) $ (2,795)
======== ======= ========
</TABLE>
The components of the provision (benefit) for income taxes are (in
thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Currently payable:
Federal $ -- $(2,404) $ (1,138)
Foreign and other 216 572 404
---- ------ -----
Total current 216 (1,832) (734)
---- ------ ------
Deferred: Federal -- 1,064 54
---- ------ ------
Total provision $216 $ (768) $ (680)
==== ====== ======
</TABLE>
Deferred income taxes relate to the following (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Depreciation $-- $ 68 $ 45
Inventory valuation -- (84) (279)
Bad debt expense -- 425 (86)
Deferred costs -- 800 240
Other, net -- (145) 134
--- ----- ------
Total $-- $1,064 $ 54
=== ====== ======
</TABLE>
The following table reconciles the U.S. statutory rate to the
Company's effective tax rate:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
U.S. statutory rate 34.0% 34.0% 34.0%
Domestic losses not benefited (24.4) -- --
Capital losses not benefited (10.0) (18.1) --
State taxes, net (0.8) (2.3) (3.0)
Goodwill amortization (1.6) (4.5) (4.3)
Effect of prior year purchase
accounting adjustments -- 2.7 --
Other, net 1.4 3.2 (2.4)
---- ----- -----
Effective tax rate (1.4)% 15.0% 24.3%
==== ===== =====
</TABLE>
In 1992, the Company was able to carryback domestic net operating
losses to prior years which resulted in refunds of previously paid taxes. Such
refunds totaled $2,462,000 and were received in 1993. Tax benefits for 1992
domestic net operating losses which could not be carried back to prior years
were recognized by reducing previously recorded deferred income taxes. At June
30, 1993, the Company had $11,547,000 of available domestic net operating loss
carryforwards for financial reporting and income tax purposes which expire in
2008.
The Company made income tax payments of $926,000 in 1993, $1,358,000
in 1992 and $1,599,000 in 1991.
F-23
<PAGE> 117
6. DEBT:
Total debt at June 30, 1993 and 1992 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
JUNE 30, 1993
-------------
<S> <C>
Domestic revolving credit agreement $ 20,400
Other notes payable, maturing at various dates through 2000 and
bearing interest at rates varying from 5.25% to 11.75% 4,660
--------
Subtotal -- Long-term debt 25,060
Less: current portion (2,493)
--------
Long-term debt, net 22,567
Senior Secured Notes 38,563
Senior Subordinated Notes 98,750
Convertible Subordinated Debentures 2,030
--------
Total long-term debt, net of current portion $161,910
========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1992
-------------
<S> <C>
Domestic revolving credit agreement $ 5,000
Other notes payable, maturing at various dates through 2000 and
bearing interest at rates varying from 5.25% to 11.75% 6,770
--------
Subtotal -- Long-term debt 11,770
Less: current-portion (2,107)
-------
Long-term debt, net 9,663
Senior Secured Notes 38,451
Senior Subordinated Notes 98,750
Convertible Subordinated Debentures 2,030
--------
Total long-term debt, net of current portion $148,894
========
</TABLE>
A. BANK DEBT
In September 1991, the Company entered into a secured revolving credit
facility with a domestic bank. The credit facility, which was amended and
restated effective April 1, 1993, provides for availability up to $30 million
and expires on December 31, 1995. Borrowings under this agreement are secured
by the inventories and accounts receivable of Waxman Industries, Inc. and
certain of its domestic subsidiaries. Interest is based, at the Company's
option, on either the bank's reference rate plus 1.5% or LIBOR plus 2.5%. The
weighted average interest rate on borrowings outstanding under the credit
facility was 6.34% during 1993. The Company is required to pay a commitment
fee of 1/2% per annum on the unused commitment. The agreement also requires
the Company to, among other things, maintain certain net worth and working
capital levels and debt service ratios.
As a result of the 1993 operating results, the Company was not in
compliance with several financial covenants contained in this agreement as of
June 30, 1993. On October 1, 1993, the Company entered into an amendment to
this agreement which waived all covenant violations as of June 30, 1993 and
amended certain of the financial covenants to provide that future compliance
will not be negatively impacted by the Company's fiscal 1993 operating results.
Under the agreement, as amended, interest is based, at the Company's option, on
either the bank's reference rate plus 1.5% or LIBOR plus 3.0%.
In May 1994, the domestic revolving credit facility was terminated by
the Company, and borrowings thereunder were refinanced as part of the Company's
debt restructuring. See Note 12.
B. SENIOR SECURED NOTES
In September 1991, the Company completed a private placement of $50
million of 7-year Senior Secured Notes (the Senior Notes), including detachable
warrants to purchase 1 million shares of the Company's common stock (the
Warrants). At the time of issuance, the Senior Notes included $42.5 million of
12.25% fixed rate notes and
F-24
<PAGE> 118
$7.5 million of floating rate notes with interest at 300 basis points over the
90 day LIBOR rate. The Senior Notes are redeemable in whole or in part, at the
option of the Company, after September 1, 1993 at a price of 107.35% for the
fixed rate notes and 103% for the floating rate notes. The redemption prices
decrease annually to 100% of the principal amounts at September 1, 1996.
Annual mandatory redemption payments of $14.45 million for the fixed rate
notes, and $2.55 million for the floating rate notes commence on September 1,
1996 and are calculated to retire 68% of the principal amount of the Senior
Notes prior to maturity. The Senior Notes, which are secured by a pledge of
all of the outstanding stock of the Company's wholly-owned subsidiary, Barnett
Inc., are senior in right of payment to all subordinated indebtedness and pari
passu with all other senior indebtedness of the Company.
The Warrants are exercisable through September 1, 1996, at a price of
$4.60 per share. A portion of the proceeds of the private placement was
allocated to the Warrants and, as a result, paid-in capital increased by $1
million in fiscal year 1992. The related $1 million reduction in the recorded
principal amount of the Senior Notes is being amortized as interest expense
over the life of the Senior Notes.
During June 1992, the Company repurchased $10,850,000 principal amount
of the fixed rate notes in open market purchases.
The Senior Note indenture contains various covenants, including
dividend restrictions and minimum operating cash flow requirements. As a
result of its 1993 operating results, the Company was not in compliance with
the operating cash flow covenant contained in the Senior Note Indenture as of
June 30, 1993. The operating cash flow covenant requires a minimum ratio of
operating cash flow to interest expense of 1.1 to 1.0 (the Company's actual
ratio for fiscal 1993 was approximately 0.4 to 1.0). Under the terms of the
indenture, the trustee or the holders of 25% of the Senior Notes may, at their
discretion, declare the Company to be in default under the indenture as a
result of the noncompliance and, after applicable grace periods, cause the
amounts due under the Senior Notes to be subject to acceleration.
As a result of the Company's 1993 operating results as well as the
unfavorable impact of the decline in the Canadian dollar on cumulative currency
translation adjustment, the Company's consolidated stockholders' equity at June
30, 1993 was below the minimum net worth requirement under the Senior Note
indenture. Minimum net worth of $35 million, adjusted for cumulative earnings
as defined in the indenture, is required to be maintained (the Company's actual
consolidated net worth at June 30, 1993 was $7.5 million). Under the terms of
the Senior Note indenture, the Company would be required to offer to purchase
$5 million of the Senior Notes at a price of 102% every six months if the
Company's net worth falls below the minimum net worth requirement for two
consecutive quarters. Such offers to purchase must continue until the
Company's net worth exceeds the minimum net worth requirement. The Company's
net worth continued to be below the minimum requirement at September 30, 1993,
which obligated the Company to offer to purchase $5.0 million of the Senior
Notes at May 30, 1994.
During November 1993, the Company completed a solicitation of consents
from the holders of the Senior Secured Notes to waive noncompliance with the
operating cash flow covenant and amend certain provisions of the Senior Secured
Note indenture. Effectiveness of the waiver and amendments required the
consent of holders of at least 66-2/3% of the outstanding principal amount of
the securities. The effect of the consent was to cure the noncompliance with
the operating cash flow covenant as well as amend the net worth and certain
other financial covenants to relieve the Company of its obligation to offer to
purchase $5 million of Senior Secured Notes on May 30, 1994 and provide that
future compliance will not be negatively impacted by the Company's fiscal 1993
operating results or fluctuations in foreign currency on cumulative translation
adjustments.
During May 1994, the Company received requisite consents from the
holders of the Senior Secured Notes to, among other things, permit the
completion of the Company's debt restructuring and eliminate any prospective
defaults resulting from the adverse results and events relating to the
Company's discontinued Canadian operations. See Note 12.
F-25
<PAGE> 119
C. SENIOR SUBORDINATED NOTES
In June 1989, the Company issued $100 million principal amount of 13
3/4% Senior Subordinated Notes (Subordinated Notes) due June 1, 1999. The
Subordinated Notes are redeemable in whole or in part, at the option of the
Company, after June 1, 1994 at a price of 105.156% which decreases annually to
100% of the principal amount at the maturity date. Annual mandatory redemption
payments of $20 million commencing June 1, 1996 are calculated to retire 60% of
the issue prior to maturity. In case of a change in control, the noteholders
have the right to require the Company to repurchase the Notes at established
redemption prices. The Subordinated Notes, which are unsecured, are
subordinate in right of payment to all senior debt and are senior in right of
payment to the Company's 6 1/4% Convertible Subordinated Debentures. Under the
terms of the indenture, the Company may not incur additional indebtedness which
is subordinate to senior debt and senior to the Subordinated Notes.
Additionally, the indenture agreement contains various other covenants,
including dividend restrictions and minimum net worth requirements.
During 1992, the Company repurchased $1,250,000 principal amount of
the Notes in an open market purchase.
As a result of the Company's 1993 operating results as well as the
unfavorable impact of the decline in the Canadian dollar on cumulative currency
translation adjustment, the Company's consolidated stockholders' equity at June
30, 1993 was below the $15 million minimum net worth requirement under the Note
indenture. Under the terms of the Note indenture, the Company is required to
offer to purchase $10 million of the Notes at a price of 100% every six months
if the Company's net worth falls below the minimum net worth requirement for
two consecutive quarters. Such offers to purchase must continue until the
Company's net worth exceeds the minimum net worth requirement. The Company may
credit against its purchase obligation the principal amount of any notes
previously acquired by the Company. The Company's net worth continued to be
below the minimum requirement at September 30, 1993, which obligated the
Company to offer to purchase $8.8 million of Notes at December 31, 1993 and
$10.0 million of Notes at June 30, 1994.
During November 1993, the Company completed a solicitation of consents
from the holders of the Subordinated Notes to waive the Company's obligation to
offer to purchase on December 31, 1993 $10 million principal amount of the
Subordinated Notes as well as amend certain provisions of the Subordinated
Notes indenture. Effectiveness of the waiver and amendments required the
consent of holders of at least 66-2/3% of the outstanding principal amount of
the Subordinated Notes. The effect of the consent was to relieve the Company
of its Obligation to offer to purchase $10 million Subordinated Notes on
December 31, 1993 as well as amend the minimum net worth covenant to provide
that future compliance will not be negatively impacted by the Company's
cumulative currency translation adjustments.
During May 1994, the Company refinanced $50 million of the
Subordinated Notes. In addition, it received requisite consents from the
holders of the Subordinated Notes to, among other things, permit the completion
of the Company's debt restructuring and eliminate any prospective defaults
which result from the adverse results and events relating to the Company's
discontinued Canadian operations. See Note 12.
D. CONVERTIBLE SUBORDINATED DEBENTURES
In March 1987, the Company issued $25 million principal amount of 6
1/4% Convertible Subordinated Debentures (the Debentures) due March 15, 2007.
The Debentures, which are unsecured, may be converted at any time prior to
maturity, unless previously redeemed, into shares of the Company's common stock
at a conversion price of $9.58 per share. The indenture agreement contains
various covenants, including dividend restrictions and minimum net worth
requirements.
During fiscal 1990, the Company called $12.5 million principal amount
of the Debentures for redemption and subsequently $6.5 million principal amount
was converted into 683,000 shares of common stock and the remaining $6.0
million principal amount was redeemed at the call price of 105%.
F-26
<PAGE> 120
During fiscal years 1990 and 1992, the Company also purchased $9.7
million and $.8 million, respectively, of the principal amount of the
Debentures in open market purchases at prices which approximated the par value
of the Debentures.
As a result of the Company's 1993 operating results, as well as the
unfavorable impact of the decline in the Canadian dollar on cumulative currency
translation adjustment, the Company's consolidated stockholders' equity at June
30, 1993 was $7.5 million, below the $8.0 million minimum net worth requirement
under the Debenture indenture. Under the terms of the Debenture indenture, if
the Company's net worth falls below the minimum net worth requirement for two
consecutive quarters, the Company is required to make a purchase offer for the
Debentures. The Company's consolidated stockholders' equity continued to be
below the minimum net worth requirement as of September 30, 1993, which
obligated the Company to make a purchase offer at December 31, 1993 for
substantially all of the $2.0 million principal amount of Debentures currently
outstanding. However, in December 1993, the Company commenced and successfully
completed a solicitation of consents from the holders of the Debentures to
defer until April 30, 1994 the Company's obligation to offer to purchase $1.9
million of the Debentures. In connection with the solicitation, the interest
rate on the Debentures was adjusted to 9.5% and the conversion price was
reduced from $9.58 to $3.25 per share.
E. MISCELLANEOUS
The Company made interest payments of $19,540,000 in 1993, $18,858,000
in 1992 and $18,622,000 in 1991. Accrued liabilities in the accompanying
consolidated balance sheets include accrued interest of $2,609,000 and
$2,600,000 at June 30, 1993 and 1992, respectively.
No quoted market prices are available for any of the Company's debt as
the debt is not actively traded. Management, however, believes the carrying
values of its bank loans approximate their fair values as they bear interest
based upon the banks' prime lending rates. It was not practical to estimate
the fair value of the Company's Senior Secured Notes and subordinated debt
because of the inability to estimate fair value without incurring excessive
costs.
7. STOCKHOLDERS' EQUITY:
In May 1992, the Company completed a public offering of 2,199,000
shares of common stock at a price of $5.00 per share. The net proceeds from
the offering, after deducting all associated costs, were $9,785,000.
During fiscal 1991, the Company purchased approximately 452,000 shares
of its common stock at an aggregate cost of approximately $1,910,000 through
open market purchases. There were no common stock repurchases in 1993 or 1992.
Each share of common stock entitles the holder to one vote, while each
share of Class B common stock entitles the holder to ten votes. Cash dividends
on the Class B common stock may not exceed those on the common stock. Due to
restricted transferability there is no trading market for the Class B common
stock. However, the Class B common stock may be converted, at the
stockholder's option, into common stock on a share-for-share basis at any time
without cost to the stockholder.
Stockholders' equity includes cumulative currency translation
adjustments of ($4,651,000) and ($1,492,000) at June 30, 1993 and 1992,
respectively.
F-27
<PAGE> 121
8. STOCK OPTIONS:
STOCK OPTION PLAN
Effective July 1, 1992, the Company's stockholders approved the 1992
Non-Qualified and Incentive Stock Option Plan (the 1992 Stock Option Plan)
which replaced the existing stock option plan (the 1982 Plan) which terminated
by its terms on April 30, 1992. The 1992 Stock Option Plan authorized the
issuance of an aggregate of 1.1 million shares of common stock as incentive
stock options to officers and key employees of the Company or its subsidiaries.
Under the terms of the 1992 Stock Option Plan, all options granted are at an
option price not less than the market value at the date of grant and may be
exercised for a period not exceeding 10 years from the date of grant.
During fiscal year 1993, options were issued under the 1992 Stock
Option Plan for 1,045,000 shares at option prices ranging from $4.25 to $5.00
per share, and options for 55,000 shares with an exercise price of $5.00 per
share were cancelled. At June 30, 1993, options for 990,000 shares were
outstanding, of which none were exercisable.
At June 30, 1992, there were options for 773,500 shares outstanding
under the 1982 Plan. During fiscal year 1993, options for 462,750 shares with
exercise prices of $4.75 to $7.29 per share were cancelled. At June 30, 1993,
options for 270,750 shares remained outstanding at option prices of $4.75 to
$6.00 per share, of which 153,710 options were exercisable.
OTHER STOCK OPTIONS
The Company has granted non-qualified stock options not under the Plan
to its Co-Chief Executive Officers, outside directors and to a consultant. At
June 30, 1993, a total of 170,000 shares, with exercise prices ranging from
$4.25 to $6.00, were outstanding under the non-qualified options, 88,000 of
which were exercisable. At June 30, 1992, options for 140,000 shares were
outstanding. During fiscal year 1993, options for 30,000 shares with an
exercise price of $4.25 per share were issued and no options were cancelled.
9. LEASE COMMITMENTS:
The Company leases certain of its warehouse and office facilities and
equipment under operating lease agreements which expire at various dates
through 2003.
Future minimum rental payments are as follows: $3,458,000 in 1994,
$3,055,000 in 1995, $2,665,000 in 1996, $2,342,000 in 1997, $1,880,000 in 1998
and $3,789,000 after 1998, with a cumulative total of $17,189,000.
Total rent expense charged to operations was $3,758,000 in 1993,
$3,398,000 in 1992 and $2,909,000 in 1991.
10. PROFIT SHARING PLAN:
The Company has a trusteed profit sharing retirement plan for
employees of certain of its divisions and subsidiaries. In fiscal 1989, the
plan was amended to qualify under Section 401(K) of the Internal Revenue Code.
Company contributions are determined by the Board of Directors. The charges to
operations for Company contributions totaled $132,000 in 1993, $123,000 in 1992
and $108,000 in 1991.
11. CONTINGENCIES:
The Company is subject to various legal proceedings and claims that
arise in the ordinary course of business. In the opinion of management, the
amount of any ultimate liability with respect to these actions will not
materially affect the Company's financial statements.
F-28
<PAGE> 122
12. SUBSEQUENT EVENTS - DISCONTINUED OPERATIONS, DEBT RESTRUCTURING AND
SALE OF A BUSINESS
A. DISCONTINUED OPERATIONS - IDEAL
Effective March 31, 1994, the Company adopted a plan to dispose of its
Canadian subsidiary, Ideal Plumbing Group, Inc. (Ideal). Unlike the Company's
U.S. operations which supply products to customers in the home repair and
remodeling market through mass retailers, Ideal primarily serves customers in
the Canadian new construction market through independent contractors.
Accordingly, Ideal is reported as a discontinued operation and the consolidated
financial statements have been reclassified to report separately Ideal's net
assets and results of operations.
At the time the plan of disposition was adopted, the Company expected
that the disposition would be accomplished through a sale of the business to a
group which included members of Ideal's management. Such transaction would
have required the consent of Ideal's Canadian bank as borrowings under its bank
credit agreements were collateralized by all of the assets and capital stock of
Ideal. The bank reviewed the management group's acquisition proposal, however
the proposal was subsequently rejected. On May 5, 1994, without advance
notice, the bank filed an involuntary bankruptcy petition against Ideal citing
defaults under the bank credit agreements. (Borrowings under these agreements
are non-recourse to Waxman Industries, Inc.) As a result of this action, the
Company's control and ownership of Ideal is likely to cease prior to June 30,
1994.
The estimated loss on disposal, which was recorded by the Company in
its consolidated financial statements as of March 31, 1994, totals $38.2
million, without tax benefit, and represents a complete write-off of the
Company's investment in Ideal. The loss includes the estimated loss on
disposal, a provision for anticipated operating losses until disposal and
provisions for other estimated costs to be incurred in connection with the
disposal, as well as a $6.4 million foreign currency exchange loss which
results from the elimination of the currency translation adjustments relating
to Ideal. In accordance with SFAS No. 109, "Accounting for Income Taxes", any
tax benefits relating to the loss on disposal have been reduced 100% by a
valuation allowance. The Company will continue to evaluate the valuation
allowance and to the extent it is determined that such allowance is no longer
required, the tax benefit of such loss on disposal may be recognized in the
future.
Net assets of the discontinued operation at June 30, 1993 consisted of
working capital of $29,878,000, net plant, property and equipment of
$15,171,000, other assets of $40,561,000 and bank debt of $56,455,000 without
any allowance for the estimated loss on disposal.
Summary operating results of the discontinued operation for the periods
presented are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- --------
<S> <C> <C> <C>
Net sales $153,875 $181,305 $197,968
Costs and expenses 164,684 178,540 191,551
------- ------- -------
Income (loss) before
income taxes (10,809) 2,765 6,417
Income taxes 431 1,619 2,074
------- ------- -------
Net income (loss) $(11,240) $ 1,146 $ 4,343
------- ======= =======
</TABLE>
F-29
<PAGE> 123
B. DEBT RESTRUCTURING
On May 20, 1994, the Company completed a restructuring of its debt
which included a refinancing of $50 million of its Subordinated Notes as well
as all borrowings under its existing domestic bank credit facilities. As part
of the restructuring, the Company exchanged $50 million of its Subordinated
Notes for $50 million initial accreted value of 12.75% Senior Secured Deferred
Coupon Notes due 2004 (the Deferred Coupon Notes) along with detachable
warrants to purchase 2.95 million shares of the Company's common stock. The
Deferred Coupon Notes have no cash interest requirements until 1999. In
addition, the Operating Companies (as defined below) entered into a new $55
million secured credit facility with an affiliate of Citibank, N.A., as agent,
which includes a $20 million letter of credit subfacility. The domestic credit
facility, which has an initial term of three years, will be extended for an
additional year if the Senior Secured Notes have been redeemed within 33 months
after the initial borrowing under the domestic credit facility. The domestic
credit facility will be subject to borrowing base formulas. Borrowings under
the domestic credit facility will bear interest at (i) the per annum rate of
1.5% plus the highest of (a) the prime rate of Citibank, N.A., (b) the federal
funds rate plus 0.5% and (c) a formula with respect to three month certificates
of deposit of major United States money market banks or (ii) LIBOR plus 3.0%.
These rates will be increased by 0.5% until such time as the domestic term
loan, discussed below, has been repaid in full. These rates will be reduced by
0.5% if Waxman USA (as defined below) achieves certain performance criteria
based on the ratio of EBITDA to fixed charges. The domestic credit facility
will be secured by the accounts receivable, inventory, certain general
intangibles and unencumbered fixed assets of the Operating Companies and 65% of
the capital stock of one subsidiary of TWI. The Operating Companies also
entered into a $15.0 million three-year term loan with Citibank, N.A., as
agent. The domestic term loan will bear interest at a rate per annum equal to
1.5% over the interest rate under the domestic credit facility and will be
secured by a junior lien on the collateral under the domestic credit facility.
A one-time fee of 1.0% of the principal amount outstanding under the domestic
term loan will be payable if such loan is not repaid within 6 months after May
20, 1994. Principal payments on the domestic term loan of $1.0 million each
will be required quarterly commencing at the end of the third quarter following
May 20, 1994. The domestic term loan will be required to be prepaid if Waxman
USA completes a financing sufficient to retire the Subordinated Notes, the
Senior Secured Notes and the domestic term loan. The initial borrowings under
the revolving credit facility (which totaled approximately $27.2 million) along
with proceeds from the domestic term loan were used to repay all borrowings
under the Company's existing domestic bank credit facilities as well as fees
and expenses associated with the restructuring.
C. CORPORATE RESTRUCTURING
The Company has restructured (the "Corporate Restructuring") its
domestic operations such that the Company will be a holding company whose only
material assets will be the capital stock of its subsidiaries. As part of the
Corporate Restructuring, the Company has formed (a) Waxman USA, Inc. ("Waxman
USA"), as a holding company for the subsidiaries that comprise and support the
Company's domestic operations, (b) Waxman Consumer Products Group Inc.(Consumer
Products), a wholly owned subsidiary of Waxman USA, to own and operate Waxman
Industries' Consumer Products Group Division, and (c) WOC Inc. ("WOC"), a
wholly owned subsidiary of Waxman USA, to own and operate Waxman USA"s domestic
subsidiaries, other than Barnett and Consumer Products. On May 20, 1994, the
Company restructured its operation by (i) contributing the capital stock of
Barnett to Waxman USA, (ii) contributing the assets and liabilities of the
Consumer Products Group Division to Consumer Products, (iii) contributing the
assets and liabilities of its Madison Equipment Division to WOC, (iv)
contributing the assets and liabilities of its Medal Distributing Division to
WOC, (v) merging U.S. Lock Corporation ("U.S. Lock") and LeRan Copper & Brass,
Inc. ("LeRan"), each a wholly owned subsidiary of the Company, into WOC, (vi)
contributing the capital stock of TWI, International, Inc. ("TWI") to Waxman
USA and (vii) contributing the capital stock of Western American Manufacturing,
Inc. ("WAMI") to TWI. The Operating Companies consist of Barnett, Consumer
Products and WOC.
F-30
<PAGE> 124
D. SALE OF A BUSINESS
At June 30, 1993, net assets held for sale in the accompanying
consolidated balance sheets related to the proposed disposal of three operating
entities in which the Company had entered into letters of intent with
prospective buyers.
During October 1993, the Company completed the sale of one of its
Canadian operations, H. Belanger Plumbing Accessories, Ltd. (Belanger). The
Company sold all of the capital stock of Belanger in exchange for approximately
U.S. $3 million in cash and a U.S. $0.3 million promissory note. The
promissory note, which matures on October 14, 1996, provides for three equal
consecutive annual payments. Interest is payable annually at a rate of 7%.
The loss on the sale of Belanger was approximately $3 million.
The Company was unable to come to terms with the prospective buyer of
the other two entities. At the present time, the Company is not engaged in any
other negotiations with respect to the sale of these entities. As such, the
consummation of a sale of these businesses is not expected to occur in the
foreseeable future, if at all. At June 30, 1993, assets and liabilities
included in net assets held for sale of these entities are as follows:
<TABLE>
<S> <C>
Accounts receivable, net $3,840,000
Inventory 3,214,000
Prepaids 143,000
Property and equipment, net 214,000
Cost of business in excess of
net assets acquired, net 1,050,000
Other assets 195,000
Accounts payable (1,331,000)
Accrued liabilities (144,000)
----------
$7,181,000
==========
</TABLE>
F-31
<PAGE> 125
<TABLE>
SUPPLEMENTARY FINANCIAL INFORMATION
QUARTERLY RESULTS OF OPERATIONS:
The following is a summary of the unaudited quarterly results of
operations for the years ended June 30, 1993 and 1992 (in thousands, except per
share amounts):
<CAPTION>
FISCAL 1993 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. TOTAL
- ----------- -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
Net sales $54,405 $50,969 $48,583 $ 50,821 $204,778
Gross profit 18,197 16,952 16,773 15,612 67,534
Operating income (loss) 4,303 3,985 3,905 (7,502) 4,691
Loss from continuing operations
before cumulative effect of
accounting change (363) (547) (710) (14,270) (15,890)
Income (loss) from discontinued
operations 785 733 (218) (12,540) (11,240)
Cumulative effect of accounting
change (2,110) -- -- -- (2,110)
Net income (loss) (1,688) 186 (928) (26,810) (29,240)
Primary and fully diluted
earnings per share:
Loss from continuing
operations before cumulative
effect of accounting change (.03) (.05) (.06) (1.22) (1.36)
Income (loss) from discontinued
operations .07 .07 (.02) (1.08) (.97)
Net income (loss) (.14) .02 (.08) (2.30) (2.51)
As Previously Reported (1):
Net Income 422
Earnings per share .04
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1992 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. TOTAL
- ----------- -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
Net sales $48,669 $47,269 $47,628 $54,172 $197,738
Gross profit 16,980 16,585 17,179 19,879 70,623
Operating income 3,789 4,289 5,374 1,447 14,899
Income (loss) from continuing
operations before
extraordinary charge (356) (335) 165 (3,832) (4,358)
Income (loss) from discontinued
operations 980 805 96 (735) 1,146
Net income (loss) 625 470 261 (5,754) (4,398)
Primary and fully diluted
earnings per share:
Income (loss) from continuing
operations before extraordinary
charge (.04) (.03) .02 (.36) (.44)
Income (loss) from discontinued
operations .11 .08 .01 (.07) .11
Net income (loss) .07 .05 .03 (.54) (.45)
<FN>
(1) First quarter results of fiscal 1993 have been restated for the
cumulative effect of the accounting change for warehouse and catalog
costs. The effect of the change on 1993 operating income has been
included in results for the fourth quarter.
</TABLE>
F-32
<PAGE> 126
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation of Waxman Industries, Inc. provides
that each person who is a party to or involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she was a director or officer of Waxman Industries,
shall be indemnified and held harmless by Waxman Industries to the fullest
extent authorized by the Delaware General Corporation Law against all expense,
liability and loss reasonably incurred by such person in connection therewith.
The Certificate of Incorporation provides that the right to indemnification
contained therein is a contract right and includes the right to be paid by
Waxman Industries 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 in
advance of the final disposition of a proceeding shall be made only upon
delivery to Waxman Industries of an undertaking to repay all amounts so
advanced if it shall ultimately be determined that such director or officer is
not entitled to be indemnified. Waxman Industries maintains directors' and
officers' liability insurance covering certain liabilities incurred by the
directors and officers of Waxman Industries in connection with the performance
of their duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
3.1** Certificate of Incorporation of Waxman Industries, Inc. (Exhibit 3(a)
to Waxman Industries, Inc.'s Form S-8 filed December 4, 1989,
File No. 0-5888, incorporated herein by reference).
3.2** By-laws of Waxman Industries, Inc. (Exhibit 3.2 to Waxman Industries,
Inc.'s Annual Report on Form 10-K for the year ended June 30, 1990,
File No. 0-5888, incorporated herein by reference).
4.1 Indenture, dated as of May 20, 1994, by and between Waxman Industries,
Inc. and The Huntington National Bank, as Trustee, with respect to the
Senior Secured Deferred Coupon Notes, including the form of Senior
Secured Deferred Coupon Notes.
4.2 Warrant Agreement, dated as of May 20, 1994, by and between Waxman
Industries, Inc. and The Huntington National Bank, as Warrant Agent.
4.3 Warrant Certificate.
5.1* Opinion of Shereff, Friedman, Hoffman & Goodman regarding legality.
10.1** Lease between Waxman Industries, Inc. as Lessee and Aurora Investment
Co. as Lessor dated June 30, 1992 (Exhibit 10.1 to Waxman Industries,
Inc.'s Annual Report on Form 10-K for the year ended June 30, 1992,
File No. 0-5888, incorporated herein by reference).
10.2** Policy Statement (revised as of June 1, 1980) regarding Waxman
Industries, Inc.'s Profit Incentive Plan (Exhibit 10(c)-1 to Waxman
Industries, Inc.'s Annual Report on Form 10-K for the year ended
June 30, 1984, File No. 0-5888, incorporated herein by reference).
II-1
<PAGE> 127
10.3** Employment Contract dated June 18, 1990 between Barnett Inc. and
William R. Pray (Exhibit 10.4 to Waxman Industries, Inc.'s Annual
Report on Form 10-K for the year ended June 30, 1991,
File No. 0-5888, incorporated herein by reference).
10.4** Form of Stock Option Agreement between Waxman Industries, Inc.
and its Directors (Exhibit 10.5 to Waxman Industries Inc.'s
Annual Report on Form 10-K for the year ended June 30, 1991, File
No. 0-5888, incorporated herein by reference).
10.5** Employment Contract dated January 1, 1992 between Waxman
Industries, Inc. and John S. Peters (Exhibit 10.6 to Waxman
Industries, Inc.'s Annual Report on Form 10-K for the year ended
June 30, 1992, File No. 0-5888, incorporated herein by
reference).
10.6 Tax Sharing Agreement dated May 20, 1994 among Waxman Industries,
Inc., Waxman USA, Barnett Inc., Waxman Consumer Products Group
Inc., WOC Inc. and Western American Manufacturing, Inc.
10.7 Intercorporate Agreement dated May 20, 1994 among Waxman
Industries, Inc., Waxman USA, Barnett Inc., Waxman Consumer
Products Group Inc., WOC Inc. and Western American Manufacturing,
Inc.
10.8 Credit Agreement dated as of May 20, 1994 among Waxman USA, Inc.,
Barnett Inc., Waxman Consumer Products Group Inc. and WOC Inc.,
the Lenders and Issuers party thereto and Citicorp USA, Inc. as
Agent, and certain exhibits thereto.
10.9 Term Loan Credit Agreement dated as of May 20, 1994 among Waxman
USA, Inc., Barnett Inc., Waxman Consumer Products Group Inc. and
WOC Inc., the Lenders and Issuers party thereto and Citibank,
N.A., as Agent.
12.1 Statement re: computation of ratios.
21.1 List of Subsidiaries of the Company.
23.1 Consent of Arthur Andersen & Co.
23.2* Consent of Shereff, Friedman, Hoffman & Goodman (contained in its
opinion filed as Exhibit 5.1 to this Registration Statement).
24.1 Power of Attorney (included in Part II of Registration Statement).
25.1* Statement of eligibility and qualification on Form T-1 of The
Huntington National Bank, as Deferred Coupon Note Trustee (bound
separately).
99* (a) Form of Letter of Transmittal with respect to the Exchange Offer
(b) Form of Notice of Guaranteed Delivery
(c) Substitute Form W-9 and Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9
[FN]
- ------------------
* To be filed by amendment.
** Incorporated herein by reference as indicated.
II-2
<PAGE> 128
(B) FINANCIAL STATEMENT SCHEDULES
None.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
persons 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.
II-3
<PAGE> 129
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Waxman
Industries, Inc. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cleveland, State of Ohio on the 20th day of
June, 1994.
WAXMAN INDUSTRIES, INC.
By:/s/Neal R. Restivo
-------------------
Neal R. Restivo,
Vice President and
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Armond Waxman and Neal R.
Restivo, his true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution and to act without the other, form him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (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 full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys and
agents, or any of their, his or her substitute or substitutes may lawfully do
or cause to be done by virtue hereof and the Company hereby confers like
authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C> <C>
/s/ Melvin Waxman Chairman of the Board, June 20, 1994
- ---------------------- Co-Chief Executive Officer
Melvin Waxman and Director
/s/ Armond Waxman President, Co-Chief Executive June 20, 1994
- ---------------------- Officer, Treasurer and Director
Armond Waxman
/s/ Neal R. Restivo Vice President and Chief Financial June 20, 1994
- ------------------------- Officer (principal financial and
Neal R. Restivo accounting officer)
/s/ Samuel J. Krasney Director June 20, 1994
- --------------------------
Samuel J. Krasney
/s/ Irving Z. Friedman Director June 20, 1994
- ---------------------------
Irving Z. Friedman
/s/ Judy Robins Director June 20, 1994
- --------------------
Judy Robins
</TABLE>
II-4
<PAGE> 130
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION SEQUENTIAL PAGE NUMBER
- ------------- ------------------------------------------ ----------------------
<S> <C> <C>
3.1** Certificate of Incorporation of Waxman
Industries, Inc. (Exhibit 3(a) to Waxman
Industries, Inc.'s Form S-8 filed
December 4, 1989, File No. 0-5888,
incorporated herein by reference).
3.2** By-laws of Waxman Industries, Inc.
(Exhibit 3.2 to Waxman Industries, Inc.'s
Annual Report on Form 10-K for the year
ended June 30, 1990, File No. 0-5888,
incorporated herein by reference).
4.1 Indenture, dated as of May 20, 1994, by
and between Waxman Industries, Inc. and
The Huntington National Bank, as Trustee,
with respect to the Senior Secured
Deferred Coupon Notes, including the form
of Senior Secured Deferred Coupon Notes.
4.2 Warrant Agreement, dated as of May 20,
1994, by and between Waxman Industries,
Inc. and The Huntington National Bank, as
Warrant Agent.
4.3 Warrant Certificate.
5.1* Opinion of Shereff, Friedman, Hoffman &
Goodman regarding legality.
10.1** Lease between Waxman Industries, Inc. as
Lessee and Aurora Investment Co. as
Lessor dated June 30, 1992 (Exhibit 10.1
to Waxman Industries, Inc.'s Annual Report
on Form 10-K for the year ended June 30,
1992, File No. 0-5888, incorporated
herein by reference).
10.2** Policy Statement (revised as of June 1,
1980) regarding Waxman Industries, Inc.'s
Profit Incentive Plan (Exhibit 10(c)-1 to
Waxman Industries, Inc.'s Annual Report on
Form 10-K for the year ended June 30,
1984, File No.
</TABLE>
II-5
<PAGE> 131
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION SEQUENTIAL PAGE NUMBER
- -------------- ------------------------------------------ ----------------------
<S> <C> <C>
0-5888, incorporated
herein by reference).
10.3** Employment Contract dated June 18, 1990
between Barnett Inc. and William R. Pray
(Exhibit 10.4 to Waxman Industries, Inc.'s
Annual Report on Form 10-K for the year
ended June 30, 1991, File No. 0-5888,
incorporated herein by reference).
10.4** Form of Stock Option Agreement between
Waxman Industries, Inc. and its Directors
(Exhibit 10.5 to Waxman Industries, Inc.'s
Annual Report on Form 10-K for the year
ended June 30, 1991, File No. 0-5888,
incorporated herein by reference).
10.5** Employment Contract dated January 1, 1992
between Waxman Industries, Inc. and John
S. Peters (Exhibit 10.6 to Waxman
Industries, Inc.'s Annual Report on Form
10-K for the year ended June 30, 1992,
File No. 0-5888, incorporated herein by
reference).
10.6 Tax Sharing Agreement dated May 20, 1994
among Waxman Industries, Waxman USA,
Barnett Inc. , Waxman Consumer Products
Group Inc., WOC Inc. and Western American
Manufacturing, Inc.
10.7 Intercorporate Agreement dated May 20,
1994 among Waxman Industries, Waxman USA,
Barnett Inc., Waxman Consumer Products
Group Inc., WOC Inc. and Western American
Manufacturing, Inc.
10.8 Credit Agreement dated as of May 20, 1994
among Waxman USA, Inc., Barnett Inc.,
Waxman Consumer Products Group Inc. and
WOC Inc., the Lenders and Issuers party
thereto and Citicorp USA, Inc., as Agent,
certain exhibits thereto.
</TABLE>
II-6
<PAGE> 132
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT INDEX SEQUENTIAL PAGE NUMBER
- -------------- ----------------------------------------- ----------------------
<S> <C>
10.9 Term Loan Credit Agreement dated as of May
20, 1994 among Waxman USA, Inc., Barnett
Inc., Waxman Consumer Products Group, Inc.
and WOC Inc., the Lenders and Issuers
party thereto and Citibank, N.A., as
Agent.
12.1 Statement re: computation of ratios.
21.1 List of Subsidiaries of the Company.
23.1 Consent of Arthur Andersen & Co.
23.2* Consent of Shereff, Friedman, Hoffman &
Goodman (contained in its opinion filed as
Exhibit 5.1 to this Registration
Statement).
24.1 Power of Attorney (included in Part II of
Registration Statement).
25.1* Statement of eligibility and qualification
on Form T-1 of The Huntington National
Bank, as Deferred Coupon Note Trustee
(bound separately).
99* (a) Form of Letter of Transmittal with
respect to the Exchange Offer
(b) Form of Notice of Guaranteed Delivery
(c) Substitute Form W-9 and Guidelines for
Certification of Taxpayer Identification
Number on Substitute Form W-9
<FN>
__________________
* To be filed by amendment.
** Incorporated herein by reference as indicated.
</TABLE>
II-7
<PAGE> 1
EXHIBIT 4.1
============================================================================
WAXMAN INDUSTRIES, INC.,
as Issuer
and
THE HUNTINGTON NATIONAL BANK,
as Trustee
____________________
INDENTURE
Dated as of May 20, 1994
____________________
$92,797,000
12 3/4% Senior Secured Deferred Coupon Notes
Due 2004, Series A
and
12 3/4% Senior Secured Deferred Coupon Notes
Due 2004, Series B
============================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
------- ---------
310(a)(1) . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10; 11.02
(c) . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . 11.03
(c) . . . . . . . . . . . . . . . . . . . . . . 11.03
313(a) . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(2) . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . 7.06; 11.02
(d) . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . . 4.07; 4.09; 11.02
(b) . . . . . . . . . . . . . . . . . . . . . . 10.02
(c)(1) . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . 10.03
(e) . . . . . . . . . . . . . . . . . . . . . . 11.05
(f) . . . . . . . . . . . . . . . . . . . . . . N.A
315(a) . . . . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . . . 7.05; 11.02
(c) . . . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . . . 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . 6.07
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . . . 11.01
(c) . . . . . . . . . . . . . . . . . . . . . . 11.01
- ----------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose,
be deemed to be a part of the Indenture.
-i-
<PAGE> 3
<TABLE>
TABLE OF CONTENTS
-----------------
Page
ARTICLE ONE ----
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 1
Section 1.02 Incorporation by Reference of TIA . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 20
Section 1.03 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 21
ARTICLE TWO
THE SECURITIES
Section 2.01 Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 21
Section 2.02 Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 22
Section 2.03 Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 23
Section 2.04 Paying Agent To Hold Assets in Trust . . . . . . . . . . . . . . . . . . . . . . .. . . . . 24
Section 2.05 Securityholder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 25
Section 2.06 Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 25
Section 2.07 Replacement Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 27
Section 2.08 Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 28
Section 2.09 Treasury Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 28
Section 2.10 Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 28
Section 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 29
Section 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 29
Section 2.13 CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 30
Section 2.14 Deposit of Monies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 30
Section 2.15 Separation of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 30
ARTICLE THREE
REDEMPTION
Section 3.01 Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 30
Section 3.02 Selection of Securities To Be Redeemed . . . . . . . . . . . . . . . . . . . . . .. . . . . 31
Section 3.03 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 31
</TABLE>
-ii-
<PAGE> 4
<TABLE>
Page
----
<S> <C> <C>
Section 3.04 Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.05 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 3.06 Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE FOUR
COVENANTS
Section 4.01 Payment of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.02 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.03 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.04 Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.05 Maintenance of Properties and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.06 Compliance Certificate; Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.07 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.08 SEC Reports and Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.09 Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.10 Limitation on Additional Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.11 Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 4.12 Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 4.13 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 4.14 Limitation on Investment, Loans and Advances . . . . . . . . . . . . . . . . . . . . . . . 46
Section 4.15 Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 4.16 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 4.17 Disposition of Proceeds of Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.18 Limitation on Sale and Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . . . 54
Section 4.19 Limitation on Issuances and Sales of Preferred
Stock by Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 4.20 Impairment of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 Consolidation, Merger, Conveyance, Transfer
or Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
-iii-
<PAGE> 5
<TABLE>
Page
----
<S> <C> <C>
Section 5.02 Successor Entity Substituted . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE SIX
DEFAULT AND REMEDIES
Section 6.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 6.02 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 6.03 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 6.04 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 6.05 Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 6.06 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 6.07 Rights of Holders To Receive Payment . . . . . . . . . . . . . . . . . . . . 62
Section 6.08 Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 6.09 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . 63
Section 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 6.11 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE SEVEN
TRUSTEE
Section 7.01 Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 7.02 Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 7.03 Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 7.04 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 7.05 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 7.06 Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 7.07 Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 7.08 Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 7.09 Successor Trustee by Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . 70
Section 7.10 Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 7.11 Preferential Collection of Claims Against Company . . . . . . . . . . . . . . 71
</TABLE>
-iv-
<PAGE> 6
<TABLE>
Page
----
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
<S> <C> <C>
Section 8.01 Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 8.02 Legal Defeasance and Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 8.03 Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 8.04 Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 8.05 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01 Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 9.02 With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 9.03 Compliance with TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 9.04 Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 9.05 Notation on or Exchange of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 9.06 Trustee To Sign Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE TEN
SECURITY AND PLEDGE OF COLLATERAL
Section 10.01 Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 10.02 Delivery of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 10.03 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 10.04 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 10.05 Dividends; Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 10.06 Trustee Appointed Attorney-in-Fact . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 10.07 Trustee May Perform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 10.08 Trustee's Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 10.09 Remedies upon Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 10.10 Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 10.11 Continuing Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 10.12 Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 10.13 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
</TABLE>
-v-
<PAGE> 7
<TABLE>
Page
----
ARTICLE ELEVEN
MISCELLANEOUS
<S> <C> <C>
Section 11.01 TIA Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 11.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 11.03 Communications by Holders with Other Holders . . . . . . . . . . . . . . . . . . . 93
Section 11.04 Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . 94
Section 11.05 Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . 94
Section 11.06 Rules by Trustee, Paying Agent, Registrar . . . . . . . . . . . . . . . . . . . . . 95
Section 11.07 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 11.08 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 11.09 No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . 95
Section 11.10 No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 11.11 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 11.12 Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 11.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 11.14 Table of Contents, Headings, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 96
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Exhibit A - Form of Series A Note
Exhibit B - Form of Series B Note
Exhibit C - Form of Legend for Book-Entry Securities
Exhibit D - Form of Transferee Letter of Representation
Schedule I - Pledged Shares
Note: This Table of Contents shall not, for any purpose, be deemed to be part of the Indenture.
</TABLE>
-vi-
<PAGE> 8
INDENTURE, dated as of May 20, 1994, between WAXMAN
INDUSTRIES, INC., a Delaware corporation (the "Company"), and THE HUNTINGTON
NATIONAL BANK, a national banking association, as Trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of
each other party and for the equal and ratable benefit of the Holders of the
Company's 12 3/4% Senior Secured Deferred Coupon Notes Due 2004, Series A, and
12 3/4% Senior Secured Deferred Coupon Notes Due 2004, Series B, without
distinction as to Series:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
------------
"Accreted Value" means as of any date prior to June 1,
1999, an amount per $1,000 principal amount of Securities that is equal to the
sum of (a) the initial offering price ($539.02 per $1,000 principal amount of
Securities) of such Securities and (b) the portion of the excess of the
principal amount of such Securities over such initial offering price which
shall have been amortized through such date, such amount to be so amortized on
a daily basis and compounded semi-annually on each June 1 and December 1 at the
rate of 12 3/4% per annum from June 1, 1994 through the date of determination
computed on the basis of a 360-day year of twelve 30-day months and as of any
date on or after June 1, 1999, the principal amount of each Security.
"Acquired Indebtedness" means with respect to any person,
Indebtedness of another person existing at the time such other person becomes a
Subsidiary of such person or is merged with or into such person or a Subsidiary
of such person or assumed in connection with an Asset Acquisition by such
person or a Subsidiary of such person, including, without limitation,
Indebtedness incurred in connection with, or in anticipation of, such other
person becoming a Subsidiary of such person, the acquisition of such other
person or the merger with or into such other person.
"Affiliate" of any specified person means any other
person which, directly or indirectly, controls, is controlled by or is 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
<PAGE> 9
-2-
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.
"Affiliate Transaction" has the meaning provided in
Section 4.15 hereof.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Acquisition" means (i) any capital contribution
(by means of transfer of cash or other property to others or payment for
property or services for the account or use of others, or otherwise) to, or
purchase or acquisition of Capital Stock in, any other person by the Company or
any of its Subsidiaries, in either case pursuant to which such person shall
become a Subsidiary of the Company or any of its Subsidiaries or shall be
merged with or into the Company or any of its Subsidiaries or (ii) any
acquisition by the Company or any of its Subsidiaries of the assets of any
person which constitute substantially all of an operating unit or business of
such person.
"Asset Sale" means with respect to any person, any direct
or indirect sale, conveyance, transfer, lease or other disposition to any other
person other than a Subsidiary of such person (other than, with respect to any
Asset Sale by the Company, Ideal Holding Group or a Subsidiary of Ideal Holding
Group), in one transaction or a series of related transactions, of (i) any
Capital Stock of any Subsidiary of such person (whether structured as a sale,
issuance or other disposition by such person or a Subsidiary of such person) or
(ii) any other property or asset of such person or any Subsidiary of such
person (other than cash or Cash Equivalents), in each case, other than
inventory in the ordinary course of business and other than isolated
transactions which do not exceed $1,000,000 individually. With respect to the
Company and its Subsidiaries, the term "Asset Sale" shall not include (a) any
disposition of properties and assets of the Company or any Subsidiary of the
Company that is governed under and complies with the requirements set forth in
Article Five hereof or (b) any sale by the Company of its Capital Stock.
"Asset Sale Offer" has the meaning provided in Section
4.17.
"Asset Sale Offer Payment Date" means, with respect to
any Excess Proceeds from an Asset Sale, the earlier of (x) the 360th day
following receipt of such Excess Proceeds or (y) such earlier date on which an
Asset Sale Offer shall expire.
"Attributable Indebtedness" means, in respect of a
Sale/Leaseback Transaction, as at the time of determination, the present value
(discounted at the interest
<PAGE> 10
-3-
rate borne, or to be borne, as the case may be, by the Securities, compounded
annually) of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale/Leaseback Transaction
(including any period for which such lease has been extended).
"Bankruptcy Law" means Title 11 of the U.S. Code or any
similar Federal, state or foreign law for the relief of debtors.
"Base Period" has the meaning provided in Section 4.11.
"Board of Directors" means, with respect to any person,
the Board of Directors of such person or any committee of the Board of
Directors of such person duly authorized, with respect to any particular
matter, to exercise the power of the Board of Directors of such person.
"Board Resolution" means, with respect to any person, a
copy of a resolution certified by the Secretary or an Assistant Secretary of
such person, to have been duly adopted by the Board of Directors of such person
and to be in full force and effect on the date of such certification, and
delivered to the Trustee.
"Book-Entry Security" means a Security represented by a
Global Security and registered in the name of the nominee of the Depository.
"Business Day" means any day that is not a Legal Holiday.
"Canadian Credit Agreement" means the credit agreement,
dated as of April 20, 1989, between Ideal and Bank of Montreal providing for
working capital and other financing, as the same may at any time be amended,
amended and restated, supplemented or otherwise modified, including any
refinancing, refunding, replacement or extension thereof which provides for
working capital and other financing, whether by the same or any other lender or
group of lenders provided that the Indebtedness represented by such Credit
Agreement or any such amendment, amendment and restatement, supplement or other
modification is non-recourse to, and credit support (other than Permitted
Credit Support) is not otherwise required to be provided by, Waxman Industries
or its Subsidiaries (other than Ideal Holding Group and its Subsidiaries).
"Capital Stock" means, with respect to any person, any
and all shares, interests, participations, rights in, or other equivalents
(however designated and whether voting or non-voting) of such person's capital
stock, whether outstanding on the Issue Date
<PAGE> 11
-4-
or issued after the Issue Date, and any and all rights, warrants or options
exchangeable for or convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation to
pay rent or other amounts under a lease of (or other agreement conveying the
right to use) any property (whether real, personal or mixed) that is required
to be classified and accounted for as a capital lease obligation under GAAP,
and, for the purpose of this Indenture, the amount of such obligation at any
date shall be the capitalized amount thereof at such date, determined in
accordance with GAAP.
"Cash Equivalents" means at any time (i) any evidence of
Indebtedness with a maturity of 180 days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit
or acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000; (iii) commercial
paper with a maturity of 180 days or less issued by a corporation (except an
Affiliate of the Company) organized under the laws of any state of the United
States or the District of Columbia and rated at least A-l by Standard & Poor's
Corporation or at least P-1 by Moody's Investors Service, Inc.; and (iv)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued 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, provided, however, that the terms of such agreements
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions with Securities Dealers and Others, as adopted by the
Comptroller of the Currency.
"Change of Control" means (i) the direct or indirect
sale, lease, exchange or other transfer of all or substantially all of the
assets of the Company to any person or entity or group of persons or entities
acting in concert as a partnership or other group (a "Group of Persons") other
than Permitted Holders, (ii) the merger or consolidation of the Company with or
into another corporation with the effect that the then existing shareholders of
the Company or their Affiliates, together with the Permitted Holders, hold less
than 50% of the Voting Power of the surviving corporation of such merger or the
corporation resulting from such consolidation and do not otherwise have the
right or ability by contract or otherwise to elect a majority of the Board of
Directors of such surviving corporation, (iii) the replacement of a majority of
the Board of Directors of the Company from the directors who constituted the
Board of Directors on the Issue Date, and such
<PAGE> 12
-5-
replacement shall not have been approved by a majority of the Board of
Directors of the Company then still in office who either were (x) members of
the Board of Directors on the Issue Date or (y) whose election as a member of
the Board of Directors was approved in the manner provided in this clause (iii)
or (iv) a person or Group of Persons shall, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or otherwise, have
become the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the Company representing 35% or more of the
Voting Power of the Company and, at such time, Permitted Holders are not the
beneficial owners (as so defined) of a greater percentage of such Voting Power
and do not otherwise have the right or ability by contract or otherwise to
elect a majority of the Board of Directors of the Company.
"Change of Control Date" has the meaning provided in Section 4.16.
"Change of Control Offer" has the meaning provided in Section 4.16.
"Change of Control Payment Date" has the meaning provided in Section
4.16.
"Collateral" has the meaning provided in Section 10.01.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
"Company Order" means a written order or request signed in the name of
the Company by its President or a Vice President, and by its Treasurer, an
Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to
the Trustee.
"Consolidated Cash Flow" means, with respect to any person for any
period, the Consolidated Net Income of such person for such period increased
(to the extent deducted in determining Consolidated Net Income) by the sum of
the following for such period: (i) all income taxes paid or accrued according
to GAAP for such period (other than income taxes attributable to extraordinary,
unusual or non-recurring gains); (ii) Consolidated Interest Expense; (iii)
depreciation; (iv) amortization including, without limitation, amortization of
capitalized debt issuance costs; and (v) any other non-cash charges (excluding
any non-cash charge to the extent that it requires an accrual of or a reserve
for cash disbursements for any future period).
<PAGE> 13
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"Consolidated Interest Coverage Ratio" means, with
respect to any person, the ratio of (i) Consolidated Cash Flow of such person
for the four full fiscal quarters for which financial statements are available
that immediately precede the date of the transaction or other circumstances
giving rise to the need to calculate the Consolidated Interest Coverage Ratio
(the "Transaction Date") to (ii) Consolidated Interest Expense of such person
and the aggregate amount of dividends or other distributions declared or paid
on Capital Stock (other than Common Stock) of such person and its Subsidiaries,
in each case for such four full fiscal quarter period. For purposes of this
definition, if the Transaction Date occurs prior to the date on which such
person's consolidated financial statements for the four full fiscal quarters
subsequent to the Issue Date are first available, "Consolidated Cash Flow" and
the items referred to in the preceding clause (ii) shall be calculated on a pro
forma basis as if the Reorganization had taken place on the first day of such
four full fiscal quarter period for which financial statements are available
that immediately precedes the Transaction Date. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
Cash Flow" and the items referred to in the preceding clause (ii) shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to (i) the incurrence or retirement of any Indebtedness of such
person or any of its Subsidiaries at any time during the period (the "Reference
Period") (A) commencing on the first day of the four full fiscal quarter period
for which financial statements are available that precedes the Transaction Date
and (B) ending on and including the Transaction Date, including, without
limitation, the incurrence of the Indebtedness giving rise to the need to make
such calculation, as if such incurrence or retirement occurred on the first day
of the Reference Period; provided, that if such person or any of its
Subsidiaries directly or indirectly guarantees Indebtedness of a third person,
the above clause shall give effect to the incurrence of such guaranteed
Indebtedness as if such person or Subsidiary had directly incurred such
guaranteed Indebtedness and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need
to make such calculation as a result of such person or any of its Subsidiaries
(including any person who becomes a Subsidiary as a result of the Asset
Acquisition) incurring Acquired Indebtedness) occurring during the Reference
Period and any retirement of Indebtedness in connection with such Asset Sales,
as if such Asset Sale or Asset Acquisition and/or retirement occurred on the
first day of the Reference Period. Furthermore, in calculating the denominator
(but not the numerator) of this fraction (1) interest on Indebtedness
determined on a fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter shall be deemed to have accrued at a
fixed rate PER ANNUM equal to the rate of interest on such Indebtedness in
effect on the Transaction Date; (2) if interest on any Indebtedness actually
incurred on the Transaction Date may optionally be determined at an interest
rate based upon a factor of a prime or similar rate, a eurocurrency interbank
offered rate, or other rates, then the interest rate
<PAGE> 14
-7-
based upon a factor of a prime or similar rate shall be deemed to have been in
effect; and (3) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by
agreements relating to Interest Rate Protection Obligations, shall be deemed to
have accrued at the rate per annum resulting after giving effect to the
operation of such agreements.
"Consolidated Interest Expense" means, with respect to
any person for any period, without duplication, the sum of (i) the cash and
non-cash interest expense of such person and its Subsidiaries for such period
as determined on a consolidated basis in accordance with GAAP consistently
applied (net of any interest income), including, without limitation, (a) any
amortization of debt discount, (b) the net cost under Interest Rate Protection
Obligations and Currency Hedging Agreements insofar as they relate to interest,
(c) the interest portion of any deferred payment obligation and (d) all accrued
interest, and (ii) the aggregate amount of the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such person and its Subsidiaries during such period as determined on
a consolidated basis in accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any
person, for any period, the aggregate of the Net Income of such person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that (a) the Net Income of any person (the "other
person") in which the person in question or one of its Subsidiaries has a joint
interest with a third party (which interest does not cause the Net Income of
such other person to be consolidated into the Net Income of the person in
question in accordance with GAAP) shall be included only to the extent of the
amount of dividends or distributions paid to the person in question or the
Subsidiary, (b) the Net Income of any Subsidiary of the person in question that
is subject to any restriction or limitation on the payment of dividends or the
making of other distributions shall be excluded to the extent of such
restriction or limitation, (c) (i) the Net Income (or loss) of any person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition and (ii) any net gain or loss resulting from an Asset Sale
by the person in question or any of its Subsidiaries shall be excluded, and (d)
any extraordinary gains and losses and any one-time increase or decrease in Net
Income recorded because of the adoption of new accounting policies, practices
or standards required or permitted by GAAP shall be excluded.
"Consolidated Net Worth" means, with respect to any
person at any date of determination, the consolidated equity represented by the
shares of such person's Capital
<PAGE> 15
-8-
Stock (other than Disqualified Stock) at such date, as determined on a
consolidated basis in accordance with GAAP.
"Convertible Debentures" means the 9 1/2% Convertible
Subordinated Debentures due 2007 of the Company.
"Currency Hedging Agreements" means, with respect to any
person, the obligations and/or rights of such person under currency hedging
arrangements designed to protect such person against currency fluctuations.
"Custodian" means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or
the passage of time or both would be, an Event of Default.
"Default Amount" shall have the meaning set forth under
"Events of Default."
"Depository" means, with respect to the Securities issued
in the form of one or more Book-Entry Securities, The Depository Trust Company
or another person designated as Depository by the Company, which must be a
clearing agency registered under the Exchange Act.
"Disqualified Stock" means with respect to any person,
any Capital Stock which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
Maturity Date.
"Domestic Credit Agreement" means the credit agreement
dated as of May 20, 1994, between Waxman USA, certain of the Subsidiaries of
Waxman USA, the lenders listed therein and Citicorp USA, Inc., as agent,
providing for working capital and other financing, as the same may at any time
be amended, amended and restated, supplemented or otherwise modified, including
any refinancing, refunding, replacement or extension thereof which provides for
working capital and other financing, whether by the same or any other lender or
group of lenders.
<PAGE> 16
-9-
"Domestic Term Loan" means the term loan agreement dated
as of May 20, 1994 between Waxman USA, certain of the Subsidiaries of Waxman
USA and Citicorp USA as the same may at any time be amended, amended and
restated, supplemented or otherwise modified, including any refinancing,
refunding, replacement or extension thereof whether by the same or any other
lender or group of lenders (including any Permitted Waxman USA Indebtedness).
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time.
"Event of Default" has the meaning provided in Section
6.01.
"Excess Proceeds" shall have the meaning set forth in
Section 4.17.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated by the SEC thereunder.
"Exchange Offer" means the registration by the Company
under the Securities Act of all the Series B Notes pursuant to a registration
statement under which the Company offers each Holder of Series A Notes the
opportunity to exchange all Series A Notes held by such Holder for Series B
Notes in an aggregate principal amount equal to the aggregate principal amount
of Series A Notes held by such Holder, all in accordance with the terms and
conditions of the Registration Rights Agreement.
"Fair Market Value" or "fair value" means, with respect
to any asset or property, the price which could be negotiated in an
arm's-length free market transaction, for cash, between a willing seller and a
willing buyer, neither of whom is under undue pressure or compulsion to
complete the transaction. With respect to any person, Fair Market Value shall
be determined by the Board of Directors of such person (and with respect to the
Company or any of its Subsidiaries, a majority of the Independent Directors of
the Company) acting in good faith and shall be evidenced by a Board Resolution
thereof delivered to the Trustee.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are applicable as of the
date of determination.
<PAGE> 17
-10-
"Global Security" means a Security evidencing all or a
part of the Securities to be issued as Book-Entry Securities, issued to the
Depository in accordance with Section 2.02 and bearing the legend prescribed in
Exhibit C to this Indenture.
"Holder" or "Securityholder" means the person in whose
name a Security is registered on the Registrar's books.
"Ideal" means Ideal Plumbing Group Inc., a corporation
organized and existing under the laws of Quebec.
"Ideal Holding Group" means Ideal Holding Group, Inc., a
Delaware corporation.
"Indebtedness" means, with respect to any person, without
duplication, (i) any liability, contingent or otherwise, of such person (A) for
borrowed money (whether or not the recourse of the lender is to the whole of
the assets of such person or only to a portion thereof), (B) evidenced by a
note, debenture or similar instrument or letter of credit (including purchase
money obligations but excluding undrawn documentary letters of credit for trade
payables arising in the ordinary course of business) or (C) for the payment of
money relating to a Capitalized Lease Obligation or other obligation relating
to the deferred purchase price of property (other than trade payables or
accrued liabilities arising in the ordinary course of business); (ii) any
liability of others of the kind described in the preceding clause (i) which the
person has guaranteed or which is otherwise its legal liability; (iii) any
obligation secured by a lien to which the property or assets of such person are
subject, whether or not the obligations secured thereby shall have been assumed
by or shall otherwise be such person's legal liability (the amount of such
obligation being deemed to be the lesser of the fair value of such property or
asset or the amount of the obligation so secured); and (iv) any and all
deferrals, renewals, extensions and refundings of, or amendments, modifications
or supplements to, any liability of the kind described in any of the preceding
clauses (i), (ii) or (iii).
"Indenture" means this Indenture, as amended or
supplemented from time to time in accordance with the terms hereof.
"Independent Director" means any director that (i) is not
and has not been an officer or employee of the Company or any of its
Affiliates, (ii) does not have any relationship that, in the opinion of the
Board of Directors of the Company (exclusive of any such Independent Director),
would interfere with his/her exercise of independent judgment in carrying out
the responsibilities of director and (iii) with respect to any
<PAGE> 18
-11-
transaction or series of related transactions, does not have any material
direct or indirect financial interest in or with respect to such transaction or
series of related transactions.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Securities.
"Interest Rate Protection Obligations" means the
obligations and/or rights of any person pursuant to any arrangement with any
other person, designed to protect such person against fluctuations in interest
rates, whereby, directly or indirectly, such person is entitled to receive from
time to time periodic payments calculated by applying either a floating or a
fixed rate of interest on a stated notional amount in exchange for periodic
payments made by such person calculated by applying a fixed or a floating rate
of interest on the same notional amount and shall include, without limitation,
interest rate swaps, caps, floors, collars and similar agreements.
"Internal Revenue Code" means the Internal Revenue Code
of 1986, as amended to the date hereof and from time to time hereafter.
"Investment" means, with respect to any person, any
direct or indirect advance, loan or other extension of credit to (including any
guarantee of a loan or other extension of credit) or investment in, 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
otherwise), or purchase of Capital Stock, bonds, notes, debentures or other
similar instruments issued by, any other person. Investments shall exclude
extensions of trade credit on commercially reasonable terms in accordance with
normal trade practices.
"Issue Date" means the date of first issuance of the
Securities under this Indenture.
"Legal Holiday" has the meaning provided in Section 11.07.
"Lien" means any mortgage, lien (statutory or other),
pledge, security interest, encumbrance, claim, hypothecation, assignment for
security, deposit arrangement or preference or other security agreement of any
kind or nature whatsoever. For purposes hereof, a person shall be deemed to
own subject to a Lien any property which it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement.
<PAGE> 19
-12-
"Material Subsidiary" means, with respect to any person,
any Subsidiary of such person which would be a "significant subsidiary"
pursuant to Article 1-02 of Regulation S-X.
"Maturity Date" means June 1, 2004.
"Net Cash Proceeds" means, with respect to any Asset
Sale the proceeds thereof in the form of cash or Cash Equivalents, including
payments in respect of deferred payment obligations when received in the form
of cash or Cash Equivalents net of (i) brokerage commissions and other
reasonable fees and expenses (including fees and expenses of counsel and
investment bankers) related to such Asset Sale; (ii) provisions for all taxes
payable within one year as a result of such Asset Sale; (iii) payments made to
retire Indebtedness secured by the assets subject to such Asset Sale to the
extent required pursuant to the terms of such Indebtedness; (iv) appropriate
amounts to be provided by the Company or any of its Subsidiaries, as the case
may be, as a reserve, required in accordance with GAAP against any liabilities
associated with such Asset Sale and retained by the Company or any of its
Subsidiaries, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, provided, however, that the amount
of any such reserve at such time that such amount is no longer required to be
provided as a reserve in accordance with GAAP and is not applied to the
liability for which such reserve was established shall be deemed Net Cash
Proceeds; and (v) any amount required to be paid to any person owning a
beneficial interest in the property or assets sold, conveyed, transferred,
leased or otherwise disposed of in an amount proportionate to such beneficial
interest.
"Net Income" means, with respect to any person for any
period, the net income (loss) of such person determined in accordance with
GAAP.
"Net Proceeds" means (a) in the case of any sale of
Capital Stock by the Company, the aggregate net cash proceeds received by the
Company after payment of expenses, commissions and the like, if any, incurred
in connection therewith, (b) in the case of the issuance of any Indebtedness by
the Company, the aggregate net cash proceeds received by the Company, after
payment of expenses, commissions and the like incurred in connection therewith,
or (c) in the case of any exchange, exercise, conversion or surrender of
outstanding securities of any kind of the Company for or into shares of Capital
Stock of the Company which is not Disqualified Stock, the net cash proceeds
received by the Company upon such exchange, exercise, conversion or surrender
(plus, with respect to the
<PAGE> 20
-13-
issuance of any such securities after the Issue Date, the net cash proceeds
received by such person upon the issuance of such securities), less any and all
payments made to the holders, e.g., on account of fractional shares, and less
all expenses, commissions and the like incurred by the Company in connection
therewith.
"Offering Memorandum" means the Offer to Exchange and
Consent Solicitation dated April 21, 1994 as amended and supplemented by the
supplements thereto dated May 6, 1994 and May 13, 1994.
"Officer" means, with respect to any person, the Chairman
of the Board, the Chief Executive Officer, the President, any Vice President,
the Chief Financial Officer, the Controller, or the Secretary of such person.
"Officers' Certificate" means, with respect to any
person, a certificate signed by two Officers or by an Officer and either an
Assistant Treasurer or an Assistant Secretary of such person and otherwise
complying with the requirements of Sections 11.04 and 11.05.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee complying with the requirements of
Sections 11.04 and 11.05. Unless otherwise required by the TIA, the legal
counsel may be an employee of or counsel to the Company.
"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Amount" has the meaning provided in Section
4.10.
"Permitted Credit Support" means (a) any pledge of
Capital Stock of Ideal Holding Group or a Subsidiary of Ideal Holding Group or
(b) loans or advances by the Company to Ideal Holding Group or its Subsidiaries
not to exceed Cdn.$450,000 aggregate principal amount outstanding at any one
time.
"Permitted Holders" means Armond Waxman, Melvin Waxman,
trusts for the benefit of any of Armond Waxman, Melvin Waxman or members of
their families, the heirs of or administrators or executors for the respective
estates of Armond Waxman or Melvin Waxman or any person, entity or group of
persons controlled by any of the foregoing.
<PAGE> 21
-14-
"Permitted Ideal Indebtedness" means indebtedness which
is non-recourse to and for which credit support (other than Permitted Credit
Support) is not otherwise provided by the Company or its Subsidiaries (other
than Ideal Holding Group or any of its Subsidiaries).
"Permitted Investments" means (i) obligations of the
United States government due within one year; (ii) certificates of deposit or
Eurodollar deposits due within one year with a commercial bank having capital
funds of at least $500,000,000 or more; (iii) commercial paper rated at least
A-1 by Standard & Poor's Corporation or at least P-1 by Moody's Investors
Service, Inc.; (iv) debt of any state or political subdivision that is rated
among the two highest rating categories obtainable from either Standard &
Poor's Corporation or Moody's Investors Service, Inc. and is due within one
year; (v) repurchase agreements and reverse repurchase agreements relating to
marketable direct obligations issued 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; provided, however, that the terms of such
agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions with Securities Dealers and Others, as
adopted by the Comptroller of the Currency; (vi) Investments represented by
Interest Rate Protection Obligations and Currency Hedging Agreements; and (vii)
Investments by the Company in Ideal Holding Group or a Subsidiary of Ideal
Holding Group not to exceed an aggregate of Cdn. $450,000 outstanding at any
one time.
"Permitted Liens" means, with respect to any person, any
Lien arising by reason of (a) any judgment, decree or order of any court, so
long as such Lien is being contested in good faith and is adequately bonded,
and any appropriate legal proceedings which may have been duly initiated for
the review of such judgment, decree or order shall not have been finally
terminated or the period within which such proceedings may be initiated shall
not have expired; (b) taxes, assessments, governmental charges or claims not
yet delinquent or which are being contested in good faith; (c) security for
payment of workers' compensation or other insurance or social security
legislation; (d) security for the performance of tenders, contracts (other than
contracts for the payment of money) or leases (excluding any Capitalized Lease
Obligations); (e) deposits to secure public or statutory obligations, or in
lieu of surety, performance or appeal bonds, entered into in the ordinary
course of business; (f) Liens arising by operation of law in favor of carriers,
warehousemen, landlords, mechanics, materialmen, laborers, employees or
suppliers, incurred in the ordinary course of business for sums which are not
yet delinquent or are being contested in good faith by negotiations or by
appropriate proceedings which suspend the collection thereof; (g) easements,
rights-of-way, zoning and similar covenants and
<PAGE> 22
-15-
restrictions and other similar encumbrances or title defects which, in the
aggregate, are not substantial in amount, and which 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 Company or any of
its Subsidiaries; and (h) Liens arising in the ordinary course of business in
favor of custom and revenue authorities to secure payment of custom duties.
"Permitted Waxman USA Indebtedness" means Indebtedness of
Waxman USA, the proceeds of which are used to refinance Senior Secured Notes,
Senior Subordinated Notes or the Domestic Term Loan (including the payment of
any related fees and expenses and the amount of accrued interest on such
Indebtedness refinanced and the amount of any premium required to be paid in
connection with the refinancing of such Indebtedness).
"person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or other agency or political subdivision thereof.
"Pledged Collateral Net Cash Proceeds" has the meaning
provided in Section 4.17.
"Pledged Shares" has the meaning provided in Section
10.01.
"Preferred Stock" means, with respect to any person, any
and all shares, interests, participations or other equivalents (however
designated) of such person's preferred or preference stock, whether now
outstanding or issued after the Issue Date, and including, without limitation,
all classes and series of preferred or preference stock of such person.
"principal" of any Indebtedness (including the
Securities) means the principal of such Indebtedness plus the premium, if any,
on such Indebtedness.
"Public Equity Offering" means the offer and sale to the
public of shares of any class of the Capital Stock (other than Disqualified
Stock) of the Company or any Subsidiary of the Company pursuant to a
registration statement declared effective by the SEC after the Issue Date (or
with respect to the Capital Stock (other than Disqualified Stock) of Ideal
Holding Group or a Subsidiary of Ideal Holding Group, pursuant to a prospectus
or other comparable document declared effective or otherwise approved by
comparable Canadian provincial security authorities after the Issue Date) and
pursuant to
<PAGE> 23
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which the Company or such Subsidiary, as the case may be, receives net cash
proceeds of not less than $15,000,000.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A under the Securities Act.
"Record Date" means the Record Dates specified in the
Securities; provided that if any such date is a Legal Holiday, the Record Date
shall be the first day immediately preceding such specified day that is not a
Legal Holiday.
"Redemption Date," when used with respect to any Security
to be redeemed, means the date fixed for such redemption pursuant to this
Indenture and the Securities.
"Redemption Price," when used with respect to any
Security to be redeemed, means the price fixed for such redemption pursuant to
this Indenture and the Securities.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration
Rights Agreement between the Company and the Trustee, dated as of May 20, 1994,
as the same may be amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof.
"Reorganization" has the meaning set forth in the
Offering Memorandum.
"Restricted Payment" means any of the following: (i) the
declaration or payment of any dividend or any other distribution on Capital
Stock of the Company or any Subsidiary of the Company or any payment made to
the direct or indirect holders (in their capacities as such) of Capital Stock
of the Company or any Subsidiary of the Company (other than (x) dividends or
distributions payable solely in Capital Stock (other than Disqualified Stock)
or in options, warrants or other rights to purchase Capital Stock (other than
Disqualified Stock) and (y) in the case of Subsidiaries of the Company,
dividends or distributions payable to the Company or to a Wholly-Owned
Subsidiary of the Company), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Company or any of its
Subsidiaries, (iii) the making of any principal payment on, or the purchase,
defeasance, repurchase, redemption or other acquisition or retirement for
value, prior to any scheduled maturity, scheduled repayment or scheduled
sinking fund payment, of any Indebtedness of the Company which is subordinated
in right of payment to the Securities (other than Indebtedness of the Company
acquired in anticipation of
<PAGE> 24
-17-
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition) and (iv) the
making of any Investment other than pursuant to clause (i), (ii), (iii), (v) or
(vi) of Section 4.14 hereof.
"Restricted Security" has the meaning set forth in Rule
144(a)(3) under the Securities Act.
"Sale/Leaseback Transaction" has the meaning provided in
Section 4.18.
"SEC" means the Securities and Exchange Commission.
"Secured Obligations" shall have the meaning set forth in
Section 10.01.
"Securities" means the Series A Notes and the Series B
Notes.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Senior Secured Notes" means the 12.25% Fixed Rate Senior
Secured Notes due September 1, 1998 of the Company and Floating Rate Senior
Secured Notes due September 1, 1998 of the Company.
"Senior Subordinated Notes" means the 13 3/4% Senior
Subordinated Notes due June 1, 1999 of the Company.
"Series A Notes" means the Company's 12 3/4% Senior
Secured Deferred Coupon Notes Due 2004, Series A, as amended or supplemented
from time to time in accordance with the terms hereof, that are issued pursuant
to this Indenture.
"Series B Notes" means the Company's 12 3/4% Senior
Secured Deferred Coupon Notes Due 2004, Series B, as amended or supplemented
from time to time in accordance with the terms hereof, that are issued pursuant
to this Indenture.
"Subsidiary" means with respect to any person (i) a
corporation a majority of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such person, by one or more Subsidiaries of such person or by such person
and one or more Subsidiaries of such person or (ii) any other person (other
than a corporation) in which such person, one or more Subsidiaries of
<PAGE> 25
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such person or such person and one or more Subsidiaries of such person,
directly or indirectly, at the date of determination thereof, has at least a
majority ownership interest.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Section Section 77aaa-77bbbb), as amended, as in effect on the date of the
execution of this Indenture until such time as this Indenture is qualified
under the TIA, and thereafter as in effect on the date on which this Indenture
is qualified under the TIA.
"Transferee Certificate" means the Transferee Letter of
Representation attached as Exhibit D to this Indenture.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"Trust Officer" means any officer of the Trustee assigned
by the Trustee to administer its corporate trust matters.
"U.S. Government Obligations" has the meaning provided in
Section 8.01.
"U.S. Legal Tender" means such coin or currency of the
United States of America as at the time of payment shall be legal tender for
the payment of public and private debts.
"Voting Power" means with respect to any person, the
power under ordinary circumstances, pursuant to the ownership of shares of any
class or classes of Capital Stock, to elect at least a majority of the board of
directors, managers or trustees of such person (irrespective of whether or not,
at the time, stock of any other class or classes shall have, or might have,
voting power by reason of the happening of any contingency).
"Waxman USA" means Waxman USA Inc., a Delaware
corporation.
"Wholly-Owned Subsidiary" means with respect to any
person any Subsidiary of such person, 100% of the Capital Stock of which (other
than shares of Capital Stock representing any director's qualifying shares or
investments by foreign nationals mandated by applicable law) is owned by such
person, by a Wholly-Owned Subsidiary of such person or by such person and one
or more Wholly-Owned Subsidiaries of such person.
<PAGE> 26
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SECTION 1.02. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or 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 or any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. 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) words in the singular include the plural, and words in
the plural include the singular;
(4) provisions apply to successive events and transactions;
and
<PAGE> 27
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(5) "herein," "hereof" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
---------------
The Securities and the Trustee's certificate of
authentication with respect thereto shall be substantially in the form of
EXHIBIT A or EXHIBIT B hereto, as the case may be, which are hereby
incorporated in and expressly made a part of this Indenture. The Securities
may have notations, legends or endorsements required by law, stock exchange
rule, usage or agreement to which the Company is subject, including without
limitation the legend set forth in Exhibit C hereto. The Company and the
Trustee shall approve the form of the Securities and any notation, legend or
endorsement on them. Each Security shall be dated the date of its
authentication, shall bear interest from the applicable date and shall be
payable on the Interest Payment Dates and the Maturity Date.
The terms and provisions contained in the Securities
shall constitute, and are hereby expressly made, a part of this Indenture and,
to the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
SECTION 2.02. Execution and Authentication.
----------------------------
Two Officers shall sign (each of whom shall have been
duly authorized by all requisite corporate actions) the Securities for the
Company by manual or facsimile signature.
If an Officer whose signature is on a Security was an
Officer at the time of such execution but no longer holds that office at the
time the Trustee authenticates the Security, the Security shall nevertheless be
valid.
<PAGE> 28
-21-
A Security shall not be valid until an authorized
signatory of the Trustee manually signs the certificate of authentication on
the Security. The signature shall be conclusive evidence that the Security has
been authenticated under this Indenture.
The Trustee shall authenticate Securities for original
issue in the aggregate principal amount at maturity of $92,797,000, upon
receipt of a written order of the Company in the form of an Officers'
Certificate and directing the Trustee to authenticate the Securities and
certifying that all conditions precedent to the issuance of the Securities
contained herein have been complied with. The Officers' Certificate shall
further specify the amount of Securities to be authenticated and the date on
which the Securities are to be authenticated. The Trustee may authenticate
Series B Securities for issuance in connection with an exchange offer effected
pursuant to the Registration Rights Agreement upon a written order of the
Company signed by two Officers certifying that all conditions precedent to the
issuance of the Securities have been complied with and specifying the amount of
Securities to be authenticated and the date on which the Securities are to be
authenticated. The aggregate principal amount at maturity of Securities
outstanding at any time may not exceed $92,797,000, except as provided in
Section 2.07. Upon the written order of the Company in the form of an
Officers' Certificate, the Trustee shall authenticate Securities in
substitution of Securities originally issued to reflect any name change of the
Company.
Series B Notes may be issued only in exchange for a like
principal amount of Series A Notes pursuant to an Exchange Offer.
The principal and interest on Book-Entry Securities shall
be payable to the Depository or its nominee, as the case may be, as the sole
registered owner and the sole holder of the Book-Entry Securities represented
thereby. The principal and interest on Securities in certificated form shall
be payable at the office of the Paying Agent.
The Trustee may appoint an authenticating agent
reasonably acceptable to the Company to authenticate Securities. Unless
otherwise provided in the appointment, an authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company
and Affiliates of the Company.
The Securities shall be issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
<PAGE> 29
-22-
If the Securities are to be issued in the form of one or
more Global Securities, then the Company shall execute and the Trustee shall
authenticate and deliver one or more Global Securities that (i) shall represent
and shall be in minimum denominations of $1,000, (ii) shall be registered in
the name of the Depository for such Global Security or Securities or the
nominee of such Depository, (iii) shall be delivered by the Trustee to such
Depository or pursuant to such Depository's instructions and (iv) shall bear
the legend set forth in Exhibit C.
SECTION 2.03. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency in the
Borough of Manhattan, The City of New York, where (a) Securities may be
presented or surrendered for registration of transfer or for exchange (the
"Registrar"), (b) Securities may be presented or surrendered for payment (the
"Paying Agent") and (c) notices and demands to or upon the Company in respect
of the Securities and this Indenture may be served. The Company may also from
time to time designate one or more other offices or agencies where the
Securities may be presented or surrendered for any or all such purposes and may
from time to time rescind such designations; PROVIDED, HOWEVER, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The
City of New York, for such purposes. Neither the Company nor any Affiliate of
the Company shall act as Paying Agent. The Registrar shall keep a register of
the Securities and of their transfer and exchange. The Company, upon notice to
the Trustee, may have one or more co-Registrars and one or more additional
paying agents reasonably acceptable to the Trustee. The term "Paying Agent"
includes any additional paying agent. The Company initially appoints the
Trustee as Registrar, Paying Agent and agent for service of notices or demands
in connection with the Securities and this Indenture until such time as the
Trustee has resigned or a successor has been appointed. Securities, notices
and demands may be delivered to the Trustee at its Columbus, Ohio office or at
the office of its agent, Bank of New York, 101 Barclay Street, New York, New
York 10286, ATTN: DROP WINDOW SERVICES.
The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, which agreement shall
incorporate the provisions of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee, in advance, of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, or fails to give the
foregoing notice, the Trustee shall act as such and shall be entitled to
appropriate compensation in accordance with Section 7.07 hereof.
<PAGE> 30
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SECTION 2.04. Paying Agent To Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other than
the Trustee to agree in writing that each Paying Agent shall hold in trust for
the benefit of the Holders or the Trustee all assets held by the Paying Agent
for the payment of principal of, or interest on, the Securities (whether such
assets have been distributed to it by the Company or any other obligor on the
Securities), and shall notify the Trustee of any Default by the Company (or any
other obligor on the Securities) in making any such payment. The Company at
any time may require a Paying Agent to distribute all assets held by it to the
Trustee and account for any assets disbursed and the Trustee may at any time
during the continuance of any payment Default, upon written request to a Paying
Agent, require such Paying Agent to distribute all assets held by it to the
Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent, the Paying Agent shall have no further liability for such assets.
SECTION 2.05. 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
addresses of the Holders. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee five days before each Record Date and at such
other times as the Trustee may request in writing a list as of such date and in
such form as the Trustee may reasonably require of the names and addresses of
the Holders, which list may be conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
----------------------
When Securities in certificated form are presented to the
Registrar or a co-Registrar with a request from the Holder thereof to register
the transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of other authorized denominations, the Registrar
or co-Registrar, as the case may be, shall register the transfer or make the
exchange as requested if its requirements for such transaction are met;
PROVIDED, HOWEVER, that the Securities surrendered for registration of transfer
or exchange shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Registrar, or co-
Registrar, as the case may be, duly executed by the Holder thereof or such
Holder's attorney duly authorized in writing. To permit registrations of
transfers and exchanges, the Company shall execute and issue, and the Trustee
shall authenticate new Securities evidencing such transfer or exchange at the
Registrar's or co-Registrar's request, as the case may be. No service charge
shall be
<PAGE> 31
-24-
made for any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchanges or transfers pursuant to
Section 2.02, 2.06, 2.10, 3.06, 4.16, 4.17 or 9.05). The Registrar or
co-Registrar shall not be required to register the transfer of or exchange of
any Security (i) during a period beginning at the opening of business 15 days
before the mailing of a notice of redemption of Securities and ending at the
close of business on the day of such mailing and (ii) selected for redemption
in whole or in part pursuant to Article Three, except the unredeemed portion of
any Security being redeemed in part.
If a Series A Note is a Restricted Security in
certificated form, then as provided in this Indenture and subject to the
limitations herein set forth, the Holder, provided it is a Qualified
Institutional Buyer, may exchange such Security for a Book-Entry Security by
instructing the Trustee to arrange for such Series A Note to be represented by
a beneficial interest in a Global Security in accordance with the customary
procedures of the Depository.
In accordance with the provisions of this Indenture and
subject to certain limitations herein set forth, an owner of a beneficial
interest in a Global Security which is a Series A Note may request a Series A
Note in certificated form, in exchange in whole or in part, as the case may be,
for such beneficial owner's interest in the Global Security.
Upon any exchange provided for in the preceding
paragraph, the Company shall execute and the Trustee shall authenticate and
deliver to the person specified by the Depository a new Series A Note or Series
A Notes registered in such names and in such authorized denominations as the
Depository, pursuant to the instructions of the beneficial owner of the
Securities requesting the exchange, shall instruct the Trustee. Thereupon, the
beneficial ownership of such Global Security shown on the records maintained by
the Depository or its nominee shall be reduced by the amounts so exchanged and
an appropriate endorsement shall be made by or on behalf of the Trustee on the
Global Security. Any such exchange shall be effected through the Depository in
accordance with the procedures of the Depository therefor.
Notwithstanding any other provision of this Section 2.06,
a Global Security representing Book-Entry Securities may not be transferred in
whole except by the Depository to a nominee of the Depository or by a nominee
of the Depository to the Depository or another nominee of the Depository or by
the Depository or any such nominee to a successor depository or a nominee of
such successor depository.
<PAGE> 32
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Notwithstanding the foregoing, no Global Security shall
be registered for transfer or exchange, or authenticated and delivered, whether
pursuant to this Section 2.06, Section 2.07, 2.10 or 3.06 or otherwise, in the
name of a person other than the Depository for such Global Security or its
nominee until (i) the Depository notifies the Company that it is unwilling or
unable to continue as Depository for such Global Security or if at any time the
Depository ceases to be a clearing agency registered under the Exchange Act,
and a successor depository is not appointed by the Company within 30 days, (ii)
the Company executes and delivers to the Trustee a Company order that all such
Global Securities shall be exchangeable or (iii) there shall have occurred and
be continuing an Event of Default. Upon the occurrence in respect of any
Global Security representing the Series A Notes of any one or more of the
conditions specified in clause (i), (ii) or (iii) of the preceding sentence,
such Global Security may be registered for transfer or exchange for Series A
Notes registered in the names of, authenticated and delivered to, such persons
as the Trustee or the Depository, as the case may be, shall direct.
Except as provided above, any Security authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
any Global Security, whether pursuant to this Section 2.06, Section 2.07, 2.10
or 3.06 or otherwise, shall also be a Global Security and bear the legend
specified in Exhibit C.
Notwithstanding any other provision of this Indenture,
all Series B Notes shall be in certificated form.
SECTION 2.07. Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Trustee 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 Trustee's requirements are met. If required by
the Trustee or the Company, such Holder must provide an indemnity bond or other
indemnity, sufficient in the judgment of both the Company and the Trustee, to
protect the Company, the Trustee or any Agent from any loss which any of them
may suffer if a Security is replaced. The Company and the Trustee may charge
such Holder for their respective reasonable, out-of-pocket expenses in
replacing a Security, including reasonable fees and expenses of counsel. Every
replacement Security shall constitute an additional obligation of the Company.
<PAGE> 33
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SECTION 2.08. Outstanding Securities.
----------------------
Securities outstanding at any time are all the Securities
that have been authenticated by the Trustee except those cancelled 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 any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other
than a mutilated Security surrendered for replacement), it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser. A mutilated Security
ceases to be outstanding upon surrender of such Security and replacement
thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying
Agent holds U.S. Legal Tender sufficient to pay all of the principal and
interest due on the Securities payable on that date and is not prohibited from
paying such principal and interest due on such date, then on and after such
date such Securities cease to be outstanding and interest on them ceases to
accrue.
SECTION 2.09. Treasury Securities.
-------------------
In determining whether the Holders of the required
principal amount of Securities have concurred in any declaration of
acceleration or notice of default or direction, waiver or consent or any
amendment, modification or other change to this Indenture, the Securities owned
by the Company or an Affiliate of the Company shall be disregarded as though
they were not outstanding, except that, for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, waiver or
consent, only Securities that the Trustee knows are so owned shall be
disregarded.
SECTION 2.10. Temporary Securities.
--------------------
Until definitive Securities are prepared and ready for
delivery, the Company may prepare and the Trustee shall authenticate temporary
Securities upon receipt of a written order of the Company in the form of an
Officers' Certificate. The Officers' Certificate shall specify the amount of
temporary Securities to be authenticated and the date on which the temporary
Securities are to be authenticated. 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, upon receipt of a written order
<PAGE> 34
-27-
of the Company pursuant to Section 2.02, definitive Securities in exchange for
temporary Securities. Until such exchange, temporary Securities shall be
entitled to the same rights, benefits and privileges as definitive Securities.
SECTION 2.11. 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, or at the direction of the Trustee, the
Registrar or the Paying Agent, and no one else, shall cancel and, at the
written direction of the Company, shall dispose of all Securities surrendered
for registration of transfer, exchange, payment or cancellation. Subject to
Section 2.07, the Company may not issue new Securities to replace Securities
that it has paid or delivered to the Trustee for cancellation. If the Company
shall acquire any of the Securities, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Securities
unless and until the same are surrendered to the Trustee for cancellation
pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
------------------
If the Company defaults in a payment of interest on the
Securities, it shall, unless the Trustee fixes another record date pursuant to
Section 6.10, pay the defaulted interest, plus (to the extent lawful) any
interest payable on the defaulted interest to the persons who are Holders on a
subsequent special record date, which date shall be a Business Day at least
five Business Days prior to the payment date. The Company shall fix such
special record date and payment date in a manner satisfactory to the Trustee.
At least 15 days before the subsequent special record date, the Company shall
mail or cause to be mailed to each Holder, with a copy to the Trustee, a notice
that states the subsequent special record date, the payment date and the amount
of defaulted interest, and interest payable on such defaulted interest, if any,
to be paid.
SECTION 2.13. CUSIP Number.
------------
The Company in issuing the Securities may use a CUSIP
number, and if so, the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Securities, and
that reliance may be placed only on the other identification numbers printed on
the Securities.
<PAGE> 35
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SECTION 2.14. Deposit of Monies.
-----------------
On or before each Interest Payment Date and the Maturity
Date, the Company shall deposit or cause to be deposited with the Paying Agent,
U.S. Legal Tender sufficient to make cash payments, if any, due on such
Interest Payment Date or the Maturity Date, as the case may be, in a timely
manner that permits the Trustee to remit payment to the Holders on such
Interest Payment Date or the Maturity Date, as the case may be.
SECTON 2.15. Separation of Securities.
------------------------
These Securities are being issued as part of a Unit, each
Unit consisting of $1,856 aggregate principal amount at maturity of Securities
and 59 Warrants (the "Warrants") to purchase shares of Common Stock, $0.01 par
value, of the Company. The Securities and Warrants will not be separately
transferable prior to July 19, 1994.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
------------------
If the Company elects to redeem Securities pursuant to
paragraph 5 of the Securities, it shall notify the Trustee and the Paying Agent
in writing of the Redemption Date and the principal amount of the Securities to
be redeemed and whether it wants the Trustee to give notice of redemption to
the Holders (at the Company's expense) at least 45 days (unless a shorter
notice shall be satisfactory to the Trustee) but not more than 60 days before
the Redemption Date, together with an Officers' Certificate stating that such
redemption will comply with the conditions contained herein and in the
Securities. Any such notice may be cancelled at any time prior to notice of
such redemption being mailed to any Holder and shall thereby be void and of no
effect.
SECTION 3.02. Selection of Securities To Be Redeemed.
--------------------------------------
If less than all of the Securities are to be redeemed,
the Trustee shall select the Securities to be redeemed in compliance with the
requirements of the principal national securities exchange, if any, on which
the Securities being redeemed are listed, or, if the
<PAGE> 36
-29-
Securities are not listed on a national securities exchange, on a PRO RATA
basis, by lot or by such other method as the Trustee considers to be fair and
appropriate.
The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption. The Trustee shall
promptly notify the Company in writing of the Securities selected for
redemption and, in the case of any Security selected for partial redemption,
the principal amount thereof to be redeemed. Securities in denominations of
$1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption.
SECTION 3.03. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a
Redemption Date, the Company shall mail a notice of redemption by first class
mail to each Holder whose Securities are to be redeemed at the address of such
Holder appearing in the Security register maintained by the Registrar. At the
Company's request, the Trustee shall give the notice of redemption in the
Company's name and at the Company's expense. Any notice which is mailed in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not the Holder receives the notice. Failure to give notice by mail,
or any defect in the notice to the Holder of any Security designated for
redemption as a whole or in part, shall not affect the validity of the
proceedings for the redemption of any other Securities. Each notice of
redemption shall identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued
interest, if any, to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price and accrued
interest, of any;
(5) that, unless the Company defaults in making the
redemption payment, interest, if any, on Securities called for redemption
ceases to accrue on
<PAGE> 37
-30-
and after the Redemption Date, and the only remaining right of the Holders of
such Securities is to receive payment of the Redemption Price upon surrender to
the Paying Agent of the Securities redeemed;
(6) if any Security is being redeemed in part, the
portion of the principal amount (equal to $1,000 or any integral multiple
thereof) of such Security to be redeemed and that, after the Redemption Date,
and upon surrender of such Security, a new Security or Securities in the
aggregate principal amount equal to the unredeemed portion thereof will be
issued without charge to the Securityholder;
(7) if fewer than all the 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; and
(8) the CUSIP number, if any, relating to such
Securities pursuant to Section 2.13 hereof.
SECTION 3.04. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with
Section 3.03, Securities called for redemption become due and payable on the
Redemption Date and at the Redemption Price. Upon surrender to the Trustee or
Paying Agent, such Securities called for redemption shall be paid at the
Redemption Price plus accrued interest, if any, to the Redemption Date, but
interest installments whose maturity is on or prior to such Redemption Date
will be payable on the relevant Interest Payment Dates to the Holders of record
at the close of business on the relevant Record Dates referred to in the
Securities.
SECTION 3.05. Deposit of Redemption Price.
---------------------------
On or before the Redemption Date, the Company shall
deposit with the Paying Agent U.S. Legal Tender sufficient to pay the
Redemption Price of all Securities to be redeemed on that date. The Paying
Agent shall promptly return to the Company any U.S. Legal Tender so deposited
which is not required for that purpose upon the written request of the Company,
except with respect to monies owed as obligations to the Trustee pursuant to
Article Seven.
<PAGE> 38
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SECTION 3.06. Securities Redeemed in Part.
----------------------------
Upon surrender of a Security that is to be redeemed in
part, the Company shall execute and the Trustee shall authenticate for the
Holder a new Security or Securities equal in principal amount to the unredeemed
portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
----------------------
The Company shall pay the principal of and interest on
the Securities on the dates and in the manner provided in the Securities and
this Indenture. An installment of principal of or interest on the Securities
shall be considered paid on the date it is due if the Trustee or Paying Agent
holds on that date U.S. Legal Tender designated for and sufficient to pay the
installment and is not prohibited from paying such installment on such date.
The Company shall pay interest on overdue principal at
the rate set forth in the second paragraph of paragraph 1 of the Securities and
it shall pay interest on overdue installments of interest at the same rate, to
the extent lawful.
SECTION 4.02. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain in the Borough of Manhattan,
The City of New York, the office or agency required under Section 2.03. The
Company shall give prior notice to the Trustee of the location, and any change
in the location, of such office or agency. If at any time the Company shall
fail to maintain any such required office or agency or shall fail to furnish
the Trustee with the address thereof, such presentations, surrenders, notices
and demands described in such Section 2.03 may be made or served at the address
of the Trustee, or its agent, Bank of New York, set forth in Section 2.03.
SECTION 4.03. Corporate Existence.
-------------------
Except as otherwise permitted by Article Five, the
Company shall do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence and the corporate or other
existence of each of its Subsidiaries in accordance with the respective
organizational documents of each such Subsidiary and the
<PAGE> 39
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rights (charter and statutory) and franchises of the Company and each such
Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required to
preserve, with respect to itself, any right or franchise, and with respect to
any of its Subsidiaries any such existence, right 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 will not be
adverse in any material respect to the Holders.
SECTION 4.04. Payment of Taxes and Other Claims.
----------------------------------
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all taxes, assessments
and governmental charges (including withholding taxes and any penalties,
interest and additions to taxes) levied or imposed upon it or any of its
Subsidiaries or properties of it or any of its Subsidiaries and (ii) all lawful
claims for labor, materials and supplies that, if unpaid, might by law become a
Lien upon the property of it or any of its Subsidiaries; 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 if either (a) the
amount, applicability or validity thereof is being contested in good faith by
appropriate proceedings and an adequate reserve has been established therefor
to the extent required by GAAP or (b) the failure to make such payment or
effect such discharge (together with all other such failures) would not have a
material adverse effect on the financial condition or results of operations of
the Company and its Subsidiaries, taken as a whole.
SECTION 4.05. Maintenance of Properties and Insurance.
---------------------------------------
(a) The Company shall cause all properties used or
useful in the conduct of its business or the business of any of its
Subsidiaries to be maintained and kept in satisfactory condition, repair and
working order and supplied with all necessary equipment and shall cause to be
made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in its judgment may be necessary, so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times unless the failure to so maintain such properties
(together with all other such failures) would not have a material adverse
effect on the financial condition or results of operations of the Company and
its Subsidiaries taken as a whole; PROVIDED, HOWEVER, that nothing in this
Section 4.05 shall prevent the Company or any Subsidiary of the Company from
discontinuing the operation or maintenance of any of such properties or
disposing of any of them if such discontinuance or disposal is either (i) in
the ordinary course of business, (ii) in the good faith judgment of the Board
of Directors of the Company or the Subsidiary concerned, or of the senior
officers of the Company or such Subsidiary, as the case may
<PAGE> 40
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be, desirable in the conduct of the business of the Company or such Subsidiary,
as the case may be, or (iii) is otherwise permitted by this Indenture.
(b) The Company shall provide or cause to be provided,
for itself and each of its Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the reasonable,
good faith opinion of the Company are adequate and appropriate for the conduct
of the business of the Company and such Subsidiaries in a prudent manner, with
reputable insurers or with the government of the United States of America or an
agency or instrumentality thereof, in such amounts, with such deductibles, and
by such methods as shall be customary, in the reasonable, good faith opinion of
the Company, for companies similarly situated in the industry, unless the
failure to provide such insurance (together with all other such failures) would
not have a material adverse effect on the financial condition or results of
operations of the Company and its Subsidiaries, taken as a whole.
(c) The Company shall and shall cause each of its
Subsidiaries to keep proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of the Company and each Subsidiary in accordance with GAAP
consistently applied to the Company and its Subsidiaries taken as a whole.
SECTION 4.06. Compliance Certificate; Notice of Default.
-----------------------------------------
(a) The Company shall deliver to the Trustee, within 60
days after the end of the Company's fiscal quarters and within 105 days after
the end of the Company's fiscal year, an Officers' Certificate stating that a
review of its activities and the activities of its Subsidiaries during the
preceding fiscal period has been made under the supervision of the signing
Officers with a view to determining whether it has kept, observed, performed
and fulfilled its obligations under this Indenture and further stating, as to
each such Officer signing such certificate, that to the best of his knowledge,
the Company during such preceding fiscal period has kept, observed, performed
and fulfilled each and every such covenant and no Default or Event of Default
occurred during such period and at the date of such certificate there is no
Default or Event of Default that has occurred and is continuing or, if such
signers do know of such Default or Event of Default, the certificate shall
describe the Default or Event of Default and its status with particularity and
what action the Company has taken or proposes to take with respect thereto.
The Officers' Certificate shall also include all calculations necessary to show
covenant compliance. The Officers' Certificate shall also notify the Trustee
should the Company elect to change the manner in which it fixes its fiscal year
end.
<PAGE> 41
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(b) So long as (and to the extent) not contrary to the
then current recommendations of the American Institute of Certified Public
Accountants, the Company shall deliver to the Trustee within 105 days after the
end of each fiscal year a written statement by the Company's independent
certified public accountants stating (A) that their audit examination has
included a review of the terms of this Indenture and the Securities as they
relate to accounting matters, and (B) whether, in connection with their audit
examination, any Default or Event of Default has come to their attention and if
such a Default or Event of Default has come to their attention, specifying the
nature and period of existence thereof.
(c) The Company will deliver to the Trustee as soon as
possible, and in any event within 10 days after the Company becomes aware or
should reasonably have become aware of the occurrence of any Default or Event
of Default, an Officers' Certificate describing such Default or Event of
Default and its status with particularity and what action the Company is taking
or proposes to take with respect thereto.
SECTION 4.07. Compliance with Laws.
--------------------
The Company shall comply, and shall cause each of its
Subsidiaries to comply, with all applicable statutes, rules, regulations,
orders and restrictions of the United States of America, Canada, all states,
provinces and municipalities thereof, and of any governmental department,
commission, board, regulatory authority, bureau, agency and instrumentality of
the foregoing, in respect of the conduct of their respective businesses and the
ownership of their respective properties, except such the noncompliance with
which would not in the aggregate have a material adverse effect on the
financial condition or results of operations of the Company and its
Subsidiaries taken as a whole.
SECTION 4.08. SEC Reports and Other Information.
---------------------------------
(a) Whether or not the Company is subject to Section
13(a) or 15(d) of the Exchange Act, the Company shall file with the SEC the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the SEC pursuant to such Sections 13(a) and
15(d) if the Company were so subject, such documents to be filed with the SEC
on or prior to the respective dates (the "Required Filing Dates") by which the
Company would have been required so to file such documents if the Company were
so subject. The Company shall also in any event (x) within 15 days after each
Required Filing Date (i) transmit by mail to all Holders, as their names and
addresses appear in the register of Securities maintained by the Registrar,
without cost to such Holders and (ii) file with the Trustee copies of the
annual reports, quarterly reports and
<PAGE> 42
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other documents which the Company would have been required to file with the SEC
pursuant to Sections 13(a) and 15(d) of the Exchange Act if the Company were
subject to such Sections and (y) if filing such documents by the Company with
the SEC is not permitted under the Exchange Act, promptly upon written request
supply copies of such documents to any prospective Holder. In any event, such
annual reports will contain consolidated financial statements and notes
thereto, together with an opinion thereon expressed by an independent public
accounting firm, and management's discussion and analysis of financial
condition and results of operations and such quarterly reports will contain
unaudited condensed consolidated financial statements for the first three
quarters of each fiscal year. Upon qualification of this Indenture under the
TIA, the Company shall also comply with the provisions of TIA Section 314(a).
(b) At any time when the Company is not subject to Section 13 or 15(d)
of the Exchange Act, upon the request of a Holder of a Series A Note, the
Company will promptly furnish or cause to be furnished such information as is
specified pursuant to Rule 144A(d)(4) under the Securities Act (or any
successor provision thereto) to such Holder or to a prospective purchaser of
such Series A Note designated by such Holder, as the case may be, in order to
permit compliance by such Holder with Rule 144A under the Securities Act.
SECTION 4.09. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury law
or other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 4.10. Limitation on Additional Indebtedness.
--------------------------------------
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume, issue,
guarantee or in any manner become liable for or with respect to the payment of,
any Attributable Indebtedness or Indebtedness
<PAGE> 43
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(including any Acquired Indebtedness) except for (each of which shall be given
independent effect):
(a) Indebtedness of the Company under the Securities
and this Indenture;
(b) Indebtedness of Subsidiaries of Waxman USA
outstanding from time to time pursuant to the Domestic Credit
Agreement and/or any other credit arrangement not to exceed at any one
time, an amount (the "Permitted Amount") equal to, when added to the
principal amount of Indebtedness of Subsidiaries of Waxman USA
outstanding pursuant to clause (k) below, (A) the sum of 85% of the
net book value of the accounts receivable and 50% of the net book
value of the inventory of the Subsidiaries of Waxman USA, in each case
calculated on a consolidated basis in accordance with GAAP minus (B)
the amount of Indebtedness pursuant to the Domestic Credit Agreement
and/or any other credit arrangement prepaid with the Net Cash Proceeds
from an Asset Sale pursuant to Section 4.17;
(c) Indebtedness of the Company and those
Subsidiaries of the Company which are in existence on the Issue Date,
which Indebtedness is outstanding on the Issue Date;
(d) Indebtedness of Waxman USA if, immediately after
giving pro forma effect to the incurrence thereof, the Consolidated
Interest Coverage Ratio of Waxman USA would be equal to or greater
than 2.00:1 if such Indebtedness is incurred on or prior to June 1,
1996 or equal to or greater than 2.25:1 if such Indebtedness is
incurred thereafter;
(e) Indebtedness of the Company if, immediately
after giving pro forma effect to the incurrence thereof, the
Consolidated Interest Coverage Ratio of the Company would be equal
to or greater than 2.00:1 if such Indebtedness is incurred on or prior
to June 1, 1996 or equal to or greater than 2.25:1 if such
Indebtedness is incurred thereafter;
(f) Indebtedness of a Subsidiary of the Company
(other than Ideal Holding Group and its Subsidiaries) issued to and
held by the Company or a Wholly-Owned Subsidiary of the Company or
Indebtedness of the Company to a Wholly-Owned Subsidiary of the
Company in respect of intercompany advances or transactions;
<PAGE> 44
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(g) Indebtedness represented by Interest Rate
Protection Obligations and Currency Hedging Agreements of Ideal
Holding Group and Subsidiaries of Waxman USA or Ideal Holding Group
with respect to Indebtedness of Ideal Holding Group and Subsidiaries
of Waxman USA or Ideal Holding Group (which Indebtedness is otherwise
permitted to be incurred under this Section 4.10) to the extent the
notional principal amount of such Interest Rate Protection Obligations
or Currency Hedging Agreements, as the case may be, does not exceed
the principal amount of the Indebtedness to which such Interest Rate
Protection Obligations or Currency Hedging Agreements, as the case may
be, relate;
(h) Working capital Indebtedness of Ideal Holding
Group or its Subsidiaries outstanding from time to time pursuant to
the Canadian Credit Agreement not to exceed at any one time an amount
equal to the sum of 85% of the net book value of the accounts
receivable and 50% of the net book value of the inventory of Ideal, in
each case calculated on a consolidated basis in accordance with GAAP
minus the amount of Indebtedness pursuant to the Canadian Credit
Agreement prepaid with the Net Cash Proceeds from an Asset Sale
pursuant to the provisions described under Section 4.17 hereof; term
loan Indebtedness of Ideal Holding Group or its Subsidiaries
outstanding pursuant to the Canadian Credit Agreement, not to exceed
Cdn.$24.5 million outstanding at any one time; and other Permitted
Ideal Indebtedness of Ideal Holding Group or its Subsidiaries not to
exceed $10,000,000 outstanding at any one time;
(i) Indebtedness of Waxman USA and Subsidiaries of
Waxman USA pursuant to the Domestic Term Loan not to exceed
$15,000,000 principal amount outstanding at any one time;
(j) any replacements, renewals, refinancings and
extensions of Indebtedness incurred under clauses (a), (c), (d) and
(e) above, provided that (i) except with respect to Permitted Waxman
USA Indebtedness, any such replacement, renewal, refinancing and
extension (x) shall not provide for any mandatory redemption,
amortization or sinking fund requirement in an amount greater than or
at a time prior to the amounts and times specified in the Indebtedness
being replaced, renewed, refinanced or extended and (y) shall be
contractually subordinated to the Securities at least to the extent,
if at all, that the Indebtedness being replaced, renewed, refinanced
or extended is subordinate to the Securities, (ii) except with respect
to Permitted Waxman USA Indebtedness, any such Indebtedness of any
person must be replaced, refinanced or extended with Indebtedness
incurred by such person or, except with respect to any such
<PAGE> 45
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Indebtedness of Ideal Holding Group or a Subsidiary of Ideal Holding
Group, by the Company and (iii) the principal amount of Indebtedness
incurred pursuant to this clause (j) (or, if such Indebtedness
provides for an amount less than the principal amount thereof to be
due and payable upon a declaration of acceleration of the maturity
thereof, the original issue price of such Indebtedness) shall not
exceed the sum of the principal amount (or with respect to
Indebtedness which provides for an amount less than the principal
amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof the accreted value thereof) of
Indebtedness so replaced, renewed, refinanced or extended, plus
accrued interest, the amount of any premium required to be paid in
connection with such replacement, renewal, refinancing or extension
pursuant to the terms of such Indebtedness or the amount of any
premium reasonably determined by the Company as necessary to
accomplish such replacement, renewal, refinancing or extension by
means of a tender offer or privately negotiated purchase and the
amount of fees and expenses incurred in connection therewith; and
(k) in addition to the items referred to in clauses (a)
through (j) above, (x) Indebtedness and Attributable Indebtedness of
Waxman USA, the Company or Subsidiaries of Waxman USA in an aggregate
principal amount not to exceed $5,000,000 at any one time outstanding,
provided that Indebtedness of Subsidiaries of Waxman USA shall not
exceed at any one time, when added to the principal amount of
Indebtedness outstanding pursuant to the preceding clause (b), the
Permitted Amount and (y) additional Indebtedness and Attributable
Indebtedness of Waxman USA or the Company in an aggregate principal
amount not to exceed $10,000,000 at any one time outstanding.
SECTION 4.11. Limitation on Restricted Payments.
----------------------------------
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, make any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and
be continuing at the time of or after giving effect to such Restricted
Payment;
(b) at the time of and after giving effect to such
Restricted Payment, the Company could incur at least $1.00 of
Indebtedness pursuant to clause (e) of Section 4.10 hereof; and
<PAGE> 46
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(c) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Issue Date through and including the date of such Restricted
Payment does not exceed the sum of (1) 50% of the Company's
Consolidated Net Income (or in the event such Consolidated Net Income
shall be a deficit, minus 100% of such deficit) from and including
April 1, 1994 to and including the last day of the fiscal quarter
immediately preceding the date of such Restricted Payment (the "Base
Period"), (2) 100% of the aggregate Net Proceeds received by the
Company from the issue or sale, during the Base Period, of Capital
Stock (other than Disqualified Stock) of the Company or any
Indebtedness or other securities of the Company convertible into or
exercisable or exchangeable for Capital Stock (other than Disqualified
Stock) of the Company which has been so converted, exercised or
exchanged, as the case may be and (3) in the case of the disposition
of any Investment (other than an Investment which is a loan) made
after the Issue Date or the repayment or disposition of any loan made
after the Issue Date (other than any such Investment or loan made
pursuant to clause (i), (ii), (iii), (v) or (vi) of Section 4.14
hereof), an amount equal to, with respect to any such Investment
(other than an Investment which is a loan), the lesser of the net cash
proceeds received on disposition with respect to such Investment or
the initial amount of such Investment, in either case, less the cost
of disposition of such Investment and with respect to any such loan,
an amount equal to any cash received on account of (A) the repayment
of principal on such loan or (B) the disposition of such loan, less
the cost of such disposition and not to exceed the principal amount of
such disposed of loan. For purposes of determining under this clause
(c) the amount expended for Restricted Payments, cash distributed
shall be valued at the face amount thereof and property other than
cash shall be valued at its Fair Market Value.
The provisions of this Section 4.11 shall not prohibit
(i) the payment of any dividend within 60 days after the date of declaration
thereof, if such payment would comply with the provisions of this Indenture at
the date of the declaration of such payment and, other than with respect to
this Section 4.11, at the date of such payment, (ii) the retirement of any
shares of Capital Stock of the Company or subordinated Indebtedness of the
Company by conversion into, or by an exchange for, shares of Capital Stock of
the Company that are not Disqualified Stock or out of the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other shares of Capital Stock (other than Disqualified Stock) of the Company,
(iii) the redemption or retirement of subordinated Indebtedness of the Company
in exchange for, by conversion into, or out of the Net Proceeds of, a
substantially concurrent sale of subordinated Indebtedness of the
<PAGE> 47
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Company (other than to a Subsidiary of the Company) that (x) is contractually
subordinated in right of payment to the Securities at least to the same extent
that the Indebtedness being redeemed or retired is subordinated to the
Securities and (y) is permitted to be incurred in accordance with Section 4.10
hereof, (iv) the redemption, repurchase, retirement or other acquisition of any
Senior Subordinated Notes (A) on the Issue Date in exchange for the Securities
and (B) after the Issue Date out of the proceeds of Permitted Waxman USA
Indebtedness, at a purchase price not in excess of the percentage of principal
amount thereof set forth in the indenture related thereto as in existence on
the Issue Date, plus accrued interest, if any, to the date of redemption,
repurchase, retirement or other acquisition, and (v) the redemption or purchase
of the Convertible Debentures at a purchase price not in excess of 101.875% of
the principal amount thereof, plus accrued interest, if any, to the date of
redemption.
In determining the amount of Restricted Payments permissible under
clause (c) above, amounts expended pursuant to clauses (i) and (ii) above shall
be included as Restricted Payments.
SECTION 4.12. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries.
-----------------------------------------
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective or enter into any agreement with any person that would cause any
consensual encumbrance or restriction of any kind on the ability of any
Subsidiary of the Company to (a) pay dividends, in cash or otherwise, or make
any other distributions on its Capital Stock or any other interest or
participation in, or measured by, its profits owned by, or pay any Indebtedness
owed to, the Company or a Subsidiary of the Company, (b) make loans or advances
to the Company or a Subsidiary of the Company or (c) transfer any of its
properties or assets to the Company or any Subsidiary of the Company, except,
in each case, for such encumbrances or restrictions existing under or
contemplated by or by reason of (i) any restrictions existing under the
Domestic Credit Agreement, the Domestic Term Loan, the Canadian Credit
Agreement and the indenture relating to the Senior Secured Notes as in effect
on the Issue Date, (ii) any restrictions existing under the instruments
evidencing Permitted Waxman USA Indebtedness provided that any such
restrictions permit dividends or distributions up to the Company to satisfy
interests payments on the Securities so long as and to the extent that no
default or event of default occurs thereunder before or after the payment of
any such dividend or distribution, (iii) instruments evidencing indebtedness
outstanding on the Issue Date, (iv) any restrictions existing under any
agreement that refinances, replaces, amends or extends an agreement containing
a
<PAGE> 48
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restriction permitted by clause (i), (ii) or (iii) above; provided that the
terms and conditions of any such restrictions are not materially less favorable
to the holders of the Securities than those under or pursuant to the agreement
being replaced, amended or extended or the agreement evidencing the
Indebtedness refinanced or (v) customary non-assignment or sublease provisions
of any agreement of the Company or its Subsidiaries.
SECTION 4.13. Limitation on Liens.
-------------------
In addition to the restrictions described in Section 4.20 hereof, the
Company shall not, and the Company shall not permit, cause or suffer any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien of any kind
upon any of its property or assets now owned or hereafter acquired by it,
unless the Securities are equally and ratably secured by such Lien
simultaneously with or prior to the creation, incurrence or assumption of such
Lien, except for:
(a) Liens existing as of the Issue Date;
(b) Permitted Liens;
(c) Liens on the assets and property of the Company and
Waxman USA to secure the payment of all or a part of the purchase
price of assets or property acquired in the ordinary course of
business after the Issue Date, provided that (i) the aggregate
principal amount of Indebtedness secured by such Liens shall not
exceed the lesser of cost or Fair Market Value of the assets or
property so acquired and shall not, in any event, when added to
the amount of Capitalized Lease Obligations and Attributable
Indebtedness permitted to be secured by clause (f) below, exceed
$5,000,000, and (ii) such Liens shall not encumber any assets or
property of the Company or its Subsidiaries other than the assets or
property so acquired and shall attach to such assets or property
within 60 days of the acquisition of such assets or property;
(d) Liens on the assets of Subsidiaries of Waxman USA
securing Indebtedness of Subsidiaries of Waxman USA;
(e) Liens on the assets and Capital Stock of Ideal Holding
Group and its Subsidiaries securing Indebtedness under the Canadian
Credit Agreement;
(f) Liens on the assets and property of the Company and
Waxman USA to secure Capitalized Lease Obligations and Attributable
Indebtedness, provided
<PAGE> 49
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(i) such Liens do not extend to or cover any property or assets of the
Company or its Subsidiaries other than the property or assets subject
to such Capitalized Lease Obligations and Attributable Indebtedness and
(ii) the amount of Capitalized Lease Obligations and Attributable
Indebtedness secured by such Liens shall not, when added to the
principal amount of Indebtedness permitted to be secured by clause
(c) above, exceed $5,000,000.
(g) leases and subleases of real property which do not
interfere with the ordinary conduct of the business of the Company or
any of its Subsidiaries, and which are made on customary and usual
terms applicable to similar properties;
(h) Liens securing Indebtedness which is incurred to
refinance Indebtedness which has been secured by a Lien permitted
hereunder and is permitted to be refinanced hereunder, provided that
such Liens do not extend to or cover any property or assets of the
Company or any of its Subsidiaries not securing the Indebtedness so
refinanced;
(i) Liens on (x) the assets or property of a Subsidiary of
Waxman USA existing at the time such Subsidiary became a Subsidiary of
Waxman USA and not incurred as a result of (or in connection with or
anticipation of) such Subsidiary becoming a Subsidiary of Waxman USA,
provided that such Liens do not extend to or cover any property or
assets of the Company or any of its Subsidiaries (other than the
property or assets of the Subsidiary so acquired that are subject to
such Lien) and (y) assets existing at the time such assets were
acquired by the Company, Waxman USA or a Subsidiary of Waxman USA and
not incurred as a result of (or in connection with or anticipation of)
the acquisition of such assets, provided that such Liens do not
extend to or cover any property or assets of the Company or any of its
Subsidiaries (other than the assets so acquired); and
(j) Liens on the Capital Stock of Subsidiaries of Waxman
USA to secure Permitted Waxman USA Indebtedness and/or the Senior
Secured Notes.
Notwithstanding the foregoing, Liens shall be permitted by the
previous clauses (a) through (j) only to the extent that any Indebtedness
secured by such Liens is incurred pursuant to and in accordance with this
Indenture.
SECTION 4.14. Limitation on Investments, Loans and Advances.
---------------------------------------------
<PAGE> 50
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The Company shall not make and shall not permit any of its Subsidiaries
to make any Investment, except:
(i) Investments by the Company or a Subsidiary of the
Company in any Wholly-Owned Subsidiary of the Company other than
Ideal Holding Group or a Subsidiary of Ideal Holding Group (including
any such Investment pursuant to which a person becomes a Wholly-Owned
Subsidiary of the Company);
(ii) Investments in the Company or a Wholly-Owned Subsidiary
of the Company by any Subsidiary of the Company;
(iii) Investments represented by receivables created or
acquired in the ordinary course of business or the settlement of such
receivables in the ordinary course of business;
(iv) Investments permitted to be made pursuant to Section 4.11
hereof;
(v) Investments represented by advances to employees of the
Company or its Subsidiaries made in the ordinary course of business
and consistent with past business practices; and
(vi) Permitted Investments.
SECTION 4.15. Limitation on Transactions with Affiliates.
------------------------------------------
The Company will not, and will not permit, cause or suffer, any of its
Subsidiaries to, conduct any business or enter into any transaction or series
of transactions with or for the benefit of any of their respective Affiliates
(each an "Affiliate Transaction"), except in good faith and on terms that are
no less favorable to the Company or such Subsidiary, as the case may be, than
those that could have been obtained in a comparable transaction on an arm's
length basis from a person not an Affiliate of the Company or such Subsidiary.
With respect to any Affiliate Transaction (and each series of related Affiliate
Transactions which are similar or part of a common plan) involving aggregate
payments or other market value in excess of $1,000,000, the Company shall
deliver an Officers' Certificate to the Trustee certifying that such Affiliate
Transaction (or series of related Affiliate Transactions) complies with the
foregoing provisions and that such Affiliate Transaction (or series of related
Affiliate Transactions) was approved by a majority of the Independent Directors
of the Company and the Board of Directors of the Company as a whole.
Notwithstanding the foregoing, the restrictions set forth in this
<PAGE> 51
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Section 4.15 shall not apply to (x) customary directors' fees and consulting
fees, (y) transactions with or among the Company and its Wholly Owned
Subsidiaries (other than Ideal Holding Group and its Subsidiaries) or (z) loans
or advances by the Company to Ideal Holding Group or its Subsidiaries not to
exceed Cdn. $450,000 aggregate principal amount outstanding at any one time.
SECTION 4.16. Change of Control.
-----------------
(a) Upon the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall notify or
cause to be notified the Holders in writing of such occurrence and shall make
an offer to purchase (the "Change of Control Offer"), on a business day (the
"Change of Control Payment Date") not earlier than 45 days or later than 60
days following the Change of Control Date, all Securities then outstanding at a
purchase price equal to 101% of the Accreted Value thereof plus accrued and
unpaid interest, if any, to the Change of Control Payment Date. Within 10 days
after the date upon which the Change of Control occurred requiring the Company
to make a Change of Control Offer pursuant to this Section 4.16, the Company
shall so notify the Trustee. In connection with such notification to the
Trustee, the Company may instruct the Trustee to give, at the cost and expense
of the Company, the notice required to be given by clause (b) below.t
(b) Notice of a Change of Control Offer shall be sent, by first class
mail, to each Holder not less than 25 days nor more than 45 days before the
Change of Control Payment Date, with copies to the Trustee, which notice shall,
consistent with the provisions of this Section 4.16, govern the terms of the
Change of Control Offer. Such notice shall contain all instructions and
materials necessary to enable such Holders to tender Securities pursuant to the
Change of Control Offer and shall state:
(1) that the Change of Control Offer is being made pursuant to
this Section 4.16 and that all Securities properly tendered will be
accepted for payment;
(2) the purchase price (including the amount of accrued interest)
and the Change of Control Payment Date;
(3) that any Security not tendered will continue to accrue
interest in accordance with the terms thereof;
<PAGE> 52
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(4) that, unless the Company defaults in making
payment therefor, any Security accepted for payment pursuant to
the Change of Control Offer shall cease to accrue interest after
the Change of Control Payment Date;
(5) that Holders electing to have a Security
purchased pursuant to a Change of Control Offer will be required
to surrender the Security, with the form entitled "Option of
Holder to Elect Purchase" on the last page of the Security
completed, to the Paying Agent at the address specified in the
notice prior to 5:00 p.m., New York City time, on the Business
Day prior to the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m.,
New York City time, on the Business Day prior to the Change of
Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal
amount of the Securities the Holder delivered for purchase, the
Security certificate number (if any) and a statement that such
Holder is withdrawing its election to have such Security
purchased;
(7) that Holders whose Securities are purchased only
in part will be issued new Securities in a principal amount equal
to the unpurchased portion of the Securities surrendered; and
(8) the circumstances and relevant facts regarding
such Change of Control.
(c) On or before the Change of Control Payment Date, the
Company shall (i) accept for payment Securities or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent
U.S. Legal Tender sufficient to pay the purchase price of all Securities so
tendered and (iii) deliver to the Trustee Securities so accepted together with
an Officers' Certificate stating the Securities or portions thereof being
purchased by the Company. The Paying Agent shall promptly mail to the Holders
of Securities so accepted payment in an amount equal to the purchase price, and
the Trustee shall promptly authenticate and mail to such Holders new Securities
equal in principal amount to any unpurchased portion of the Securities
surrendered. Any Securities not so accepted shall be promptly mailed by the
Company to the Holder thereof. The Company will 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 shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any
<PAGE> 53
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other securities laws or regulations in connection with the repurchase of
securities pursuant to a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions
of this Section 4.16, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under this Section 4.16 by virtue thereof. The Change of Control Offer shall
remain open for at least 20 Business Days and until 5:00 p.m., New York City
time, on the Business Day next preceding the Change of Control Payment Date.
SECTION 4.17. Disposition of Proceeds of Asset Sales.
--------------------------------------
(a) The Company will not, and will not permit any of its
Subsidiaries to, make any Asset Sale unless (i) the Company or the applicable
Subsidiary, as the case may be, receives consideration at the time of such
Asset Sale at least equal to the Fair Market Value of the assets sold or
otherwise disposed of and (ii) at least 75% of the consideration received by
the Company or such Subsidiary, as the case may be, from such Asset Sale shall
be in the form of cash or Cash Equivalents (with Indebtedness of the Company or
its Subsidiaries assumed by the purchaser being counted as cash for such
purposes if the Company and its Subsidiaries are permanently released from all
liability therefor).
(b) The Company shall or shall cause its Subsidiaries
to, within five days of receipt of any Net Cash Proceeds from an Asset Sale
involving the sale, transfer or other disposition of the Capital Stock of any
person which is pledged or required to be pledged pursuant to the provisions of
this Indenture to the Trustee for the benefit of the Holders of the Securities
("Pledged Collateral Net Cash Proceeds"), to the extent such Pleded Collateral
Net Cash Proceeds are not to be used to redeem Securities pursuant to and in
accordance with paragraph 6(a) of the Securities, designate such Pledged
Collateral Net Cash Proceeds as "Excess Proceeds" subject to disposition as
provided below.
(c) The Company shall or shall cause its Subsidiaries
to, within 360 days of receipt of any Net Cash Proceeds from an Asset Sale
(other than any Pledged Collateral Net Cash Proceeds, which shall be disposed
of as set forth in clause (b) above):
(x) with respect to any such Net Cash Proceeds from
an Asset Sale involving property or assets of Ideal Holding Group
or a Subsidiary of Ideal Holding Group or the Capital Stock of
Ideal Holding Group or a Subsidiary of Ideal Holding Group, apply
such Net Cash Proceeds to reduce amounts owing under the Canadian
Credit Agreement and with respect to any other Net Cash Proceeds,
apply such net Cash Proceeds to permanently prepay Indebtedness
of the Company which ranks PARI PASSU with the Securities
(including any repurchase of Securities
<PAGE> 54
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through open market purchases or otherwise) or Indebtedness of a
Subsidiary of the Company, other than Ideal Holding Group and its
Subsidiaries (including, without limitation, any repurchase of
Permitted Waxman USA Indebtedness through open market purchases
or otherwise); or
(y) apply such Net Cash Proceeds to acquire or
construct assets in lines of business related to the Company's
and its Subsidiaries' businesses as in existence on the Issue
Date, provided that only Net Cash Proceeds from an Asset Sale
involving property or assets of Ideal Holding Group or a
Subsidiary of Ideal Holding Group may be applied to acquire or
construct assets of Ideal Holding Group or a Subsidiary of Ideal
Holding Group.
To the extent such Net Cash Proceeds are not applied as provided in the
previous clauses (x) and (y), such Net Cash Proceeds shall constitute Excess
Proceeds subject to disposition as provided in clause (d) below.
(d) When the aggregate amount of unutilized Excess
Proceeds equals or exceeds $5.0 million, the Company shall make an offer to
repurchase (the "Asset Sale Offer") on the Asset Sale Payment Date an aggregate
principal amount of the Securities equal to such entire unutilized Company
Excess Proceeds (and not just the amount in excess of $5.0 million) at a price
in cash equal to 100% of the Accreted Value thereof, plus accrued and unpaid
interest, if any, to the Asset Sale Payment Date. The Company shall, subject
to the provisions described herein, be required to repurchase all Securities
validly tendered into such Asset Sale Offer and not withdrawn. Upon completion
of such Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero
and any unutilized Excess Proceeds may be utilized by the Company for any
purpose.
(e) The Company shall provide the Trustee with prompt
notice of the occurrence of an Asset Sale Offer. Such notice shall be
accompanied by an Officers' Certificate setting forth (i) a statement to the
effect that the Company or a Subsidiary of the Company has made an Asset Sale
and (ii) the aggregate principal amount of Securities offered to be purchased
and the basis of calculation in determining such aggregate principal amount.
(f) Notice of an Asset Sale Offer shall be sent, by
first class mail, by the Company (or caused to be mailed by the Company), with
a copy to the Trustee, to all Holders of Securities not less than 30 days nor
more than 60 days before the Asset Sale Payment Date at their last registered
address. The Asset Sale Offer shall remain open from the time of mailing for
at least 20 Business Days and until at least 5:00 p.m., New York
<PAGE> 55
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City time, on the Business Day next preceding the Asset Sale Payment Date. The
notice to the Holders shall contain all instructions and materials necessary to
enable such Holders to tender Securities pursuant to the Asset Sale Offer. At
the Company's request,the Trustee shall give, at the cost and expense of the
Company, the notice required by this paragraph (f). Such notice shall state:
(1) that the Asset Sale Offer is being made pursuant
to this Section 4.17;
(2) the purchase price (including the amount of accrued
interest, if any) for each Security and the Asset Sale Payment Date;
(3) that any Security not tendered or accepted for
payment will continue to accrue interest in accordance with the terms
thereof;
(4) that unless the Company defaults on making payment
therefor, any Security accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest after the Asset Sale Payment Date;
(5) that Holders electing to have a Security purchased
pursuant to an Asset Sale Offer will be required to surrender the
Security, with the form entitled "Option of Holder to Elect Purchase"
on the last page of the Security completed, to the Paying Agent at the
address specified in the notice prior to 5:00 p.m., New York City time,
on the Business Day prior to the Asset Sale Payment Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New
York City time, on the Business Day prior to the Asset Sale Payment
Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of Securities the Holder
delivered for purchase, the Security certificate number (if any) and a
statement that such Holder is withdrawing his election to have such
Securities purchased;
(7) that if Securities in a principal amount in excess of
the principal amount of the Securities to be acquired pursuant to the
Asset Sale Offer are tendered and not withdrawn pursuant to the Asset
Sale Offer, the Company shall purchase Securities on a PRO RATA
basis among the Securities tendered (with such adjustment as may be
deemed appropriate by the Company so that only Securities in
denominations of $1,000 or integral multiples of $1,000 shall be so
acquired);
<PAGE> 56
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(8) that Holders whose Securities are purchased only in
part will be issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered; and
(9) the instructions that Holders must follow in order to
tender their Securities.
(g) On or before an Asset Sale Payment Date, the Company shall (i)
accept for payment on a PRO RATA basis among the Securities or portions thereof
tendered pursuant to the Asset Sale Offer (subject to adjustment as
contemplated by paragraph (7) above), (ii) deposit with the Paying Agent U.S.
Legal Tender sufficient to pay the purchase price of all Securities or portions
thereof so tendered and (iii) deliver to the Paying Agent the Securities so
accepted together with an Officers' Certificate identifying the Securities or
portions thereof accepted for payment by the Company. The Paying Agent shall
promptly mail or deliver to Holders of Securities tendered to and accepted for
payment an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail or deliver to such Holders new Securities equal in
principal amount to any unpurchased portion of the Securities surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by the Company
to the Holder thereof. The Paying Agent shall return to the Company any money
not required to fund the payment for Securities accepted for payment by the
Company. The Company will publicly announce the results of the Asset Sale
Offer as promptly as practicable following the Asset Sale Payment Date.
(h) The Company shall 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 an
Asset Sale Offer. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.17, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.17 by virtue
thereof.
SECTION 4.18. Limitation on Sale and Leaseback Transactions.
----------------------------------------------
The Company shall not, and shall not permit any of its Subsidiaries to,
enter into any arrangement with any person providing for the leasing to the
Company or any such Subsidiary of any real or tangible personal property
(except for leases between or among the Company and any of its Subsidiaries),
which property or similar property has been or is to be sold or transferred by
the Company or such Subsidiary to such person in
<PAGE> 57
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contemplation of such leasing (a "Sale/Leaseback Transaction"). The foregoing
will not prohibit a Sale/Leaseback Transaction entered into by the Company,
Waxman USA or Subsidiaries of Waxman USA if (a) the Company, Waxman USA or
such Subsidiary of Waxman USA, as the case may be, would be entitled to incur
Indebtedness in an amount equal to the Attributable Indebtedness with respect
to such arrangement pursuant to Section 4.10 hereof, (b) the Company, Waxman
USA or such Subsidiary of Waxman USA, as the case may be, could incur a Lien on
the assets subject to such Sale/Leaseback Transaction pursuant to Section 4.13
hereof if such Sale/Leaseback had been a mortgage, and (c) such net proceeds
are deemed to be Net Cash Proceeds for purposes of, and the Company, Waxman USA
or such Subsidiary of Waxman USA, as the case may be, otherwise complies with,
the provisions of Section 4.17 hereof.
SECTION 4.19. Limitation on Issuances and Sales
of Preferred Stock by Subsidiaries.
----------------------------------
The Company (i) will not permit any of its Subsidiaries
to issue any Preferred Stock (other than to the Company or to a Wholly-Owned
Subsidiary of the Company) and (ii) will not permit any person (other than the
Company or a Wholly-Owned Subsidiary of the Company) to own any Preferred Stock
of any Subsidiary of the Company. Notwithstanding the foregoing, Ideal Holding
Group and its Subsidiaries may issue Preferred Stock to persons other than the
Company or a Wholly-Owned Subsidiary of the Company to the extent that Ideal
Holding Group or such Subsidiary of Ideal Holding Group, as the case may be,
could incur Indebtedness in a principal amount equal to the liquidation
preference of such Preferred Stock pursuant to clause (h) of Section 4.10
hereof.
SECTION 4.20. Impairment of Security Interest.
--------------------------------
The Company shall not, and shall not permit any of its
Subsidiaries to, take or omit to take any action which action or omission might
or would have the result of affecting or impairing the security interest in
favor of the Trustee, on behalf of itself and the Holders, with respect to the
Collateral required to be pledged hereunder and the Company shall not create,
otherwise incur or suffer to exist, in favor of any person (other than the
Trustee on behalf of itself and the Holders) any interest whatsoever in such
Collateral.
<PAGE> 58
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ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Consolidation, Merger, Conveyance,
Transfer or Lease.
----------------------------------
The Company shall not consolidate with or merge with or
into or sell, assign, convey, lease, transfer or otherwise dispose of all or
substantially all of its properties and assets to another person or persons, in
a single transaction or through a series of related transactions or permit any
of its Subsidiaries to do any of the foregoing unless:
(a) the Company is the continuing person, or the person
formed by or surviving such consolidation or merger or the person
to which such sale, assignment, conveyance, lease, transfer or
other disposition is made (the "surviving entity") is a
corporation organized and validly existing under the laws of the
United States, any State thereof or the District of Columbia;
(b) the surviving entity shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee, in
form and substance reasonably satisfactory to the Trustee, all of
the obligations of the Company under the Securities and this
Indenture;
(c) immediately before and immediately after giving
effect to such transaction, or series of transactions (including,
without limitation, any Indebtedness incurred or anticipated to
be incurred in connection with or in respect of such transaction
or series of transactions), no Default or Event of Default shall
have occurred and be continuing;
(d) the Company or the surviving entity (in the case of
a merger or consolidation involving the Company or any sale,
assignment, conveyance, lease, transfer or other disposition of
all or substantially all of the Company's properties and assets)
shall immediately after giving effect to such transaction or
series of transactions (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection
with or in respect of such transaction or series of transactions)
have a Consolidated Net Worth equal to or greater than the
<PAGE> 59
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Consolidated Net Worth of the Company immediately prior to such
transaction or series of transactions;
(e) immediately after giving effect to such transaction
or series of transactions, the Company or the surviving entity
(in the case of a merger or consolidation involving the Company
or any sale, assignment, conveyance, lease, transfer or other
disposition of all or substantially all of the Company's assets)
could incur $1.00 of Indebtedness pursuant to clause (e) of
Section 4.10 hereof; and
(f) the Company or the surviving entity shall have
delivered to the Trustee an Officers' Certificate stating that
such consolidation, merger, sale, assignment, conveyance, lease,
transfer or other disposition and, if a supplemental indenture is
required in connection with such transaction or series of
transactions, such supplemental indenture complies with this
Section 5.01 and that all conditions precedent in this Indenture
relating to the transaction or series of transactions have been
satisfied.
SECTION 5.02. Successor Entity Substituted.
----------------------------
Upon any consolidation, merger or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.01,
the surviving entity formed by such consolidation or into which the Company is
merged or to which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this
Indenture with the same effect as if such surviving entity had been named as
the Company herein and the Company shall be discharged from all obligations and
covenants under the Indenture and the Securities.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
-----------------
An "Event of Default" occurs if:
<PAGE> 60
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(i) the Company defaults in the payment of interest
on any Security when the same becomes due and payable and
continuance of any such default for a period of 30 days; or
(ii) the Company defaults in the payment of the
principal of any Security when due (including a default in
payment upon an offer to purchase required to be made by this
Indenture); or
(iii) the Company defaults in the performance of, or
breaches, any covenant hereof (other than defaults specified in
clause (i) or (ii) above), and such default or breach continues
for a period of 30 days after written notice to the Company by
the Trustee or to the Company and the Trustee by the Holders of
at least 25% in aggregate principal amount of the outstanding
Securities; or
(iv) failure by the Company or any of its
Subsidiaries (a) to make any payment when due with respect to any
other Indebtedness under one or more classes or issues of
Indebtedness which one or more classes or issues of Indebtedness
are in an aggregate principal amount of $5,000,000 or more (other
than any such failure to make a payment with respect to the
Canadian Credit Agreement or any Permitted Ideal Indebtedness);
or (b) to perform any term, covenant, condition, or provision of
one or more classes or issues of Indebtedness which one or more
classes or issues of Indebtedness are in an aggregate principal
amount of $5,000,000 or more, which failure, in the case of this
clause (b), results in an acceleration of the maturity thereof
(other than any such failure which results in the acceleration of
the maturity of the Canadian Credit Agreement or any Permitted
Ideal Indebtedness); or
(v) one or more judgments, orders or decrees for the
payment of money in excess of $5,000,000, either individually or
in an aggregate amount, shall be entered against the Company or
any of its Subsidiaries (other than Ideal Holding Group and its
Subsidiaries (but only so long as the Canadian Credit Agreement
and any Permitted Ideal Indebtedness is non-recourse to, and
credit support (other than Permitted Credit Support) is not
otherwise required to be provided by, the Company or its
Subsidiaries (other than Ideal Holding Group and its
Subsidiaries))) or any of their respective properties and shall
not be discharged and there shall have been a period of 60 days
during which a stay of enforcement of such judgment or order, by
reason of pending appeal or otherwise, shall not be in effect; or
<PAGE> 61
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(vi) the Company or any Material Subsidiary (other than Ideal
Holding Group and its Subsidiaries (but only so long as the Canadian
Credit Agreement and any Permitted Ideal Indebtedness is non-recourse
to, and credit support (other than Permitted Credit Support) is not
otherwise required to be provided by, the Company or its Subsidiaries
(other than Ideal Holding Group and its Subsidiaries))) of the Company
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief against it
in an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or
for all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors or
(E) shall generally not pay its debts when such debts
become due or shall admit in writing its inability to pay its debts
generally; or
(vii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Material
Subsidiary (other than Ideal Holding Group and its Subsidiaries
(but only so long as the Canadian Credit Agreement and any
Permitted Ideal Indebtedness is non-recourse to, and credit
support (other than Permitted Credit Support) is not otherwise
required to be provided by, the Company or its Subsidiaries
(other than Ideal Holding Group and its Subsidiaries))) of the
Company in an involuntary case or proceeding,
(B) appoints a Custodian of the Company or any Material
Subsidiary (other than Ideal Holding Group and its Subsidiaries
(but only so long as the Canadian Credit Agreement and any
Permitted Ideal Indebtedness is non-recourse to, and credit
support (other than Permitted Credit Support) is not otherwise
required to be provided by, the Company or its Subsidiaries (other
than Ideal Holding Group
<PAGE> 62
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and its Subsidiaries))) of the Company for all or substantially
all of its properties, or
(C) orders the liquidation of the Company or any
Material Subsidiary (other than Ideal Holding Group and its
Subsidiaries (but only so long as the Canadian Credit Agreement
and any Permitted Ideal Indebtedness is non-recourse to, and
credit support (other than Permitted Credit Support) is not
otherwise required to be provided by, the Company or its
Subsidiaries (other than Ideal Holding Group and its
Subsidiaries))) of the Company,
and in each case the order or decree remains unstayed and in effect
for 60 days; PROVIDED, HOWEVER, that if the entry of such
order or decree is appealed and dismissed on appeal, then the Event
of Default hereunder by reason of the entry of such order or decree
shall be deemed to have been cured; or
(viii) this Indenture ceases to be in full force and effect or
ceases to give the Trustee, in any material respect, the Liens,
rights, powers and privileges purported to be created hereby.
SECTION 6.02. Acceleration.
-------------
If an Event of Default (other than an Event of Default specified in
clause (vi) or (vii) above with respect to the Company) occurs and is
continuing, then the Trustee or the Holders of at least 25% in aggregate
principal amount of the outstanding Securities may, by written notice, and the
Trustee upon the request of the Holders of not less than 25% in aggregate
principal amount of the outstanding Securities shall, declare the Accreted
Value plus accrued interest (if any) on all the Securities on the date of such
declaration to be due and payable immediately (the "Default Amount"). Upon any
such declaration, the Default Amount shall become due and payable immediately.
If an Event of Default specified in clause (vi) or (vii) above with respect to
the Company occurs and is continuing, then the Default Amount on all the
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder.
After a declaration of acceleration, the Holders of a majority in
aggregate principal amount of outstanding Securities may, by notice to the
Trustee, rescind such declaration of acceleration if all existing Events of
Default have been cured or waived, other than nonpayment of the Default Amount
on the Securities that have become due
<PAGE> 63
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solely as a result of such acceleration and if the rescission of acceleration
would not conflict with any judgment or decree. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the
Trustee may pursue any available remedy by proceeding at law or in equity 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 as may be
required or permitted thereunder.
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 to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
-----------------------
Subject to Sections 6.07 and 9.02, the Holders of a
majority in principal amount of the outstanding Securities by notice to the
Trustee may waive an existing Default or Event of Default and its consequences,
except a Default in the payment of principal of or interest on any Security as
specified in clauses (i) and (ii) of Section 6.01 or in respect of any
provision hereof which cannot be modified or amended without the consent of the
Holder so affected pursuant to Section 9.02. When a Default or Event of
Default is so waived, it shall be deemed cured and ceases to exist.
SECTION 6.05. Control by Majority.
-------------------
The Holders of a majority in principal amount of the
outstanding Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it including, without limitation, any remedies provided for
in Section 6.03. Subject to Section 7.01, however, the Trustee may refuse to
follow any direction that conflicts with any law or this Indenture, that the
Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal liability unless
the Trustee has asked for and received indemnification reasonably satisfactory
to it against any loss, liability or expense caused by its following such
direction; PROVIDED that the Trustee may
<PAGE> 64
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take any other action deemed proper by the Trustee which is not inconsistent
with such direction.
SECTION 6.06. 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 notice of a
continuing Event of Default;
(2) Holders of at least 25% in principal amount of
the outstanding Securities make a written request to the Trustee
to pursue the remedy;
(3) such Holders offer to the Trustee reasonable
indemnity against any loss, liability or expense to be incurred
in compliance with such request;
(4) the Trustee does not comply with the request
within 15 days after receipt of the request and the offer of
reasonable indemnity; and
(5) during such 15-day period the Holders of a
majority in principal amount of the outstanding Securities do not
give the Trustee a direction which, in the opinion of the
Trustee, is inconsistent with the request.
A Securityholder may not use this Indenture to prejudice
the rights of another Securityholder or to obtain a preference or priority over
such other Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture,
the right of any Holder to receive payment of principal of and interest on a
Security, on or after the respective due dates expressed in such Security, 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 except to the extent that the institution or prosecution of such suit or
the entry of judgment therein would, under applicable law, result in the
surrender, impairment, waiver or loss of the Lien of this Indenture upon the
Collateral.
<PAGE> 65
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SECTION 6.08. Collection Suit by Trustee.
---------------------------
If an Event of Default in payment of principal or
interest specified in clause (i) or (ii) of Section 6.01 occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company or any other obligor on the Securities for
the whole amount of principal and accrued interest remaining unpaid, together
with interest on overdue principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate per annum borne by the Securities and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09. 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 (including any claim for the reasonable compensation,
expenses, taxes, disbursements and advances of the Trustee, its agents and
counsel) and the Securityholders allowed in any judicial proceedings relating
to the Company or any other obligor upon the Securities, any of their
respective creditors or any of their respective property and shall be entitled
and empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any Custodian in
any such judicial proceedings is hereby authorized by each Securityholder to
make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Securityholders, to
first pay to the Trustee any amount due to it for the reasonable compensation,
expenses, taxes, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 7.07. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Securityholder in any such proceeding.
SECTION 6.10. Priorities.
----------
If the Trustee collects any money pursuant to this
Article Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
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Second: to Holders for interest accrued on the
Securities, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Securities for interest;
Third: to Holders for principal amounts owing under the
Securities, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Securities for principal; and
Fourth: to the Company or any other obligor on the
Securities, as their interests may appear, or as a court of competent
jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a
record date and payment date for any payment to Securityholders pursuant to
this Section 6.10.
SECTION 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy
under this Indenture or in any suit against the Trustee for any action taken or
omitted by it as 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 6.11 does not apply to a suit by the Trustee, a suit by
a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more
than 10% in principal amount of the outstanding Securities.
ARTICLE SEVEN
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by
this Indenture and covenants and agrees to perform the same, as herein
expressed.
SECTION 7.01. Duties of Trustee.
-----------------
(a) If a Default or an Event of Default has occurred and
is continuing, the Trustee shall exercise such of the rights and powers vested
in it by this Indenture and use
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the same degree of care and skill in its exercise thereof as a prudent person
would exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of a Default or an
Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no covenants or
obligations shall be implied in this Indenture that are adverse
to the Trustee.
(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, the Trustee shall
examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of
paragraph (b) of this Section 7.01.
(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.
(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 6.05.
(d) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any 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 for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
(e) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject
to paragraphs (a), (b), (c) and (d) of this Section 7.01.
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(f) The Trustee shall not be liable for interest on any
money or assets received by it except as the Trustee may agree with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
SECTION 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in
acting or refraining from acting upon any document believed by it
to be genuine and to have been signed or presented by the proper
person. The Trustee need not investigate any fact or matter
stated in the document.
(b) Before the Trustee acts or refrains from acting, it
may consult with counsel and may require an Officers' Certificate
or an Opinion of Counsel, which shall conform to Sections 11.04
and 11.05. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of
any agent (other than the negligence or misconduct of an agent
who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action that
it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers, PROVIDED that the
Trustee's conduct does not constitute negligence or bad faith.
(e) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, notice, request,
direction, consent, order, bond, debenture, or other paper or
document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled, upon
reasonable notice to the Company, to examine the books, records,
and premises of the Company, personally or by agent or attorney.
(f) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request, order or direction of any of the
<PAGE> 69
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Holders pursuant to the provisions of this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may
be incurred by it in compliance with such request, order or
direction.
SECTION 7.03. Individual Rights of Trustee.
-----------------------------
The Trustee in its individual or any other capacity may
become the owner or pledgee of Securities and may otherwise deal with the
Company, any Subsidiary of the Company or their respective Affiliates with the
same rights it would have if it were not Trustee. Any Agent may do the same
with like rights. However, the Trustee must comply with Sections 7.10 and
7.11.
SECTION 7.04. Trustee's Disclaimer.
--------------------
The Trustee 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 in the Securities other than the Trustee's
certificate of authentication.
SECTION 7.05. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder, as their names and addresses appear on the Securityholder list
described in Section 2.05, notice of the uncured Default or Event of Default
within 30 days after such Default or Event of Default has occurred. Except in
the case of a Default or an Event of Default in payment of principal of, or
interest on, any Security, and a Default or Event of Default that resulted from
the failure to comply with Section 4.16, 4.17 or 5.01, the Trustee may withhold
the notice if and so long as its board of directors, the executive committee of
its board of directors or a committee of its directors and/or Trust Officers in
good faith determines that withholding the notice is in the interest of the
Securityholders.
SECTION 7.06. Reports by Trustee to Holders.
-----------------------------
This Section 7.06 shall not be operative as a part of
this Indenture until this Indenture is qualified under the TIA, and, until such
qualification, this Indenture shall be construed as if this Section 7.06 were
not contained herein.
<PAGE> 70
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Within 60 days after each May 15 beginning with the May
15 following the date of this Indenture, the Trustee shall, to the extent that
any of the events described in TIA Section 313(a) occurred within the previous
twelve months, but not otherwise, mail to each Securityholder a brief report
dated as of such May 15 that complies with TIA Section 313(a). The Trustee
also shall comply with TIA Section Section 313(b) and 313(c).
A copy of each report at the time of its mailing to
Securityholders shall be mailed to the Company and filed with the SEC and each
securities exchange, if any, on which the Securities are listed.
The Company shall notify the Trustee if the Securities
become listed on any securities exchange.
SECTION 7.07. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time
reasonable compensation for its services as the Company and the Trustee may
agree. 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 tax obligations imposed on the Trustee related to
this Indenture and all reasonable out-of-pocket expenses incurred or made by
it. Such expenses shall include the reasonable fees and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee and its agents
for, and hold them harmless against, any loss, liability or expense incurred by
them except for such actions to the extent caused by any negligence, bad faith
or willful misconduct on their part, arising out of or in connection with the
administration of this trust including the reasonable costs and expenses of
defending themselves against any claim or liability in connection with the
exercise or performance of any of their rights, powers or duties hereunder.
The Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity, but the Trustee's failure to so notify
the Company shall not affect the Company's obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel; PROVIDED that the Company will not be required to
pay such fees and expenses if they assume the Trustee's defense and there is no
conflict of interest between the Company and the Trustee in connection with
such defense as reasonably determined by the Trustee. The Company need not pay
for any settlement made without its written consent. The Company need not
reimburse any
<PAGE> 71
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expense or indemnify against any loss or liability to the extent incurred by
the Trustee through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this
Section 7.07, the Trustee shall have a lien prior to the Securities on all
assets or money held or collected by the Trustee, in its capacity as Trustee,
except assets or money held in trust to pay principal of or interest on
Securities.
When the Trustee incurs expenses or renders services
after an Event of Default specified in Section 6.01(vi) or (vii) occurs, such
expenses and the compensation for such services are intended to constitute
expenses of administration under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Company. The
Holders of a majority in principal amount of the outstanding Securities may
remove the Trustee by so notifying the Company and the Trustee and may appoint
a successor trustee with the Company's consent. The Company may remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an
insolvent;
(3) a receiver or other public officer takes charge
of the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason, the Company shall notify each
Holder of such event and shall promptly appoint a successor Trustee. Within
one year after the successor Trustee takes office, the Holders of a majority in
principal amount of the Securities may appoint a successor Trustee to replace
the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of
its appointment to the retiring Trustee and to the Company. Immediately after
that, the retiring Trustee shall transfer all property held by it as Trustee to
the successor Trustee, subject to the lien provided in Section 7.07, the
resignation or removal of the retiring Trustee shall become
<PAGE> 72
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effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Securityholder.
If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the retiring Trustee,
the Company or the Holders of at least 10% in principal amount of the
outstanding Securities may petition 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 replacement of the Trustee pursuant to
this Section 7.08, the Company's obligations under Section 7.07 shall continue
for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
--------------------------------
If the Trustee consolidates with, merges or converts
into, or transfers all or substantially all of its corporate trust business to,
another corporation, the resulting, surviving or transferee corporation without
any further act shall, if such resulting, surviving or transferee corporation
is otherwise eligible hereunder, be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies
the requirement of TIA Section Section 310(a)(1) and 310(a)(5). The Trustee
(or in the case of a corporation included in a bank holding company system, the
related bank holding company) shall have a combined capital and surplus of at
least $50,000,000 as set forth in its most recent published annual report of
condition. In addition, if the Trustee is a corporation included in a bank
holding company system, the Trustee, independently of such bank holding
company, shall meet the capital requirements of TIA Section 310(a)(2). 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.
<PAGE> 73
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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 therein.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Discharge of Indenture.
----------------------
The Company may at any time terminate all of its
obligations under the Securities and this Indenture shall terminate, except for
those obligations referred to in the penultimate paragraph of this Section
8.01, if all Securities previously authenticated and delivered (other than
destroyed, lost or stolen Securities which have been replaced or paid and
Securities for whose payment money has heretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation and the Company has paid all sums payable by it hereunder, or if:
(a) pursuant to Article Three, the Company shall have
given notice to the Trustee and mailed a notice of redemption to each
Holder of the redemption of all of the Securities under arrangements
satisfactory to the Trustee for the giving of such notice;
(b) the Company shall have irrevocably deposited or
caused to be deposited with the Trustee or a trustee satisfactory to the
Trustee, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee, as trust funds in trust solely for
the benefit of the Holders for that purpose, U.S. Legal Tender sufficient
to pay principal of and interest, if any, on the outstanding Securities to
redemption; PROVIDED that the Trustee shall have been irrevocably
instructed to apply such U.S. Legal Tender to the payment of said principal
and interest with respect to the Securities;
<PAGE> 74
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(c) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent providing for the termination of the Company's
obligation under the Securities and this Indenture have been complied with;
and
(d) the Company shall have paid all sums payable by it
hereunder.
Notwithstanding the foregoing paragraph, the Company's
obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 7.08, 8.04
and 8.05 shall survive until the Securities are no longer outstanding. After
the Securities are no longer outstanding, the Company's obligations in Sections
7.07, 8.04 and 8.05 shall survive.
After such delivery or irrevocable deposit the Trustee
upon request shall acknowledge in writing the discharge of the Company's
obligations under the Securities and this Indenture except for those surviving
obligations specified above.
SECTION 8.02. Legal Defeasance and Covenant Defeasance.
----------------------------------------
(a) The Company may, at its option by Board Resolution,
at any time, with respect to the Securities, elect to have either paragraph (b)
or paragraph (c) below be applied to the outstanding Securities upon compliance
with the conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of
the option applicable to this paragraph (b), the Company shall be deemed to
have been released and discharged from its obligations with respect to the
outstanding Securities on the date the conditions set forth below are satisfied
(hereinafter, "legal defeasance"). For this purpose, such legal defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of paragraph (e) below and
the other Sections of and matters under this Indenture referred to in (i) and
(ii) below, and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (i) the rights of Holders of
outstanding Securities to receive solely from the trust fund described in
paragraph (d) below and as more fully set forth in such paragraph, payments in
respect of the principal of and interest on such Securities when such payments
are due, (ii) the Company's obligations with respect to such Securities under
Sections 2.05, 2.06, 2.07, 2.08, 4.02, 7.07,
<PAGE> 75
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7.08, 8.04 and 8.05, (iii) the rights, powers, trusts, duties and immunities of
the Trustee hereunder and (iv) this Section 8.02. Subject to compliance with
this Section 8.02, the Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under paragraph (c) below with
respect to the Securities.
(c) Upon the Company's exercise under paragraph (a) of
the option applicable to this paragraph (c), the Company shall be released and
discharged from its obligations under any covenant contained in Article Five
and in Sections 4.10 through 4.20 with respect to the outstanding Securities on
and after the date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance"), and the Securities shall thereafter be deemed to be not
"outstanding" for the purpose of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to the outstanding Securities, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 6.01, but, except as specified above, the remainder of this Indenture
and such Securities shall be unaffected thereby.
(d) The following shall be the conditions to application
of either paragraph (b) or paragraph (c) above to the outstanding Securities:
(i) the Company shall irrevocably have deposited or
caused to be deposited with the Trustee as trust funds in trust
for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of
the Holders of such Securities, (A) U.S. Legal Tender in an
amount, or (B) direct non-callable obligations of, or
non-callable obligations guaranteed by, the United States of
America for the payment of which guarantee or obligation the full
faith and credit of the United States is pledged ("U.S.
Government Obligations") which through the scheduled payment of
principal of and interest in respect thereof in accordance with
their terms will provide (without giving effect to the
reinvestment of any interest thereon), not later than one day
before the due date of any payment, U.S. Legal Tender in an
amount, or (C) a combination thereof, sufficient, in the opinion
of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the
Trustee, to pay and discharge and which shall be applied by the
Trustee (or other qualifying trustee) to pay and
<PAGE> 76
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discharge principal of and interest, if any, on the outstanding
Securities on the Maturity Date of such principal or installment
of principal or interest in accordance with the terms of this
Indenture and of such Securities; PROVIDED, HOWEVER, that the
Trustee (or other qualifying trustee) shall have received an
irrevocable written order from the Company instructing the
Trustee (or other qualifying trustee) to apply such U.S. Legal
Tender or the proceeds of such U.S. Government Obligations to
said payments with respect to the Securities;
(ii) no Default or Event of Default or event which
with notice or lapse of time or both would become a Default or an
Event of Default with respect to the Securities shall have
occurred and be continuing on the date of such deposit;
(iii) such legal defeasance or covenant defeasance shall
not result in a breach or violation of, or constitute a Default
or Event of Default under, this Indenture or any other agreement
or instrument to which the Company or any Subsidiary of the
Company is a party or by which any of them is bound;
(iv) in the case of an election under paragraph (b)
above, the Company shall have delivered to the Trustee an Opinion
of Counsel stating that (x) the Company has received from, or
there has been published by, the Internal Revenue Service a
ruling or (y) 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 shall confirm
that, the Holders of the outstanding Securities will not
recognize income, gain or loss for Federal income tax purposes as
a result of such legal defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the
same times as would have been the case if such legal defeasance
had not occurred;
(v) in the case of an election under paragraph (c)
above, the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that the Holders of the outstanding
Securities 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;
(vi) in the case of an election under either
paragraph (b) or (c) above, an Opinion of Counsel to the effect
that, (x) the trust funds will not be subject to any rights of
any other holders of any other Indebtedness of the Company, and
(y) after
<PAGE> 77
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the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable Bankruptcy Law; and
(vii) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that (A) all conditions precedent provided for relating to either
the legal defeasance under paragraph (b) above or the covenant
defeasance under paragraph (c) above, as the case may be, have
been complied with and (B) if any other Indebtedness of the
Company shall then be outstanding, such legal defeasance or
covenant defeasance will not violate the provisions of the
agreements or instruments evidencing such Indebtedness.
(e) All money and U.S. Government Obligations (including
the proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this paragraph (e), the "Trustee") pursuant to
paragraph (d) above in respect of the outstanding Securities shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Securities and this Indenture, to the payment, either directly or through any
Paying Agent as the Trustee may determine, to the Holders of such Securities of
all sums due and to become due thereon in respect of principal and interest,
but such money need not be segregated from other funds except to the extent
required by law.
The Company shall pay and indemnify the Trustee against
any tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to paragraph (d) above or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding
Securities.
Anything in this Section 8.02 to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon the request, in writing, by the Company any money or U.S. Government
Obligations held by it as provided in paragraph (d) above which, in the opinion
of a nationally recognized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect an
equivalent legal defeasance or covenant defeasance.
SECTION 8.03. Application of Trust Money.
--------------------------
The Trustee shall hold in trust U.S. Legal Tender or U.S.
Government Obligations deposited with it pursuant to Sections 8.01 and 8.02,
and shall apply the deposited U.S. Legal Tender and the U.S. Legal Tender from
U.S. Government Obligations
<PAGE> 78
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in accordance with this Indenture to the payment of principal of and interest
on the Securities.
SECTION 8.04. Repayment to Company.
--------------------
Subject to Sections 7.07, 8.01 and 8.02, the Trustee
shall promptly pay to the Company, upon receipt by the Trustee of an Officers'
Certificate, any excess money, determined in accordance with Sections
8.02(d)(i) and (e), held by it at any time. The Trustee and the Paying Agent
shall pay to the Company upon receipt by the Trustee or the Paying Agent, as
the case may be, of an Officers' Certificate, any money held by it for the
payment of principal or interest that remains unclaimed for two years;
PROVIDED, HOWEVER, that the Trustee and the Paying Agent before being required
to make any payment may, but need not, at the expense of the Company, cause to
be published once in a newspaper of general circulation in The City of New York
or mail to each Holder entitled to such money notice that such money remains
unclaimed and that after a date specified therein, which shall be at least 30
days from the date of such publication or mailing, any unclaimed balance of
such money then remaining will be repaid to the Company. After payment to the
Company, Securityholders entitled to money must look solely to the Company for
payment as general creditors unless an applicable abandoned property law
designates another person, and all liability of the Trustee or Paying Agent
with respect to such money shall thereupon cease.
SECTION 8.05. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any
U.S. Legal Tender or U.S. Government Obligations in accordance with this
Indenture 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, then and only then the Company's
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had been made pursuant to this Indenture until
such time as the Trustee is permitted to apply all such U.S. Legal Tender or
U.S. Government Obligations in accordance with this Indenture; 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 U.S. Legal Tender or U.S. Government Obligations held by
the Trustee or Paying Agent.
<PAGE> 79
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ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
--------------------------
The Company, when authorized by its Board Resolution, and
the Trustee, together, may without notice to or the consent of any
Securityholder amend, waive or supplement this Indenture or the Securities:
(1) to cure any ambiguity, defect or inconsistency,
maintain qualification of this Indenture under the TIA; PROVIDED
that such amendment or supplement does not adversely affect the
rights of any Holder;
(2) to comply with Article Five;
(3) to provide for uncertificated Securities in
addition to or in place of certificated Securities;
(4) to make any other change that does not adversely
affect the rights of any Securityholders hereunder;
(5) to comply with any requirements of the SEC in
connection with the qualification of this Indenture under the
TIA; or
(6) mortgaging, hypothecating, pledging or granting
a security interest in favor of the Trustee as additional
security for the payment and performance of the obligations under
this Indenture, in any property or asset, including any which is
required to be mortgaged, pledged or hypothecated or in which a
security interest is required to be granted to the Trustee
pursuant to this Indenture or otherwise;
PROVIDED that the Company has delivered to the Trustee an Opinion of Counsel
and an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
-----------------------
<PAGE> 80
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Subject to Section 6.07, the Company when authorized by its Board
Resolution, and the Trustee, together, with the written consent of the Holder
or Holders of at least a majority in aggregate principal amount of the
outstanding Securities, may amend or supplement this Indenture or the
Securities, without notice to any other Securityholders. However, without the
consent of each Securityholder affected, no amendment, supplement or waiver,
including a waiver pursuant to Section 6.04, may:
(i) reduce the Accreted Value of, extend the fixed maturity of, or
alter the redemption provisions of, the Securities;
(ii) change the currency in which Securities or any principal or the
accrued interest thereon is payable;
(iii) reduce the percentage in principal amount outstanding of
Securities which must consent to an amendment, supplement or waiver or
consent to take any action under this Indenture or the Securities;
(iv) impair the right to institute suit for the enforcement of any
payment on or with respect to the Securities;
(v) waive a default in payment with respect to the Securities;
(vi) reduce the rate or extend the time for payment of interest, if
any, on the Securities;
(vii) affect the ranking of the Securities or the security for the
Securities;
(viii) following the mailing of a Change of Control Offer, modify
the provisions of this Indenture with respect to such Change of Control
Offer in a manner adverse to any Holder; or
(ix) release any Collateral, except in compliance with the terms
hereof.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly
<PAGE> 81
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describing the amendment, supplement or waiver. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such amendment, supplement or waiver.
SECTION 9.03. Compliance with TIA.
-------------------
From the date on which the Indenture is qualified under
the TIA, every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes
effective, a consent to it by a Holder is a continuing consent by the Holder
and every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security, even if notation
of the consent is not made on any Security. However, any such Holder or
subsequent Holder may revoke the consent as to his Security or portion of his
Security by notice to the Trustee or the Company received before the date on
which the Trustee receives an Officers' Certificate certifying that the Holders
of the requisite principal amount of Securities have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver.
Notwithstanding the above, nothing in this paragraph shall impair the right of
any Securityholder under Section 316(b) of the TIA.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled to consent to
any amendment, supplement or waiver. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
persons who were Holders at such record date (or their duly designated
proxies), and only those persons, shall be entitled to revoke any consent
previously given, whether or not such persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes
effective, it shall bind every Securityholder, unless it makes a change
described in any of clauses (i) through (ix) of Section 9.02, in which case,
the amendment, supplement or waiver shall bind only each Holder of a Security
who has consented to it and every subsequent Holder of a Security or portion of
a Security that evidences the same debt as the consenting Holder's Security.
<PAGE> 82
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SECTION 9.05. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver 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
about 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 issue a new
Security shall not affect the validity and effect of such amendment, supplement
or waiver.
SECTION 9.06. Trustee To Sign Amendments, Etc.
-------------------------------
The Trustee shall execute any amendment, supplement or
waiver authorized pursuant to this Article Nine; PROVIDED that the Trustee may,
but shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver is
authorized and permitted by this Indenture.
ARTICLE TEN
SECURITY AND PLEDGE OF COLLATERAL
SECTION 10.01. Grant of Security Interest.
--------------------------
To secure the full and punctual payment of the principal
of and interest on the Securities and any other amounts owing under this
Indenture pursuant to Section 7.07 when and as the same shall be due and
payable, whether on an Interest Payment Date or the Maturity Date, by
acceleration, repurchase, redemption or otherwise (including, without
limitation, the payment of interest and other amounts which would accrue and
become due but for the filing of a petition in bankruptcy (whether or not a
claim is allowed against the Company for such interest or other amounts in any
such bankruptcy proceeding) or the operation of the automatic stay under
Section 362(a) of the Bankruptcy Law), and interest on the overdue principal of
and interest (to the extent permitted by law), if any, on the Securities and
the performance of all other obligations of the Company to the Holders or the
Trustee under this Indenture and the Securities, according to the terms
hereunder or
<PAGE> 83
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thereunder (collectively, the "Secured Obligations"), the Company hereby grants
to the Trustee, for the benefit of the Trustee and the Holders, a continuing
first priority security interest in all its right, title and interest in and to
the following (collectively, the "Collateral"):
(i) all of the shares of Capital Stock identified on
Schedule I hereto (the "Pledged Shares") and all certificates
representing such shares and any interest of the Company in the
entries on the books of any financial intermediary pertaining to
such shares;
(ii) all additional shares of Capital Stock of any
Subsidiary from time to time acquired by or issued to the Company
in any manner (which shares shall be deemed to be Pledged
Shares), and all certificates representing such additional shares
and any interest of the Company in the entries on the books of
any financial intermediary pertaining to such additional shares,
provided that in no event shall such Pledged Shares include the
Capital Stock of any Subsidiary that relates to the business
conducted by Ideal on the Issue Date or more than 65% of the
outstanding Capital Stock of any foreign Subsidiary of the
Company; and
(iii) all dividends, cash, instruments and other
property and "proceeds" (as such term is defined in the Uniform
Commercial Code as in effect in any and all relevant
jurisdictions) from time to time received, receivable or
otherwise distributed in respect of or in exchange for any of the
foregoing (except as otherwise set forth in Section 10.05), and
any account in which any Collateral is deposited or invested,
including any earnings thereon.
SECTION 10.02. Delivery of Collateral.
----------------------
(a) Any and all cash, certificates or instruments
representing or evidencing the Collateral shall be delivered to and held by or
on behalf of the Trustee in New York, New York pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Trustee.
(b) The Trustee shall have the right, at any time after
the occurrence and during the continuance of an Event of Default, in its
discretion and without notice to the Company, to transfer to or to register in
the name of the Trustee or any of its nominees any or all of the Collateral.
In addition, the Trustee shall have the right at any time to
<PAGE> 84
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exchange certificates or instruments representing or evidencing Collateral for
certificates or instruments of different denominations.
(c) If an issuer of Pledged Shares is incorporated in a
jurisdiction which does not permit the use of certificates to evidence equity
ownership, then the Company shall, to the extent permitted by applicable law,
record such pledge on the stock register of the issuer of such Pledged Shares,
execute any customary stock pledge forms or other documents necessary to
complete the pledge and give the Trustee the right to transfer the Pledged
Shares under the terms hereof and provide to the Trustee a written opinion of
counsel, in form and substance satisfactory to it, confirming such pledge.
SECTION 10.03. Representations and Warranties.
------------------------------
The Company hereby represents and warrants as follows:
(a) It is the legal, record and beneficial owner of the
Pledged Shares described on Schedule I as being owned by it and has good
and valid title thereto free and clear of any Lien, except for the Lien
created by this Indenture. No Collateral on the date hereof is evidenced
by promissory notes, certificates or other instruments which have not been
delivered to the Trustee.
(b) It has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Indenture and to
carry out the provisions and conditions hereof (including, without
limitation, the creation and perfection of the security interests in the
Collateral); and this Indenture has been duly authorized, validly executed
and delivered by it, and constitutes the legal, valid and binding
obligation of the Company enforceable against it in accordance with its
terms except as such enforcement may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(c) The pledge, assignment and, delivery of the
Collateral pursuant to this Indenture creates a valid and continuing Lien
on and perfected first priority security interest in the Collateral in
favor of the Trustee for the benefit of the Holders and the Trustee,
superior and prior to the rights of all other persons therein and subject
to no other Liens.
<PAGE> 85
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(d) The Pledged Shares described on Schedule I hereto as
owned by the Company constitute all of the Capital Stock of each issuer of
Pledged Shares owned by the Company; there are no outstanding rights
(including, without limitation, preemptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any shares of
Capital Stock or other equity interest of or in any issuer of Pledged
Shares described on Schedule I hereto or any contract, commitment,
agreement, understanding or arrangement of any kind relating to the
issuance of any such Capital Stock, any such convertible or exchangeable
securities or any such rights, warrants or options.
(e) The Pledged Shares described on Schedule I hereto
represent the percentage set forth therein of the issued and outstanding
shares of Capital Stock of the corporation named thereon, and such
shares of Capital Stock have been duly authorized and validly issued for
good and valuable consideration and are fully paid and non-assessable.
(f) None of the Pledged Shares is "margin stock" as such
term is defined in Section 221.1 of Regulation U of the Board of Governors
of the Federal Reserve System.
(g) the Company has no direct Subsidiaries other than
Ideal Holding Group and those Subsidiaries identified on Schedule I hereto.
SECTION 10.04. Further Assurances.
------------------
(a) The Company agrees that at any time and from time to
time, at the expense of the Company, the Company will promptly execute and
deliver all further instruments and documents and take all further action that
may be necessary or that the Trustee may reasonably request in order to perfect
and protect any Lien granted or purported to be granted hereby or to enable the
Trustee to exercise and enforce its rights and remedies hereunder with respect
to any Collateral. Without limiting the foregoing, the Company shall, at the
time of any acquisition of additional shares of Capital Stock of any issuer
constituting Pledged Shares pursuant to Section 10.01, provide to the Trustee
a revised Schedule I to reflect any changes made necessary by such acquisition.
(b) The Company shall have the right from time to time
to execute and deliver in favor of the Trustee for the benefit of the Holders
one or more instruments or other documents evidencing or providing for
additional security for the Securities, which may be in the form of a pledge of
collateral, a negative pledge or otherwise. Any such
<PAGE> 86
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instrument or document shall be effective without requiring execution or
delivery by the Trustee and may be terminated pursuant to the terms thereof by
written notice to the Trustee.
SECTION 10.05. Dividends; Voting Rights.
------------------------
(a) As long as no Event of Default shall have occurred
and be continuing:
(i) The Company shall be entitled to exercise any and
all voting and other consensual rights pertaining to the Pledged Shares or
any part thereof for any purpose not inconsistent with the terms of this
Indenture; provided, however, that no vote shall be cast or consent,
waiver or ratification given or action taken that would (a) directly or
indirectly impair the value of any of the Pledged Shares, (b) be
inconsistent with or violate any provision of this Indenture or (c) approve
any merger or consolidation with or any sale of all or substantially all of
the assets of the issuer of any of the Pledged Shares except as otherwise
provided by the terms of this Indenture;
(ii) The Company shall be entitled to receive and
retain, and to utilize free and clear of the Lien of this Indenture, any
and all dividends or distributions paid with respect to any of the Pledged
Shares; PROVIDED, HOWEVER, that any and all
(1) dividends and other distributions paid or
payable other than in cash with respect to, and instruments and other
property received, receivable or otherwise distributed with respect
to, or in exchange for, any such Pledged Shares;
(2) dividends, cash, instruments and other
property and proceeds received, receivable or otherwise distributed on
any Pledged Shares constituting any liquidating dividend or other
liquidating distribution, whether or not in connection with a
reduction of capital, capital surplus or paid-in surplus, or other
similar extraordinary dividend or distribution; and
(3) cash paid, payable or otherwise distributed
in redemption of, or in exchange for, any Pledged Shares
shall be, and shall be forthwith delivered to the Trustee to hold as,
Collateral and be subject to the Lien of this Indenture and shall, if
received by the Company, be received in trust for the benefit of the
Trustee, be segregated from the other
<PAGE> 87
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property or funds of the Company, and be forthwith delivered to the Trustee
as Collateral (with any necessary endorsement and accompanied by any
documentation necessary to ensure and evidence that a first priority
security interest is being created therein); and
(iii) in order to permit the Company to exercise the
voting and other rights which it is entitled to exercise pursuant to
Section 10.05(a)(i) above and to receive the dividends, distributions
and other payments which it is authorized to receive and retain pursuant to
Section 10.05 (a)(ii) or Section 10.05(b)(ii) above, the Trustee shall, if
necessary, upon request of the Company, execute and deliver (or cause to be
executed and delivered) to the Company all such proxies, payment orders and
other instruments as the Company may reasonably request for such purposes
as shall be specified in such request.
Until actually paid, all rights to any such dividends,
distributions and other payments shall remain subject to the Lien of this
Indenture.
(b) Upon the occurrence and during the continuance of an
Event of Default:
(i) all rights of the Company to exercise the voting
and other consensual rights which it would otherwise be entitled to
exercise pursuant to Section 10.05(a)(i) above shall cease, and all such
rights shall thereupon become vested in the Trustee, which shall
thereupon have the sole right to exercise such voting and other consensual
rights during the continuance of such Event of Default;
(ii) all rights of the Company to receive the
dividends, distributions and other payments which it would otherwise be
authorized to receive and retain pursuant to Section 10.05(a)(ii) above
shall cease and all such rights shall thereupon become vested in the
Trustee, which shall thereupon have the sole right to receive and hold as
Collateral such dividends, distributions and other payments during the
continuance of such Event of Default, and all such dividends,
distributions, and other payments shall be forthwith delivered to the
Trustee to hold as Collateral and be subject to the Lien of this Indenture
and shall be segregated from all other Collateral; and
(iii) in order to permit the Trustee to exercise the
voting and other consensual rights which it may be entitled to exercise
pursuant to Section 10.05(b)(i) above, and to receive all dividends,
distributions and other payments which it may be entitled to receive under
Section 10.05(b)(ii) above, the Company
<PAGE> 88
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shall, if necessary, upon written notice from the Trustee, from time to
time execute and deliver to the Trustee all such proxies, payment orders
and other instruments as the Trustee may reasonably request.
(c) Upon the cure or waiver of any such Event of
Default, so long as no other Event of Default has occurred and is continuing,
all rights of the Company to receive dividends, distributions and other
payments pursuant to Section 10.05(a) (ii) shall revert to the Company.
(d) All dividends, distributions and other payments
which are received by the Company contrary to the provisions of Section
10.05(b)(ii) above shall be received in trust for the benefit of the Trustee,
shall be segregated from other funds of the Company and shall be forthwith paid
over to the Trustee as Collateral in the same form as received by the Company
(duly endorsed by the Company to the Trustee, if required) to be held as
Collateral.
(e) The Trustee may join in any plan of voluntary or
involuntary reorganization or readjustment or rearrangement in respect of any
Pledged Shares or any issuer thereof and may accept or authorize the acceptance
of new securities issued in exchange therefor under any such plan. Any new
securities so issued shall be deposited and pledged with the Trustee under this
Indenture.
SECTION 10.06. Trustee Appointed Attorney-in-Fact.
----------------------------------
The Company hereby appoints the Trustee as the Company's
attorney-in-fact, with full authority in the place and stead of the Company and
in the name of the Company or otherwise, from time to time in the Trustee's
discretion, to take any action and to execute any instrument which the Trustee
may deem necessary or advisable in order to accomplish the purposes of this
Article Ten, including to receive, endorse and collect all instruments made
payable to the Company representing any dividend, interest payment or other
distribution in respect to the Collateral or any part thereof and to give full
discharge for the same. This power, being coupled with an interest, is
irrevocable.
SECTION 10.07. Trustee May Perform.
-------------------
If the Company fails to perform any agreement contained
in this Article Ten, the Trustee may, but shall not be obligated to, itself
perform, or cause performance of, such agreement, and the expenses of the
Trustee incurred in connection therewith shall be payable by the Company under
Section 7.07.
<PAGE> 89
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SECTION 10.08. Trustee's Duties.
----------------
The powers conferred on the Trustee under this Article
Ten are solely to protect its interest in the Collateral and shall not impose
any duty upon it to exercise any such powers. Except for the safe custody of
any Collateral in its possession and the accounting for moneys actually
received and/or disbursed by it thereunder, the Trustee shall have no duty as
to any Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral.
SECTION 10.09. Remedies upon Event of Default.
------------------------------
If any Event of Default shall have occurred and be
continuing, the Trustee may sell the Collateral as an entirety or in any such
portions as the Holders of a majority in aggregate principal amount of the
Securities then outstanding shall request in writing, or in the absence of such
request, in such manner as the Trustee deems appropriate. In addition to the
other rights and remedies provided for herein or otherwise available to it, the
Trustee may exercise, as provided in the preceding sentence, all the rights and
remedies provided a secured party upon the default of a debtor under the
Uniform Commercial Code (as in effect in the relevant jurisdiction) at that
time.
Any sale of Collateral pursuant to this Section 10.09 may
be without notice, except as specified below, may consist of any part of or all
of the Collateral and may be in one or more parcels at public or private sale,
at any exchange, broker's board or at any of the Trustee's offices or
elsewhere, for cash, on credit or for future delivery, upon such terms as the
Trustee may determine to be commercially reasonable, and the Trustee or any
Securityholder may be the purchaser of any or all of the Collateral so sold and
shall thereafter hold the same, absolutely, free from any right or claim of
whatsoever kind. The Company agrees that, to the extent notice of sale shall
be required by law, at least 5 days' notice to the Company of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Trustee shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
The Trustee may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
The Company hereby waives any claims against the Trustee arising by reason of
the fact that the price at which any Collateral may have been sold at such a
private sale was less than the price which might have been obtained at a public
sale, even if the Trustee accepts the first offer received and does not offer
such Collateral to more than one offeree.
<PAGE> 90
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The Company hereby waives, to the extent permitted by
applicable law, notice (other than the notice described in the preceding
paragraph) or judicial hearing in connection with the Trustee's disposition of
any Collateral, including, without limitation, any and all prior notice and
hearing for any prejudgment remedy or remedies and any such right which the
Company would otherwise have under law, and the Company hereby further waives,
to the extent permitted by law: (a) all other requirements as to the time,
place and terms of sale or other requirements with respect to the enforcement
of the Trustee's rights hereunder and (b) all rights of redemption, appraisal,
valuation, stay, extension or moratorium now or hereafter in force under any
applicable law. Any sale of, or the grant of options to purchase, or any other
realization upon, any Collateral shall operate to divest all right, title,
interest, claim and demand, either at law or in equity, of the Company therein
and thereto, and shall be a perpetual bar both at law and in equity against the
Company and against any and all persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under the Company.
The Company recognizes that, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws, the Trustee may be compelled, with respect to any sale of all or any part
of the Collateral, to limit purchasers to those who will agree, among other
things, to acquire such securities for their own account, for investment, and
not with a view to the distribution or resale thereof. The Company
acknowledges and agrees that any such sale may result in prices and other terms
less favorable to the seller than if such sale were a public sale without such
restrictions and, notwithstanding such circumstances, agrees that any such sale
shall be deemed to have been made in a commercially reasonable manner. The
Trustee shall be under no obligation to delay the sale of any of the Collateral
for the period of time necessary to permit the issuers of the Collateral to
register any securities constituting such Collateral for public sale under the
Securities Act, or under applicable state securities laws, even if they would
agree to do so; PROVIDED, HOWEVER, in the event that the Trustee determines
that it is advisable to register under or otherwise comply in any way with the
Securities Act or any similar federal or state law, or if such registration or
compliance is required with respect to all or any part of the Collateral prior
to the sale thereof by the Trustee, the Company will use its best efforts to
cause such registration to be effectively made and will reimburse the Trustee
and the Holders for any and all expense incurred by any of them, including,
without limitation, reasonable attorneys' and accountants' fees and expenses,
printing fees and filing fees in connection therewith.
The Company further agrees to do or cause to be done all
such other acts and things as may be reasonably necessary to make such sale or
sales of any portion or all
<PAGE> 91
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of the Collateral valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or awards of
any and all courts, arbitrators or governmental bodies having jurisdiction over
any such sale or sales, all at the Company's expense.
SECTION 10.10. Application of Proceeds.
-----------------------
Upon the occurrence and during the continuance of an
Event of Default (so long as such acceleration has not been rescinded), any
cash held by the Trustee as Collateral and all cash proceeds received by the
Trustee in respect of any sale of, collection from, or other realization upon,
all or any part of the Collateral, shall be applied by the Trustee in the
manner specified in Section 6.10.
SECTION 10.11. Continuing Lien.
---------------
Except as provided in Section 10.13, this Indenture shall
create a continuing Lien on the Collateral that shall (i) remain in full force
and effect until payment in full of the Securities and any other amounts owing
under this Indenture pursuant to Section 7.07, (ii) be binding upon the Company
and its successors and assigns and (iii) inure to the benefit of the Trustee
and its successors, transferees and assigns.
SECTION 10.12. Certificates and Opinions.
-------------------------
The Company shall comply with (a) TIA Section 314(b),
relating to Opinions of Counsel regarding the Lien of this Indenture and (b)
TIA Section 314(d), relating to, among other matters, the release of
Collateral from the Lien of this Indenture and Officers' Certificates or other
documents regarding fair value of the Collateral, to the extent such provisions
are applicable. Any certificate or opinion required by TIA Section 314(d) may
be executed and delivered by an Officer of the Company to the extent permitted
by TIA Section 314(d).
SECTION 10.13. Release.
-------
Upon satisfaction by the Company of the conditions set
forth in Article Eight to its legal defeasance option, its covenant defeasance
option or to the discharge of this Indenture, the Lien of this Indenture on all
the Collateral shall terminate and all the Collateral shall be released without
any further action on the part of the Trustee or any other person. In
addition, in the event that any of the Collateral is sold and so long as such
sale is made in compliance with Section 4.17 and any Net Cash Proceeds from
such
<PAGE> 92
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sale are applied in accordance with such Section 4.17, the Lien of this
Indenture on such Collateral shall terminate and such Collateral shall be
released; provided that the Company delivers to the Trustee an Officers'
Certificate that such Net Cash Proceeds have been so applied. Upon the
release of any Collateral, the Trustee shall execute and deliver to the Company
an instrument or instruments acknowledging the release of such Collateral from
this Indenture and the discharge of the Lien on such Collateral created by this
Article Ten, and will duly assign, transfer and deliver to or upon the order of
the Company (without recourse and without any representation or warranty) such
Collateral.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA 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 required provision shall control.
SECTION 11.02. Notices.
-------
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telex, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, or overnight courier addressed as follows:
if to the Company:
Waxman Industries, Inc.
24460 Aurora Road
Bedford Heights, Ohio 44146
Attention: Neal R. Restivo
<PAGE> 93
-86-
with a copy to:
Shereff, Friedman, Hoffman & Goodman
919 Third Avenue
New York, New York 10022
Attention: Scott Zimmerman, Esq.
if to the Trustee (at its Cleveland, Ohio office)
The Huntington National Bank
Attn: Corporate Trust - CM23
Cleveland, Ohio 44115
Attention: F.G. Lamb
Each of the Company and the Trustee by written notice to
each other may designate additional or different addresses for notices. Any
notice or communication to the Company or the Trustee shall be deemed to have
been given or made as of the date so delivered, if personally delivered; when
answered back, if telexed; when receipt is acknowledged, if faxed; and five (5)
calendar days after mailing, if sent by registered or certified mail, postage
prepaid (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee).
Any notice or communication mailed to a Securityholder,
including any notice delivered in connection with TIA Section 310(b), TIA
Section 313(c), TIA Section 314(a) and TIA Section 315(b), shall be mailed
to him by first class mail or other equivalent means
at his address as it appears on the registration books of the Registrar and
shall be sufficiently given to him 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 11.03. Communications 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
<PAGE> 94
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Company, the Trustee, the Registrar and any other person shall have the
protection of TIA Section 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions
Precedent.
----------------------------------------
Upon any request or application by the Company to the
Trustee to take any action under this Indenture, the Company shall furnish to
the Trustee at the request of the Trustee:
(1) an Officers' Certificate, in form and substance
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;
(2) an Opinion of Counsel stating that, in the
opinion of such counsel, all such conditions precedent have been
complied with; and
(3) where applicable, a certificate or opinion by an
independent certified public accountant satisfactory to the
Trustee that complies with TIA Section 314(c).
SECTION 11.05. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such
certificate or opinion has read such covenant or condition;
(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 person,
he or she has made such examination or investigation as is
necessary to enable him or her to express an informed opinion as
to whether or not such covenant or condition has been complied
with; and
<PAGE> 95
-88-
(4) a statement as to whether or not, in the opinion
of each such person, such condition or covenant has been complied
with.
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
----------------------------------------
The Trustee may make reasonable rules in accordance with
the Trustee's customary practices for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 11.07. Legal Holidays.
--------------
A "Legal Holiday" used with respect to a particular place
of payment is a Saturday, a Sunday or a day on which banking institutions in
New York, New York or at such place of payment are not required to be open. If
a payment date is a Legal Holiday at such place, payment may be made at such
place on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period.
SECTION 11.08. Governing Law.
-------------
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS. Each of the parties hereto agrees to submit to
the jurisdiction of any United States federal court or state court in the State
of New York in any action or proceeding arising out of or relating to this
Indenture and the Securities and the Company hereby irrevocably appoints the
Trustee as its agent to receive service of process in connection with any such
action or proceeding and the Trustee hereby accepts such appointment.
SECTION 11.09. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another
indenture, loan or debt agreement of any of the Company or any of its
Subsidiaries. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 11.10. No Recourse Against Others.
---------------------------
A director, officer, employee, stockholder or Affiliate,
as such, of the Company and each of its Subsidiaries shall not have any
liability for any obligations of the
<PAGE> 96
-89-
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. Each
Securityholder by accepting a Security waives and releases all such liability.
Such waiver and release are part of the consideration for the issuance of the
Securities.
SECTION 11.11. Successors.
----------
All agreements of the Company in this Indenture and the
Securities shall bind its successors. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 11.12. Duplicate Originals.
-------------------
All parties may sign any number of copies of this
Indenture. Each signed copy shall be an original, but all of them together
shall represent the same agreement.
SECTION 11.13. Severability.
------------
In case any provision in this Indenture or in the
Securities shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the full
extent of the law.
SECTION 11.14. Table of Contents, Headings, Etc.
--------------------------------
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, and are not to be considered a part hereof, and
shall in no way modify or restrict any of the terms or provisions hereof.
<PAGE> 97
-90-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
WAXMAN INDUSTRIES, INC.,
as Issuer
By:__________________________
Name:
Title:
THE HUNTINGTON NATIONAL BANK,
as Trustee
By:__________________________
Name:
Title:
<PAGE> 98
EXHIBIT A
[FORM OF SERIES A NOTE]
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. 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 OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO (X) THE
DATE WHICH IS THREE 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 SECURITY) AND (Y) SUCH LATER DATE,
IF ANY, AS MAY BE REQUIRED BY ANY SUBSEQUENT CHANGE IN APPLICABLE LAW (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) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, 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 SUBPARAGRAPHS (a)(1), (a)(2), (a)(3) OR (a)(7)
OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, 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 IN THEIR SOLE
DISCRETION PRIOR
A-1
<PAGE> 99
TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (C), (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF OPINIONS OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF THE FOREGOING
CLAUSE (E), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM ATTACHED AS
EXHIBIT D TO THE INDENTURE (A COPY OF WHICH CAN BE OBTAINED FROM THE TRUSTEE)
IS COMPLETED AND DELIVERED BY THE TRANSFEREE TO EACH OF THEM. THIS LEGEND WILL
BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
THESE SECURITIES HAVE BEEN OFFERED AS PART OF A UNIT.
EACH OF THE UNITS CONSISTS OF $1,856 PRINCIPAL AMOUNT OF SECURITIES AND
WARRANTS OF THE COMPANY INITIALLY EXERCISABLE FOR 59 SHARES OF COMMON STOCK OF
THE COMPANY (THE "WARRANTS"). THE SECURITIES AND WARRANTS WILL NOT BE
TRANSFERABLE BY A HOLDER THEREOF SEPARATELY FROM EACH OTHER UNTIL JULY 19,
1994.
A-2
<PAGE> 100
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS
THEREUNDER, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR
EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY, (1) THE ISSUE PRICE IS $489.02;
(2) THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $510.98; (3) THE ISSUE DATE IS MAY
20, 1994; AND (4) THE YIELD TO MATURITY (COMPOUNDED SEMI-ANNUALLY) IS 13.93%.
WAXMAN INDUSTRIES, INC.
12 3/4% Senior Secured Deferred Coupon Note
Due 2004, Series A
No. $
WAXMAN INDUSTRIES, INC., a Delaware corporation (the
"Company," which term includes any successor entity), for value received
promises to pay to or registered assigns, the principal
sum of Dollars, on June 1, 2004.
Interest Payment Dates: June 1 and December 1, beginning
December 1, 1999.
Record Dates: May 15 and November 15, beginning November 15, 1999.
To the extent set forth in the Indenture, payment hereof
is secured, on an equal and ratable basis with all other Securities, by a valid
first priority security interest in the Collateral (as defined in the
Indenture), the terms of which security interest are set forth in Article Ten
of the Indenture.
A-3
<PAGE> 101
Reference is made to the further provisions of this
Security contained herein, which will for all purposes have the same effect as
if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security
to be signed manually or by facsimile by its duly authorized officers.
Dated: , 1994
WAXMAN INDUSTRIES, INC.
By:____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
A-4
<PAGE> 102
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the
within-mentioned Indenture.
THE HUNTINGTON NATIONAL BANK,
as Trustee
By:_____________________________________
Authorized Signer
A-5
<PAGE> 103
WAXMAN INDUSTRIES, INC.
12 3/4% Senior Secured Deferred Coupon Note
Due 2004, Series A
1. Interest.
--------
WAXMAN INDUSTRIES, INC., a Delaware corporation (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 semi-annually
in arrears on June 1, and December 1 of each year (the "Interest Payment
Date"), commencing December 1, 1999. Notwithstanding anything in this Security
or the Indenture (as defined below) to the contrary, in the event the Issue
Date is prior to June 1, 1994, the Company will pay interest on the Securities
on the Issue Date to the persons who are the registered Holders upon the
issuance of the Securities for the period from the Issue Date up to, but not
including June 1, 1994. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Company shall pay interest on overdue principal and
interest on overdue installments of interest, to the extent lawful, at a rate
equal to 12 3/4% per annum.
2. Method of Payment.
-----------------
The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date
even if the Securities are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal and interest in U.S. Legal Tender. If this Security is a Global
Security, all payments in respect of this Security will be made to the
Depository or its nominee in immediately available funds in accordance with
customary procedures established from time to time by the Depository. If this
Security is a Global Security and a Restricted Security, only Qualified
Institutional Buyers (as defined in Rule 144A under the Securities Act) may
hold a beneficial interest herein.
A-6
<PAGE> 104
3. Paying Agent and Registrar.
--------------------------
Initially, The Huntington National Bank, Columbus, Ohio
(the "Trustee"), will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without notice to the
Holders.
4. Indenture.
---------
The Company issued the Securities under an Indenture,
dated as of May 20, 1994 (the "Indenture"), between the Company and the
Trustee. This Security is one of a duly authorized issue of Securities of the
Company designated as its 12 3/4% Senior Secured Deferred Coupon Notes Due
2004, Series A (the "Series A Securities"). Capitalized terms herein are used
as defined in the Indenture unless otherwise defined herein. 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. Code Section
Section 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture
until such time as the Indenture is qualified under the TIA, and thereafter as
in effect on the date on which the Indenture is qualified under the TIA.
Notwithstanding anything to the contrary herein, the Securities are subject to
all such terms, and Holders of Securities are referred to the Indenture and the
TIA for a statement of them. The Securities are secured obligations of the
Company limited (except as otherwise provided in the Indenture) in aggregate
principal amount at maturity to $92,797,000.
5. Optional Redemption.
-------------------
(a) On or prior to June 1, 1997, the Company may use all
or any portion of the net cash proceeds from one or more Public Equity
Offerings to redeem outstanding Securities in an aggregate principal amount at
maturity not to exceed $25,000,000 at a redemption price of 112.75% of the
Accreted Value thereof plus accrued and unpaid interest, if any, to the
Redemption Date; provided that not less than $65,000,000 aggregate principal
amount at maturity of Securities remains outstanding upon the completion of any
such redemption. Any such redemption must occur on or prior to 60 days after
the Company's receipt of the net cash proceeds of any such Public Equity
Offering.
"Public Equity Offering" means the offer and sale to the
public of shares of any class of the Capital Stock (other than Disqualified
Stock) of the Company or any Subsidiary of the Company pursuant to a
registration statement declared effective by the SEC after the Issue Date (or
with respect to the Capital Stock (other than Disqualified Stock) of Ideal
Holding Group or a Subsidiary of Ideal Holding Group, pursuant to a prospectus
or other comparable document declared effective or otherwise approved by
A-7
<PAGE> 105
comparable Canadian provincial security authorities after the Issue Date) and
pursuant to which the Company or such Subsidiary, as the case may be, receives
net cash proceeds of not less than $15,000,000.
(b) Except as set forth in the preceding paragraph,
the Securities may not be redeemed prior to June 1, 1999. On or after that
date, the Securities may be redeemed, at the option of the Company, in whole or
in part, at any time at a redemption price equal to a percentage of the
Accreted Value thereof, as set forth in the immediately succeeding paragraph,
plus accrued and unpaid interest, if any, to the Redemption Date (subject to
the right of Holders of record on relevant Record Dates to receive interest due
on an Interest Payment Date). The Company may at any time or from time to time
purchase Securities from Securityholders in market transactions and such
purchases shall not be considered redemptions.
The redemption price as a percentage of the Accreted
Value shall be as follows, if the Securities are redeemed during the 12-month
period beginning June 1 of the years indicated below:
Year Percentage
- ---- ----------
1999 . . . . . . . . . . . . . . . . 106.375%
2000 . . . . . . . . . . . . . . . . 104.250%
2001 . . . . . . . . . . . . . . . . 102.125%
2002 and thereafter . . . . . . . . . 100.000%
6. Notice of Redemption.
--------------------
Notice of redemption will be mailed by first class mail
at least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at such Holder's registered address.
Securities in denominations larger than $1,000 may be redeemed in part but only
in multiples of $1,000.
Except as set forth in the Indenture, from and after any
Redemption Date, if on such Redemption Date the Paying Agent holds U.S. Legal
Tender sufficient for the redemption of the Securities called for redemption on
such Redemption Date, then, unless the Company defaults in the payment of the
Redemption Price or the Paying Agent is otherwise prohibited from paying the
Redemption Price, the Securities called for redemption will cease to bear
interest and the only right of the Holders of such Securities will be to
receive payment of the Redemption Price.
A-8
<PAGE> 106
7. Registration Rights.
-------------------
Pursuant to the Registration Rights Agreement among the
Company and the Trustee, the Company will be obligated to consummate an
exchange offer pursuant to which the Holder of this Security shall have the
right to exchange this Security for 12 3/4% Senior Secured Deferred Coupon
Notes Due 2004, Series B, of the Company (the "Series B Securities"), which
have been registered under the Securities Act, in like principal amount and
having identical terms as the Series A Securities. The Holders of Series A
Securities shall be entitled to receive liquidated damages in the event such
exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement. The Series A Securities and the Series B Securities are together
referred to herein as the "Securities."
8. Offers To Purchase.
-------------------
Sections 4.17 and 4.16 of the Indenture provide that
after an Asset Sale or upon the occurrence of a Change of Control, and subject
to further limitations contained therein, the Company shall make an offer to
purchase a certain amount of the outstanding Securities in the event of an
Asset Sale and 100% of the outstanding Securities in the event of a Change of
Control, in each case in accordance with the procedures set forth in the
Indenture.
9. Security.
--------
In order to secure the due and punctual payment of the
Secured Obligations the Company has granted a security interest in the
Collateral to the Trustee for the benefit of the Holders of Securities pursuant
to the Indenture.
10. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons,
in denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption. No
service charge shall be made for any registration of transfer or exchange or
redemption of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
A-9
<PAGE> 107
11. Discharge Prior to Redemption or Maturity; Defeasance.
-----------------------------------------------------
The Company's obligations pursuant to the Indenture will
be discharged, except for obligations pursuant to certain sections thereof,
subject to the terms of the Indenture, upon the payment of all the Securities
or upon the irrevocable deposit with the Trustee of U.S. Legal Tender
sufficient to pay when due principal of and interest, if any, on the Securities
to maturity or redemption, as the case may be.
The Indenture contains provisions (which provisions apply
to this Security) for defeasance at any time of (a) the entire Indebtedness of
the Company on this Security or (b) certain restrictive covenants and the
Defaults and Events of Default related thereto, in each case upon compliance by
the Company with certain conditions set forth therein.
12. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the
Securities may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a majority
in aggregate principal amount of the Securities then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Securities to, among other things, cure any ambiguity,
defect or inconsistency, provide for uncertificated Securities in addition to
or in place of certificated Securities, comply with Article Five of the
Indenture or comply with any requirements of the SEC in connection with the
qualification of the Indenture under the TIA, or make any other change that
does not adversely affect the rights of any Holder of a Security.
13. Restrictive Covenants.
---------------------
The Indenture contains certain covenants that, among
other things, limit the ability of the Company and its Subsidiaries to incur
additional Indebtedness, transfer or sell assets, pay dividends, make certain
other Restricted Payments and Investments, create Liens or enter into sale
lease-back transactions, transactions with Affiliates and mergers. The
Company must quarterly report to the Trustee on compliance with such
limitations.
14. Successors.
----------
When a successor assumes all the obligations of its
predecessor under the Securities and the Indenture and the transaction complies
with the terms of Article Five of the Indenture, the predecessor will be
released from those obligations.
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<PAGE> 108
15. Defaults and Remedies.
---------------------
If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of
Securities then outstanding may declare all the Securities to be due and
payable in the manner, at the time and with the effect provided in the
Indenture. Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee is not obligated
to enforce the Indenture or the Securities unless it has received indemnity
reasonably satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Securities then outstanding to direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Holders of Securities
notice of any continuing Default or Event of Default (except a Default or Event
of Default in payment of principal or interest or a Default or Event of Default
that resulted from failure to comply with Section 4.16, 4.17 or 5.01 of the
Indenture) if it determines that withholding notice is in their interest.
16. Trustee Dealings with Company.
-----------------------------
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 the Company, its Subsidiaries or their respective Affiliates as if it
were not the Trustee.
17. No Recourse Against Others.
--------------------------
No stockholder, director, officer, employee or
incorporator, as such, of the Company or any of its Subsidiaries shall have any
liability for any obligation 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. Each Holder of a Security by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Securities.
18. Authentication.
--------------
This Security shall not be valid until the Trustee or
authenticating agent manually signs the certificate of authentication on this
Security.
19. Governing Law.
-------------
The Laws of the State of New York shall govern this Security and the Indenture.
A-11
<PAGE> 109
20. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a
Holder of a Security or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
21. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee
on Uniform Security Identification Procedures, the Company will cause CUSIP
numbers to be printed on the Securities immediately prior to the qualification
of the Indenture under the TIA as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
22. Indenture.
---------
Each Holder, by accepting a Security, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Security upon
written request and without charge a copy of the Indenture. Requests may be
made to: WAXMAN INDUSTRIES, INC., 24460 Aurora Road, Bedford Heights, Ohio
44146, Attn.: President.
23. Certain Information Obligations.
-------------------------------
At any time when the Company is not subject to Section 13
or 15(d) of the Securities Exchange Act of 1934, upon the request of a Holder
of a Series A Security, the Company will promptly furnish or cause to be
furnished such information as is specified pursuant to Rule 144A(d)(4) under
the Securities Act (or any successor provision thereto) to such Holder or to a
prospective purchaser of such Series A Security designated by such Holder, as
the case may be, in order to permit compliance by such Holder with Rule 144A
under the Securities Act.
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<PAGE> 110
[FORM OF ASSIGNMENT]
I or we assign this Security to
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other
identifying number of assignee
_______________________________________
and irrevocably appoint _______________________ agent to transfer this Security
on the books of the Company. The agent may substitute another to act for it.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to (x) the date which is three 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, and (y) such later date, if any, as may be required by any
subsequent change in applicable law (the "Resale Restriction Termination
Date"), the undersigned confirms that such Securities are being transferred:
CHECK ONE BOX BELOW
(1) [ ] to the Company; or
(2) [ ] pursuant to a registration statement which has been declared
effective under the Securities Act; or
(3) [ ] pursuant to and in compliance with Rule 144A under the Securities
Act; or
A-13
<PAGE> 111
(4) [ ] pursuant to and in compliance with Regulation S under the
Securities Act; or
(5) [ ] 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 Company and the Trustee the Transferee
Certificate in the form attached as Exhibit D to the Indenture
(such Transferee Certificate can be obtained from the Trustee);
or
(6) [ ] pursuant to another available exemption from the registration
requirements of the Securities Act.
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 (3), (4),
(5) or (6) is checked, the Company and the Trustee may require, prior to
registering any such transfer of the Securities, in their sole discretion, such
opinions of counsel, certifications and/or other information satisfactory to
each of them 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.
Dated: ____________________ Signed: ____________________________
_______________________________________________________________
(Sign exactly as your name appears on
the front of this Security)
Signature Guarantee: ___________________________________________
A-14
<PAGE> 112
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Security purchased by
the Company pursuant to Section 4.16 or Section 4.17 of the Indenture, check
the appropriate box:
Section 4.16 [ ]
Section 4.17 [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.16 or Section 4.17 of the
Indenture, state the amount:
$
Date:________________ Signature:_____________________________________
(Sign exactly as your name
appears on the front of
this Security)
Signature Guarantee:______________________________________
A-15
<PAGE> 113
EXHIBIT B
---------
[FORM OF SERIES B NOTE]
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS
THEREUNDER, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR
EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY, (1) THE ISSUE PRICE IS $489.02;
(2) THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $510.98; (3) THE ISSUE DATE IS MAY
20, 1994; AND (4) THE YIELD TO MATURITY (COMPOUNDED SEMI-ANNUALLY) IS 13.93%.
WAXMAN INDUSTRIES, INC.
12 3/4% Senior Secured Deferred Coupon Note
Due 2004, Series B
No. $
WAXMAN INDUSTRIES, INC., a Delaware corporation (the
"Company," which term includes any successor entity), for value received
promises to pay to or registered assigns, the principal
sum of Dollars, on June 1, 2002.
Interest Payment Dates: June 1 and December 1 beginning
December 1, 1999.
Record Dates: May 15 and November 15 beginning November
15, 1999.
To the extent set forth in the Indenture, payment hereof
is secured, on an equal and ratable basis with all other Securities, by a valid
first priority security interest in the Collateral (as defined in the
Indenture), the terms of which security interest are more fully set forth in
Article Ten of the Indenture.
B-1
<PAGE> 114
Reference is made to the further provisions of this
Security contained herein, which will for all purposes have the same effect as
if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security
to be signed manually or by facsimile by its duly authorized officers.
Dated:
WAXMAN INDUSTRIES, INC.
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
B-2
<PAGE> 115
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the
within-mentioned Indenture.
THE HUNTINGTON NATIONAL BANK,
as Trustee
By______________________________________
Authorized Signer
B-3
<PAGE> 116
WAXMAN INDUSTRIES, INC.
12 3/4% Senior Secured Deferred Coupon Note
Due 2004, Series B
1. Interest.
---------
WAXMAN INDUSTRIES, INC., a Delaware corporation (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 semi-annually
in arrears on June 1 and December 1 of each year (the "Interest Payment Date"),
commencing December 1, 1999. Notwithstanding anything in this Security or the
Indenture (as defined below) to the contrary, in the event the Issue Date is
prior to June 1, 1994, the Company will pay interest on the Issue Date to the
persons who are the registered Holders upon the issuance of the Securities for
the period from the Issue Date up to, but not including June 1, 1994. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and
interest on overdue installments of interest, to the extent lawful, at a rate
equal to 12 3/4% per annum.
2. Method of Payment.
-----------------
The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date
even if the Securities are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal and interest in U.S. Legal Tender.
3. Paying Agent and Registrar.
--------------------------
Initially, The Huntington National Bank, Columbus, Ohio
(the "Trustee"), will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without notice to the
Holders.
4. Indenture.
---------
B-4
<PAGE> 117
The Company issued the Securities under an Indenture,
dated as of May 20, 1994 (the "Indenture"), between the Company and the
Trustee. This Security is one of a duly authorized issue of Securities of the
Company designated as its 12 3/4% Senior Secured Deferred Coupon Notes Due
2004, Series B (the "Series B Securities"). Capitalized terms herein are used
as defined in the Indenture unless otherwise defined herein. 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. Code Section
Section 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture
until such time as the Indenture is qualified under the TIA, and thereafter as
in effect on the date on which the Indenture is qualified under the TIA.
Notwithstanding anything to the contrary herein, the Securities are subject to
all such terms, and Holders of Securities are referred to the Indenture and the
TIA for a statement of them. The Securities are secured obligations of the
Company limited (except as otherwise provided in the Indenture) in aggregate
principal amount at maturity to $92,797,000.
5. Exchange Offer.
--------------
The Series B Securities were issued pursuant to an
exchange offer pursuant to which 12 3/4% Senior Secured Deferred Coupon Notes
Due 2004, Series A, of the Company (the "Series A Securities"), in like
principal amount and having substantially identical terms as the Series B
Securities, were exchanged for the Series B Securities. The Series A
Securities and the Series B Securities are together referred to herein as the
"Securities."
6. Optional Redemption.
-------------------
(a) On or prior to June 1, 1997, the Company may use all
or any portion of the net cash proceeds from one or more Public Equity
Offerings to redeem outstanding Securities in an aggregate principal amount at
maturity not to exceed $25,000,000 at a redemption price of 112.75% of the
Accreted Value thereof plus accrued interest, if any, to the Redemption Date,
provided that not less than $65,000,000 aggregate principal amount at maturity
of Securities remains outstanding upon the completion of any such redemption.
Any such redemption must occur on or prior to 60 days after the Company's
receipt of the net cash proceeds of any such Public Equity Offering.
"Public Equity Offering" means the offer and sale to the
public of shares of any class of the Capital Stock (other than Disqualified
Stock) of the Company or any Subsidiary of the Company pursuant to a
registration statement declared effective by the SEC after the Issue Date (or
with respect to the Capital Stock (other than Disqualified Stock) of Ideal
Holding Group or a Subsidiary of Ideal Holding Group, pursuant to a
B-5
<PAGE> 118
prospectus or other comparable document declared effective or otherwise
approved by comparable Canadian provincial security authorities after the Issue
Date) and pursuant to which the Company or such Subsidiary, as the case may be,
receives net cash proceeds of not less than $15,000,000.
(b) Except as set forth in the preceding paragraph, the
Securities may not be redeemed prior to June 1, 1999. On or after that date,
the Securities may be redeemed, at the option of the Company, in whole or in
part, at any time at a redemption price equal to a percentage of the Accreted
Value thereof, as set forth in the immediately succeeding paragraph, plus
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on relevant Record Dates to receive interest due on
an Interest Payment Date). The Company may at any time or from time to time
purchase Securities from Securityholders in market transactions and such
purchases shall not be considered redemptions.
The redemption price as a percentage of the Accreted
Value shall be as follows, if the Securities are redeemed during the 12-month
period beginning June 1 of the years indicated below:
Year Percentage
---- ----------
1999 . . . . . . . . . . . . . . . . . . 106.375%
2000 . . . . . . . . . . . . . . . . . . 104.250%
2001 . . . . . . . . . . . . . . . . . . 102.125%
2002 and thereafter . . . . . . . . . . . 100.000%
7. Notice of Redemption.
--------------------
Notice of redemption will be mailed by first class mail
at least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at such Holder's registered address.
Securities in denominations larger than $1,000 may be redeemed in part but only
in multiples of $1,000.
Except as set forth in the Indenture, from and after any
Redemption Date, if on such Redemption Date the Paying Agent holds U.S. Legal
Tender for the redemption of the Securities called for redemption on such
Redemption Date, then, unless the Company defaults in the payment of the
Redemption Price or the Paying Agent is otherwise prohibited from paying the
Redemption Price, the Securities called for redemption will cease to bear
interest and the only right of the Holders of such Securities will be to
receive payment of the Redemption Price.
B-6
<PAGE> 119
8. Offers To Purchase.
------------------
Sections 4.17 and 4.16 of the Indenture provide that
after an Asset Sale or upon the occurrence of a Change of Control, and subject
to further limitations contained therein, the Company shall make an offer to
purchase a certain amount of the outstanding Securities in the event of an
Asset Sale and 100% of the outstanding Securities in the event of a Change of
Control, in each case in accordance with the procedures set forth in the
Indenture.
9. Security.
--------
In order to secure the due and punctual payment of the
Secured Obligations, the Company has granted a security interest in the
Collateral to the Trustee for the benefit of the Holders of Securities pursuant
to the Indenture.
10. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons,
in denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption. No
service charge shall be made for any registration of transfer or exchange or
redemption of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
11. Discharge Prior to Redemption or Maturity; Defeasance.
------------------------------------------------------
The Company's obligations pursuant to the Indenture will
be discharged, except for obligations pursuant to certain sections thereof,
subject to the terms of the Indenture, upon the payment of all the Securities
or upon the irrevocable deposit with the Trustee of U.S. Legal Tender
sufficient to pay when due principal of and interest, if any, on the Securities
to maturity or redemption, as the case may be.
The Indenture contains provisions (which provisions apply
to this Security) for defeasance at any time of (a) the entire Indebtedness of
the Company on this Security or (b) certain restrictive covenants and the
Defaults and Events of Default related thereto, in each case upon compliance by
the Company with certain conditions set forth therein.
B-7
<PAGE> 120
12. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the
Securities may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a majority
in aggregate principal amount of the Securities then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Securities to, among other things, cure any ambiguity,
defect or inconsistency, provide for uncertificated Securities in addition to
or in place of certificated Securities, comply with Article Five of the
Indenture or comply with any requirements of the SEC in connection with the
qualification of the Indenture under the TIA, or make any other change that
does not adversely affect the rights of any Holder of a Security.
13. Restrictive Covenants.
---------------------
The Indenture contains certain covenants that, among
other things, limit the ability of the Company and its Subsidiaries to incur
additional Indebtedness, transfer or sell assets, pay dividends, make certain
other Restricted Payments and Investments, create Liens or enter into sale
lease-back transactions, transactions with Affiliates and mergers. The Company
must quarterly report to the Trustee on compliance with such limitations.
14. Successors.
----------
When a successor assumes all the obligations of its
predecessor under the Securities and the Indenture and the transaction complies
with the terms of Article Five of the Indenture, the predecessor will be
released from those obligations.
15. Defaults and Remedies.
---------------------
If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of
Securities then outstanding may declare all the Securities to be due and
payable in the manner, at the time and with the effect provided in the
Indenture. Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee is not obligated
to enforce the Indenture or the Securities unless it has received indemnity
reasonably satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Securities then outstanding to direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Holders of Securities
notice of any continuing Default or Event of Default (except a Default or Event
of Default
B-8
<PAGE> 121
in payment of principal or interest or a Default or Event of Default that
resulted from failure to comply with Section 4.16, 4.17 or 5.01 of the
Indenture) if it determines that withholding notice is in their interest.
16. Trustee Dealings with Company.
-----------------------------
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 the Company, its Subsidiaries or their respective Affiliates as if it
were not the Trustee.
17. No Recourse Against Others.
--------------------------
No stockholder, director, officer, employee or
incorporator, as such, of the Company or any of its Subsidiaries shall have any
liability for any obligation 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. Each Holder of a Security by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Securities.
18. Authentication.
--------------
This Security shall not be valid until the Trustee or
authenticating agent manually signs the certificate of authentication on this
Security.
19. Governing Law.
-------------
The Laws of the State of New York shall govern this Security and the Indenture.
20. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a
Holder of a Security or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
21. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee
on Uniform Security Identification Procedures, the Company will cause CUSIP
numbers to be printed
B-9
<PAGE> 122
on the Securities immediately prior to the qualification of the Indenture under
the TIA as a convenience to the Holders of the Securities. No representation
is made as to the accuracy of such numbers as printed on the Securities and
reliance may be placed only on the other identification numbers printed hereon.
22. Indenture.
---------
Each Holder, by accepting a Security, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Security upon
written request and without charge a copy of the Indenture. Requests may be
made to: WAXMAN INDUSTRIES, INC., 24460 Aurora Road, Bedford Heights, Ohio
44146, Attn.: President.
B-10
<PAGE> 123
[FORM OF ASSIGNMENT]
I or we assign this Security to
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other
identifying number of assignee
_______________________________________
and irrevocably appoint _______________________ agent to transfer this Security
on the books of the Company. The agent may substitute another to act for it.
Dated:____________________ Signed:____________________________
________________________________________________________________________________
(Sign exactly as your
name appears on the front of this Security)
Signature Guarantee:__________________________________________
B-11
<PAGE> 124
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Security purchased by
the Company pursuant to Section 4.16 or Section 4.17 of the Indenture, check
the appropriate box:
Section 4.16 [ ]
Section 4.17 [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.16 or Section 4.17 of the
Indenture, state the amount:
$
Date:__________ Signature:____________________________
(Sign exactly as your name
appears on the front of
this Security)
Signature Guarantee:______________________________________
B-12
<PAGE> 125
EXHIBIT C
---------
[FORM OF LEGEND FOR BOOK-ENTRY SECURITIES]
Any Global Security authenticated and delivered hereunder
shall bear a legend (which would be in addition to any other legends required
in the case of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF
THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON
OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A
TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR 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.
C-1
<PAGE> 126
EXHIBIT D
---------
Transferee Letter of Representation
------------------------------------
c/o The Huntington National Bank
917 Euclid Avenue
Cleveland, Ohio 44115
Ladies and Gentlemen:
In connection with our proposed purchase of $
aggregate principal amount of the 12 3/4% Senior Secured Deferred Coupon Notes
Due 2004 (the "Notes") of Waxman Industries, Inc., a Delaware corporation (the
"Company"), we confirm that:
1. We understand that the Notes have not been
registered under the Securities Act of 1933, as amended (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 Notes to offer, sell or otherwise transfer such Notes
prior to (x) the date which is three 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 Notes (or any predecessor thereto) and (y) such
later date, if any, as may be required by any subsequent change in applicable
law (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) so long as the Notes are eligible for resale pursuant
to 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 subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act that is purchasing for his own account or for the account of
such an institutional "accredited investor," in each case in a minimum
principal amount of Notes of $500,000 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
D-1
<PAGE> 127
such investor account or accounts be at all times within our or their control
and to 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 Notes 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 Trustee, which shall provide,
among other things, that the transferee is an institutional "accredited
investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
501 under the Securities Act and that it is acquiring such Notes for investment
purposes and not for distribution in violation of the Securities Act. The
Company and the Trustee reserve the right prior to any offer, sale or other
transfer prior to the Resale Restriction Termination Date of the Notes pursuant
to clause (c), (d), (e) or (f) above to require the delivery of opinions of
counsel, certifications and/or other information satisfactory to the Company
and the Trustee.
2. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) purchasing for our own account or for the account of such an institutional
"accredited investor," and we are acquiring the Notes 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 and we have such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Notes, and we and any accounts for
which we are acting are each able to bear the economic risk of our or its
investment for an indefinite period.
3. We are acquiring the Notes purchased by us for our
own account or for one or more accounts as to each of which we exercise sole
investment discretion.
D-2
<PAGE> 128
4. You are entitled to rely upon this letter and you
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
________________________________________
(Name of Purchaser)
By: ___________________________________
Date: _________________________________
Upon transfer the Notes would be registered in the name of the new
beneficial owner as follows:
Name: ________________________________________
Address: ______________________________________
Taxpayer ID Number: ___________________________
D-3
<PAGE> 129
SCHEDULE I
Issuer Certificate No. Number ofShares
- ------ --------------- ---------------
Waxman USA Inc. 1 100 Shares of Common
Stock, $.01 par value
2 1 Share of Common
Stock, $.01 par value
3 1 Share of Common
Stock, $.01 par value20
<PAGE> 1
EXHIBIT 4.2
________________________________________________________________________________
WARRANT AGREEMENT
BETWEEN
WAXMAN INDUSTRIES, INC.
AND
THE HUNTINGTON NATIONAL BANK,
as Warrant Agent
_______________________
Dated as of May 20, 1994
________________________________________________________________________________
<PAGE> 2
-2-
WARRANT AGREEMENT (the "Agreement"), dated as of May 20,
1994, between Waxman Industries, Inc., a Delaware corporation (together with
any successors and assigns, the "Company"), and The Huntington National Bank, a
National Association, as Warrant Agent (the "Warrant Agent").
WHEREAS, the Company proposes, upon the terms and subject
to the conditions set forth in the Private Offer to Exchange and Consent
Solicitation dated April 21, 1994, as amended and supplemented, and the related
Consent and Letter of Transmittal to (x) offer to exchange for $50,000,000
aggregate principal amount of its 13 3/4% Senior Subordinated Notes due 1998
(the "Notes"), 1 Unit per $1,000 principal amount of Notes (the "Units"), each
Unit consisting of $1,856 aggregate principal amount at maturity of the
Company's 12 3/4% Senior Secured Deferred Coupon Notes Due 2004 (the "Deferred
Coupon Notes") and 59 warrants (the "Warrants"), each Warrant entitling its
holder to initially acquire one share of Common Stock, par value $.01 per share
(the "Common Stock"), of the Company (the "Warrant Shares") and (y) solicit
holders of Notes to consent to waivers of and amendments to certain of the
provisions in the indenture governing the Notes.
WHEREAS, the Company wishes the Warrant Agent to act on
behalf of the Company and the Warrant Agent is willing to so act in connection
with the issuance, division, transfer, exchange and exercise of Warrants.
NOW, THEREFORE, in consideration of the foregoing and for
the purpose of defining the terms and provisions of the Warrants and the
respective rights and obligations thereunder of the Company and the registered
owners of the Warrants (the "Holders"), the Company and the Warrant Agent
hereby agree as follows:
SECTION 1. APPOINTMENT OF WARRANT AGENT. The Company
hereby appoints the Warrant Agent to act as agent for the Company in accordance
with the instructions hereinafter set forth in this Agreement, and the Warrant
Agent hereby accepts such appointment.
SECTION 2. WARRANT CERTIFICATES; EXECUTION; REGISTRATION.
2.1. WARRANT CERTIFICATES; EXECUTION OF WARRANTS. The
Warrants will initially be issued either in global form (the "Global
Warrants"), substantially in the form of Exhibit A (including footnote 1
thereto) or in registered form as definitive Warrant certificates ("Definitive
Warrants"). Any certificates (the "Warrant Certificates") evidencing the
Global Warrants or the Definitive Warrants to be delivered pursuant to this
Agreement
<PAGE> 3
-3-
shall be substantially in the form set forth in Exhibit A attached hereto.
Such Global Warrants shall represent such of the outstanding Warrants as shall
be specified therein and each shall provide that it shall represent the
aggregate amount of outstanding Warrants from time to time endorsed thereon and
that the aggregate amount of outstanding Warrants represented thereby may from
time to time be reduced or increased, as appropriate. Any endorsement of a
Global Warrant to reflect the amount of any increase or decrease in the amount
of outstanding Warrants represented thereby shall be made by the Warrant Agent
and the Depositary specified in the next succeeding sentence (the "Depositary")
in accordance with instructions given by the holder thereof. The Depository
Trust Company shall act as the Depositary with respect to the Global Warrants
until a successor shall be appointed by the Company and the Warrant Agent.
Upon written request, a Warrant holder may receive from the Depositary and
Warrant Agent Definitive Warrants as set forth in Section 4 below.
The Warrant Certificates shall be signed on behalf of the
Company by its Chairman of the Board, President or one of its Vice Presidents.
The signature of any such officers on the Warrant Certificates may be manual or
facsimile.
In case any officer of the Company who shall have signed
any of the Warrant Certificates shall cease to be such officer before the
Warrant Certificates so signed shall have been countersigned by the Warrant
Agent, or disposed of by the Company, such Warrant Certificates nevertheless
may be countersigned and delivered or disposed of as though such person had not
ceased to be such officer of the Company; and any Warrant Certificate may be
signed on behalf of the Company by any person who, at the actual date of the
execution of such Warrant Certificate, shall be a proper officer of the Company
to sign such Warrant Certificate, although at the date of the execution of this
Warrant Agreement any such person was not such officer.
Each Warrant Certificate shall be dated the date it is
countersigned by the Warrant Agent.
2.2. REGISTRATION. The Warrant Agent, on behalf of the
Company, shall number and register Warrant Certificates in a register (the
"Warrant Register") as they are issued by the Company. The Company and the
Warrant Agent shall be entitled to treat the registered owner of any Warrant as
the owner in fact thereof for all purposes and shall not be bound to recognize
any equitable or other claim to or interest in such Warrant on the part of any
other person.
2.3. COUNTERSIGNATURE OF WARRANTS. The Warrants shall
be manually countersigned by the Warrant Agent (or any successor to the Warrant
Agent then acting as warrant agent under this Agreement) and shall not be valid
for any purpose unless so
<PAGE> 4
-4-
countersigned. Warrants may be countersigned, however, by the Warrant Agent
(or by its successor as warrant agent hereunder) and may be delivered by the
Warrant Agent, notwithstanding that the persons whose manual or facsimile
signatures appear thereon as proper officers of the Company shall have ceased
to be such officers at the time of such countersignature, issuance or delivery.
The Warrant Agent shall, upon written instructions of the Chairman of the
Board, the President, a Vice President, the Treasurer or the Controller of the
Company, countersign, issue and deliver Warrants entitling the Holders thereof
to purchase not more than 2,950,000 Warrant Shares (subject to adjustment
pursuant to Section 10 hereof) and shall countersign and deliver Warrants as
otherwise provided in this Agreement.
SECTION 3. TRANSFER AND EXCHANGE OF WARRANTS.
The Warrant Agent shall from time to time, subject to the
limitations of Section 4 and Section 5.3, register the transfer of any
outstanding Warrants upon the records to be maintained by it for that purpose,
upon surrender thereof duly endorsed or accompanied (if so required by it) by a
written instrument or instruments of transfer in form satisfactory to the
Warrant Agent, duly executed by the registered Holder or Holders thereof or by
the duly appointed legal representative thereof or by a duly authorized
attorney. Subject to the terms of this Agreement, each Warrant Certificate may
be exchanged for another certificate or certificates entitling the Holder
thereof to purchase a like aggregate number of Warrant Shares as the
certificate or certificates surrendered then entitle each Holder to purchase.
Any Holder desiring to exchange a Warrant Certificate or Certificates shall
make such request in writing delivered to the Warrant Agent, and shall
surrender, duly endorsed or accompanied (if so required by the Warrant Agent)
by a written instrument or instruments of transfer in form satisfactory to the
Warrant Agent, the Warrant Certificate or Certificates to be so exchanged.
Upon registration of transfer, the Warrant Agent shall
countersign and deliver by certified mail a new Warrant Certificate or
Certificates to the persons entitled thereto. The Warrant Certificates may be
exchanged at the option of the Holder thereof, when surrendered at the office
of the Warrant Agent's agent, Bank of New York, 101 Barclay Street, New York,
New York for another Warrant Certificate, or other Warrant Certificates of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of Warrant Shares.
No service charge shall be made for any exchange or
registration of transfer of Warrant Certificates, but the Company may require
payment of a sum sufficient to cover any stamp or other tax or other
governmental charge that is imposed in connection with any such exchange or
registration of transfer.
<PAGE> 5
-5-
SECTION 4. REGISTRATION OF TRANSFERS AND EXCHANGES.
4.1. TRANSFER AND EXCHANGE OF DEFINITIVE WARRANTS. When
Definitive Warrants are presented to the Warrant Agent with a request:
(a) to register the transfer of the Definitive Warrants; or
(b) to exchange such Definitive Warrants for an equal number
of Definitive Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as requested
if its requirements under this Warrant Agreement and applicable law for such
transactions are met; PROVIDED, HOWEVER, that the Definitive Warrants presented
or surrendered for registration of transfer or exchange:
(x) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Warrant Agent, duly executed by the holder thereof or by
his attorney, duly authorized in writing; and
(y) in the case of Warrants the offer and sale of which have
not been registered under the Securities Act of 1933, as
amended (the "Securities Act") and are presented for
transfer or exchange prior to (x) the date which is three
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 Warrant, or any
predecessor thereto and (y) such later date, if any, as
may be required by any subsequent change in applicable
law (the "Resale Restriction Termination Date"), such
Warrants shall be accompanied, in the sole discretion of
the Company or the Warrant Agent, by the following
additional information and documents, as applicable:
(A) if such Warrant is being delivered to the
Warrant Agent by a holder for registration in
the name of such holder, without transfer, a
certification from such holder to that effect
(in substantially the form of Exhibit B hereto);
or
(B) if such Warrant is being transferred to an
institutional "accredited investor" within the
meaning of subparagraphs (a)(1), (a)(2), (a)(3)
or (a)(7) of Rule 501 under the Securities Act,
delivery of a Certificate of Transfer (in the
form of Exhibit C hereto) opinion of counsel,
certification (in substantially the form of
Exhibit B hereto)
<PAGE> 6
-6-
and/or such other information satisfactory to
the Warrant Agent and Company to the effect that
such transfer is in compliance with the
Securities Act; or
(C) if such Warrant is being transferred in reliance
on another exemption from the registration
requirements of the Securities Act, a
certification to that effect (in substantially
the form of Exhibit B hereto) and an opinion of
counsel and/or such other information
satisfactory to the Company and to the Warrant
Agent to the effect that such transfer is in
compliance with the Securities Act.
4.2. RESTRICTIONS ON TRANSFER OF A DEFINITIVE WARRANT
FOR A BENEFICIAL INTEREST IN A GLOBAL WARRANT. A Definitive Warrant may not be
exchanged for a beneficial interest in a Global Warrant except upon
satisfaction of the requirements set forth below. Upon receipt by the Warrant
Agent of a Definitive Warrant, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Warrant Agent, together
with:
(A) certification that such Definitive Warrant is
being transferred to a qualified institutional
buyer (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A
under the Securities Act; and
(B) written instructions directing the Warrant Agent
to make, or to direct the Depositary to make, an
endorsement on the Global Warrant to reflect an
increase in the aggregate amount of the Warrants
represented by the Global Warrant,
then the Warrant Agent shall cancel such Definitive Warrant and cause, or
direct the Depositary to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Warrant Agent, the
number of Warrant Shares represented by the Global Warrant to be increased
accordingly. If no Global Warrant is then outstanding, the Company shall issue
and the Warrant Agent shall authenticate a new Global Warrant in the
appropriate amount.
4.3. TRANSFER AND EXCHANGE OF GLOBAL WARRANTS. The
transfer and exchange of Global Warrants or beneficial interests therein shall
be effected through the Depositary, in accordance with this Warrant Agreement
(including the restrictions on transfer set forth herein) and the procedures of
the Depositary therefor.
<PAGE> 7
-7-
4.4. TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL
WARRANT FOR A DEFINITIVE WARRANT.
(a) Any person having a beneficial interest in a Global
Warrant may upon request exchange such beneficial
interest for a Definitive Warrant. Upon receipt by the
Warrant Agent of written instructions (or such other form
of instructions as is customary for the Depositary) from
the Depositary or its nominee on behalf of any person
having a beneficial interest in a Global Warrant and upon
receipt by the Warrant Agent of a written order (or such
other form of instructions as is customary for the
Depositary or the person designated by the Depositary as
having such a beneficial interest) containing
registration instructions and, in the case of any such
transfer or exchange prior to the Resale Restriction
Termination Date with respect to a Warrant the offer and
sale of which has not been registered under the
Securities Act, in the sole discretion of the Company or
the Warrant Agent, the following additional information
and documents:
(A) If such beneficial interest is being transferred
to the person designated by the Depositary as
being the beneficial owner, a certification from
such person to that effect (in substantially the
form of Exhibit B hereto); or
(B) if such Warrant is being transferred to an
institutional "accredited investor" within the
meaning of subparagraphs (a)(1), (a)(2), (a)(3)
or (a)(7) of Rule 501 under the Securities Act,
delivery of a Certificate of Transfer (in the
form of Exhibit C hereto) and an opinion of
counsel, certification (in substantially the
form of Exhibit B hereto) and/or such other
information satisfactory to the Warrant Agent
and Company to the effect that such transfer is
in compliance with the Securities Act; or
(C) if such beneficial interest is being transferred
in reliance on another exemption from the
registration requirements of the Securities Act,
a certification to that effect (in substantially
the form of Exhibit B hereto) and an opinion of
counsel and/or such other information
satisfactory to the Company and to the Warrant
Agent to the effect that such transfer is in
compliance with the Securities Act,
then the Warrant Agent will cause, in accordance with the
standing instructions and procedures existing between the
Depositary and the
<PAGE> 8
-8-
Warrant Agent, the aggregate amount of the Global Warrant
to be reduced and, following such reduction, the Company
will execute and, upon receipt of an authentication order
in the form of an Officers' Certificate (as defined
below), the Warrant Agent will authenticate and deliver
to the transferee a Definitive Warrant.
(b) Definitive Warrants issued in exchange for a beneficial
interest in a Global Warrant pursuant to this Section 4.4
shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions
from its direct or indirect participants or otherwise,
shall instruct the Warrant Agent in writing. The Warrant
Agent shall deliver such Definitive Warrants to the
persons in whose names such Warrants are so registered.
4.5. RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL
WARRANTS. Notwithstanding any other provisions of this Warrant Agreement
(other than the provisions set forth in Section 4.6), a Global Warrant may not
be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
4.6. AUTHENTICATION OF DEFINITIVE WARRANTS IN ABSENCE OF
DEPOSITARY. If at any time:
(a) the Depositary for the Warrants notifies the Company that
the Depositary is unwilling or unable to continue as
Depositary for the Global Warrant and a successor
Depositary for the Global Warrant is not appointed by the
Company within 90 days after delivery of such notice; or
(b) the Company, at its sole discretion, notifies the Warrant
Agent in writing that it elects to cause the issuance of
Definitive Warrants under this Warrant Agreement,
then the Company will execute, and the Warrant Agent, upon receipt of an
officers' certificate signed by two officers of the Company (one of whom must
be the principal executive officer, principal financial officer or principal
accounting officer) (an "Officers' Certificate") requesting the authentication
and delivery of Definitive Warrants, will authenticate and deliver Definitive
Warrants, in an aggregate number equal to the aggregate number of warrants
represented by the Global Warrant, in exchange for such Global Warrant.
<PAGE> 9
-9-
4.7. LEGENDS.
(a) Except as permitted by the following paragraph (b), each
Warrant Certificate evidencing the Global Warrants and
the Definitive Warrants (and all Warrants issued in
exchange therefor or substitution thereof) shall bear a
legend substantially to the following effect:
NEITHER THIS SECURITY NOR THE SECURITIES ISSUABLE UPON
THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. NONE OF THIS
SECURITY, THE SECURITIES ISSUABLE UPON EXERCISE HEREOF,
OR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO (X) THE DATE WHICH IS THREE 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 SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS
MAY BE REQUIRED BY ANY SUBSEQUENT CHANGE IN APPLICABLE
LAW (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) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A, 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
<PAGE> 10
-10-
THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPHS
(a)(1), (a)(2), (a)(3) OR (a)(7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH,
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR
(F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT
TO THE COMPANY'S AND THE WARRANT AGENT'S RIGHT IN THEIR
SOLE DISCRETION PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (C), (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND IN THE CASE OF THE FOREGOING CLAUSE
(E), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE
FORM ATTACHED AS EXHIBIT C TO THE WARRANT AGREEMENT (A
COPY OF WHICH CAN BE OBTAINED FROM THE WARRANT AGENT) IS
COMPLETED AND DELIVERED BY THE TRANSFEREE TO EACH OF
THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
THESE SECURITIES HAVE BEEN OFFERED AS PART OF A UNIT.
EACH OF THE UNITS CONSISTS OF $1,856 PRINCIPAL AMOUNT AT
MATURITY OF DEFERRED COUPON SENIOR SECURED NOTES DUE 2004
(THE "DEFERRED COUPON NOTES") OF THE COMPANY AND 59
WARRANTS, EACH WARRANT INITIALLY EXERCISABLE TO PURCHASE
1 SHARE OF COMMON STOCK OF THE COMPANY. THE DEFERRED
COUPON NOTES AND WARRANTS WILL NOT BE TRANSFERABLE BY A
HOLDER THEREOF SEPARATELY FROM EACH OTHER UNTIL JULY 19,
1994.
(b) Upon any sale or transfer of a Warrant pursuant to Rule
144 under the Securities Act or an effective registration
statement under the Act:
(A) in the case of any Definitive Warrant, the Warrant
Agent shall
<PAGE> 11
-11-
permit the holder thereof to exchange such
Warrant for a Definitive Warrant that does not
bear the first two paragraphs of the legend set
forth above and rescind any related restriction
on the transfer of such Warrant; and
(B) any such Warrant represented by a Global Warrant
shall not be subject to the provisions set forth
in (a) above (such sales or transfers being
subject only to the provisions of Section 4.3
hereof); PROVIDED, HOWEVER, that with respect to
any request for an exchange of a Warrant that is
represented by a Global Warrant for a Definitive
Warrant that does not bear the first two
paragraphs of the legend set forth above, which
request is made in reliance upon Rule 144, the
holder thereof shall certify in writing to the
Warrant Agent that such request is being made
pursuant to Rule 144 (such certification to be
substantially in the form of Exhibit B hereto).
(c) Upon original issuance prior to the Resale Restriction
Termination Date, each Warrant Share or other securities
issued upon exercise of the Warrants shall bear the
following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. 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 OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE
HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO (X) THE DATE WHICH IS THREE 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 SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS
MAY BE REQUIRED BY ANY SUBSEQUENT CHANGE IN APPLICABLE
LAW (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
<PAGE> 12
-12-
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A, 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 SUBPARAGRAPHS (a)(1),
(a)(2), (a)(3) OR (a)(7) OF RULE 501 UNDER THE SECURITIES
ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT,
OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT
TO THE RIGHT OF THE COMPANY AND THE TRANSFER AGENT FOR
THE COMPANY'S COMMON STOCK (THE "TRANSFER AGENT") IN
THEIR SOLE DISCRETION PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSES (C), (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF OPINIONS OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND IN THE CASE OF THE FOREGOING CLAUSE
(E), TO REQUIRE THAT A CERTIFICATE OF TRANSFER
CONTAINING, AMONG OTHER THINGS, REPRESENTATIONS AS TO
SUCH TRANSFEREE'S STATUS AS AN "ACCREDITED INVESTOR" (A
COPY OF WHICH CAN BE OBTAINED FROM THE TRANSFER AGENT) IS
COMPLETED AND DELIVERED BY THE TRANSFEREE TO EACH OF
THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
4.8. CANCELLATION AND/OR ADJUSTMENT OF A GLOBAL WARRANT.
At such time as all beneficial interests in a Global Warrant have either been
exchanged for Definitive Warrants, redeemed, repurchased or cancelled, such
Global Warrant shall be returned to
<PAGE> 13
-13-
or retained and cancelled by the Warrant Agent. At any time prior to such
cancellation, if any beneficial interest in a Global Warrant is exchanged for
Definitive Warrants, redeemed, repurchased or cancelled, the number of Warrants
represented by such Global Warrant shall be reduced and an endorsement shall be
made on such Global Warrant, by the Warrant Agent to reflect such reduction.
4.9. OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES
OF DEFINITIVE WARRANTS.
(a) To permit registrations of transfers and
exchanges, the Company shall execute, at the Warrant Agent's request, and the
Warrant Agent shall authenticate Definitive Warrants and Global Warrants.
(b) All Definitive Warrants and Global Warrants
issued upon any registration, transfer or exchange of Definitive Warrants or
Global Warrants shall be the valid obligations of the Company, entitled to the
same benefits under this Warrant Agreement as the Definitive Warrants or Global
Warrants surrendered upon the registration of transfer or exchange.
(c) Prior to due presentment for registration of
transfer of any Warrant, the Warrant Agent and the Company may deem and treat
the person in whose name any Warrant is registered as the absolute owner of
such Warrant, and neither the Warrant Agent nor the Company shall be affected
by notice to the contrary.
SECTION 5. TERM OF WARRANTS; EXERCISE OF WARRANTS;
SEPARATION OF WARRANTS.
5.1. TERM OF WARRANTS. Subject to the terms of this
Agreement, each Holder shall have the right, which may be exercised at any time
from and including July 19, 1994 to and including 5:00 p.m., New York City time
on June 1, 2004 (the "Exercise Period"), to receive from the Company the number
of Warrant Shares which the Holder may at the time be entitled to receive on
exercise of such Warrants and payment of the Exercise Price (as defined below)
then in effect for such Warrant Shares, and the Warrant Shares issued to a
Holder upon exercise of its Warrants shall be validly issued, fully paid,
nonassessable and not subject to any preemptive rights. Each Warrant not
exercised prior to the expiration of the Exercise Period shall become void and
all rights thereunder and all rights in respect thereof under this Agreement
shall cease as of such time. No adjustments as to dividends will be made upon
exercise of the Warrants.
5.2. EXERCISE OF WARRANTS. During the Exercise Period,
each Holder may
<PAGE> 14
-14-
exercise some or all of the Warrants represented by its Warrant Certificate(s)
by (i) surrendering to the Company at the principal office of the Warrant Agent
such certificate(s) with the form of election to purchase on the reverse
thereof duly filled in and signed, which signature shall be guaranteed by a
bank or trust company having an office or correspondent in the United States or
a broker or dealer which is a member of a registered securities exchange or the
National Association of Securities Dealers, Inc., and (ii) paying to the
Warrant Agent for the account of the Company the exercise price set forth in
the form of Warrant Certificate attached hereto as Exhibit A, as adjusted
pursuant to Section 10 hereof (the "Exercise Price"), for the number of Warrant
Shares in respect of which such Warrants are then exercisable. Warrants shall
be deemed exercised on the date such Warrant Certificate(s) are surrendered to
the Warrant Agent and payment of the Exercise Price is made. Payment of the
aggregate Exercise Price shall be made in cash by wire transfer to the Warrant
Agent for the account of the Company or by certified or official bank check to
the order of the Company or by any combination thereof. In addition to the
foregoing, the Company may accept in payment of the Exercise Price any other
consideration in lieu of cash as the Company may agree with the Holder of such
Warrants and the Company shall give the Warrant Agent written notice of the
terms of any such agreement.
Subject to the provisions of Section 6 hereof, upon the
exercise of any Warrants, the Company shall issue and cause to be delivered
with all reasonable dispatch, and in any event within four days, other than a
Saturday or Sunday or a day on which banking institutions in the State of New
York are not open for business (each a "business day"), to or upon the written
order of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrants and shall take such other actions as are
necessary to complete the exercise of the Warrants. The certificate or
certificates representing such Warrant Shares shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become a holder of record of such Warrant Shares as of the date the Warrants
are deemed exercised. The Company covenants that each Warrant Share, when
issued upon exercise of the Warrants, will be validly issued, fully paid and
non-assessable, will not have been issued in violation of any preemptive rights
and will be free from all liens, charges, security interests and, subject to
Section 6, taxes.
The Warrants shall be exercisable, at the election of the
holders thereof, either in full or from time to time in part (provided that
Warrants shall be exercisable in multiples of 100 Warrants unless all of the
Warrants evidenced by a particular Warrant Certificate are being exercised)
and, in the event that a Warrant Certificate is exercised in respect of fewer
than all of the Warrant Shares issuable on the exercise of such Warrants,
<PAGE> 15
-15-
a new certificate evidencing the remaining Warrant or Warrants will be issued,
and the Warrant Agent is hereby irrevocably authorized to countersign and to
deliver the required new Warrant Certificate or Certificates pursuant to the
provisions of this Section and of Section 2.3 hereof, and the Company, whenever
required by the Warrant Agent, will supply the Warrant Agent with Warrant
Certificates duly executed on behalf of the Company for such purpose.
All Warrant Certificates surrendered upon exercise of
Warrants shall be cancelled by the Warrant Agent. Such cancelled Warrant
Certificates shall then be disposed of by the Warrant Agent in a manner
satisfactory to the Company in accordance with its written instructions to the
Warrant Agent. The Warrant Agent shall pay to the Company all monies received
by the Warrant Agent for the purchase of the Warrant Shares through the
exercise of such Warrants within two business days of receipt thereof and
concurrently account to the Company with respect to such exercise.
The Warrant Agent shall keep copies of this Agreement and
any notices given or received hereunder available for inspection by the Holders
during normal business hours at its office. The Company shall supply the
Warrant Agent from time to time with such numbers of copies of the Agreement as
the Warrant Agent may request.
5.3. SEPARATION OF WARRANTS. The Deferred Coupon Notes
and Warrants will not be separately transferable prior to July 19, 1994.
SECTION 6. PAYMENT OF TAXES. The Company will pay all
documentary stamp and other like taxes, if any, attributable to the initial
issuance or delivery of any Warrant Certificates or Warrant Shares upon the
exercise of Warrants; PROVIDED, HOWEVER, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any Warrant Certificates or issuance or
delivery of certificates for Warrant Shares in a name other than that of the
Holder of such Warrant Certificates or Warrant Shares, respectively, and the
Warrant Agent shall not register any such transfer or issue any such Warrant
Certificates or Warrant Shares unless or until the persons requesting the
registration or issuance shall have paid to the Warrant Agent for the account
of the Company the amount of such tax, if any, or shall have established to the
satisfaction of the Company that such tax, if any, has been paid.
SECTION 7. MUTILATED OR MISSING WARRANTS. In the event
that any Warrant Certificate shall be mutilated, lost, stolen or destroyed, the
Company shall issue, and the Warrant Agent shall countersign and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate or in lieu of and substitution for the
<PAGE> 16
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Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of
like tenor and representing an equivalent right or interest, but only upon
receipt of evidence satisfactory to the Company and the Warrant Agent of such
loss, theft or destruction of such Warrant Certificate and an indemnity or
bond, if requested by them, also satisfactory to them.
SECTION 8. RESERVATION OF WARRANT SHARES
8.1. RESERVATION OF WARRANT SHARES. The Company will at
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants. The transfer agent for the Common Stock
and every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the Warrants (each, a "Transfer Agent")
will be and are hereby irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
The Company will keep a copy of this Agreement on file with the Transfer Agent.
The Warrant Agent is hereby irrevocably authorized to requisition from time to
time from the Transfer Agent the stock certificates for Warrant Shares required
to honor outstanding Warrants upon exercise thereof in accordance with the
terms of this Agreement. The Company covenants that all Warrant Shares which
may be issued upon exercise of Warrants are duly authorized and will, upon
issuance thereof as provided herein, be validly issued, fully paid,
nonassessable, free of preemptive rights and free from all taxes, liens,
charges and security interests. The Company will supply such Transfer Agent
with duly executed stock certificates for such purposes and will itself provide
or otherwise make available any cash which may be payable as provided in
Section 11. The Company will furnish to such Transfer Agent a copy of all
notices of adjustments and certificates related thereto, transmitted to each
Holder pursuant to Section 10.3 hereof. The Company will give the Warrant
Agent notice of any change in the Transfer Agent or any change of address of
the Transfer Agent.
Before taking any action which would cause an adjustment
pursuant to Section 10 reducing the Exercise Price below the then par value (if
any) of the Warrant Shares, the Company will take any and all corporate action
which may be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
SECTION 9. STOCK EXCHANGE LISTINGS. The Company shall
use its best efforts to list the Warrant Shares on each national securities
exchange and market on
<PAGE> 17
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which the Common Stock may at any time be listed, subject to official notice of
issuance upon the exercise of the Warrants, and shall use its best efforts to
maintain such listing, so long as any other shares of its Common Stock shall be
so listed; and the Company shall use its best efforts to so list on each
national securities exchange and market, and shall use its best efforts to
maintain such listing of, any other shares of capital stock of the Company
issuable upon the exercise of the Warrants if and so long as any shares of
capital stock of the Company which are of the same class and substantially
similar to such shares shall be listed on such national securities exchange or
market by the Company. Any such listing shall be at the Company's expense.
In the event that, at any time during the Exercise
Period, the Common Stock is not listed on any principal securities exchange or
market within the United States of America, the Company will use its best
efforts to permit the Warrant Shares to be designated PORTAL securities in
accordance with the rules and regulations adopted by the National Association
of Securities Dealers, Inc. relating to trading in the Private Offering,
Resales and Trading through Automated Linkages market.
SECTION 10. ADJUSTMENT OF EXERCISE PRICE, NUMBER OF
WARRANT SHARES AND SHARES OF CAPITAL STOCK WARRANTS ARE EXERCISABLE INTO. The
number and kind of securities purchasable upon the exercise of each Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of certain events, as hereinafter defined.
10.1. MECHANICAL ADJUSTMENTS.
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. In case
the Company shall (i) pay a dividend on the Common Stock in shares of its
Common Stock or make any other distribution of shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of
shares or (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, the number of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be adjusted so that
the Holder of each Warrant shall be entitled to receive the number of Warrant
Shares which he would have owned or have been entitled to receive after the
happening of any of the events described above had such Warrant been exercised
immediately prior to the happening of such event or any record date with
respect thereto.
An adjustment made pursuant to this paragraph (a) shall
become effective immediately after the effective date of such event retroactive
to the record date, if any, for such event. Such adjustment shall be made
successively whenever such a payment, subdivision or combination is made.
<PAGE> 18
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(b) ADJUSTMENT FOR OTHER DISTRIBUTIONS. In case the
Company shall distribute to all holders of its shares of Common Stock evidences
of its indebtedness (other than Convertible Securities), assets (excluding cash
dividends or distributions payable out of consolidated retained earnings and
dividends or distributions referred to in paragraph (a) above or in the
paragraph immediately following this paragraph), shares of capital stock (other
than Common Stock), or rights, options or warrants containing the right to
subscribe for or purchase debt securities, assets or securities of the Company
(other than Convertible Securities or shares of Common Stock) (collectively
"Assets"), then in each case the number of Warrant Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon the
exercise of each Warrant by a fraction, of which the numerator shall be the
market price per share of Common Stock (as defined in paragraph (f) below) on
the date of such distribution, and the denominator of which shall be such
market price per share of Common Stock less the fair value as of such record
date (as determined in good faith by the Board of Directors of the Company) of
the portion of the Assets applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of distribution retroactive to the record date for
the determination of shareholders entitled to receive such distribution. A
reclassification of the Common Stock (other than a change in par value, from
par value to no par value or from no par value to par value) into shares of
Common Stock and shares of any other class of stock shall be deemed a
distribution by the Company to the holders of its Common Stock of such shares
of such other class of stock within the meaning of this Section 10.1(b) and, if
the outstanding shares of Common Stock shall be changed into larger or smaller
number of shares of Common Stock as a part of such reclassification, such
change shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 10.1(a).
No adjustment shall be made pursuant to this paragraph
(b) unless, on the record date for such distribution, the market price per
share of Common Stock exceeds the fair market value of the Assets applicable to
each outstanding share of Common Stock. In the event, and each time, that the
Company distributes Assets to all holders of its Common Stock and the market
price per share of Common Stock on the record date for such distribution is
less than or equal to the fair market value of the Assets applicable to each
share of outstanding Common Stock on such date, the Company shall either (i)
distribute Assets to the Holders of record on the record date for such
distribution when such Assets are distributed to the holders of Common Stock as
though all Warrants had been exercised as of such record date or (ii) deposit
such Assets in trust with a trustee. If the Company elects to distribute
Assets to the Holders, the Company shall, on the date Assets are distributed to
holders of Common Stock, distribute to each Holder of record the Assets
<PAGE> 19
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that it would have been entitled to receive on such date if it had exercised
its Warrants immediately prior to the record date for such distribution. If,
however, the Company elects to deposit the Assets due Holders in trust, the
Company shall, on the date Assets are distributed to holders of Common Stock,
place in trust the Assets that all Holders would have been entitled to receive
on such date if all of their Warrants had been exercised immediately prior to
the record date for such distribution; and each Holder shall be entitled upon
exercise of its Warrants to receive the Common Stock issuable upon exercise
thereof, the Assets placed in trust in respect of such Warrants, and the
interest and dividends paid on such Assets since being placed in trust. In the
event any Warrants have not been exercised during the Exercise Period, any
assets remaining in such trust after distributions have been made in respect of
Warrants exercised shall be returned to the Company.
In the event of a distribution by the Company to all
holders of its shares of Common Stock of stock of a subsidiary or securities
convertible into or exercisable for such stock, then in lieu of an adjustment
in the number of Warrant Shares purchasable upon the exercise of each Warrant,
the Holder of each Warrant, upon the exercise thereof at any time after such
distribution, shall be entitled to receive from the Company, such subsidiary or
both, as the Company shall determine, the stock or other securities to which
such Holder would have been entitled if such Holder had exercised such Warrant
immediately prior thereto, all subject to further adjustment as provided in
this Section 10.1.
For all purposes of this Section 10 "Convertible
Securities" shall mean evidences of indebtedness, shares of stock or other
securities which are convertible into or exchangeable for, with or without
payment of additional consideration in cash or property, shares of Common
Stock, either immediately or upon the occurrence of a specified date or a
specified event.
(c) ADJUSTMENT FOR COMMON STOCK ISSUE. If at any
time the Company shall (except as hereinafter provided) issue or sell any
shares of Common Stock for consideration in an amount per share of Common Stock
less than the then current market price per share of Common Stock (as defined
in paragraph (f) below), then (i) the number of Warrant Shares purchaseable
upon the exercise of each Warrant shall be adjusted to equal the product
obtained by multiplying the number of shares of Common Stock for which such
Warrant is exercisable immediately prior to such issue or sale by a fraction
(A) the numerator of which shall be the number of shares of Common Stock
outstanding immediately after such issue or sale, and (B) the denominator of
which shall be the sum of (1) the number of shares of Common Stock outstanding
immediately prior to such issue or sale, and (2) the aggregate consideration
received from the issuance or sale of such
<PAGE> 20
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additional shares of Common Stock divided by the market price (as defined in
paragraph (f) below) immediately prior to such issue or sale, PROVIDED,
HOWEVER, that no adjustment shall be made pursuant to this Section 10.1(c) upon
the issuance of Common Stock (i) in a bona fide public offering pursuant to a
firm commitment underwriting or pursuant to Rule 144A under the Securities Act,
(ii) pursuant to any existing employee stock option, purchase or similar plan
providing for options or other similar rights to purchase shares of Common
Stock or (iii) upon the exercise of any warrants to purchase Common Stock
issued pursuant to the Warrant Agreement dated as of September 17, 1991 between
the Company and United States Trust Company of New York, as warrant agent. For
the purposes of this 10.1(c), the date as of which the current market price per
share of Common Stock shall be computed shall be the earlier of (a) the date on
which the Company shall enter into a firm contract for the issuance of such
shares of Common Stock or (b) the date of actual issuance of such shares of
Common Stock.
(d) ISSUANCE OF WARRANTS OR OTHER RIGHTS. In the
case the Company shall distribute to all holders of its shares of Common Stock
or shall in any manner (whether directly or by assumption in a merger in which
the Company is the surviving corporation) issue or sell, any warrants or other
rights to subscribe for or purchase any shares of Common Stock or any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such warrants or other rights or
upon conversion or exchange of such Convertible Securities plus the price paid
to the Company to acquire such warrants, other rights or Convertible Securities
shall be less than the current market price per share of Common Stock (as
defined in paragraph (f) below) in effect immediately prior to the time of such
distribution, issue or sale, then the number of Warrant Shares purchasable upon
the exercise of each Warrant shall be adjusted as provided in Section 10.1(c)
on the basis that (i) the maximum number of shares of Common Stock issuable
pursuant to all such warrants or other rights or necessary to give effect to
the conversion or exchange of all such Convertible Securities shall be deemed
to be issued and outstanding, (ii) the price per share for such shares of
Common Stock shall be deemed to be the lowest possible price per share in any
range of prices per share at which such shares of Common Stock are available to
such holders, and (iii) the Company shall have received all of the
consideration payable therefor, if any, as of the date of the actual issuance
of such warrants or other rights PROVIDED, HOWEVER, that no adjustment shall be
made pursuant to this Section 10.1(d) upon the issuance or sale of any warrants
or other rights to subscribe for or purchase any shares of Common Stock or
Convertible Securities pursuant to any existing employee stock option, purchase
or similar plan. No further adjustments of the number of shares of Common
Stock for which any such Warrant is exercisable shall be made upon the actual
issue of such Common Stock or of such Convertible Securities upon exercise of
such warrants or other rights or upon the
<PAGE> 21
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actual issue of such Common Stock upon such conversion or exchange of such
Convertible Securities. For the purposes of this Section 10.1(d), the date as
of which the current market price of Common Stock shall be computed shall be
the earliest of (a) the date on which the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive any
such warrants or other rights, (b) the date on which the Company shall enter
into a firm contract for the issuance of such warrants or other rights or (c)
the date of actual issuance of such warrants or other rights.
(e) ADJUSTMENTS FOR ISSUANCE OF CONVERTIBLE
SECURITIES. In the case the Company shall distribute to all holders of its
shares of Common Stock or shall in any manner (whether directly or by
assumption in a merger in which the Company is the surviving corporation) issue
or sell any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange, plus the price
paid to the Company to acquire such Convertible Security, shall be less than
the current market price per share of Common Stock (as defined in paragraph (f)
below), in effect immediately prior to the time of such distribution, issue or
sale, then the number of Warrant Shares purchasable upon the exercise of each
Warrant shall be adjusted as provided in Section 10.1(c) on the basis that (i)
the maximum number of shares of Common Stock necessary to effect the conversion
or exchange of all such Convertible Securities shall be deemed to be issued and
outstanding, (ii) the price per share of such shares of Common Stock shall be
deemed to be the lowest possible price in any range of prices at which such
shares of Common Stock are available to such holders, and (iii) the Company
shall have received all of the consideration payable therefor, if any, as of
the date of actual issuance of such Convertible Securities, PROVIDED, HOWEVER,
that no adjustment shall be made pursuant to this Section 10.1(e) upon the
issuance of Convertible Securities (i) in a bona fide public offering pursuant
to a firm commitment underwriting or pursuant to Rule 144 under the Securities
Act or (ii) pursuant to any existing employee stock option, purchase or similar
plan. No adjustment of the number of shares of Common Stock for which such
Warrant is exercisable shall be made under this Section 10.1(e) upon the
issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to 10.1(d). No further adjustments of the
number of shares of Common Stock for which any such Warrant is exercisable
shall be made upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities and, if any issue or sale of such
Convertible Securities is made upon exercise of any warrant or other right to
subscribe for or to purchase any such Convertible Securities for which
adjustments have been or are to be made pursuant to other provisions of this
Section 10, no further adjustments shall be made by reason of such issue or
sale. For the purposes of
<PAGE> 22
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this Section 10.1(e), the date as of which the current market price of Common
Stock shall be computed shall be the earliest of (a) the date on which the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive any such Convertible Securities, (b) the date on
which the Company shall enter into a firm contract for the issuance of such
Convertible Securities or (c) the date of actual issuance of such Convertible
Securities.
(f) CURRENT MARKET PRICE. For the purpose of any
computation under paragraphs (c), (d) and (e) of this Section, the market price
per share of Common Stock at any date shall be the average of the daily closing
prices for 20 consecutive trading days preceding the date of such computation.
The closing price for each day shall be the last reported sales price regular
way or, in case no such reported sale takes place on such day, the average of
the closing bid and asked prices regular way for such day, in each case on the
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading or, if not listed or admitted to trading, the
average of the last reported sales price or in case no such reported sales take
place on such day, the average of the closing bid and asked prices of the
Common Stock in the over-the-counter market as reported by National Association
of Securities Dealers Automated Quotations ("NASDAQ") or NASDAQ/NMS or any
comparable system or, if the Common Stock is not included for quotation in
NASDAQ or NASDAQ/NMS or a comparable system, the average of the closing bid and
asked prices as furnished by two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Board of Directors
of the Company for that purpose. In the absence of one or more such
quotations, the market price per share of the Common Stock shall be determined
by the Board of Directors of the Company, in good faith.
(g) WHEN DE MINIMIS ADJUSTMENT MAY BE DEFERRED. No
adjustment in the number of Warrant Shares purchasable hereunder shall be
required unless such adjustment would require an increase or decrease of at
least one percent (1%) in the number of Warrant Shares purchasable upon the
exercise of each Warrant; PROVIDED, HOWEVER, that any adjustments which by
reason of this paragraph (g) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
shall be made to the nearest one-thousandth of a share.
(h) ADJUSTMENT IN EXERCISE PRICE. Whenever the
number of Warrant Shares purchasable upon the exercise of each Warrant is
adjusted as herein provided, the Exercise Price payable upon exercise of each
Warrant shall be adjusted by multiplying such Exercise Price immediately prior
to such adjustment by a fraction, of which the numerator shall be the number of
Warrant Shares purchasable upon the exercise of each Warrant immediately prior
to such adjustment, and of which the denominator shall be the
<PAGE> 23
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number of Warrant Shares purchasable immediately thereafter.
(i) WHEN NO ADJUSTMENT REQUIRED. No adjustment in
the number of Warrant Shares purchasable upon the exercise of each Warrant need
be made under paragraphs (b) and (d) and (e) if the Company issues or
distributes to each Holder of Warrants the Assets, warrants or other rights or
Convertible Securities referred to in those paragraphs which each Holder of
Warrants would have been entitled to receive had the Warrants been exercised
prior to the happening of such event or the record date with respect thereto.
No adjustment in the number of Warrant Shares purchasable upon the exercise of
each Warrant need be made for sales of Common Stock pursuant to a Company plan
for reinvestment of dividends or interest. No adjustment need be made for a
change in the par value or to no par value of the Warrant Shares; PROVIDED,
HOWEVER, that the Exercise Price shall at no time be less than the par value of
the Common Stock of the Company, PROVIDED, FURTHER, that the Company shall
reduce the par value of its Common Stock from time to time as necessary so that
such par value shall not be more than the Exercise Price then in effect.
(j) SHARES OF COMMON STOCK. For all purposes of
this Agreement, the term "shares of Common Stock" shall mean (i) the class of
stock designated as the Common Stock of the Company at the date of this
Agreement or (ii) any other class of stock resulting from successive changes or
reclassifications of such shares consisting solely of changes in par value, or
from par value to no par value, or from no par value to par value. In the
event that at any time, as a result of an adjustment made pursuant to paragraph
(a) above, the Holders shall become entitled to purchase any securities of the
Company other than shares of Common Stock, thereafter the number of such other
shares so purchasable upon exercise of each Warrant and the Exercise Price of
such shares shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Warrant Shares contained in paragraphs (a) through (i) herein, inclusive,
above, this paragraph and the provisions of Section 5 and Sections 10.2 through
10.4, inclusive, with respect to the Warrant Shares, shall apply on like terms
to any such other securities.
(k) EXPIRATION OF RIGHTS, WARRANTS OR CONVERTIBLE
SECURITIES. Upon the expiration of any rights, warrants or Convertible
Securities, if any thereof shall not have been exercised, exchanged or
converted, the Exercise Price and the number of shares of Common Stock
purchasable upon the exercise of each Warrant shall, upon such expiration, be
readjusted and shall thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment not been required, as the
case may be) as if (A) the only shares of Common Stock so issued were the
shares of Common Stock, if any, actually issued or sold upon the exercise of
such rights or warrants or conversion
<PAGE> 24
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or exchange of Convertible Securities and (B) such shares of Common Stock, if
any, were issued or sold for the consideration actually received by the Company
upon such exercise, conversion or exchange plus the aggregate consideration, if
any, actually received by the Company for the issuance, sale or grant of all of
such rights, warrants or Convertible Securities whether or not exercised,
converted or exchanged, as the case may be; PROVIDED, HOWEVER, that no such
readjustment shall have the effect of increasing the Exercise Price or
decreasing the number of shares of Common Stock purchasable upon the exercise
of each Warrant by an amount in excess of the amount of the adjustment
initially made in respect of the issuance, sale or grant of such rights,
warrants or Convertible Securities.
(l) In the event of any issuance of securities by
the Company for consideration in whole or in part in other than cash, the Board
of Directors of the Company shall determine in good faith the value thereof
which determination shall be conclusive and binding.
10.2. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company
may at its option, at any time during the term of the Warrants, reduce the then
current Exercise Price to any amount deemed appropriate by the Board of
Directors of the Company; PROVIDED, HOWEVER, the Company may not in any case
increase the Exercise Price pursuant to this Section 10.2; PROVIDED, FURTHER,
if the Company elects to reduce the then current Exercise Price, such reduction
shall remain in effect for at least a 30 day period, after which time the
Company may, at its option, reinstate the Exercise Price in effect immediately
prior to such reduction.
10.3. NOTICE OF ADJUSTMENT. Whenever the number of
Warrant Shares purchasable upon the exercise of each Warrant or the Exercise
Price of such Warrant Shares is adjusted, as herein provided, the Company
shall cause the Warrant Agent promptly to mail by first class mail, postage
prepaid, to each Holder notice of such adjustment or adjustments and shall
deliver to the Warrant Agent a certificate of a firm of independent public
accountants (who may be the regular accountants employed by the Company)
setting forth the number of Warrant Shares purchasable upon the exercise of
each Warrant and the Exercise Price of such Warrant Shares after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
The Warrant Agent shall be entitled to rely on such certificate and shall be
under no duty or responsibility with respect to any such certificate, except to
exhibit the same, from time to time, to any Holder desiring an inspection
thereof during reasonable business hours. The Warrant Agent shall not at any
time be under any duty or responsibility to any Holders to determine whether
any facts exist which may require any adjustment of the Exercise Price or the
number of Warrant
<PAGE> 25
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Shares or other stock or property purchasable on exercise thereof, or with
respect to the nature or extent of any such adjustment when made, or with
respect to the method employed in making such adjustment.
10.4. PRESERVATION OF PURCHASE RIGHTS UPON MERGER,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger
of the Company with or into another corporation, the Company or such successor
corporation shall execute with the Warrant Agent an agreement that each Holder
shall have the right thereafter upon payment of the Exercise Price in effect
immediately prior to such action to purchase upon exercise of each Warrant the
kind and amount of shares and other securities and property (including cash)
which such Holder would have owned or have been entitled to receive after the
happening of such consolidation or merger had such Warrant been exercised
immediately prior to such action; PROVIDED, HOWEVER, that no adjustment in
respect of dividends, interest or other income on or from such shares or other
securities and property shall be made during the term of a Warrant or upon the
exercise of a Warrant. The Company shall mail by first class mail, postage
prepaid, to each Holder notice of the execution of any such agreement. Such
agreement shall provide for adjustments, which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 10. In
addition, the Company will not merge or consolidate with or into any other
corporation unless the successor corporation (if not the Company), shall
expressly assume, by supplemental agreement reasonably satisfactory in form to
the Warrant Agent and executed and delivered to the Warrant Agent, the due and
punctual performance and observance of each and every covenant and condition of
this Agreement to be performed and observed by the Company. The provisions of
this Section 10.4 shall similarly apply to successive consolidations or
mergers. The Warrant Agent shall be under no duty or responsibility to
determine the correctness of any provisions contained in any such agreement
relating to the kind or amount of shares of stock or other securities or
property receivable upon exercise of Warrants or with respect to the method
employed and provided therein for any adjustments and shall be entitled to rely
upon the provisions contained in any such agreement.
10.5. STATEMENT ON WARRANTS. Irrespective of any
adjustments in the Exercise Price or the number or kind of shares purchasable
upon the exercise of the Warrants, Warrants theretofore or thereafter issued
may continue to express the same price and number and kind of shares as are
stated in the Warrants initially issuable pursuant to this Agreement.
SECTION 11. FRACTIONAL INTERESTS. The Company shall not
be required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant Certificate shall be presented for exercise in full at
the same time by the same Holder, the
<PAGE> 26
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number of full Warrant Shares which shall be issuable upon the exercise thereof
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrants so presented. If any fraction of a
Warrant Share would, despite the provisions of this Section 11, be issuable on
the exercise of any Warrant (or specified portion thereof), the Company shall
pay an amount in cash equal to the current market price (as defined in
paragraph (f) of Section 10.1) for one share of the Common Stock multiplied by
such fraction.
SECTION 12. NO RIGHTS AS STOCKHOLDERS; NOTICES TO
HOLDERS. Nothing contained in this Agreement or in any of the Warrants shall
be construed as conferring upon the Holders or their transferees the right to
vote or to receive dividends or to consent or to receive notice as stockholders
in respect of any meeting of stockholders for the election of directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company.
SECTION 13. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF
WARRANT AGENT. Any corporation into which the Warrant Agent may be merged or
with which it may be consolidated, or any corporation resulting from any
merger or consolidation to which the Warrant Agent shall be a party, or any
corporation succeeding to the corporate trust business of the Warrant Agent,
shall be the successor to the Warrant Agent hereunder without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, provided that such corporation would be eligible for appointment as a
successor Warrant Agent under the provisions of Section 15 hereof. In case at
the time such successor to the Warrant Agent shall succeed to the agency
created by this Agreement, any of the Warrant Certificates shall have been
countersigned but not delivered, any such successor to the Warrant Agent may
adopt the countersignature of the original Warrant Agent and deliver such
Warrant Certificates so countersigned; and in case at that time any of the
Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificates either in the name of
the predecessor Warrant Agent or in the name of the successor Warrant Agent;
and in any such case Warrants shall have the full force provided in the
Warrants and in this Agreement.
In case at any time the name of the Warrant Agent shall
be changed and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent may adopt the
countersignatures under its prior name and deliver such Warrant Certificates so
countersigned; and in case at that time any of the Warrant Certificates shall
not have been countersigned, the Warrant Agent may countersign such Warrant
Certificates either in its prior name or in its changed name; and in all such
cases such Warrants shall have the full force provided in the Warrants and in
this Agreement.
<PAGE> 27
-27-
SECTION 14. CONCERNING THE WARRANT AGENT. The Warrant
Agent undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the Holders, by
their acceptance of Warrant Certificates, shall be bound:
14.1. CORRECTNESS OF STATEMENTS. The statements
contained herein and in the Warrant Certificates shall be taken as statements
of the Company and the Warrant Agent assumes no responsibility for the
correctness of any of the same except such as describe the Warrant Agent or
action taken by it. The Warrant Agent assumes no responsibility with respect
to the distribution of the Warrants except as herein otherwise provided.
14.2. BREACH OF COVENANTS. The Warrant Agent shall not
be responsible for any failure of the Company to comply with any of the
covenants contained in this Agreement or in the Warrant to be complied with by
the Company.
14.3. PERFORMANCE OF DUTIES. The Warrant Agent may
execute and exercise any of the rights or powers hereby vested in it or perform
any duty hereunder either itself or by or through its attorneys or agents and
shall not be responsible for the misconduct or negligence of any agent
(excluding any employee) appointed with due care.
14.4. RELIANCE ON COUNSEL. The Warrant Agent may
consult at any time with legal counsel satisfactory to it (who may be counsel
for the Company) and the Warrant Agent shall incur no liability or
responsibility to the Company or to any Holder in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
opinion or the advice of such counsel.
14.5. PROOF OF ACTIONS TAKEN. Whenever in the
performance of its duties under this Agreement the Warrant Agent shall deem it
necessary or desirable that any fact or matter be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed)
may be deemed conclusively to be proved and established by a certificate signed
by the Chairman of the Board or President, a Vice President, the Treasurer or
the Controller of the Company and delivered to the Warrant Agent; and such
certificate shall be full authorization to the Warrant Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
14.6. COMPENSATION. The Company agrees to pay the
Warrant Agent reasonable compensation for all services rendered by the Warrant
Agent in the
<PAGE> 28
-28-
performance of its duties under this Agreement, to reimburse the Warrant Agent
for all reasonable expenses, taxes and governmental charges and other charges
of any kind and nature incurred by the Warrant Agent in the performance of its
duties under this Agreement, and to indemnify the Warrant Agent and save it
harmless against any and all liabilities, including judgments, costs and
counsel fees, for anything done or omitted by the Warrant Agent in the
performance of its duties under this Agreement, except as a result of the
Warrant Agent's negligence or bad faith. The Company's obligations under this
Section 14.6 and any claim arising hereunder shall survive the resignation or
removal of the Warrant Agent and the termination or discharge of the Company's
obligations under this Agreement.
14.7. LEGAL PROCEEDINGS. The Warrant Agent shall be
under no obligation to institute any action, suit or legal proceeding or to
take any other action likely to involve expense unless the Company or any one
or more Holders shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without any such security or
indemnity. All rights of action under this Agreement or under any of the
Warrants may be enforced by the Warrant Agent without the possession of any of
the Warrant Certificates or the production thereof at any trial or other
proceeding relative thereto, and any such action, suit or proceeding instituted
by the Warrant Agent shall be brought in its name as Warrant Agent, and any
recovery of judgment shall be for the ratable benefit of the Holders, as their
respective rights or interests may appear.
14.8. OTHER TRANSACTIONS IN SECURITIES OF COMPANY. The
Warrant Agent and any stockholder, director, officer or employee of the Warrant
Agent may buy, sell or deal in any of the Warrants, or other securities of the
Company or become pecuniarily interested in any transaction in which the
Company may be interested or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Warrant Agent under
this Agreement. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity.
14.9. LIABILITY OF WARRANT AGENT. The Warrant Agent
shall act hereunder solely as agent, and its duties shall be determined solely
by the provisions hereof. The Warrant Agent shall not be liable for anything
which it may do or refrain from doing in connection with this Agreement except
for its own negligence or bad faith.
14.10. RELIANCE ON DOCUMENTS. The Warrant Agent will
not incur any liability or responsibility to the Company or to any Holder for
any action taken in reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, document or
<PAGE> 29
-29-
instrument reasonably believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties.
14.11. VALIDITY OF AGREEMENT. The Warrant Agent shall
not be under any responsibility in respect of the validity of this Agreement or
the execution and delivery hereof (except the due execution hereof by the
Warrant Agent) or in respect of the validity or execution of any Warrant
(except its countersignature thereof); nor shall the Warrant Agent by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Warrant Shares (or other stock) to be
issued pursuant to this Agreement or any Warrant, or as to whether any Warrant
Shares (or other stock) will, when issued, be validly issued, fully paid and
nonassessable, or as to the Exercise Price or the number or amount of Warrant
Shares or other securities or other property issuable upon exercise of any
Warrant.
14.12. INSTRUCTIONS FROM COMPANY. The Warrant Agent is
hereby authorized and directed to accept instructions with respect to the
performance of its duties hereunder from the Chairman of the Board, the
President, a Vice President, the Controller or the Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and shall not be liable for any action taken or suffered to be taken by
it in good faith in accordance with instructions of any such officer or
officers.
SECTION 15. CHANGE OF WARRANT AGENT. The Warrant Agent
may resign and be discharged from its duties under this Agreement by giving to
the Company 60 days' notice in writing. The Warrant Agent may be removed by
like notice to the Warrant Agent from the Company, such notice to specify the
date when removal shall become effective. If the Warrant Agent shall resign or
be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Warrant Agent. If the Company shall fail to make
such appointment within a period of 60 days after such removal or notification
in writing of such resignation or incapacity by the resigning or incapacitated
Warrant Agent, then any Holder may apply to any court of competent jurisdiction
for the appointment of a successor to the Warrant Agent. Any successor warrant
agent, whether appointed by the Company or such a court, shall be a bank or
trust company, in good standing, incorporated under the laws of the United
States of America or any state thereof and having at the time of its
appointment as warrant agent a combined capital and surplus of at least
$50,000,000. After appointment and acceptance of such appointment in writing,
the successor warrant agent shall be vested with the same powers, rights,
duties and responsibilities as if it had been originally named as Warrant
Agent without further act or deed; but the former warrant agent shall deliver
and transfer to the successor Warrant Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose.
<PAGE> 30
-30-
Failure to file any notice provided for in this Section 15, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Warrant agent or the appointment of the successor warrant agent,
as the case may be. In the event of such resignation or removal, the successor
warrant agent shall mail, by first class mail, postage prepaid, to each Holder,
written notice of such removal or resignation and the name and address of such
successor warrant agent.
SECTION 16. IDENTITY OF TRANSFER AGENT. Forthwith upon
the appointment of any subsequent transfer agent for the Common Stock, or any
other shares of the Company's capital stock issuable upon the exercise of the
Warrants, the Company will file with the Warrant Agent a statement setting
forth the name and address of such subsequent transfer agent.
SECTION 17. NOTICES. Any notice pursuant to this
Agreement by the Company or by any Holder to the Warrant Agent, or by the
Warrant Agent or by any Holder to the Company, shall be in writing and shall be
delivered in person or by facsimile transmission, or mailed first class,
postage prepaid (a) to the Company, at its offices at 24460 Aurora Road,
Bedford Heights, Ohio 44146, Attention: Chief Financial Officer or (b) to the
Warrant Agent, at its Cleveland office at 917 Euclid Avenue, Cleveland, Ohio,
Attention: Corporate Trust Department. Each party hereto may from time to time
change the address to which notices to it are to be delivered or mailed
hereunder by notice to the other party.
Any notice mailed pursuant to this Agreement by the
Company or the Warrant Agent to the Holders shall be in writing and shall be
mailed first class, postage prepaid, or otherwise delivered, to such Holders at
their respective addresses on the books of the Warrant Agent.
SECTION 18. FURNISHING INFORMATION. So long as the
Warrants remain outstanding, the Company shall cause its annual report to
stockholders and any quarterly or other financial reports furnished by it to
stockholders to be mailed to the Holders, at their addresses as set forth in
the Warrant Register maintained by the Warrant Agent, at the time that they are
mailed or otherwise sent to the Company's stockholders.
At any time that the Company does not have a class of
securities registered under the Exchange Act or is not otherwise required to
file with the Securities and Exchange Commission the reports required to be
filed by Section 13 of the Securities Exchange Act of 1934, as amended, the
Company will prepare, for the first three quarters of each fiscal year
quarterly reports, and for each fiscal year an annual report, containing
information (including, but not limited to, combined or consolidated financial
statements
<PAGE> 31
-31-
which in the case of annual reports shall be audited) substantially equivalent
to that required to be included in reports on Form 10-Q and on Form 10-K,
respectively, under the Exchange Act. All financial statements will be
prepared in accordance with generally accepted accounting principles
consistently applied, except for changes with which the Company's independent
public accountants concur and except that quarterly statements need not comply
with footnote disclosure requirements, may be subject to normal year-end
adjustments and shall be certified by the Chief Financial Officer of the
Company, and in the case of the annual financial statements, certified by the
Company's independent public accountants. The Company will cause at the
Company's expense a copy of the respective reports to be mailed to the Warrant
Agent and each of the Holders within 60 days after the close of each of the
first three quarters of each fiscal year and within 115 days after the close of
each fiscal year, to the respective address designated in Section 16 hereof.
SECTION 19. SUPPLEMENTS AND AMENDMENTS. The Company and
the Warrant Agent may from time to time supplement or amend this Agreement
without approval of any Holder, in order to cure any ambiguity or to make any
other change that does not adversely affect the rights of any Holder. Any
amendment or supplement that has an adverse effect on the interests of Holders
shall require the written consent of Holders of a majority of the then
outstanding Warrants. The consent of each Holder affected shall be required
for any amendment pursuant to which the number of Warrant Shares which could be
acquired upon exercise of Warrants would be decreased or the Exercise Period
would be modified in any manner.
SECTION 20. SUCCESSORS. All the covenants and
provisions of this Agreement by or for the benefit of the Company or the
Warrant Agent shall bind and inure to the benefit of their respective
successors and assigns hereunder.
SECTION 21. APPLICABLE LAW. This Agreement and each
Warrant issued hereunder shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to principles of
conflict of laws.
SECTION 22. BENEFITS OF THIS AGREEMENT. Nothing in this
Agreement shall be construed to give to any person or corporation other than
the Company, the Warrant Agent, and the Holders any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Warrant Agent and its respective
successors and assigns and the Holders of the Warrants.
SECTION 23. COUNTERPARTS. This Agreement may be
executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to
<PAGE> 32
-32-
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 24. CAPTIONS. The captions of the Sections and
subsections of this Agreement have been inserted for convenience only and shall
have no substantive effect.
<PAGE> 33
-33-
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, all as of the day and year first above written.
THE HUNTINGTON NATIONAL BANK,
Warrant Agent
By: ________________________
Name:
Title:
WAXMAN INDUSTRIES, INC.
By: ________________________
Name:
Title:
<PAGE> 1
EXHIBIT 4.3
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[Unless and until it is exchanged in whole or in part for
Warrants in definitive form, this Warrant may not be transferred as a whole
except by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as requested by an authorized representative of
DTC (and any payment is made to Cede & Co. or 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.]1
NEITHER THIS SECURITY NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. NONE OF THIS SECURITY, THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF, OR ANY INTEREST OR PARTICIPATION HEREIN OR
THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO (X) THE DATE WHICH IS THREE 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 SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED
BY ANY SUBSEQUENT CHANGE IN APPLICABLE LAW (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) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
____________________
1 This paragraph is to be included only if the Warrant is
in global form.
<PAGE> 2
-3-
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 SUBPARAGRAPHS (a)(1), (a)(2),
(a)(3) OR (a)(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE WARRANT AGENT'S RIGHT IN THEIR SOLE DISCRETION PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSE (C), (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF THE FOREGOING CLAUSE (E), TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM ATTACHED AS EXHIBIT C TO THE
WARRANT AGREEMENT (A COPY OF WHICH CAN BE OBTAINED FROM THE WARRANT AGENT) IS
COMPLETED AND DELIVERED BY THE TRANSFEREE TO EACH OF THEM. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
THESE SECURITIES HAVE BEEN OFFERED AS PART OF A UNIT. EACH OF THE UNITS
CONSISTS OF $1,856 PRINCIPAL AMOUNT AT MATURITY OF DEFERRED COUPON SENIOR
SECURED NOTES DUE 2004 (THE "NOTES") OF THE COMPANY AND 59 WARRANTS, EACH
WARRANT INITIALLY EXERCISABLE TO PURCHASE 1 SHARE OF COMMON STOCK OF THE
COMPANY. THE NOTES AND WARRANTS WILL NOT BE TRANSFERABLE BY A HOLDER THEREOF
SEPARATELY FROM EACH OTHER UNTIL JULY 19, 1994.
<PAGE> 3
No. ___ Warrants
Warrant Certificate
WAXMAN INDUSTRIES, INC.
This Warrant Certificate certifies that __________, or
registered assigns, is the registered holder of Warrants expiring at 5:00 p.m.,
New York City time, on June 1, 2004 (the "Warrants") to purchase Common Stock,
no par value (the "Common Stock") of Waxman Industries, Inc. (the "Company").
Each Warrant entitles the holder upon exercise to receive from the Company if
exercised before 5:00 p.m., New York City time, on June 1, 2004, one validly
issued, fully paid and nonassessable share of Common Stock (a "Warrant Share")
at the initial exercise price (the "Exercise Price") of $2.45 payable in lawful
money of the United States of America upon surrender of this Warrant
Certificate and payment of the Exercise Price at the office or agency of the
Warrant Agent, but only subject to the conditions set forth herein and in the
Warrant Agreement referred to on the reverse hereof. The Exercise Price and
number of Warrant Shares issuable upon exercise of the Warrants are subject to
adjustment upon the occurence of certain events set forth in the Warrant
Agreement.
Warrants not exercised on or before 5:00 p.m., New York
City time, on June 1, 2004, shall become void.
This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent, as such term is used in the Warrant
Agreement.
IN WITNESS WHEREOF, Waxman Industries, Inc. has caused
this Warrant Certificate to be duly executed.
WAXMAN INDUSTRIES, INC.
By: ________________________
Title:
DATED:
Countersigned:
<PAGE> 4
-2-
THE HUNTINGTON NATIONAL BANK,
as Warrant Agent
By: ________________________
Authorized Signatory
<PAGE> 5
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are
part of a duly authorized issue of Warrants expiring June 1, 2004, entitling
the holder on exercise to receive shares of Common Stock, par value $.01 per
share, of the Company (the "Common Stock") and are issued or to be issued
pursuant to a Warrant Agreement dated as of May 20, 1994 (the Warrant
Agreement"), duly executed and delivered by the Company to The Huntington
National Bank, as Warrant Agent (the "Warrant Agent"), which Warrant Agreement
is hereby incorporated by reference in and made a part of this instrument and
is hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Warrant Agent, the Company
and the holders (the words "holders" or "holder" meaning the registered holders
or registered holder) of the Warrants. A copy of the Warrant Agreement may be
obtained by the holder hereof upon written request to the Company.
Warrants may be exercised at any time on or after July
19, 1994 and before 5:00 p.m. New York City time on June 1, 2004. The holder
of Warrants evidenced by this Warrant Certificate may exercise them by
surrendering this Warrant Certificate, with the form of election to purchase
set forth hereon properly completed and executed, together with payment of the
Exercise Price in the manner described below at the office of the Warrant
Agent. In the event that upon any exercise of Warrants evidenced hereby the
number of Warrants exercised shall be less than the total number of Warrants
evidenced hereby, there shall be issued to the holder hereof or its assignee a
new Warrant Certificate evidencing the number of Warrants not exercised. No
holder of Warrants shall be entitled to receive any dividends paid on the
Common Stock prior to the exercise of its Warrants and, upon the exercise of
some or all of its Warrants, a Warrant holder shall be entitled to receive only
dividends paid on the shares of Common Stock issuable to him on or prior to the
record date for such dividends.
Payment of the Exercise Price may be made in cash by wire
transfer to the Warrant Agent for the account of the Company or by certified or
official bank check to the order of the Company or by any combination thereof.
The Company may accept in payment of the Exercise Price any other consideration
as the Company may agree with the holder of such Warrants.
The Warrant Agreement provides that upon the occurrence
of certain events the number of shares of Common Stock issuable upon the
exercise of each Warrant set forth on the face hereof may, subject to certain
conditions, be adjusted. No fractions of a share of Common Stock will be
issued upon the exercise of any Warrant, but the Company shall pay the cash
value thereof determined as provided in the Warrant
A-1
<PAGE> 6
Agreement.
The holders of the Warrants are entitled to certain
registration rights with respect to the Warrants and the Common Stock
purchasable upon exercise thereof. Said registration rights are set forth in a
Registration Rights Agreement dated as of May 20, 1994.
Warrant Certificates, when surrendered at the office of
the Warrant Agent by the registered holder thereof in person or by legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of
this Warrant Certificate at the office of the Warrant Agent a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided in
the Warrant Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder(s) hereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, of any distribution to
the holder(s) hereof, and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
A-2
<PAGE> 7
PURCHASE FORM
-------------
Dated ___________, ____
The undersigned hereby irrevocably elects to exercise the
within Warrant to the extent of purchasing ____ shares of Common Stock and
hereby makes payment of ____ in payment of the exercise price thereof.
_____________
INSTRUCTIONS FOR REGISTRATION OF STOCK
--------------------------------------
Name _______________________________________________________________________
(please typewrite or print in block letters)
Address ____________________________________________________________________
Signature ____________________________________________________
_____________
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers unto
Name _______________________________________________________________________
(please typewrite or print in block letters)
Address ____________________________________________________________________
its right to purchase _____ shares of Common Stock represented by this Warrant
and does hereby irrevocably constitute and appoint _____ Attorney, to transfer
the same on the books of the Company, with full power of substitution in the
premises.
Date:_____________, ____
A-1
<PAGE> 8
________________________ Signature _____________________
Social Security or other Note: The signature
identifying number of must conform in all
holder respects to name of
holder as specified
_______________________ on the face of this
Signature Guarantee Warrant Certificate.
A-2
<PAGE> 9
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants")
of Waxman Industries, Inc.
This Certificate relates to ____ Warrants held in* ___
book-entry or* _______ definitive form by ______ (the "Transferor").
The Transferor:*
/ / has requested the Warrant Agent by written order to
deliver in exchange for its beneficial interest in the Global Warrant held by
the depository a Warrant or Warrants in definitive, registered form of
authorized denominations and an aggregate number equal to its beneficial
interest in such Global Warrant (or the portion thereof indicated above); or
/ / has requested the Warrant Agent by written order to
exchange or register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each
such Warrant, the Transferor does hereby certify that Transferor is familiar
with the Warrant Agreement relating to the above captioned Warrants and the
restrictions on transfers thereof as provided in Section 4 of such Warrant
Agreement, and that the transfer of this Warrant does not require registration
under the Securities Act (as defined below) because:__
/ / Such Warrant is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section 4.1(y)(A) or Section
4.4(a)(A) of the Warrant Agreement).
/ / Such Warrant is being transferred to an institutional
"accredited investor" within the meaning of subparagraphs (a)(1), (a)(2),
(a)(3) or (a)(7) of Rule 501 under the Securities Act of 1933, as amended (the
"Securities Act") that has furnished to the Company and the Warrant Agent a
Transferee Certificate in the form attached as Exhibit
B-1
<PAGE> 10
C to the Warrant Agreement.
/ / Such Warrant is being transferred in reliance on and in
compliance with the exemption from the registration requirements of the
Securities Act set forth below. An opinion of counsel to the effect that such
transfer does not require registration under the Securities Act accompanies
this Certificate.
/ / Regulation S under the Securities Act.
/ / Rule 144 under the Securities Act.
/ / Rule 144A under the Securities Act.
______________________________
[INSERT NAME OF TRANSFEROR]
By: _________________________
Date: _____________
*Check applicable box.
B-2
<PAGE> 11
EXHIBIT C
Transferee Letter of Representation
Waxman Industries, Inc.
24460 Aurora Road
Bedford Heights, Ohio 44146
Dear Sirs:
In connection with our proposed purchase of
Common Stock Purchase Warrants (the "Securities") of Waxman Industires, Inc.
(the "Company") we confirm that:
1. We understand that the Securities have not been
registered under the Securities Act of 1933, as amended (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 (x) the date which is three 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 and (y) such later date,
if any, as may be required by any subsequent change in applicable
law (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) so long as the
Securites are eligible for resale pursuant to 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 subparagraph (a)(1), (2), (3) or (7) of
Rule 501 under the Securities Act that is purchasing for his own
account or for the account of such an institutional "accredited
investor," 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 to compliance with any applicable state securities laws. The
foregoing restrictions on resale will not apply subsequent to
the Resale
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<PAGE> 12
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 warrant agent
under the Warrant Agreement pursuant to which the Securities were
issued (the "Warrant Agent") which shall provide, among other
things, that the transferee is an institutional "accredited
investor" within the meaning of subparagraph (a)(1), (2), (3) or
(7) of Rule 501 under the Securities Act and that it is acquiring
such Securities for investment purposes and not for distribution
in violation of the Securities Act. The Warrant Agent and the
Company reserve the right prior to any offer, sale or other
transfer prior to the Resale Restriction Termination Date of the
Securities pursuant to clauses (c), (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
Warrant Agent.
2. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) purchasing for our own account or for the
account of such an institutional "accredited investor," and we
are acquiring the 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 and we have such
knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment
in the Securities, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its
investment for an indefinite period.
3. We are acquiring the Securities purchased by us for
our own account or for one or more accounts as to each of which
we exercise sole investment discretion.
4. You are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Very truly yours,
-------------------
(Name of Purchaser)
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<PAGE> 13
By:__________________________
Date:________________________
Upon transfer the Securities would be registered in the
name of the new beneficial owner as follows:
Name:______________________________
Address:___________________________
Taxpayer ID Number:________________
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<PAGE> 1
EXHIBIT 10.6
TAX SHARING AGREEMENT
---------------------
THIS AGREEMENT dated as of May 20, 1994 is entered into by and among
WAXMAN INDUSTRIES, INC., a Delaware corporation ("Waxman") and each member of
the Waxman Group (as hereinafter defined) as set forth herein and WAXMAN USA
INC., a Delaware corporation ("Waxman USA") and each member of the Waxman USA
Group (as hereinafter defined) as set forth herein. This Agreement shall be
effective as of the date hereof, with respect to all Taxable Periods (as
hereinafter defined); provided, however, that if a corporation becomes a member
of either the Waxman Group or the Waxman USA Group after the date hereof, then
this Agreement shall be effective with respect to such corporation as of the
date on which such corporation becomes such a member.
WITNESSETH:
----------
WHEREAS, Waxman is the common parent corporation of an affiliated group of
corporations within the meaning of Section 1504(a) of the Internal Revenue Code
of 1986, as amended, and the members of the Waxman USA Group are members of
said affiliated group; and
WHEREAS, the parties hereto deem it appropriate to define the method by
which the income and franchise tax liability of the affiliated group shall be
allocated among the parties and the manner in which such allocated liability
shall be paid.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, and other good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged,
the parties hereto agree as follows:
<PAGE> 2
1. Definitions
-----------
The following terms as used in this Agreement shall have the
meanings set forth below:
(a) "Code" shall mean the Internal Revenue Code of 1986,
as amended, and any successor statute.
(b) "Consolidated Return" shall mean a consolidated
federal income tax return prepared and filed by Waxman pursuant to Section 1501
of the Code.
(c) "Federal Taxes" shall mean all United States federal
income taxes (including, without limitation, all alternative minimum taxes)
together with interest and penalties assessed with respect thereto.
(d) "IRS" shall mean the Internal Revenue Service.
(e) "Loss Item" shall mean a net operating loss, a net
capital loss or a credit against federal income tax liability.
(f) "Regulations" shall mean the Treasury Regulations
as in effect from time to time.
(g) "Taxable Period" shall mean the fiscal year of each
of the Waxman Group and Waxman USA Group ending on June 30 of each year or such
other fiscal year to which such group may change; provided that the first
Taxable Period to which this Agreement applies is the Taxable Period ending
June 30, 1994.
(h) "Waxman Consolidated Group" shall mean the affiliated
group of corporations within the meaning of section
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<PAGE> 3
1504(a) of the Code for any Taxable Period of which Waxman is the common
parent.
(i) "Waxman Consolidated Tax Liability" shall mean the
consolidated Federal Tax liability of the Waxman Consolidated Group for any
Taxable Period for which the Waxman Consolidated Group files a consolidated
return.
(j) "Waxman Group" shall mean the Waxman Consolidated Group
excluding members of the Waxman USA Group. The appropriate comparable rules
utilized by state, local or foreign taxing authorities shall be used for
determining membership in the group for state, local and foreign tax purposes.
(k) "Waxman USA Group" shall mean for federal income tax
purposes Waxman USA, Barnett Inc., a Delaware corporation, WOC Inc., a Delaware
corporation, Waxman Consumer Products Group Inc., a Delaware corporation, TWI,
International, Inc., a Delaware corporation, and Western American
Manufacturing, Inc., a Delaware corporation, for so long as they remain in the
Waxman USA Group and any other corporation which becomes member of the
affiliated group of corporations within the meaning of Section 1504(a) of the
Code for any Taxable Period of which Waxman USA would be the common parent if
it were not owned by Waxman. The appropriate comparable rules utilized by
state, local or foreign taxing authorities shall be used for determining
membership in the group for state, local and foreign tax purposes.
(l) "Waxman USA Group Member's Tax Liability" shall mean
with respect to a member of the Waxman USA Group for a Taxable Period, the
liability for Federal Taxes that such member would have for such Taxable Period
if it were not a member of the Waxman Consolidated Group or the Waxman USA
Group during such Taxable Period but instead were filing a separate return for
such Taxable
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<PAGE> 4
Period (and all prior Taxable Periods beginning after June 30, 1993); provided,
however, that for purposes of determining such liability for a Taxable Period
(i) all tax elections shall be consistent with the tax elections of the Waxman
Consolidated Group for such period; (ii) the tax consequences of any
transaction among members of the Waxman Consolidated Group that results in the
deferral of an income tax liability under the appropriate Regulations shall be
taken into account only when such income tax liability is actually recognized
by the members of such Group; and (iii) any tax credit, tax benefit, or
exclusion from a tax detriment that is solely determined or otherwise limited
(in an absolute amount, in proportion or otherwise) in respect of a
consolidated return will be utilized by the members of the Waxman USA Group to
determine the members' Waxman USA Group Members' Tax Liability in an amount
equal to the amount which bears the same relationship to such tax credit, tax
benefit or exclusion from tax detriment as the tax credit, tax benefit, or
exclusion from tax detriment actually generated by the member bears to the
aggregate amount of such tax credits, tax benefits or exclusions from tax
detriments actually generated by all members of the Waxman Consolidated Group.
Notwithstanding the foregoing, if for any Taxable Period, the aggregate total
of each Waxman USA Group members' Waxman USA Group Member's Tax Liability
exceeds, without regard to this sentence, the Waxman USA Group Tax Liability
for such Tax Period as a result of the incurrence of a loss or a Loss Item
(including any carry-back or carry-over of a loss or Loss Item) by the Waxman
Group or other members of the Waxman USA Group, then each member's Waxman USA
Group Member's Tax Liability shall be limited to an amount equal to the amount
which bears the same relationship to the Waxman USA Group Tax Liability as such
member's Waxman USA Group Member's Tax Liability bears to the aggregate total
of each Waxman USA Group member's Waxman USA Group Member's Tax Liability, each
determined without regard to this sentence. In subsequent Taxable Periods, to
the extent that the Waxman USA Group
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<PAGE> 5
Tax Liability exceeds the aggregate total of all Waxman USA Group members'
Waxman USA Group Member's Tax Liability, such member's Waxman USA Group
Member's Tax Liability shall be increased, but not in excess of the aggregate
amount of reductions to its Waxman USA Group Member's Tax Liability pursuant to
the previous sentence, by the proportionate amount of such excess.
(m) "Waxman USA Group Tax Liability" shall mean for a
Taxable Period, the liability for Federal Taxes that the Waxman USA Group would
have for such Taxable Period if its members were not members of the Waxman
Consolidated Group during such Taxable Period but instead were filing a
separate consolidated return for such Taxable Period (and all prior Taxable
Periods beginning after June 30, 1993); provided, however, that for purposes of
determining such liability for a Taxable Period (i) all tax elections shall be
consistent with the tax elections of the Waxman Consolidated Group for such
period, (ii) the tax consequences of any transaction among members of the
Waxman Consolidated Group that results in the deferral of an income tax
liability under the Regulations shall be taken into account only when such
income tax liability is actually recognized by the members of such Group; and
(iii) any tax credit, tax benefit, or exclusion from a tax detriment that is
solely determined or otherwise limited (in an absolute amount, in proportion or
otherwise) in respect of a consolidated return will be utilized by the Waxman
USA Group to determine the Waxman USA Group Tax Liability in an amount equal to
the amount which bears the same relationship to such tax credit, tax benefit or
exclusion from a tax detriment as the tax credit, tax benefit or exclusion from
tax detriment actually generated by all members of the Waxman USA Group bears
to the aggregate amount of such tax credits, tax benefits or exclusions from
tax detriments actually generated by all members of the Waxman Consolidated
Group. Notwithstanding the foregoing, if for any Taxable Period, the Waxman
USA Group Tax Liability, without regard to this sentence, exceeds the Waxman
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<PAGE> 6
Consolidated Tax Liability for such Tax Period as a result of the incurrence of
a loss or a Loss Item (including any carry-back or carry-over of a loss or Loss
Item) by the Waxman Group, then the Waxman USA Group Tax Liability shall be
reduced by such excess for such Taxable Period. In subsequent Taxable Periods,
to the extent that the Waxman Consolidated Group Tax Liability exceeds Waxman
USA Group Tax Liability, the Waxman USA Group Tax Liability shall be increased,
but not in excess of the aggregate amount of reductions to the Waxman USA Group
Tax Liability pursuant to the previous sentence, by the amount by which the
Waxman Group's tax liability would have been reduced had the Waxman Group filed
a consolidated return without the inclusion of the Waxman USA Group for all
periods subsequent to June 30, 1993.
2. Payment of Waxman USA Group Member's Tax Liability and
------------------------------------------------------
Waxman USA Group Tax Liability; Responsibilities.
------------------------------------------------
Approximately 15 days prior to the due date for payment of an
installment of estimated Federal Taxes, Waxman shall notify the Waxman USA
Group in writing, and no later than 5 days prior to the due date for payment of
such Federal Taxes, the members of the Waxman USA Group shall pay to Waxman USA
an amount equal to the installment that each member of the Waxman USA Group
would have been required to pay as an estimated payment of Federal Taxes if it
were filing a separate return in respect of its Waxman USA Group Member's Tax
Liability, and Waxman USA shall pay to Waxman, an amount equal to the
installment that the Waxman USA Group would have been required to pay as an
estimated payment of Federal Taxes if it were filing a separate consolidated
return in respect of the Waxman USA Group Tax Liability (but not in excess of
the applicable installment that Waxman is required to pay). Any balance due
with respect to a Waxman USA member's Waxman USA Group Member's Tax Liability
or the Group's Waxman USA Group Tax Liability for a Taxable Period shall be
paid to Waxman USA or Waxman, respectively, on or before the 15th day of the
third month after the close of
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<PAGE> 7
such Taxable Period; provided, however, if it is not possible to determine the
amount of such balance on or before such day, (a) a reasonable estimate thereof
shall be paid on or before such day, (b) the amount of such balance shall be
finally determined on or before the 15th day of the ninth month after the close
of such Taxable Period and (c) any difference between the amount so determined
and the estimated amount shall be promptly paid to Waxman, Waxman USA, and/or
any member of the Waxman USA Group, as required. With respect to the Taxable
Period ending June 30, 1994, the parties hereto shall agree upon a reasonable
payment method for the amount due hereunder. As between the parties to this
Agreement, the Waxman USA Group shall be solely responsible for the Waxman USA
Group Tax Liability and shall have no responsibility for the Waxman
Consolidated Tax Liability other than payment of the Waxman USA Group Tax
Liability in accordance with the terms of this Agreement.
3. Recomputation of Tax.
--------------------
If, by reason of any audit, examination, litigation,
settlement, filing of an amended return, carryover or carry-back of a tax
attribute, or otherwise (a "Recomputation Event"), the amount of any item of
taxable income, gain, loss, deduction or credit used in computing the Waxman
Consolidated Tax Liability or the Waxman Group Tax Liability is revised for any
Taxable Period, (a) the amount of any payments due under this Agreement will be
recomputed by Waxman to reflect the revised amount of such tax item, (b) the
Waxman Group and the Waxman USA Group will each promptly pay the other any
unpaid balance of such recomputed amount of payments due to the other under
this Agreement, plus interest calculated in the same manner and at the same
rates as calculated by the IRS based on the recomputed Waxman USA Group Tax
Liability. Penalties charged to Waxman USA as a result of any Recomputation
Event shall be based on actual penalties charged by the IRS and shall be
apportioned to
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<PAGE> 8
Waxman USA in proportion to the Waxman USA Group's share of the Waxman
Consolidated Group's tax on which the penalty was based.
If, by reason of a Recomputation Event, the amount of any item of
taxable income, gain, loss, deduction or credit used in computing the Waxman
Consolidated Tax Liability, the Waxman USA Group Tax Liability, or a member's
Waxman USA Group Member's Tax Liability is revised for any Taxable Period, (a)
the amount of any payments due under this Agreement will be recomputed by
Waxman USA to reflect the revised amount of such tax item, (b) Waxman USA and
the Waxman USA Group member will each promptly pay the other any unpaid balance
of such recomputed amount of payments due to the other under this Agreement,
plus interest calculated in the same manner and at the same rates as calculated
by the IRS based on the recomputed the Waxman USA Group Member's Tax Liability.
Penalties charged to Waxman USA as a result of any Recomputation Event shall be
based on actual penalties charged by the IRS, and shall be apportioned to
members of the Waxman USA Group in proportion to their share of such Group's
tax on which the penalty was based.
4. Liabilities and Obligations
---------------------------
(a) Notwithstanding any provision herein to the contrary,
if and to the extent that Waxman USA or any member of the Waxman USA Group is
no longer a member of the Waxman Consolidated Group, neither Waxman USA nor any
member of the Waxman USA Group shall be responsible to make any payments of
Federal Taxes to Waxman or any member of the Waxman Consolidated Group
determined with respect to tax periods during which such member was not a
member of the Waxman Consolidated Group. For any tax period that a member is
not a member of the Waxman Consolidated Group such member shall have
responsibility for its own taxes.
(b) Each member of the Waxman Group shall be jointly and
severally liable for all obligations of the Waxman Group hereunder; and each
member of the Waxman USA Group shall be jointly and
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<PAGE> 9
severally liable for all obligations of the Waxman USA Group hereunder. Any
member who discharges the obligation of another member under this Agreement
shall have a right of contribution against such other member.
5. Carry-backs from Separate Return Years
--------------------------------------
If, for any future separate return year, as defined
in Regulations Section 1.1502-1, a former member of the Waxman USA Group has
Loss Items which, under the applicable provisions of the Code and the
Regulations, may be carried back to a Taxable Period during which such former
member was a member of the Waxman Consolidated Group, such former member shall
not be entitled to carry back such Loss Items to the Waxman Consolidated Return
without the express written consent of Waxman. Provided, however, that such
consent shall not unreasonably be denied where carry-back of the former
member's Loss Item is the most immediately available means for the former
member to retrieve payments previously made under this Agreement.
6. State and Local Returns and State and Local Tax Payments
--------------------------------------------------------
(a) In the event that the law of any state or locality
requires any member of the Waxman Group and any member of the Waxman USA Group
to file a consolidated or combined state or local income or franchise tax
return (without regard to how the tax is measured), or, if the law of any state
or locality permits any member of the Waxman Group and any member of the Waxman
USA Group to file such a state or local return and Waxman in its sole
discretion determines to so file, then Waxman will determine their respective
rights and obligations with respect to state and local taxes payable in
connection with such return in accordance with the principles governing their
rights and obligations (including obligations to make payments under Section 2
hereof) with respect
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<PAGE> 10
to Federal Taxes payable (including estimated taxes) in connection with the
Consolidated Return under this Agreement.
(b) Waxman shall prepare combined or consolidated state
or local income or franchise tax returns which are required by law to be filed
or which Waxman has determined to file and shall pay all taxes shown as due on
such returns. Waxman will advise Waxman USA in a timely manner of the Waxman
USA Group member which will be included in combined or consolidated tax returns
to be prepared by Waxman pursuant to this paragraph, and the states or
localities in which such returns will be filed. Each such member included in
any such combined or consolidated state or local income tax return shall
execute its consent to be included in such return on any form as may be
prescribed for such consent, if such consent is requested, provided, however,
that any member of the Waxman USA Group shall have the right not to be included
in such return where it can reasonably demonstrate that such inclusion would
result in payment obligations under this Agreement materially greater than its
tax liability would have been if it not been included in such return, and that
such combined or consolidated state or local return is not required by
applicable law to be filed. Such member shall promptly prepare and submit to
Waxman all information which Waxman shall reasonably request with respect to
the assets, businesses and operations of such member so as to enable Waxman to
prepare such combined or consolidated returns. Waxman shall execute and timely
file the combined or consolidated income or franchise tax returns prepared by
Waxman.
(c) Except as provided in 6(a) and (b) above, Waxman USA
shall prepare, or provide for the preparation of, and file all state and local
income and franchise tax returns of the Waxman USA Group and its members and
the Waxman USA Group shall pay, or provide for the payment of, all taxes due on
such returns.
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<PAGE> 11
7. Filing of Foreign Income and Franchise Tax Returns and
------------------------------------------------------
Payment of Taxes
----------------
Waxman USA shall prepare, or provide for the preparation of,
and file all foreign income and franchise tax returns and reports which, are
required to be filed for any member of the Waxman USA Group and shall pay, or
provide for the payment of, all taxes shown as due thereon. Any foreign return
filed or required to be filed on a consolidated or combined basis will be filed
and taxes will be paid utilizing the methods and principals set forth in
Section 6 with respect to state taxes.
8. Indemnification
---------------
If for, or with respect to, any Taxable Period, whether as the
result of an IRS audit or otherwise, any member or former member of the Waxman
USA Group is actually required to pay any Federal Tax or state, local or
foreign tax liabilities that under this Agreement they are not required to pay,
Waxman shall indemnify, defend, save and hold such member harmless from and
against any and all losses incurred or sustained by such member or former
member arising from the payment of such tax liability. Any obligation to
indemnify hereunder must be paid by Waxman to the appropriate member or former
member of the Waxman USA Group within 90 days of the later of (i) the payment
of such member's or former member's tax liability (provided that Waxman have
actual knowledge of such payment within such time period) or (ii) in the case
of a former member, written demand for such indemnification payment is
received, which demand must be made within 90 days of such former member's
payment. Notwithstanding any provision contained herein to the contrary, this
indemnification provision shall survive the termination of this Agreement with
respect to any or all such members or former members of the Waxman USA Group.
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<PAGE> 12
9. Determinations
--------------
All determinations required with respect to Federal Taxes or
combined or consolidated state, local or foreign taxes shall be made by the
Director of Corporate Taxes of Waxman. All determinations will be made in a
reasonable manner which does not unreasonably discriminate against any member
of the Waxman USA Group. Determinations under this Section 9, if disputed,
must be disputed within three (3) years after the filing of the tax return with
respect to which the determination was made; provided that if a Recomputation
Event occurs with respect to a tax return, any determination with respect to
items changed in connection with the Recomputation Event may be disputed within
the two-year period after the determination is made by the Director of
Corporate Taxes in connection with that Recomputation Event.
10. Arbitration
-----------
All disputes, disagreements and adjustments arising out of or
under the application of the terms and provisions of this Agreement, including
any determinations made by the Director of Corporate Taxes pursuant to Section
9 hereof, shall be settled by arbitration (held in a mutually convenient place
or places as the parties hereto may agree) by an independent certified public
accounting firm of national reputation as may be mutually acceptable to the
parties; provided, however, neither the independent certified public accounting
firm used principally by Waxman, nor the firm used principally by Waxman USA
may be eligible to settle such disputes, determinations or adjustments. In the
event that the parties are unable to agree on an independent certified public
accounting firm for this purpose, each party to the arbitration shall select an
independent certified public accounting firm of national reputation which
together shall select an additional independent certified public accounting
firm of
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<PAGE> 13
national reputation which shall settle such disputes, determinations or
adjustments. Arbitration shall be the sole and exclusive remedy and shall be
binding on all parties.
11. Procedural Matters
------------------
Waxman shall prepare and file the Consolidated Returns and any
other returns, documents or statements required to be filed with the IRS or any
other taxing authority with respect to the determination of the Federal Tax
liability or consolidated or combined state or local income or franchise tax
liability of the Waxman Consolidated Group. In its sole discretion, Waxman
shall have the right with respect to any consolidated or combined returns which
it has filed or will file (a) to determine (i) the manner in which such
returns, documents or statements shall be prepared and filed, including,
without limitation, the manner in which any item of income, gain, loss,
deduction or credit shall be reported and (ii) whether any extensions may be
requested, (b) to contest, compromise or settle any adjustment or deficiency
proposed, asserted or assessed as a result of any audit of such returns by the
IRS or other taxing authority, and (c) to file, prosecute, compromise or settle
any claim for refund. Each member of the Waxman USA Group hereby irrevocably
appoints Waxman as its agent and attorney-in-fact to take such action
(including the execution of documents) as Waxman may deem appropriate to effect
the foregoing.
12. Expense Reimbursements
----------------------
Waxman may charge the Waxman USA Group a reasonable amount for
expenses related to or incurred in connection with (i) the determination of the
Waxman USA Group Tax Liability and any combined state, local or foreign tax
liability incurred by any member of the Waxman USA Group, and (ii) any
administrative
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<PAGE> 14
proceedings (including audits) and judicial proceedings with respect to such
returns; provided, that during any period of time in which that certain
Intercorporate Agreement, dated as of April 4, 1994, between Waxman, Waxman USA
and the members of the Waxman USA Group is in effect, Waxman shall not be
entitled to be reimbursed for any expenses relating to or incurred in
connection with those items referred to in this Section 12, clause (i) above in
addition to the amounts payable pursuant to such Intercorporate Agreement.
13. Pre-Agreement Adjustments
-------------------------
If, as a result of an audit, examination, litigation or
settlement by or with any taxing authority, there are adjustments to the tax
returns of the Waxman Consolidated Group which relate to corporations (or their
predecessors) which are members of the Waxman USA Group for any period ending
on or before June 30, 1993, and such adjustments on a net basis increase (or
decrease) the tax liability (including interest and penalties) of the Waxman
Consolidated Group, the Waxman USA Group shall pay Waxman (or Waxman shall pay
the Waxman USA Group) the amount of such increase (or decrease).
14. Change In Ownership
-------------------
In the event that any party to this Agreement, other than
Waxman, ceases to be wholly-owned by Waxman, considering ownership by any
member of the Waxman Consolidated Group as ownership by Waxman itself, this
Agreement, as it pertains to such member, shall be renegotiated.
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<PAGE> 15
15. Miscellaneous Provisions
------------------------
(a) This Agreement contains the entire understanding of
the parties with respect to the subject matter hereof. This Agreement shall
commence on the date first written above and shall continue in effect unless
otherwise agreed to in writing by the parties hereto or their successors or
assigns. No alteration, amendment or modification of any of the terms of this
Agreement shall be valid unless made by an instrument signed in writing by an
authorized officer of each party hereto;
(b) This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Delaware without giving
effect to principles of conflicts of laws.
(c) This Agreement shall be binding upon and inure to the
benefit of each party hereto and their respective successors and assigns.
(d) This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(e) All notices and other communications hereunder shall
be deemed to have been duly given if delivered by hand or mailed certified or
registered mail, postage prepaid:
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<PAGE> 16
(i) If to Waxman:
Waxman Industries, Inc.
24460 Aurora Road
Bedford Heights, OH 44146
Attn: Chief Financial Officer
Facsimile No.: (216) 439-8678
(ii) If to Waxman USA or a member of the
Waxman USA Group
c/o Waxman Industries, Inc.
24460 Aurora Road
Bedford Heights, OH 44146
Attn: Chief Financial Officer
Facsimile No.: (216) 439-8678
or to such other address or addresses as from time to time designated by the
respective parties in writing.
(f) The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not constitute a part hereof.
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<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and their respective corporate seals to be
affixed hereto, all as of the date and year first above written.
WAXMAN INDUSTRIES, INC.
Neal R. Restivo
By:_________________________
Name: Neal R. Restivo
Title: Chief Financial Officer
WAXMAN USA INC.
Neal R. Restivo
By:_________________________
Name: Neal R. Restivo
Title: Chief Financial Officer
BARNETT INC.
Armond Waxman
By:_________________________
Name: Armond Waxman
Title: Chairman
BARNETT INC.
William R. Pray
By:_________________________
Name: William R. Pray
Title: President
WAXMAN CONSUMER PRODUCTS GROUP INC.
Armond Waxman
By:_________________________
Name: Armond Waxman
Title: Chairman
WOC INC.
Armond Waxman
By:_________________________
Name: Armond Waxman
Title: Vice Chairman
TWI, INTERNATIONAL, INC.
Armond Waxman
By:_________________________
Name: Armond Waxman
Title: Vice Chairman
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WESTERN AMERICAN MANUFACTURING,
INC.
Armond Waxman
By:_________________________
Name: Armond Waxman
Title: Chairman
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EXHIBIT 10.7
INTERCORPORATE AGREEMENT
------------------------
This Intercorporate Agreement ("Agreement") dated as of May 20, 1994,
by and among Waxman Industries, Inc., a Delaware corporation ("Waxman"), Waxman
USA Inc., a Delaware corporation ("WUSA"), Waxman Consumer Products Group Inc.,
a Delaware corporation ("CPG"), Barnett Inc., a Delaware corporation
("Barnett"), and WOC Inc., a Delaware corporation ("WOC").
WHEREAS, in connection with a series of interrelated transactions
intended to refinance Waxman's domestic indebtedness (the "Reorganization"),
Waxman has formed (a) WUSA, as a holding company for the subsidiaries that
comprise and support Waxman's domestic operations, (b) CPG, a wholly owned
subsidiary of WUSA, which contains Waxman's Consumer Products Group Division
(the "Consumer Products Division"), and (c) WOC, a wholly owned subsidiary of
WUSA, which contains WUSA's domestic operations, other than Barnett and CPG;
WHEREAS, as a condition to, and concurrent with, the consummation of
the Reorganization, Waxman will restructure its operations by (i) contributing
the capital stock of Barnett to WUSA, (ii) contributing the assets and
liabilities of the Consumer Products Division to CPG, (iii) contributing the
assets and liabilities of its Madison Equipment Division ("Madison") to WOC,
(iv) contributing the assets and liabilities of its Medal Distributing Division
("Medal") to WOC, (v) merging U.S. Lock Corporation ("U.S. Lock") and LeRan
Copper & Brass, Inc. ("LeRan"), each a wholly owned subsidiary of Waxman, into
WOC, (vi) contributing the capital stock of TWI, International, Inc. ("TWI") to
WUSA and (vii) contributing the capital stock of Western American
Manufacturing, Inc. ("WAMI") to TWI;
WHEREAS, Waxman currently provides certain managerial, administrative
and financial services to CPG, Barnett, U.S. Lock, LeRan, Medal, Madison and
WAMI (collectively, the "Domestic Operations"), including, among other things,
financial and treasury functions, tax services, administration of employee
benefit plans and insurance and risk management services;
WHEREAS, to facilitate Waxman's and the Domestic Operations' separate
ongoing businesses and to reduce unnecessary additional overhead and personnel
costs, the parties hereto desire to enter into this Agreement to set forth the
terms upon which Waxman will continue to provide services to each of WUSA, CPG,
Barnett and WOC (individually a "Domestic Subsidiary" and collectively, the
"Domestic Subsidiaries").
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NOW THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. SERVICES.
Each Domestic Subsidiary hereby engages Waxman to provide, and
Waxman agrees to provide, to each Domestic Subsidiary, such administrative
services as each Domestic Subsidiary may reasonably require with respect to (i)
securing and monitoring the insurance needs of the Domestic Subsidiaries and
securing the appropriate insurance coverage therefor, (ii) the preparation and
filing of federal and certain state and local tax returns, (iii) administering
the employee benefit programs designated by each Domestic Subsidiary, (iv)
certain accounting, treasury and other financial services, including payroll
processing, cash management and the preparation of all required filings under
federal and state securities laws and any securities exchange or the National
Association of Securities Dealers, Inc., (v) assistance in financing matters,
(vi) relations with lending, banking and underwriting institutions and
organizations and (vii) the payment of franchise taxes by the Domestic
Subsidiaries, as well as such other services as each Domestic Subsidiary may
reasonably request (collectively, the "Waxman Services"). The Waxman Services
will be provided at such times and with respect to such matters within the
above described categories as each Domestic Subsidiary may reasonably request
from time to time and will be of the same type and quality and at least at the
same levels that Waxman has historically provided to itself or the Domestic
Subsidiaries or their predecessor operations. Each of the Domestic
Subsidiaries agrees that it will not reduce the level of Waxman Services
provided to it substantially below that which is described in the foregoing
sentence without the consent of Waxman. The parties hereto agree that services
to be provided by Waxman for the Domestic Subsidiaries hereunder are to be
performed by such persons as shall be designated by Waxman from time to time
(all of such persons are hereafter collectively referred to as the "Waxman
Providers"). The parties hereto further acknowledge that it is their mutual
expectation that certain of the Waxman Providers shall continue to serve as, or
be elected as, officers of the Domestic Subsidiaries, and that the services
rendered by such persons in such capacity from this date forward shall be
deemed to be rendered pursuant to the terms of this Agreement, unless other
arrangements are agreed to among such Waxman Provider, Waxman and such affected
Domestic Subsidiary. The Waxman Providers shall devote to the providing of
Waxman Services that amount of time which is reasonably necessary in order for
Waxman to fulfill its obligations hereunder. Waxman shall not take any
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action or enter into any agreement which would render it unable to fully
perform its obligations under this Agreement.
2. FEES.
As compensation for the Waxman Services rendered under this
Agreement, each Domestic Subsidiary will pay, without duplication in the case
of WUSA, to Waxman a monthly fee (the "Management Services Fee") in the
aggregate amount of (i) the lesser of (x) 2% of such Domestic Subsidiary's
consolidated net sales (not including net sales between such Domestic
Subsidiary and its affiliates) per month (or the prorated portion of such
amount for any period which is less than a full month) calculated in accordance
with generally accepted accounting principles and (y) the actual cost of
providing the Waxman Services to such Domestic Subsidiary plus (ii)
reimbursement, without duplication of any amounts paid pursuant to the
preceding clause (i)(y), for actual amounts paid to third parties by Waxman on
behalf of the Domestic Subsidiaries or required for the provision of any
services (including, for example, insurance and healthcare) for such Domestic
Subsidiary. Statements for the forgoing shall be provided by Waxman to the
affected Domestic Subsidiary monthly and shall be paid by such Domestic
Subsidiary within 5 days of the receipt of such statements.
It is acknowledged and agreed among the parties hereto that,
so long as Waxman engages in no activities other than the provision of the
Waxman Services to the Domestic Subsidiaries pursuant to this Agreement, the
costs of providing the Waxman Services to the Domestic Subsidiaries as set
forth in the foregoing clause (y) shall be equal to the costs of operating
Waxman's corporate operations (including the maintenance of its corporate
existence).
The Management Services Fee shall be payable to Waxman by each
Domestic Subsidiary monthly in arrears upon the first day of each month with
respect to such Domestic Subsidiary's net sales for the preceding month. If,
and to the extent, that any calculation of net sales is inaccurate for any
reason, additional Management Service Fees shall be payable to Waxman by, or
shall be reimbursed by Waxman to, as may be appropriate, the Domestic
Subsidiary or Domestic Subsidiaries whose net sales were incorrectly
calculated. Such additional payments or reimbursements shall be made within 5
days of the proper recalculation of such erroneous net sales.
3. INSURANCE. Except as otherwise agreed by the parties, all
policies of liability, fire, workers' compensation, directors and officers, and
other forms of insurance covering each Domestic Subsidiary's business, its
properties and assets and its directors and officers that are part of Waxman's
coverage will
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continue to be maintained by Waxman until any such Domestic Subsidiary obtains
appropriate replacement coverage. Each Domestic Subsidiary will reimburse
Waxman for the actual premium costs associated with providing such insurance
coverage within 5 days after Waxman's receipt of invoices for such insurance
coverage.
4. INDEMNIFICATION. Each Domestic Subsidiary agrees to indemnify
Waxman, each other Domestic Subsidiary and the Waxman Providers (individually,
a "Waxman Indemnitee", and collectively, the "Waxman Indemnitees"), if a Waxman
Indemnitee is made, or threatened to be made, a party to any action, claim or
proceeding, whether civil or criminal, including any action by or in the right
of such Waxman Subsidiary, by reason of the provision of services by Waxman
and/or the Waxman Providers to such Waxman Subsidiary pursuant to the terms of
this Agreement (other than any action by such Waxman Subsidiary against Waxman
by reason of a breach of this Agreement by Waxman) against judgments, fines,
amounts paid in settlement and reasonable expenses, including reasonable
attorneys' fees (collectively, "Losses"); provided, however, that the foregoing
indemnity shall not apply to any Losses to the extent such Losses resulted
primarily from the willful misconduct, bad faith or gross negligence of a
Waxman Indemnitee.
5. RESPONSIBILITY FOR PROVIDING COMPENSATION AND FRINGE BENEFITS
TO SERVICE PROVIDERS. Waxman shall be responsible for the payment of all of
the costs and expenses of the personal compensation and fringe benefits and
perquisites, including, without limitation, pension, life insurance, health
insurance, hospitalization and other forms of insurance, of the Waxman
Providers and such persons shall not, except as approved by Waxman and the
affected Domestic Subsidiary, be entitled to any compensation or benefit from
such affected Domestic Subsidiary or Waxman, as the case may be, for services
performed for such Domestic Subsidiary, in any capacity, including, but not
limited to, services as an officer of such Domestic Subsidiary.
6. PRODUCT PURCHASES. Waxman, each Domestic Subsidiary and TWI
and its subsidiaries may purchase products from each other at prices and upon
terms and conditions as may be agreed among the parties from time to time;
provided, that such terms and conditions are no less favorable to Waxman, such
Domestic Subsidiary or TWI and its subsidiaries, as the case may be, than the
terms and conditions upon which product purchases were made prior to the date
hereof.
7. STATUS AS INDEPENDENT CONTRACTOR. It is expressly understood
between the parties hereto that Waxman, with respect to services provided by it
to the Domestic Subsidiaries hereunder, shall be an independent contractor. It
is also
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expressly agreed that Waxman shall be solely responsible for the withholding
and payment of any and all taxes and other sums required to be withheld or paid
by an employer pursuant to any and all state, federal or other laws in
connection with the rendering of services hereunder.
8. WORK PRODUCT; CONFIDENTIALITY. (a) Waxman agrees, on behalf
of itself, and its employees, representatives and agents, including without
limitation the Waxman Providers, that all memoranda, notes, records or other
documents made or compiled by Waxman, and its employees, representatives and
agents, including, without limitation, the Waxman Providers, in the fulfillment
of Waxman's obligations under this Agreement or otherwise, or made available to
any of them concerning a Domestic Subsidiary's Information (as defined below)
shall be such Domestic Subsidiary's property and shall be delivered to such
Domestic Subsidiary on such Domestic Subsidiary's request on the termination of
this Agreement or at any other time. None of Waxman, or its employees,
representatives and agents shall, directly or indirectly, knowingly use, for
themselves or others, or divulge to others, other than in the ordinary course
and in furtherance of the Domestic Subsidiaries businesses, any secret or
confidential information, non-public information, knowledge, or data of a
Domestic Subsidiary (including, without limitation, names of customers of the
Domestic Subsidiary (collectively, "Domestic Subsidiary's Information"))
obtained by any of them as a result of Waxman's performance of this Agreement,
unless authorized by a Domestic Subsidiary. The provisions of this Section do
not extend to any portion of such Domestic Subsidiary's Information which
becomes generally available to the public other than as a result of a
disclosure by the recipient or its representatives, subsidiaries or affiliates,
and will not be deemed to restrict the recipient from complying with any order,
request or decree of any court, government or other regulatory body to produce
any such information, but upon receiving notice that any such order, request or
decree is being sought, the recipient will promptly give the party furnishing
such Domestic Subsidiary's Information notice thereof and agree to cooperate
with such furnishing parties' efforts, if any, to contest the issuance of such
order, request or decree.
9. TERM. This Agreement will commence on the date hereof and may
be terminated by Waxman at any time upon 90 days prior written notice given as
provided herein to the other parties hereto or by a Domestic Subsidiary solely
with respect to such Domestic Subsidiary at any time, upon 90 days prior
written notice given as provided herein to Waxman, after the date upon which
such Domestic Subsidiary is no longer a direct or indirect majority-owned
subsidiary of Waxman.
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10. NOTICES. All notices and other communications under this
Agreement must be in writing and will be deemed to have been duly given when
delivered by hand, upon receipt of a telephonic facsimile transmission or sent
by registered or certified mail, return receipt requested, postage prepaid and
addressed as follows:
To Waxman: Waxman Industries, Inc.
24460 Aurora Road
Bedford Heights, Ohio 44146
Attention: Chief Executive Officer
Telecopy No. (216) 439-8678
To Barnett: Barnett Inc.
3333 Lenox Avenue
Jacksonville, Florida 32205
Attention: President
Telecopy No. (909) 388-4566
To WUSA: Waxman USA Inc.
c/o Waxman Industries
24460 Aurora Road
Bedford Heights, Ohio 44146
Attention: Chief Executive Officer
Telecopy No. (216) 439-8678
To CPG: Consumer Products Group Inc.
24455 Aurora Road
Bedford Heights, Ohio 44146
Attention: President
Telecopy No. (216) 439-1262
To WOC: WOC Inc.
c/o Waxman Industries, Inc.
24460 Aurora Road
Bedford Heights, Ohio 44146
Attention: Chief Executive Officer
Telecopy No. (216) 439-8678
11. COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all previous negotiations, commitments and writings with respect to
such subject matter.
12. AMENDMENTS. This Agreement may not be modified or amended
except by an agreement in writing signed by each of the parties hereto.
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13. GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware without regard
to the principles of conflicts of laws thereof.
14. ASSIGNMENT. None of Waxman nor any of the Domestic
Subsidiaries may assign any of its rights or benefits under this Agreement
without the prior written consent of the other parties hereto, which consent
will not be unreasonably withheld or delayed. This Agreement is binding on and
will inure to the benefit of the parties and their respective successors and
permitted assigns.
15. NO THIRD PARTY BENEFICIARIES. This Agreement is solely for
the benefit of the parties hereto and should not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action or other
right in excess of those existing without reference to this Agreement.
16. CAPTIONS. Captions and section headings are used for
convenience of reference only and are not part of this Agreement and may not be
used in construing it.
17. ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction will, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction will not invalidate or render
unenforceable such provision or remedies otherwise available to any party
hereto.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
together constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
WAXMAN INDUSTRIES, INC.
Neal R. Restivo
By:____________________________
Neal R. Restivo
Chief Financial Officer
WAXMAN USA INC.
Neal R. Restivo
By:____________________________
Neal R. Restivo
Chief Financial Officer
WAXMAN CONSUMER PRODUCTS GROUP INC.
Neal R. Restivo
By:____________________________
Neal R. Restivo
Secretary
BARNETT INC.
William R. Pray
By:_____________________________
William R. Pray
President
BARNETT INC.
Neal R. Restivo
By:_____________________________
Neal R. Restivo
Secretary
WOC INC.
Neal R. Restivo
By:_____________________________
Neal R. Restivo
Secretary
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EXHIBIT 10.8
U.S. $55,000,000
CREDIT AGREEMENT
Dated as of May 20, 1994
Among
WAXMAN USA INC.,
AS THE COMPANY
and
BARNETT INC.
WAXMAN CONSUMER PRODUCTS GROUP INC.
and
WOC INC.
AS BORROWERS
and
THE LENDERS AND ISSUERS PARTY HERETO
and
CITICORP USA, INC.
AS AGENT
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CREDIT AGREEMENT, dated as of May 20, 1994, among WAXMAN USA
INC. (the "Company"), BARNETT INC., WAXMAN CONSUMER PRODUCTS GROUP INC. and WOC
INC. (the "Borrowers"), each a Delaware corporation, the financial institutions
listed on the signature pages hereof listed under the caption of "Lender" (each
individually a "Lender" and collectively the "Lenders"), the financial
institutions listed on the signature pages under the caption of "Issuer" (each
individually an "Issuer" and collectively the "Issuers") and CITICORP USA, INC.
("Citicorp"), as agent for the Lenders (in such capacity, the "Agent").
W I T N E S S E T H:
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WHEREAS, the Borrowers have requested that the Lenders make
revolving credit advances of up to $55,000,000 in aggregate principal amount
outstanding at any one time for the purposes hereinafter specified; and
WHEREAS, the Borrowers have requested that the Issuers provide
the Borrowers with letters of credit and the Issuers are willing to issue
letters of credit for such purpose upon the terms and subject to the conditions
contained herein; and
WHEREAS, the Lenders are willing to make funds available for
such purposes upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. DEFINED TERMS. As used in this Agreement, the following
terms have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"ACCOUNTS" has the meaning specified in the Section 9-106 of
the UCC.
"ADJUSTED NET WORTH" of any Person means, at any date, the Net
Worth of such Person at such date, EXCLUDING, HOWEVER, from the determination
of the Total Assets of such
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Person at such date, (i) all goodwill, organizational expenses, research and
development expenses, trademarks, trade names, copyrights, patents, patent
applications, licenses and rights in any thereof, and other similar
intangibles, (ii) all unamortized debt discount and expense, (iii) all reserves
carried and not deducted from assets, (iv) treasury stock and capital stock,
obligations or other securities of, or capital contributions to, or investments
in, any Subsidiary of such Person, (v) securities which are not readily
marketable, (vi) cash held in a sinking or other analogous fund established for
the purpose of redemption, retirement, defeasance or prepayment of any Stock or
Indebtedness, to the extent that such Stock or Indebtedness is not reflected on
the balance sheet of such Person, (vii) any write-up in the book value of any
asset resulting from a revaluation thereof, and (viii) any items not included
in clauses (i) through (vii) above which are treated as intangibles in
conformity with GAAP.
"AFFILIATE" means, as to any Person, any Subsidiary of such
Person and any other Person which, directly or indirectly, controls, is
controlled by or is under common control with such Person and includes each
executive officer or director or general partner of such Person, and each
Person who is the beneficial owner of 5% or more of any class of voting Stock
of such Person. For the purposes of this definition, "control" means the
possession of the power to direct or cause the direction of management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"AGREEMENT" means this Credit Agreement, together with all
Exhibits and Schedules hereto, as the same may be amended, supplemented or
otherwise modified from time to time.
"APPLICABLE BASE RATE MARGIN" means one and one-half percent
(1.50%); PROVIDED, HOWEVER, if, at the end of any Fiscal Quarter commencing
with the Fiscal Quarter ending December 31, 1994, the Company meets either of
the tests set forth below, then the Applicable Base Rate Margin for the
immediately succeeding Fiscal Quarter shall be reduced to the percentage set
forth opposite the test set forth below that the Company has met and if (i) the
Company has not met either of the tests set forth below at the end of any
Fiscal Quarter, the Applicable Base Rate Margin shall be one and one-half
percent (1.50%) for the next succeeding Fiscal Quarter or (ii) any Event of
Default shall occur and be
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continuing, the Applicable Base Rate Margin shall be one and one-half percent
(1.50%) upon the occurrence of such Event of Default:
APPPLICABLE BASE RATE MARGIN TEST MET
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1.25% First Stepdown Test
1.00% Second Stepdown Test
provided that, in all cases, the Applicable Base Rate Margin shall be increased
by 0.50% over the percentage as determined above until such time as the loans
and other obligations under the Term Loan Credit Agreement have been paid in
full.
"APPLICABLE EURODOLLAR RATE MARGIN" means three
percent (3%); PROVIDED, HOWEVER, if, at the end of any Fiscal Quarter
commencing with the Fiscal Quarter ending December 31, 1994, the Company meets
the tests set forth below, then the Applicable Eurodollar Rate Margin for the
immediately succeeding Fiscal Quarter shall be reduced to the percentage set
forth opposite the test set forth below that the Company has met and if (i) the
Company has not met either of the tests set forth below at the end of any
Fiscal Quarter, the Applicable Eurodollar Rate Margin shall be three percent
(3.0%) for the next succeeding Fiscal Quarter or (ii) any Event of Default
shall occur and be continuing, the Applicable Eurodollar Rate Margin shall be
three percent (3.0%) upon the occurrence and during the continuance of such
Event of Default:
APPLICABLE EURODOLLAR RATE MARGIN TEST MET
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2.75% First Stepdown Test
2.50% Second Stepdown Test
provided that, in all cases, the Applicable Eurodollar Rate Margin shall be
increased by 0.50% over the percentage as determined above until such time as
the loans and other obligations under the Term Loan Credit Agreement have been
paid in full.
"APPLICABLE LENDING OFFICE" means, with respect to
each Lender, its Domestic Lending Office in the case of a Base Rate Loan and
its Eurodollar Lending Office in the case of a Eurodollar Rate Loan.
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"ASSET SALE" means any sale or other disposition, or
series of sales or other dispositions (including, without limitation, by merger
or consolidation, and whether by operation of law or otherwise), made on or
after the Closing Date by any Borrower or any of its Subsidiaries to any Person
of (i) all or substantially all of the outstanding Stock of any of its
Subsidiaries, (ii) all or substantially all of its assets or the assets of any
division of any Borrower or any of its Subsidiaries, or (iii) any other asset
or assets which, when taken together with all sales or other dispositions of
assets not covered by the foregoing clauses (i) and (ii) yield proceeds or
involve assets having a Fair Market Value in excess of $1,000,000 in any
twelve-month period; PROVIDED, HOWEVER, that any sale permitted pursuant to
clauses (i), (ii) or (iii) of Section 7.5(c) shall not constitute an Asset Sale
for purposes of this Agreement.
"ASSET SALE PROCEEDS" means payments in Dollars or
freely convertible into Dollars received by any Borrower or any of its
Subsidiaries (including, without limitation, any cash payments received by way
of deferred payment of principal pursuant to a note or receivable or otherwise,
but only as and when received) from any Asset Sale (the "Payments") in each
case net of the amount of (i) brokerage commissions and other reasonable fees
and expenses (including fees and expenses of counsel and investment bankers)
payable other than to an Affiliate of such Borrower in connection with such
Asset Sale, (ii) provisions for all taxes payable within one year as a result
of such Asset Sale, (iii) payments made to retire Indebtedness secured by the
assets subject to such Asset Sale to the extent required pursuant to the terms
of the Indebtedness, (iv) appropriate amounts to be provided by such Borrower
or any of its Subsidiaries as a reserve, in accordance with GAAP, against
liabilities associated with such Asset Sale and retained by such Borrower or
any of its Subsidiaries after such Asset Sale; PROVIDED, HOWEVER, that the
amount of any such reserve at such time that such amount is no longer required
to be provided as is not applied to the liability for which such reserve was
established shall be deemed Asset Sale Proceeds, (v) any amount required to be
paid to any Person (other than such Borrower and any of its Subsidiaries)
owning a beneficial interest in the property or assets sold; PROVIDED, FURTHER,
that such Payments shall not be deemed to be Asset Sale Proceeds until one year
after such Asset Sale and only to the extent that the Borrowers have not used
such Payments to acquire or construct assets in lines of business related
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to the Borrowers' lines of business on the Closing Date. For the purposes of
this definition, Asset Sale Proceeds shall be deemed to include, without
limitation, any award of compensation for any asset or property or group
thereof taken by condemnation or eminent domain and insurance proceeds for the
loss of or damage to any asset or property if such award or proceeds equals or
exceeds $1,000,000 (in the aggregate) and within one year after the receipt
thereof replacement or repair of such asset or property has not commenced,
except that in the event that at any time such replacement or repair is
abandoned or is otherwise discontinued or is not diligently pursued, the
remaining award or proceeds, as the case may be, shall constitute Asset Sale
Proceeds at such time.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and
acceptance entered into by a Lender and an Eligible Assignee, and accepted by
the Agent, in substantially the form of Exhibit G.
"AVAILABLE CREDIT" means, at any time and for any
Borrower, an amount equal to the lower of (a) the then effective Commitments of
the Lenders MINUS the aggregate outstanding principal amount of the Loans to
all Borrowers at such time and the Letter of Credit Obligations of all
Borrowers at such time and (b) the Borrowing Base of such Borrower at such time
MINUS the aggregate amount of outstanding principal amount of the Loans
advanced to such Borrower at such time and the Letter of Credit Obligations of
such Borrower at such time.
"BASE RATE" means, for any period, a fluctuating
interest rate per annum as shall be in effect from time to time, which rate per
annum shall be equal at all times to the highest of:
(a) the rate of interest announced publicly by Citibank
in New York, New York, from time to time, as Citibank's base rate;
(b) the sum (adjusted to the nearest 1/4 of one percent
or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one
percent) of (i) 1/2 of one percent per annum, PLUS (ii) the rate per annum
obtained by dividing (A) the latest three-week moving average of secondary
market morning offering rates in the United States for three-month certificates
of deposit of major United States money market banks, such three-week moving
average
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being determined weekly on each Monday (or, if any such day is not a Business
Day, on the next succeeding Business Day) for the three-week period ending on
the previous Friday by Citibank on the basis of such rates reported by
certificate of deposit dealers to and published by the Federal Reserve Bank of
New York or, if such publication shall be suspended or terminated, on the basis
of quotations for such rates received by Citibank from three New York
certificate of deposit dealers of recognized standing selected by Citibank, by
(B) a percentage equal to 100% MINUS the average of the daily percentages
specified during such three-week period by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or
other marginal reserve requirement) for Citibank in respect of liabilities
consisting of or including (among other liabilities) three-month U.S. dollar
nonpersonal time deposits in the United States, PLUS (iii) the average during
such three-week period of the maximum annual assessment rates payable to the
Federal Deposit Insurance Corporation (or any successor) by banks which are
members of the Bank Insurance Fund for insuring U.S. dollar deposits in the
United States; and
(c) the sum (adjusted to the nearest 1/4 of one percent
or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one
percent) of (i) 1/2 of one percent per annum PLUS (ii) the Federal Funds Rate.
"BASE RATE LOAN" means any outstanding principal
amount of the Loans of any Lender that bears interest with reference to the
Base Rate.
"BORROWING" means a borrowing consisting of Loans by
the Lenders.
"BORROWING BASE" means, at any time for any Borrower,
the sum of 85% of the Eligible Receivables of such Borrower at such time PLUS
(a) in the case of Barnett Inc., the sum of the
product of the advance rate set forth in the table
below based on such Borrower, the GMROI of such class
of Inventory of such Borrower at such time and the
amount of the Eligible Inventory in such class of
such Borrower at such time,
GMROI OF INVENTORY CLASS ADVANCE DATE
- ------------------------ ------------
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100 or more 60%
80 - 99.9 50%
60 - 79.9 30%
40 - 59.9 20%
below 40 0%,
(b) in the case of Waxman Consumer Products Group Inc.,
the sum of the product of the advance rate set forth in
the table below based on the class of Inventory and
the amount of Eligible Inventory in such class of
Waxman Consumer Products Group Inc. at such time,
Inventory Class Advance Rate
--------------- ------------
Plumbcraft 60%
Bulk Plumbing 50%
Bulk Electrical 50%
Floor Care 30%
KF Packaged Plumbing 30%
Packaged Electrical 20%
Raw Materials 50%
Packaging Materials 0%
Buy-backs 15%
In-Transit Inventory 35%
(c) in the case of WOC Inc., the sum of the product
of the advance rate set forth in the table below based on
the division owning such Inventory and the amount of
Eligible Inventory owned by such division of WOC Inc.
at such time
DIVISION ADVANCE RATE
-------- ------------
U.S. Lock 35%
LeRan Copper & Brass 45%
Medal Distributing 45%
Madison Equipment 45%
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in each case, less reserves as the Agent reasonably deems appropriate
(including, without limitation, a reserve, as the Agent reasonably determines
for Inventory held at leased locations where the landlord thereof has not
executed a landlord consent in form and substance reasonably satisfactory to
the Agent, such reserve not to be imposed until 90 days after the Closing
Date).
"BORROWING BASE CERTIFICATE" means a certificate of
the Borrowers substantially in the form of Exhibit I or such other form
acceptable to the Agent.
"BUSINESS DAY" means a day of the year on which banks
are not required or authorized to close in New York City and, if the applicable
Business Day relates to a Eurodollar Rate Loan, a day on which dealings are
also carried on in the London interbank market.
"CAPITAL EXPENDITURES" means, for any Person for any
period, the aggregate of (i) all expenditures by such Person and its
consolidated Subsidiaries, except interest capitalized during construction,
during such period for property, plant or equipment, including, without
limitation, renewals, improvements, replacements and capitalized repairs, that
would be reflected as additions to property, plant or equipment on a
consolidated balance sheet of such Person and its Subsidiaries prepared in
conformity with GAAP and (ii) without duplication, the principal amount of all
Indebtedness incurred or assumed to finance any such additions to property,
plant and equipment. For the purpose of this definition, the purchase price of
equipment which is acquired simultaneously with the trade-in of existing
equipment owned by such Person or any of its Subsidiaries or with insurance
proceeds shall be included in Capital Expenditures only to the extent of the
gross amount of such purchase price less the credit granted by the seller of
such equipment being traded in at such time or the amount of such proceeds, as
the case may be.
"CAPITALIZED LEASE" means, as to any Person, any
lease of property by such Person as lessee which would be capitalized on a
balance sheet of such Person prepared in conformity with GAAP.
"CASH COLLATERAL ACCOUNTS" had the meaning set forth
in Section 2.17.
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"CAPITALIZED LEASE OBLIGATIONS" means, as to any
Person, the capitalized amount of all obligations of such Person or any of its
Subsidiaries under Capitalized Leases, as determined on a consolidated basis in
conformity with GAAP.
"CASH EQUIVALENTS" means (i) securities with
maturities of one year or less from the date of acquisition issued or fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof, (ii) certificates of deposit, eurodollar time
deposits, overnight bank deposits and bankers' acceptances of any Lender having
maturities of one year or less from the date of acquisition, (iii) commercial
paper of an issuer rated at least "A-1" by Standard & Poor's Corporation or
"P-1" 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 (iii) repurchase agreements and
reverse repurchase agreements relating to marketable direct obligations issued
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; provided,
however, that the terms of such agreements comply with the guidelines set forth
in the Federal Financial Agreements of Depository Institutions with Securities
Dealers and Others, as adopted by the Comptroller of the Currency.
"CASH INTEREST EXPENSE" means, for any Person for any
period, the Net Interest Expense of such Person for such period, PLUS (a)
interest expense capitalized during construction for such period to the extent
deducted in the determination of such Net Interest Expense, LESS (b) Non-Cash
Interest Expense of such Person for such period; provided that "Cash Interest
Expense" for the Company for any period shall include, without duplication, the
Cash Interest Expense of Holdings with respect to the Debentures for such
period.
"CHANGE OF CONTROL" means the occurrence of one or more of
the following events: (i) the direct or indirect, sale, lease, exchange or
other transfer of all or substantially all of the assets of Holdings to any
Person or entity or group of Persons or entities acting in concert as a
partnership or other group (a "Group of Persons") other than Permitted Holders,
(ii) the merger or consolidation of
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Holdings with or into another corporation with the effect that the then
existing shareholders of Holdings or their Affiliates, together with the
Permitted Holders, hold less than 50% of the Voting Stock of the surviving
corporation of such merger or the corporation resulting from such consolidation
and do not otherwise have the right or ability by contract or otherwise to
elect a majority of the Board of Directors of such surviving corporation, (iii)
the replacement of a majority of the Board of Directors of Holdings from the
directors who constituted the Board of Directors on the Closing Date, and such
replacement shall not have been approved by a majority of the members of the
Board of Directors of Holdings then still in office either (x) who were members
of the Board of Directors on the Closing Date or (y) whose election as a member
of the Board of Directors was approved in the manner provided in this clause
(iii), (iv) a Person or Group of Persons shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases or
otherwise, have become the beneficial owner (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934, as amended) of securities of
Holdings representing 35% or more of the Voting Stock of Holdings and, at such
time Permitted Holders are not the beneficial owners (as so defined) of a
greater percentage of such Voting Stock and do not otherwise have the right or
ability by contract or otherwise to elect a majority of the Board of Directors
of Holdings, (v) Holdings shall fail to own all of the issued and outstanding
Stock of the Company (other than those options in respect of the Stock of the
Company issued by the Company to employees or directors of Holdings or any of
its Subsidiaries in an aggregate amount not to exceed 10% of the total
outstanding Stock of the Company, such options not to be exercisable until an
initial public offering of the Company's Common Stock); (vi) the Company shall
fail to own all of the issued and outstanding Stock of each of the Borrowers or
TWI (other than options to purchase Stock of such Borrower or TWI, as the case
may be, issued to employees or directors of Holdings or any of its
Subsidiaries, by such Borrower or TWI, as the case may be, in an aggregate
amount not to exceed 10% of the outstanding Stock of such Borrower or TWI, as
the case may be, which options may not be exercised until an initial public
offering of common stock of such Borrower or TWI, as the case may be); or (vii)
a change of control shall occur under any Indenture.
"CITIBANK" means Citibank, N.A.
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"CLOSING DATE" means the first date on which any Loan
is made or any Letter of Credit is issued or assumed hereunder.
"CODE" means the Internal Revenue Code of 1986 (or
any successor legislation thereto), as amended from time to time.
"COLLATERAL" means all property and interests in
property and proceeds thereof now owned or hereafter acquired by any Loan Party
in or upon which a Lien is granted under any of the Collateral Documents.
"COLLATERAL DOCUMENTS" means the Security Agreements,
the Intellectual Property Security Agreements, the Mortgage, the Pledge
Agreements and any other document executed and delivered by a Loan Party
granting a Lien on any of its property to secure payment of the Obligations.
"COMMITMENT" means, as to each Lender, the commitment
of such Lender to make Revolving Credit Loans to the Borrowers pursuant to
Section 2.1 in the aggregate principal amount outstanding not to exceed the
amount set forth opposite such Lender's name on Schedule I under the caption
"Commitment", as such amount may be reduced or modified pursuant to this
Agreement.
"COMMITMENT FEE" has the meaning specified in
Section 2.3(a).
"CONTAMINANT" means any substance regulated or
forming the basis of liability under any Environmental Law, including, without
limitation, any waste, pollutant, hazardous substance, toxic substance,
hazardous waste, special waste, petroleum or petroleum-derived substance or
waste, or any constituent of any such substance or waste.
"CONTINGENT OBLIGATION" means, as applied to any
Person, any direct or indirect liability, contingent or otherwise, of such
Person with respect to any Indebtedness or Contractual Obligation of another
Person, if the purpose or intent of such Person in incurring the Contingent
Obligation is to provide assurance to the obligee of such Indebtedness or
Contractual Obligation that such Indebtedness or Contractual Obligation will be
paid or discharged, or that any agreement relating thereto will be complied
with, or that any holder of such Indebtedness or Contractual Obligation will be
protected (in whole or in part) against
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loss in respect thereof. Contingent Obligations of a Person include, without
limitation, (without duplication) (a) the direct or indirect guarantee,
endorsement (other than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of an obligation of another Person, and (b) any liability of such Person
for an obligation of another Person through any agreement (contingent or
otherwise) (i) to purchase, repurchase or otherwise acquire such obligation or
any security therefor, or to provide funds for the payment or discharge of such
obligation (whether in the form of a loan, advance, stock purchase, capital
contribution or otherwise), (ii) to maintain the solvency or any balance sheet
item, level of income or financial condition of another Person, (iii) to make
take-or-pay or similar payments, if required, regardless of non-performance by
any other party or parties to an agreement, (iv) to purchase, sell or lease (as
lessor or lessee) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such obligation or to assure
the holder of such obligation against loss, or (v) to supply funds to or in any
other manner invest in such other Person (including, without limitation, to pay
for property or services irrespective of whether such property is received or
such services are rendered), if in the case of any agreement described under
subclause (i), (ii), (iii), (iv) or (v) of this sentence the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported.
"CONTRACTUAL OBLIGATION" of any Person means any
obligation, agreement, undertaking or similar provision of any security issued
by such Person or of any agreement, undertaking, contract, lease, indenture,
mortgage, deed of trust or other instrument to which such Person is a party or
by which it or any of its property is bound or to which any of its properties
is subject, excluding a Loan Document but including without limitation the
requirements to make contributions to or pay benefits under any Employee
Benefit Plan.
"CORPORATE RESTRUCTURING" means the transactions by
which Holdings will restructure its operations such that the Company will
become a holding company for all of Holdings' Subsidiaries that comprise and
support its domestic operations (but not the Ideal Subsidiaries).
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"DEBENTURES" means (i) prior to the consummation of
the Proposed Restructuring, the Exchange Notes, the Existing 12 1/4% Senior
Secured Notes, the Existing Floating Rate Senior Secured Notes, the Existing
Senior Subordinated Notes and the Existing Convertible Debentures and (ii)
after the consummation of the Proposed Restructuring, the Exchange Notes and
the Proposed Notes.
"DEFAULT" means any event which with the passing of
time or the giving of notice or both would become an Event of Default.
"DISCLOSURE DOCUMENT" means the Offer to Exchange and
Consent Solicitation relating to the Existing Senior Subordinated Notes, dated
April 21, 1994, and the Consent Solicitation relating to the Existing 12 1/4%
Senior Secured Notes and the Existing Floating Rate Senior Secured Notes dated
April 21, 1994, as each may be amended, supplemented or modified from time to
time.
"DOL" means the United States Department of
Labor, or any successor thereto.
"DOLLARS" and the sign "$" each mean the lawful money
of the United States of America.
"DOMESTIC LENDING OFFICE" means, with respect to any
Lender, the office of such Lender specified as its "Domestic Lending Office"
opposite its name on Schedule II or such other office of such Lender as such
Lender may from time to time specify to the Borrowers and the Agent.
"EBITDA" means, for any Person for any period, the
Net Income (Loss) of such Person for such period taken as a single accounting
period, PLUS (a) the sum of the following amounts of such Person and its
Subsidiaries for such period determined on a consolidated basis in conformity
with GAAP to the extent included in the determination of such Net Income (Loss)
(without duplication): (i) depreciation expense, (ii) amortization expense,
(iii) Net Interest Expense, (iv) income tax expense, (v) extraordinary losses
(and other losses on Asset Sales not otherwise included in extraordinary losses
determined on a consolidated basis in conformity with GAAP) and (vi)
non-recurring non-cash write-offs to the extent that such write-offs do not
require any present or future cash expenditures; LESS (b) the sum of the
following amounts of such Person and its Subsidiaries determined on a
consolidated basis in
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conformity with GAAP to the extent included in the determination of such Net
Income (Loss) (without duplication): (i) extraordinary gains (and in the case
of any Borrower, other gains on Asset Sales not otherwise included in
extraordinary gains determined on a consolidated basis in conformity with
GAAP), (ii) the Net Income (Loss) of any other Person that is accounted for by
the equity method of accounting except to the extent of the amount of dividends
or distributions paid to such Person, and (iii) the Net Income (Loss) of any
other Person acquired by such Person or a Subsidiary of such Person in a
transaction accounted for as a pooling of interests for any period prior to the
date of such acquisition.
"ELIGIBLE ASSIGNEE" means (i) a commercial bank
organized under the laws of the United States, or any State thereof, and having
total assets in excess of $5,000,000,000; (ii) a commercial bank organized
under the laws of any other country which is a member of the OECD, or a
political subdivision of any such country, and having total assets in excess of
$5,000,000,000, provided that such bank is acting through a branch or agency
located in the country in which it is organized or another country which is
also a member of the OECD or the Cayman Islands; (iii) the central bank of any
country which is a member of the OECD; (iv) any corporation organized under the
laws of the United States, or any State thereof, and having total assets in
excess of $3,000,000,000; (v) an insurance company organized under the laws of
the United States, or any State thereof, and having total assets in excess of
$5,000,000,000; (vi) any Lender; and (vii) any Affiliate of any of the above to
the extent such Affiliate is consented to by the Agent and the Borrowers which
consent shall not be unreasonably withheld.
"ELIGIBLE INVENTORY" means, with respect to any
Borrower, such of the Inventory of such Borrower valued at the lower of market
or cost on a first in first out basis, which constitutes Collateral in which
the Agent has a fully perfected first priority security interest and which the
Agent deems eligible in its reasonable judgment, less such reserves as the
Agent deems appropriate in its reasonable judgment, including, without
limitation, without duplication, (i) a reserve for in-transit goods, (ii) a
reserve for the difference between Inventory on the general ledger and
Inventory in which such Borrower has physical possession, but only to the
extent the higher Inventory value is being reported on the Borrowing Base
Certificate of such Borrower
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delivered to the Agent, (iii) a reserve for consignment shipments from, or
purchase money security interests granted to, General Electric Corporation to
the extent such shipments are reflected in a filed UCC statement, (iv) a
reserve for profits from sales by such Borrower's Affiliates to such Borrower,
(v) a reserve for packaging and display Inventory, and (vi) a reserve for
Inventory held by stocking sales representatives (unless an agreement in form
and substance satisfactory to the Agent with such stocking sales representative
has been executed and delivered to the Agent); PROVIDED, HOWEVER, that an item
of Inventory shall in no event be Eligible Inventory if such Inventory is
defective.
"ELIGIBLE RECEIVABLES" means, with respect to any
Borrower, the gross outstanding balance of all Accounts of such Borrower, less
(i) all finance charges, late fees and other fees which are unearned, sales,
excise or similar taxes, and credits or allowances granted, of those Accounts
of such Borrower and (ii) such reserves as the Agent deems appropriate in its
reasonable judgment, including without limitation, a reserve equal to the
accrued liabilities in respect of cooperative advertising, a reserve equal to
the accrued liabilities in connection with the buy-back of inventory or the
amount of the estimated credits required to be issued by such Borrower in
connection with inventory committed to be bought back by such Borrower (as
agreed to by the Agent and such Borrower) and a reserve equal to 50% of the
charge-backs in connection with the sale of Inventory, in each case, arising
out of sales of merchandise, goods or services in the ordinary course of
business, made by such Borrower to a Person which is not an Affiliate of such
Borrower, which are not in dispute, and which constitute Collateral in which
the Agent has a fully perfected first priority security interest, and, if the
account debtor is a Governmental Authority, such Borrower has assigned its
rights to payment of such account to the Agent pursuant to the Assignment of
Claims Act of 1940, as amended, in the case of a federal Governmental
Authority, and pursuant to applicable state law, if any, in the case of any
other Governmental Authority, and such assignment has been accepted and
acknowledged by the appropriate government officers; PROVIDED, HOWEVER, that an
Account shall in no event be an Eligible Receivable if:
(a) such Account is more than (i) (A) for Accounts
with terms of 60 days or less, 60 days past due, according to the original
terms of sale or (B) for Accounts
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with terms of more than 60 days but less than 150 days, 30 days past due
according to the original terms of sale but in no case may such Accounts set
forth in clause (B) constitute more than 15% of the total Eligible Accounts of
Waxman Consumer Products Group Inc. or more than 10% of the total Eligible
Accounts for such other Borrower, or (ii) 180 days past the original invoice
date thereof; or
(b) any warranty contained in this Agreement or any
other Loan Document with respect either to Accounts or Eligible Receivables in
general or to such specific Account is not true and correct with respect to
such Account; or
(c) the account debtor on such Account has disputed
liability or made any claim with respect to any other Account due from such
account debtor to such Borrower or any of its Subsidiaries; provided that, at
the Agent's reasonable discretion, such Account may be deemed eligible solely
to the extent such Account exceeds such liability of claim; or
(d) the account debtor on such Account has filed a
petition for bankruptcy or any other relief under the Bankruptcy Code or any
other law relating to bankruptcy, insolvency, reorganization or relief of
debtors; made an assignment for the benefit of creditors; had filed against it
any petition or other application for relief under the Bankruptcy Code or any
such other law; has failed, suspended business operations, become insolvent,
called a meeting of its creditors for the purpose of obtaining any financial
concession or accommodation, or had or suffered a receiver or a trustee to be
appointed for all or a significant portion of its assets or affairs; or
(e) the account debtor on such Account or any of its
Affiliates is also a supplier to or creditor of such Borrower or any of its
Subsidiaries (other than freight carriers), provided that the amount of such
Account that shall not be deemed ineligible solely as a result of this clause
(E) shall be the excess of the amount of such Account over 115% of the amount
owed to any such supplier or creditor; or
(f) the account debtor on such Account or any of its
Affiliates is also a freight carrier for such Borrower supplying goods to such
Borrower; or
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(g) the sale represented by such Account is to an
account debtor outside the continental United States, unless the sale is on
letter of credit or acceptance terms acceptable to the Agent, in its sole
judgment exercised reasonably; or
(h) the sale to such account debtor on such Account
is on a bill-and-hold, guaranteed sale, sale-and-return, sale-on-approval or
consignment basis; or
(i) such Account is subject to a Lien in favor of
any Person other than the Agent for the benefit of the Secured Parties; or
(j) such Account is subject to any deduction,
offset, counterclaim, return privilege (without consent of such Borrower) or
other conditions, provided that if such deduction, offset or counterclaim is
known, then the Agent may, in its reasonable discretion, deem such Account
eligible to the extent such Account exceeds such known deduction, offset or
counterclaim; or
(k) the account debtor on such Account is located in
New Jersey or Minnesota, unless such Borrower (i) has received a certificate of
authority to do business and is in good standing in such state or (ii) has
filed a Notice of Business Activities Report with the appropriate office or
agency of such state for the current year; or
(l) the Agent, reasonably deems such Account
ineligible; or
(m) 50% or more of the outstanding Accounts of
the account debtor or such Account that constituted Eligible Receivables at the
time they arose have become, or have been reasonably determined by the Agent,
in accordance with the provisions hereof, to be, ineligible; or
(n) the sale represented by such Account is
denominated in other than United States dollars; or
(o) such Account is not evidenced by an invoice
or other writing in form acceptable to the Agent, in its sole discretion; or
(p) such Borrower or any of its Subsidiaries, in
order to be entitled to collect such Account, is required to perform any
additional service for, or perform or incur any
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additional obligation to, the Person to whom or to which it was made.
"ENVIRONMENTAL LAWS" means all foreign, federal,
state and local laws, statutes, ordinances and regulations, now or hereafter in
effect, and in each case as amended or supplemented from time to time, and any
judicial or administrative interpretation thereof, including, without
limitation, any judicial or administrative order, consent decree or judgment
relating to the regulation and protection of human health, safety, the
environment or natural resources (including, without limitation, ambient air,
surface water, groundwater, wetlands, land surface or subsurface strata,
wildlife, aquatic species and vegetation).
"ENVIRONMENTAL LIABILITIES AND COSTS" means, as to
any Person, all liabilities, obligations, responsibilities, Remedial Actions,
losses, damages, punitive damages, consequential damages, treble damages, costs
and expenses (including, without limitation, all fees, disbursements and
expenses of counsel, experts and consultants and costs of investigation and
feasibility studies), fines, penalties, sanctions and interest incurred as a
result of any claim or demand by any other Person, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute,
including, without limitation, any thereof arising under any Environmental Law,
Permit, order or agreement with any Governmental Authority or other Person, and
which relate to any environmental, health or safety condition, or a Release or
threatened Release, and result from the past, present or future operations of,
or ownership of property by, such Person or any of its Subsidiaries.
"ENVIRONMENTAL LIEN" means any Lien in favor of any
Governmental Authority for Environmental Liabilities and Costs.
"ERISA" means the Employee Retirement Income Security
Act of 1974 (or any successor legislation thereto), as amended from time to
time and any applicable regulations promulgated thereunder.
"ERISA AFFILIATE" means any trade or business
(whether or not incorporated) under common control with any Loan Party or any
of its Subsidiaries and which, together with any Loan Party or any of its
Subsidiaries, are treated
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<PAGE> 20
as a single employer within the meaning of Section 414 (b), (c), (m) or (o) of
the Code.
"ERISA EVENT" means (i) a Reportable Event with
respect to a Title IV Plan or a Multiemployer Plan; (ii) the withdrawal of any
Loan Party, any of its Subsidiaries or any ERISA Affiliate from a Title IV Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer, as defined in Section 4001(a)(2) of ERISA; (iii) the
complete or partial withdrawal of any Loan Party, any of its Subsidiaries or
any ERISA Affiliate from any Multiemployer Plan; (iv) the filing of a notice of
intent to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (v) the institution of proceedings to
terminate a Title IV Plan or Multiemployer Plan by the PBGC; (vi) the failure
to make any required contribution to a Qualified Plan; or (vii) any other event
or condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Title IV Plan or Multiemployer Plan or the imposition of any
liability under Title IV of ERISA, other than for PBGC premiums due but not
delinquent under Section 4007 of ERISA.
"EUROCURRENCY LIABILITIES" has the meaning assigned
to that term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"EURODOLLAR LENDING OFFICE" means, with respect to
any Lender, the office of such Lender specified as its "Eurodollar Lending
Office" opposite its name on Schedule II (or, if no such office is specified,
its Domestic Lending Office) or such other office of such Lender as such Lender
may from time to time specify to the Borrowers and the Agent.
"EURODOLLAR RATE" means, for any Interest Period, an
interest rate per annum equal to the rate per annum obtained by dividing (a)
the rate of interest determined by the Agent to be the average (rounded upward
to the nearest whole multiple of 1/16 of 1% per annum, if such average is not
such a multiple) of the rate per annum at which deposits in U.S. dollars are
offered by the principal office of Citibank in London, England to prime banks
in the London interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period in an
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amount substantially equal to the Eurodollar Rate Loan of Citibank during such
Interest Period and for a period equal to such Interest Period by (b) a
percentage equal to 100% MINUS the Eurodollar Rate Reserve Percentage for such
Interest Period.
"EURODOLLAR RATE LOAN" means any outstanding
principal amount of the Loans of any Lender to a Borrower that, for an Interest
Period, bears interest at a rate determined with reference to the Eurodollar
Rate. Eurodollar Rate Loans made on the same date with the same Interest
Period to different Borrowers shall be deemed to be separate Eurodollar Rate
Loans and must each meet the criteria set forth herein.
"EURODOLLAR RATE RESERVE PERCENTAGE" for any Interest
Period means the reserve percentage applicable two Business Days before the
first day of such Interest Period under regulations issued from time to time by
the Board of Governors of the Federal Reserve System for determining the
maximum reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member bank of the
Federal Reserve System in New York City with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities (or with respect to any
other category of liabilities which includes deposits by reference to which the
Eurodollar Rate is determined) having a term equal to such Interest Period.
"EVENT OF DEFAULT" has the meaning specified in
Section 8.1.
"EXCHANGE NOTES" means the 12-3/4% Senior Secured
Deferred Coupon Notes due 2004 of Holdings issued pursuant to the Indenture,
dated as of May 20, 1994, by and between Holdings and The Huntington National
Bank, as trustee, as amended, modified or supplemented from time to time in
accordance with the provisions of this Agreement.
"EXCHANGE OFFER AND CONSENT SOLICITATION" means the
Offer to Exchange and Consent Solicitation in respect of the Existing Senior
Subordinated Notes dated April 21, 1994 relating to (i) Holdings' offer to
exchange for $50,000,000 aggregate principal amount of its Existing Senior
Subordinated Notes its Exchange Notes and warrants to purchase Holdings' common
stock and (ii) consents to consummate the Corporate Restructuring and the
Refinancing,
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each as more particularly described in the Disclosure Document.
"EXISTING BARNETT FACILITY" means the $5,000,000
Credit Agreement, dated as of December 30, 1993, by and among Barnett Inc. as
borrower, Citicorp USA Inc. as lender and secured party and Citibank, N.A. as
issuer, as amended or supplemented through the date hereof.
"EXISTING CONVERTIBLE DEBENTURES" means the 9 1/2%
Convertible Debentures due 2007 of Holdings issued pursuant to the Indenture,
dated as of March 15, 1987 by and between Holdings and The Huntington National
Bank, as trustee, as amended or supplemented through the date hereof.
"EXISTING FLOATING RATE SENIOR SECURED NOTES" means
the Floating Rate Senior Secured Notes due 1998 of Holdings issued pursuant to
the Indenture, dated as of September 1, 1991, by and between Holdings and
United States Trust Company of New York, as trustee, as amended or supplemented
through the date hereof.
"EXISTING 12 1/4% SENIOR SECURED NOTES" means the
12 1/4% Fixed Rate Senior Secured Notes due 1998 of Holdings issued pursuant to
the Indenture, dated as of September 1, 1991, by and between Holdings and
United States Trust Company of New York, as trustee.
"EXISTING SENIOR SUBORDINATED NOTES" means the
13 3/4% Senior Subordinated Notes due 1999 of Holdings issued pursuant to the
Indenture, dated as of June 1, 1989, by and between Holdings and AmeriTrust
Company National Association (now known as Society National Bank), as trustee,
as amended or supplemented through the date hereof.
"EXISTING WAXMAN INDUSTRIES CREDIT AGREEMENT" means
the amended and restated revolving credit facility, dated as of April 1, 1993,
by and among Holdings as borrower, the financial institutions party thereto as
lender and National City Bank as agent, as amended or supplemented through the
date hereof.
"FAIR MARKET VALUE" means (i) with respect to any
asset (other than a marketable security) at any date, the value of the
consideration obtainable in a sale of such asset at such date assuming a sale
by a willing seller to a willing purchaser dealing at arm's length and arranged
in an orderly manner over a reasonable period of time having
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regard to the nature and characteristics of such asset or, if such asset shall
have been the subject of a relatively contemporaneous appraisal by an
independent third party appraiser, the basic assumptions underlying which have
not materially changed since its date, as set forth in such appraisal, and (ii)
with respect to any marketable security at any date, the closing sale price of
such security on the business day (on which any national securities exchange is
open for the normal transaction of business) next preceding such date, as
appearing in any published list of any national securities exchange or in the
National Market List of the National Association of Securities Dealers, Inc.
or, if there is no such closing sale price of such security, the final price
for the purchase of such security at face value quoted on such business day by
a financial institution of recognized standing which regularly deals in
securities of such type.
"FEDERAL FUNDS RATE" means, for any period, a
fluctuating interest rate per annum equal for each day during such period to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by the Agent from
three Federal funds brokers of recognized standing selected by it.
"FIRST STEPDOWN TEST" means the Company maintaining
at the end of a Fiscal Quarter set forth below, a ratio of (a) EBITDA LESS
Capital Expenditures (other than in respect of Capitalized Leases) LESS income
taxes paid to (b) Fixed Charges, in each case determined on the basis of the
four Fiscal Quarters ending on the date of determination (or, in the case of
the Fiscal Quarter ending December 31, 1994, on the basis of the three Fiscal
Quarters then ending), not less than the ratio set forth below opposite such
Fiscal Quarter:
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<TABLE>
<CAPTION>
For the
Fiscal Quarter Ending on Minimum Ratio
------------------------ -------------
<S> <C>
December 31, 1994 1.65
March 31, 1995 1.70
June 30, 1995 1.70
September 30, 1995 1.75
December 31, 1995 1.75
March 31, 1996 1.80
June 30, 1996 1.80
September 30, 1996 1.85
December 31, 1996 1.85
March 31, 1997 1.90
June 30, 1997 1.95
September 30, 1997 2.00
December 31, 1997 2.00
March 31, 1998 2.00
</TABLE>
provided that if the Company, as of the end of such Fiscal Quarter, has also
met the Second Stepdown Test at such time, then the Second Stepdown Test (and
not the First Stepdown Test) shall be deemed to be met.
"FISCAL QUARTER" means each of the three month
periods ending on March 31, June 30, September 30 and December 31.
"FISCAL YEAR" means the twelve month period ending on
June 30.
"FIXED CHARGES" means, for any Person for any period,
the sum of (without duplication) (i) the Cash Interest Expense of such Person
and each of its Subsidiaries for such period, (ii) the principal amount of
Indebtedness for borrowed money of such Person and each of its Subsidiaries
determined on a consolidated basis in conformity with GAAP having a scheduled
due date during such period, (iii) all amounts having a scheduled due date
during such period payable by such Person and each of its Subsidiaries
determined on a consolidated basis in conformity with GAAP, on Capitalized
Lease Obligations and (iv) any dividends or distributions made during such
period pursuant to Section 7.4(a)(iii); provided that "Fixed Charges" for the
Company
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for any period shall include, without duplication, the Cash Interest Expense of
Holdings with respect to the Debentures for such period and the principal
amount of the Debentures of Holdings having a scheduled due date during such
period.
"GAAP" means 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 Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board, or in such other statements by
such other entity as may be in general use by significant segments of the
accounting profession, which are applicable to the circumstances as of the date
of determination except that, for purposes of Article V, 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 audited financial
statements referred to in Section 4.5.
"GMROI" means, with respect to any class of Inventory
of any Borrower at any time, the gross margin return on investment of such
class of Inventory of such Borrower as calculated using the method used as of
the date hereof by such Borrower with such changes in such method as agreed to
by the Borrowers and the Agent.
"GOVERNMENTAL AUTHORITY" means 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.
"HOLDINGS" means Waxman Industries, Inc., a Delaware
corporation.
"IDEAL SUBSIDIARIES" means Ideal Holding Group, Inc.
and its Subsidiaries.
"IMPROVEMENTS" has the meaning specified in Section
4.22(d).
"INDEBTEDNESS" of any Person means, without
duplication, (i) all indebtedness of such Person for borrowed money (including,
without limitation, reimbursement and all other obligations with respect to
surety bonds, letters of credit and bankers' acceptances, whether or not
matured) or for the deferred purchase price of property or services,
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<PAGE> 26
(ii) all obligations of such Person evidenced by notes, bonds, debentures or
similar instruments, (iii) all indebtedness of such Person 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), (iv) all Capitalized Lease Obligations
of such Person, (v) all Contingent Obligations of such Person, (vi) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any Stock or Stock Equivalents of such Person, valued, in the
case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, and (vii)
all Indebtedness of the types referred to in clause (i), (ii), (iii), (iv), (v)
or (vi) above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
property (including, without limitation, accounts and general intangibles)
owned by such Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness to the extent of the lesser of the amount
of the Indebtedness so secured or the fair value of the property so secured,
(viii) in the case of any Borrower, the Obligations and (ix) all liabilities of
such Person that would be shown on a balance sheet of such Person prepared in
conformity with GAAP.
"INDEMNITEES" has the meaning specified in Section
10.4.
"INDENTURES" means the indentures relating to each of
the Debentures.
"INTELLECTUAL PROPERTY SECURITY AGREEMENT" means a
security agreement made by each of the Borrowers, in substantially the form of
Exhibit E, as such agreement may be amended, supplemented or otherwise modified
from time to time.
"INTERCOMPANY NOTE" shall mean any intercompany note,
substantially in the form of Exhibit K, made by any Borrower to any other
Borrower or by any Borrower to the Company or Holdings.
"INTERCORPORATE AGREEMENT" means the Intercorporate
Agreement among Holdings, the Company and the Borrowers dated on or about the
Closing Date.
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"INTERCREDITOR AGREEMENT" means the intercreditor
agreement by and among the agent for the Term Loan Lenders and the Agent
substantially in the form of Exhibit M hereto, as the same may be amended,
supplemented or otherwise modified from time to time.
"INTEREST PERIOD" means, (a) initially, the period
commencing on the date such Eurodollar Rate Loan is made or on the date of
conversion of a Base Rate Loan to such Eurodollar Rate Loan and ending one,
two, three or six months thereafter, as selected by the Borrowers in the Notice
of Borrowing or Notice of Conversion or Continuation given to the Agent
pursuant to Section 2.2 or 2.7, and (b) thereafter, if such Loan is continued,
in whole or in part, as a Eurodollar Rate Loan pursuant to Section 2.7, a
period commencing on the last day of the immediately preceding Interest Period
therefor and ending one, two, three or six months thereafter, as selected by
the Borrowers in the Notice of Conversion or Continuation given to the Agent
pursuant to Section 2.7; PROVIDED, HOWEVER, that all of the foregoing
provisions relating to Interest Periods in respect of Eurodollar Rate Loans are
subject to the following:
(i) if any Interest Period would otherwise
end on a day which 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 extend 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 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;
(iii) the Borrowers may not select any
Interest Period which ends after the Termination Date;
(iv) the Borrowers may not select any
Interest Period in respect of Loans having an
aggregate principal amount of less than $3,500,000;
and
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<PAGE> 28
(v) there shall be outstanding at any one
time no more than seven Interest Periods
in the aggregate.
"INVENTORY" has the meaning specified in Section
9-109(4) of the UCC.
"INVESTMENTS" has the meaning specified in Section
7.6.
"IRS" means the Internal Revenue Service, or any
successor thereto.
"ISLIP IRB" means the Lease Agreement, dated as of
December 1, 1986, between the Town of Islip Industrial Development Authority
and Holdings, as amended, supplemented or modified from time to time and each
of the agreements, documents and instruments executed in connection therewith.
"ISSUER" and "ISSUERS" have the meanings set forth in
the introductory paragraph.
"L/C CASH COLLATERAL ACCOUNT" has the meaning set
forth in Section 8.3.
"LEASES" means, with respect to any Borrowers or any
of their Subsidiaries, all of those leasehold estates in real property owned by
such Borrower or such Subsidiary, as lessee, as such may be amended,
supplemented or otherwise modified from time to time to the extent permitted by
this Agreement.
"LETTER OF CREDIT" means any letter of credit issued
for the account of any Borrower by an Issuer pursuant to Section 2.16.
"LETTER OF CREDIT FEE PERCENTAGE" means two and
three-quarters percent (2.75%); PROVIDED, HOWEVER, if, at the end of any Fiscal
Quarter commencing with the Fiscal Quarter ending December 31, 1994, the
Company meets either of the tests set forth below, then the Letter of Credit
Fee Percentage for the immediately succeeding Fiscal Quarter shall be reduced
to the percentage set forth opposite the test set forth below that the Company
has met and if (i) the Company has not met either of the tests set forth below
at the end of any Fiscal Quarter, the Letter of Credit Fee Percentage shall be
two and three-quarters percent (2.75%) for the next succeeding Fiscal Quarter
or (ii) any Event of
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Default shall occur and be continuing, the Letter of Credit Fee Percentage
shall be two and three-quarters percent (2.75%) upon the occurrence and during
the continuance of such Event of Default:
LETTER OF CREDIT FEE PERCENTAGE TEST MET
- ------------------------------- --------
2.50% First Stepdown Test
2.25% Second Stepdown Test
provided that, in all cases, the Letter of Credit Fee Percentage shall be
increased by 0.50% over the percentage as determined above until such time as
the loans and other obligations under the Term Loan Credit Agreement have been
paid in full.
"LETTER OF CREDIT OBLIGATIONS" means, at any time
with respect to any Borrower, all liabilities at such time of such Borrower to
all Issuers with respect to Letters of Credit, whether or not any such
liability is contingent, and includes the sum of (i) the Reimbursement
Obligations of such Borrower at such time and (ii) the Letter of Credit Undrawn
Amounts of such Borrower at such time.
"LETTER OF CREDIT REIMBURSEMENT AGREEMENT" has the
meaning specified in Section 2.16(c).
"LETTER OF CREDIT REQUEST" has the meaning specified
in Section 2.16(d).
"LETTER OF CREDIT UNDRAWN AMOUNTS" means, at any time
with respect to any Borrower, the aggregate undrawn face amount of all Letters
of Credit for the account of such Borrower outstanding at such time.
"LIEN" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), security interest or preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever intended to assure
payment of any Indebtedness or other obligation, including, without limitation,
any conditional sale or other title retention agreement, the interest of a
lessor under a Capitalized Lease Obligation, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing,
under the Uniform Commercial Code or comparable law of any jurisdiction, of any
financing state-
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<PAGE> 30
ment naming the owner of the asset to which such Lien relates as debtor.
"LOAN" means a Revolving Credit Loan or any loan made
by any Lender or Issuer to the Borrower pursuant to Section 2.16 or 2.18
(including, without limitation, a Swing Advance).
"LOAN DOCUMENTS" means, collectively, this Agreement,
the Notes, the Collateral Documents, the Intercreditor Agreement and each
certificate, agreement or document executed by any Loan Party.
"LOAN PARTY" means each Borrower and each Subsidiary
or Affiliate which executes a Loan Document.
"MAJORITY LENDERS" means, at any time, Lenders
holding at least 51% of the then aggregate unpaid principal amount of the Loans
or, if no Loans are then outstanding, Lenders having at least 51% of the
Commitments (determined assuming that a Settlement Date pursuant to Section
2.18(c), and all of the transactions contemplated thereby, have occurred).
"MATERIAL ADVERSE CHANGE" and "MATERIAL ADVERSE
EFFECT" mean a material adverse change in or effect on, as the case may be, any
of (i) the condition (financial or otherwise), business, performance,
prospects, operations or properties of any Loan Party or any Loan Party and its
Subsidiaries taken as one enterprise, (ii) the legality, validity or
enforceability of any Loan Document, (iii) the perfection or priority of the
Liens granted pursuant to the Collateral Documents, (iv) the ability of any
Borrower to repay the Obligations or of any Loan Party to perform its
obligations under any Loan Document, or (v) the rights and remedies of the
Lenders, the Issuers or the Agent under the Loan Documents.
"MORTGAGE" means the Mortgage made by any Borrower in
substantially the form of Exhibit J, as such mortgage may be amended,
supplemented or otherwise modified from time to time.
"MULTIEMPLOYER PLAN" means a multiemployer plan, as
defined in Section 4001(a)(3) of ERISA, and to which any Loan Party, any of its
Subsidiaries or any ERISA Affiliate is making, is obligated to make, has made
or been obligated
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<PAGE> 31
to make, contributions on behalf of participants who are or were employed by
any of them.
"NET INCOME (LOSS)" means, for any Person for any
period, the aggregate of net income (or loss) of such Person and its
Subsidiaries for such period, determined on a consolidated basis in conformity
with GAAP.
"NET INTEREST EXPENSE" means, for any Person for any
period, gross interest expense of such Person and its Subsidiaries for such
period determined on a consolidated basis in conformity with GAAP, LESS the
following for such Person and its Subsidiaries determined on a consolidated
basis in conformity with GAAP: (a) the sum of (i) interest capitalized during
construction for such period, (ii) interest income for such period, and (iii)
gains for such period on interest rate contracts (to the extent not included in
interest income above and to the extent not deducted in the calculation of such
gross interest expense) and (iv) to the extent included in such gross interest
expense, consent fees paid in connection with the Exchange Offer and Consent
Solicitation and the 12 1/4% Consent Solicitation, PLUS the following for such
Person and its Subsidiaries determined on a consolidated basis in conformity
with GAAP: (b) the sum of (i) losses for such period on interest rate
contracts (to the extent not included in such gross interest expense), and (ii)
the amortization of upfront costs or fees for such period associated with
Interest Rate Contracts (to the extent not included in gross interest expense).
"NET WORTH" of any Person means, at any date, the
excess of the Total Assets of such Person at such date over the Total
Liabilities of such Person at such date.
"NON-CASH INTEREST EXPENSE" means, for any Person for
any period, the sum of the following amounts to the extent included in Net
Interest Expense of such Person for such period: (i) the amount of amortized
debt discount, (ii) charges relating to write-ups or write-downs in the book or
carrying value of existing Indebtedness and (iii) amortization of deferred
financing costs.
"NOTES" means, collectively, the Revolving Credit
Notes.
"NOTICE OF BORROWING" has the meaning specified in
Section 2.2(a).
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<PAGE> 32
"OBLIGATIONS" means the Loans, the Letter of Credit
Obligations and all other advances, debts, liabilities, obligations, covenants
and duties owing by the Borrowers to the Agent, any Lender, any Affiliate of
any of them or any Indemnitee, of every type and description, present or
future, whether or not evidenced by any note, guaranty or other instrument,
arising under this Agreement or under any other Loan Document, whether or not
for the payment of money, whether arising by reason of an extension of credit,
opening or amendment of a Letter of Credit or payment of any draft drawn
thereunder, loan, guaranty, indemnification, foreign exchange transaction or in
any other manner, whether direct or indirect (including, without limitation,
those acquired by assignment), absolute or contingent, due or to become due,
now existing or hereafter arising and however acquired. The term "Obligations"
includes, without limitation, all interest, charges, expenses, fees, attorneys'
fees and disbursements and any other sum chargeable to the Borrowers under this
Agreement or any other Loan Document and all obligations of the Borrowers to
cash collateralize Letter of Credit Obligations.
"OPERATING PLAN" means those financial plans dated
March 7, 1994 covering the Fiscal Years ending in 1994 through 1998, inclusive,
delivered to the Lenders by the Borrowers.
"OTHER TAXES" has the meaning specified in Section
2.14(b).
"PBGC" means the Pension Benefit Guaranty
Corporation, or any successor thereto.
"PENSION PLAN" means an employee pension benefit
plan, as defined in Section 3(2) of ERISA (other than a Multiemployer Plan),
which is not an individual account plan, as defined in Section 3(34) of ERISA,
and which any Loan Party, any of its Subsidiaries or, if a Title IV Plan, any
ERISA Affiliate maintains, contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by any of them.
"PERFECTION CERTIFICATE" means a certificate, in form
satisfactory to the Agent, executed by a Responsible Officer of each Borrower.
"PERMIT" means any permit, approval, authorization, license,
variance or permission required from a
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<PAGE> 33
Governmental Authority under an applicable Requirement of Law.
"PERMITTED HOLDERS" means Armond Waxman, Melvin
Waxman, trusts for the benefit of any of Armond Waxman, Melvin Waxman or
members of their families, the heirs or administrators or executors for the
respective estates of Armond Waxman or Melvin Waxman or any Person, entity or
group of Persons controlled by any of the foregoing.
"PERSON" means an individual, partnership,
corporation (including, without limitation, a business trust), joint stock
company, trust, unincorporated association, joint venture or other entity, or a
Governmental Authority.
"PLAN" means an employee benefit plan, as defined in
Section 3(3) of ERISA, which any Loan Party, any of its Subsidiaries or any
ERISA Affiliate maintains, contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by any Loan Party or any of
its Subsidiaries.
"PLEDGE AGREEMENT" means the pledge agreement
executed by TWI pledging 100% of the outstanding Stock of each of its direct
domestic Subsidiaries and 65% of the outstanding Stock of each of its direct
foreign Subsidiaries, in substantially the form of Exhibit L, as such pledge
agreement may be amended, supplemented or otherwise modified from time to time.
"PROPOSED NOTES" means the notes to be issued by
Holdings and/or the Company in connection with the Proposed Restructuring.
"PROPOSED RESTRUCTURING" means (A) the redemption,
repayment or defeasance of (i) all of the Existing 12 1/4% Senior Secured Notes
and the Existing Floating Rate Senior Secured Notes outstanding, (ii) all of
the Existing Senior Subordinated Notes outstanding, (iii) the Existing
Convertible Debentures, if any, outstanding and (iv) the obligations under the
Term Loan Agreement outstanding, (B) the offering of the Proposed Notes by
Holdings and/or the Company the proceeds of which, in the aggregate, are
sufficient to finance the transactions described in clause (A) above, and (C)
the contribution by Holdings or the Company to the Borrowers of funds
sufficient to pay the obligations under the Term Loan Agreement outstanding and
the actual payment of such obligations, as
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such transactions may be consummated pursuant to Section 10.16.
"PUBLIC FILINGS" means the Report on Form 10-K of
Holdings for the year ended June 30, 1993, and the quarterly Reports on Form
10-Q of Holdings for the fiscal quarters ended September 30, 1993 and December
31, 1993, in each case as amended through the date hereof.
"QUALIFIED PLAN" means an employee pension benefit
plan, as defined in Section 3(2) of ERISA, which is intended to be
tax-qualified under Section 401(a) of the Code, and which any Loan Party, any
of its Subsidiaries or any ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were employed
by any of them.
"RATABLE PORTION" or "RATABLY" means, with respect to
any Lender, the quotient obtained by dividing the Commitment of such Lender by
the Commitments of all Lenders provided that, (i) payments of principal of the
Loans and interest on the Loans shall be made pro rata in accordance with the
respective unpaid principal amounts of the Loans held by the Lenders and (ii)
payments of interest on the Loans shall be made pro rata in accordance with the
respective amounts of unpaid interest on the Loans in respect of which such
interest is being paid owed to all the Lenders.
"REAL ESTATE" means all of those plots, pieces or
parcels of land now owned or hereafter acquired by any Borrower or any of its
Subsidiaries (the "Land"), including, without limitation, those listed on
Schedule 4.22(a) and described in the Mortgages, together with the right, title
and interest of such Borrower or such Subsidiary, if any, in and to the
streets, the land lying in the bed of any streets, roads or avenues, opened or
proposed, in front of, adjoining or abutting the Land to the center line
thereof, the air space and development rights pertaining to the Land and the
right to use such air space and development rights, all rights of way,
privileges, liberties, tenements, hereditaments and appurtenances belonging or
in any way appertaining thereto, all fixtures, all easements now or hereafter
benefiting the Land and all royalties and rights appertaining to the use and
enjoyment of the Land, including, without limitation, all alley, vault,
drainage, mineral, water, oil and gas rights, together with all of the
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buildings and other improvements now or hereafter erected on the Land, and any
fixtures appurtenant thereto.
"REFINANCING" means (i) the repayment of the
Indebtedness of Holdings owed pursuant to the Existing Waxman Industries Credit
Agreement assumed by one or more Borrowers and the collateralization of the
letters of credit thereunder and (ii) the repayment of the Indebtedness of
Barnett owed pursuant to the Existing Barnett Facility and the assumption
hereunder of the letters of credit issued thereunder by Citibank, as disclosed
in the Disclosure Document.
"REGISTER" has the meaning specified in Section 10.7.
"REIMBURSEMENT OBLIGATIONS" means all matured
reimbursement or repayment obligations of any Borrower to any Issuer with
respect to Letters of Credit pursuant to Letter of Credit Reimbursement
Agreements.
"RELATED DOCUMENTS" means (a) the Indenture relating
to the Exchange Notes, (b) the amendments to the Indentures relating to the
Existing 12 1/4% Senior Secured Notes and the Existing Floating Rate Senior
Secured Notes and the Existing Senior Subordinated Notes, (c) the Term Loan
Agreement and (d) each document and instrument executed in connection with the
Corporate Restructuring.
"RELEASE" means, as to any Person, any release,
spill, emission, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration, in each case of any Contaminant, into the
indoor or outdoor environment or into or out of any property owned by such
Person, including, without limitation, the movement of Contaminants through or
in the air, soil, surface water, ground water or property which forms the basis
of Environmental Costs and Liabilities.
"REMEDIAL ACTION" means all actions required to (i)
clean up, remove, treat or in any other way address Contaminants in the indoor
or outdoor environment, (ii) prevent the Release or threat of Release or
minimize the further Release of Contaminants so they do not migrate or endanger
or threaten to endanger public health or welfare or the indoor or outdoor
environment, or (iii) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
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"REORGANIZATION" shall mean the following
transactions: (i) the Exchange Offer and Consent Solicitation and the 12 1/4%
Consent Solicitation, (ii) the Corporate Restructuring, (iii) the execution of
this Credit Agreement and the Term Loan Agreement, and (iv) the Refinancing, as
described in the Disclosure Document.
"REPORTABLE EVENT" means any of the events described
in Sections 4043(b)(1), (2), (3), (5), (6), (8) or (9) of ERISA.
"REQUIREMENT OF LAW" means, as to any Person, the
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and all federal, state and local laws, rules and
regulations, including, without limitation, federal, state or local securities,
antitrust and licensing laws, any federal, state or local laws or regulations
concerning physicians, nurses and psychologists, all food, health and safety
laws, and all applicable trade laws and requirements, including, without
limitation, all disclosure requirements of Environmental Laws, ERISA and all
orders, judgments, decrees or other determinations of any Governmental
Authority or arbitrator, 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" means, with respect to any
Person, any of the principal executive officers (including treasurer) or any
other officer or employee of such Person selected by such Person as a
Responsible Officer hereunder and notification of whose selection is made in
writing to the Agent.
"RETIREE WELFARE PLAN" means any Welfare Plan
providing for continuing coverage or benefits for any participant or any
beneficiary of a participant after such participant's termination of
employment, other than continuation coverage provided pursuant to Section 4980B
of the Code and at the sole expense of the participant or the beneficiary of
the participant.
"REVOLVING CREDIT BORROWING" means a Borrowing
consisting of Revolving Credit Loans made by the Lenders ratably according to
their respective Commitments.
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"REVOLVING CREDIT LOAN" means a Loan made by a Lender
to any Borrower pursuant to Section 2.1 or Section 2.18.
"REVOLVING CREDIT NOTE" means a promissory note of
the Borrowers payable to the order of any Lender in a principal amount equal to
the amount of such Lender's Commitment as originally in effect, in
substantially the form of Exhibit A, evidencing the aggregate Indebtedness of
the Borrowers to such Lender resulting from the Revolving Credit Loans made by
such Lender.
"SECOND STEPDOWN TEST" means the Company maintaining
at the end of a Fiscal Quarter set forth below, a ratio of (a) EBITDA LESS
Capital Expenditures (other than in respect of Capitalized Leases) LESS income
taxes paid to (b) Fixed Charges, in each case determined on the basis of the
four Fiscal Quarters ending on the date of determination (or, in the case of
the Fiscal Quarter ending December 31, 1994, on the basis of the three Fiscal
Quarters then ending), not less than the ratio set forth below opposite such
Fiscal Quarter:
<TABLE>
<CAPTION>
For the
Fiscal Quarter Ending on Minimum Ratio
------------------------ --------------
<S> <C>
December 31, 1994 1.75
March 31, 1995 1.75
June 30, 1995 1.80
September 30, 1995 1.80
December 31, 1995 1.85
March 31, 1996 1.85
June 30, 1996 1.90
September 30, 1996 1.95
December 31, 1996 1.95
March 31, 1997 2.00
June 30, 1997 2.05
September 30, 1997 2.10
December 31, 1997 2.10
March 31, 1998 2.10
</TABLE>
"SECURED PARTIES" means the Lenders, Issuers and the
Agent.
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"SECURITY AGREEMENT" means an agreement, in
substantially the form of Exhibit E, executed by each of the Borrowers, as such
agreement may be amended, supplemented or modified from time to time.
"SOLVENT" means, with respect to any Person, that the
value of the assets of such Person (both at fair value and present fair
saleable value) is, on the date of determination, greater than the total amount
of liabilities (including, without limitation, contingent and unliquidated
liabilities) of such Person as of such date and that, as of such date, such
Person is able to pay all liabilities of such Person as such liabilities mature
and does not have unreasonably small capital. In computing the amount of
contingent or unliquidated liabilities at any time, such liabilities will be
computed at the amount which, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
"STOCK" means shares of capital stock, beneficial or
partnership interests, participations or other equivalents (regardless of how
designated) of or in a corporation or equivalent entity, whether voting or
non-voting, and includes, without limitation, common stock and preferred stock.
"STOCK EQUIVALENTS" means all securities convertible
into or exchangeable for Stock and all warrants, options or other rights to
purchase or subscribe for any stock, whether or not presently convertible,
exchangeable or exercisable.
"SUBSIDIARY" means, with respect to any Person, any
corporation, partnership or other business entity of which an aggregate of 50%
or more of the outstanding Stock having ordinary voting power to elect a
majority of the board of directors, managers, trustees or other controlling
persons, is, at the time, directly or indirectly, owned or controlled by such
Person and/or one or more Subsidiaries of such Person (irrespective of whether,
at the time, Stock of any other class or classes of such entity shall have or
might have voting power by reason of the happening of any contingency).
"SWING ADVANCE" has the meaning set forth in Section
2.18.
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"SWING ADVANCE AVAILABLE CREDIT" means the
Swing Advance Bank's Ratable Portion of the Available Credit.
"SWING ADVANCE BANK" means Citicorp, or such other
Lender who shall also be the Agent or who, with the agreement of the Agent,
shall agree to act hereunder as Swing Advance Bank.
"TAX AFFILIATE" means, as to any Person, (i) any
Subsidiary of such Person, and (ii) any Affiliate of such Person with which
such Person files or is eligible to file consolidated, combined or unitary tax
returns.
"TAX RETURN" has the meaning specified in Section 4.3.
"TAXES" has the meaning specified in Section 2.14(a).
"TAX SHARING AGREEMENT" means the tax sharing
agreement, dated on or about the Closing Date by and among Holdings and its
domestic Subsidiaries.
"TERM LOAN LENDERS" means the lenders party to the
Term Loan Credit Agreement.
"TERM LOAN CREDIT AGREEMENT" means the Credit
Agreement, dated as of May 20, 1994, by and among the financial institutions
party thereto and Citibank, N.A. as agent pursuant to which the financial
institutions will make loans to the Borrowers in the amount of $15,000,000.
"TERMINATION DATE" means the earliest of (i) June 1,
1994, unless the Closing Date occurs prior thereto, (ii) the third anniversary
of the Closing Date or, if the Proposed Restructuring is consummated within 33
months of the Closing Date, the fourth anniversary of the Closing Date, and
(iii) the date of termination in whole of the Commitments pursuant to Section
2.4 or 8.2.
"TITLE INSURANCE POLICIES" has the meaning specified
in Section 3.1(h).
"TITLE IV PLAN" means a Pension Plan which is covered
by Title IV of ERISA.
"TOTAL ASSETS" of any Person means, at any date, the
total assets of such Person and its Subsidiaries at such
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<PAGE> 40
date determined on a consolidated basis in conformity with GAAP.
"TOTAL LIABILITIES" of any Person means, at any date,
all obligations which in conformity with GAAP would be included in determining
total liabilities as shown on the liabilities side of a consolidated balance
sheet of such Person and its Subsidiaries at such date.
"TRADEMARK LICENSE AGREEMENT" means the Trademark
License Agreement by and among Holdings, the Company and the Borrowers dated on
or about the Closing Date.
"TRIGGER EVENT" means the failure of the Company to
maintain at the end of each Fiscal Quarter set forth below a ratio of EBITDA to
Cash Interest Expense, in each case determined based on the four Fiscal
Quarters ending on the date of determination (except that (i) in the case of
the Fiscal Quarter ending June 30, 1994, such determination shall be made based
on the three months then ending, (ii) in the case of the Fiscal Quarter ending
September 30, 1994, such determination shall be made based on the six months
then ending, and (iii) in the case of the Fiscal Quarter ending December 31,
1994, such determination shall be based on the nine months then ending) of not
less than the ratio set forth below for such Fiscal Quarter:
<TABLE>
<CAPTION>
For Each Fiscal Quarter
Ending on Minimum Ratio
------------- -------------
<S> <C>
June 30, 1994 1.28
September 30, 1994 1.32
December 31, 1994 1.33
March 31, 1995 1.36
June 30, 1995 1.39
September 30, 1995 1.42
December 31, 1995 1.43
March 31, 1996 1.43
June 30, 1996 1.43
September 30, 1996 1.46
December 31, 1996 1.47
March 31, 1997 1.52
June 30, 1997 1.54
September 30, 1997 1.85
December 31, 1997 1.85
</TABLE>
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March 31, 1998 1.85
A Trigger Event shall be deemed to occur at the end of the Fiscal Quarter for
which the Company fails to maintain the ratio as described above and shall
continue until the end of the first Fiscal Quarter in which the Company does
maintain such ratio.
"12 1/4% CONSENT SOLICITATION" means the Consent
Solicitation in respect of the Existing 12 1/4% Senior Secured Notes and the
Existing Floating Rate Senior Secured Notes relating to consents to amend the
indenture in respect thereof to permit the Corporate Restructuring and the
Refinancing.
"TWI" mean TWI, International, Inc., a Delaware
corporation.
"UNFUNDED PENSION LIABILITY" means the aggregate
amount, if any, of the sum of (i) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with
Title IV of ERISA, all determined as of the most recent valuation date for each
such Title IV Plan using the actuarial assumptions in effect under such Title
IV Plan, and (ii) for a period of five years following a transaction reasonably
likely to be covered by Section 4069 of ERISA, the liabilities (whether or not
accrued) that could be avoided by any Loan Party, any of its Subsidiaries or
any ERISA Affiliate as a result of such transaction.
"VOTING STOCK" means, with reference to the Company,
Stock of any class or classes if the holders of such Stock are ordinarily, in
the absence of contingencies, entitled to vote for the election of the
directors (or Persons performing similar functions) of the Company, even though
the right so to vote has been suspended by the happening of such a contingency.
"WELFARE PLAN" means an employee welfare plan, as
defined in Section 3(1) of ERISA, to which any Loan Party or any of its
Subsidiaries maintains, contributes to or has an obligation to contribute to,
on behalf of any participants (or their beneficiaries) who are or were employed
by any of them.
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"WITHDRAWAL LIABILITY" means, as to any Loan Party at
any time, the aggregate amount of the liabilities of any Loan Party, any of its
Subsidiaries or any ERISA Affiliate pursuant to Section 4201 of ERISA, and any
increase in contributions required to be made pursuant to Section 4243 of
ERISA, with respect to all Multiemployer Plans.
1.2. COMPUTATION OF TIME PERIODS. In this
Agreement, in the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each mean "to but excluding" and the word "through" means "to
and including".
1.3. ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in conformity with GAAP and all
accounting determinations required to be made pursuant hereto shall, unless
expressly otherwise provided herein, be made in conformity with GAAP.
1.4. CERTAIN TERMS. (a) The words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole, and not to any particular Article, Section, subsection or
clause in this Agreement. References herein to an Exhibit, Schedule, Article,
Section, subsection or clause refer to the appropriate Exhibit or Schedule to,
or Article, Section, subsection or clause in this Agreement.
(b) The terms "Lender," "Issuer" and "Agent" include
their respective successors and the terms "Lender" and "Issuer" include each
assignee of such Lender or such Issuer who becomes a party hereto pursuant to
Section 10.7.
(c) Upon the appointment of any successor Agent
pursuant to Section 9.6, references to Citicorp in Section 9.3 and in the
definition of Eurodollar Rate shall be deemed to refer to the successor then
acting as the Agent.
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
2.1. THE REVOLVING CREDIT LOANS. On the terms and
subject to the conditions contained in this Agreement, each Lender severally
agrees to make loans (each a
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<PAGE> 43
"Revolving Credit Loan") to one or more of the Borrowers from time to time on
any Business Day during the period from the date hereof until the Termination
Date in an aggregate amount not to exceed at any time outstanding such Lender's
Commitment; PROVIDED, HOWEVER, that at no time shall any Lender be obligated to
make a Revolving Credit Loan to any Borrower in excess of such Lender's Ratable
Portion of the Available Credit with respect to such Borrower and PROVIDED,
FURTHER, HOWEVER, that at no time shall any Lender be obligated to make a
Revolving Credit Loan to any Borrower the result of which is that the aggregate
amount of all Loans and Letter of Credit Obligations owed by all Borrowers is
greater than the sum of (i) the aggregate amount of the Borrowing Bases of all
of the Borrowers (calculated only with respect to Eligible Accounts) and (ii)
$35,000,000. Within the limits of each Lender's Commitment, amounts prepaid
pursuant to Section 2.6(b) or 2.17(e) may be reborrowed under this Section 2.1.
The Revolving Credit Loans of each Lender shall be evidenced by the Revolving
Credit Note to the order of such Lender.
2.2. MAKING THE LOANS. (a) Each Revolving Credit
Borrowing shall be made on notice, given by the Borrower so requesting the
Revolving Credit Borrowing to the Agent not later than 12:00 (noon) (New York
City time) on the Business Day of the proposed Revolving Credit Borrowing (or,
in the case of a Borrowing consisting of Eurodollar Rate Loans, three Business
Days prior to such proposed Revolving Credit Borrowing). Each such notice (a
"Notice of Borrowing") shall be in substantially the form of Exhibit B,
specifying therein (i) the name of such Borrower, (ii) the date of such
proposed Revolving Credit Borrowing, (iii) the aggregate amount of such
proposed Revolving Credit Borrowing, (iv) the amount thereof, if any, requested
to be Eurodollar Rate Loans, and (v) the initial Interest Period or Periods for
any such Eurodollar Rate Loans. The Loans shall be made as Base Rate Loans
unless (subject to Section 2.11) the Notice of Borrowing specifies that all or
a pro rata portion thereof shall be Eurodollar Rate Loans; PROVIDED, HOWEVER,
that the aggregate of the Eurodollar Rate Loans for each Interest Period must
be in an amount of not less than $3,500,000 or an integral multiple of $500,000
in excess thereof.
(b) The Agent shall give to each Lender prompt
notice of the Agent's receipt of a Notice of Borrowing and, if Eurodollar Rate
Loans are properly requested in such Notice of Borrowing, the applicable
interest rate under
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Section 2.8(b). Each Lender shall, before 3:00 P.M. (New York City time) on
the date of the proposed Borrowing, make available for the account of its
Applicable Lending Office to the Agent at its address referred to in Section
10.2, in immediately available funds, such Lender's Ratable Portion of such
proposed Borrowing. After the Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article III, the Agent
will make such funds available to such Borrower at the Agent's aforesaid
address.
(c) Each Borrowing shall be in an aggregate amount
of not less than $50,000.
(d) Each Notice of Borrowing shall be irrevocable
and binding on the Borrower so making the request. In the case of any proposed
Borrowing which the related Notice of Borrowing specifies is to be comprised of
Eurodollar Rate Loans, the Borrowers shall jointly and severally indemnify each
Lender against any loss, cost or expense incurred by such Lender as a result of
any failure to fulfill on or before the date specified in such Notice of
Borrowing for such proposed Borrowing the applicable conditions set forth in
Article III, including, without limitation, any loss (including, without
limitation, loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund any Eurodollar Rate Loan to be made by such Lender as part of
such proposed Borrowing when such Eurodollar Rate Loan, as a result of such
failure, is not made on such date.
(e) Unless the Agent shall have received notice from
a Lender prior to the time of any proposed Borrowing that such Lender will not
make available to the Agent such Lender's Ratable Portion of such Borrowing,
the Agent may assume that such Lender has made such Ratable Portion available
to the Agent on the date of such Borrowing in accordance with this Section 2.2
and the Agent may, in reliance upon such assumption, make available to the
Borrower requesting the Borrowing on such date a corresponding amount. If and
to the extent that such Lender shall not have so made such Ratable Portion
available to the Agent, such Lender and such Borrower severally agree to repay
to the Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
such Borrower until the date such amount is repaid to the Agent, at (i) in the
case of such Borrower, the interest rate applicable at the time
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<PAGE> 45
to the Loans comprising such Borrowing and (ii) in the case of such Lender, the
Federal Funds Rate. If such Lender shall repay to the Agent such corresponding
amount, such amount so repaid shall constitute such Lender's Loan as part of
such Borrowing for purposes of this Agreement. If such Borrower shall repay to
the Agent such corresponding amount, such payment shall not relieve such Lender
of any obligation it may have to such Borrower hereunder.
(f) The failure of any Lender to make the Loan to be
made by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Loan on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Loan to be made by such other Lender on the date of any Borrowing.
2.3. FEES. (a) The Borrowers jointly and severally
agree to pay to each Lender a commitment fee (the "Commitment Fee") on the
average daily amount of the excess of such Lender's Commitment over such
Lender's Loans and Letter of Credit Obligations owed to it from the date hereof
until the Termination Date at the rate of 0.5 of 1% per annum, payable monthly
(i) on the first day of each month during the term of such Lender's Commitment,
(ii) on the date of any reduction in whole of the Commitments pursuant to
Section 2.4 and (iii) on the Termination Date.
(b) The Borrowers have agreed to pay additional
fees, the amount and dates of payment of which are embodied in a separate
agreement between the Company and Citibank.
2.4. REDUCTION AND TERMINATION OF THE COMMITMENTS.
(a) The Borrowers may, upon at least three Business Days' prior notice to the
Agent, terminate in whole or reduce ratably in part the unused portions of the
respective Commitments of the Lenders; PROVIDED, HOWEVER, that each partial
reduction shall be in the aggregate amount of not less than $1,000,000 or an
integral multiple of $1,000,000 in excess thereof.
(b) The then current Commitments shall be reduced on
each date on which any Borrower receives payment from any of the following (and
the Commitment of each Lender shall be reduced by its Ratable Portion of such
amount):
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(i) upon receipt by such Borrower or its
Subsidiaries of Asset Sale Proceeds in an amount
equal to 75% of such Asset Sale Proceeds.
(ii) upon receipt of any reversion from a defined
benefit plan, in an amount equal to the amount of
such reversion so received. For purposes of this
subsection (ii), reversion is defined as the amount
of surplus assets which, upon the termination of any
defined benefit plan, revert to the Borrowers or any
of their Subsidiaries (net of any taxes, after taking
into account any available tax credits or deductions,
and excise taxes or penalties thereon).
2.5. REPAYMENT. The Borrowers jointly and severally
agree to repay the entire unpaid principal amount of the Loans on the
Termination Date.
2.6. PREPAYMENTS. (a) The Borrowers shall have no
right to prepay the principal amount of any Loan other than as provided in this
Section 2.6 and Section 2.17(e).
(b) Any Borrower may, upon at least three Business
Days' prior notice to the Agent, stating the proposed date and aggregate
principal amount of the prepayment, prepay the outstanding principal amount of
the Revolving Credit Loans made to it in whole or ratably in part. If such
Borrower is making payment in whole, such payment shall be paid together with
accrued interest to the date of such prepayment on the principal amount
prepaid. Upon the giving of such notice of prepayment, the principal amount of
the Loans specified to be prepaid shall become due and payable on the date
specified for such prepayment.
(c) (i) If at any time the aggregate principal
amount of Loans outstanding at such time exceeds the Commitments at such time,
the Borrowers jointly and severally agree to forthwith prepay the Loans then
outstanding in an amount equal to such excess.
(ii) If at any time the sum of the aggregate
principal amount of Loans and Letter of Credit Obligations outstanding to any
Borrower at such time exceeds the Borrowing Base of such Borrower at such time,
such Borrower shall forthwith prepay the Revolving Credit Loans then
outstanding in an amount equal to such excess, and if no Revolving Credit Loans
made to it are then outstanding, such
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Borrower shall forthwith cash collateralize such excess by paying to the Agent
immediately available funds in the amount of such excess for deposit in the L/C
Cash Collateral Account referred to in Section 8.3, which funds shall be
maintained in the L/C Cash Collateral Account in accordance with the provisions
of Section 8.3 as long as and to the extent that the Letter of Credit
Obligations of such Borrower exceed the Borrowing Base of such Borrower.
2.7. CONVERSION/CONTINUATION OPTION. The Borrowers
may elect (i) at any time to convert Base Rate Loans or any portion thereof to
Eurodollar Rate Loans or (ii) at the end of any Interest Period with respect
thereto, to convert Eurodollar Rate Loans or any portion thereof into Base Rate
Loans or to continue such Eurodollar Rate Loans or any portion thereof for an
additional Interest Period; PROVIDED, HOWEVER, that the aggregate of the
Eurodollar Loans for each Interest Period therefor must be in the amount of
$3,500,000 or an integral multiple of $500,000 in excess thereof. Each
conversion or continuation shall be allocated among the Loans of all Lenders in
accordance with their Ratable Portion. Each such election shall be in
substantially the form of Exhibit C hereto (a "Notice of Conversion or
Continuation") and shall be made by giving the Agent at least three Business
Days' prior written notice thereof specifying (A) the amount and type of
conversion or continuation, (B) in the case of a conversion to or a
continuation of Eurodollar Rate Loans, the Interest Period therefor, and (C) in
the case of a conversion, the date of conversion (which date shall be a
Business Day and, if a conversion from Eurodollar Rate Loans, shall also be the
last day of the Interest Period therefor). The Agent shall promptly notify
each Lender of its receipt of a Notice of Conversion or Continuation and of the
contents thereof. Notwithstanding the foregoing, no conversion in whole or in
part of Base Rate Loans to Eurodollar Rate Loans, and no continuation in whole
or in part of Eurodollar Rate Loans upon the expiration of any Interest Period
therefor, shall be permitted at any time at which a Default or an Event of
Default shall have occurred and be continuing. If, within the time period
required under the terms of this Section 2.7, the Agent does not receive a
Notice of Conversion or Continuation from the Borrowers containing a permitted
election to continue any Eurodollar Rate Loans for an additional Interest
Period or to convert any such Loans, then, upon the expiration of the Interest
Period therefor, such Loans will be automatically converted to Base Rate
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Loans. Each Notice of Conversion or Continuation shall be irrevocable.
2.8. INTEREST. The Borrowers jointly and severally
agree to pay interest on the unpaid principal amount of each Loan from the date
thereof until the principal amount thereof shall be paid in full, at the
following rates per annum:
(a) For Base Rate Loans, at a rate per
annum equal at all times to the Base Rate in effect from time
to time PLUS the Applicable Base Rate Margin, payable monthly
on the first day of each month and on the Termination Date;
PROVIDED, HOWEVER, that during the continuance of an Event of
Default, all Base Rate Loans shall bear interest, payable on
demand, at a rate per annum equal at all times to 2% per annum
above the sum of the Applicable Base Rate Margin and the Base
Rate in effect from time to time.
(b) For Eurodollar Rate Loans, at a rate
per annum equal at all times during the applicable Interest
Period for each Eurodollar Rate Loan to the sum of the
Eurodollar Rate for such Interest Period PLUS the Applicable
Eurodollar Rate Margin in effect on the first day of such
Interest Period, payable monthly and on the Termination Date;
PROVIDED, HOWEVER, that during the continuance of an Event of
Default, all Eurodollar Rate Loans shall bear interest,
payable on demand, at a rate per annum equal at all times to
2% above the sum of the Eurodollar Rate and the Applicable
Eurodollar Rate Margin per annum in effect from time to time.
2.9. INTEREST RATE DETERMINATION AND PROTECTION.
(a) The Eurodollar Rate for each Interest Period for Eurodollar Rate Loans
shall be determined by the Agent two Business Days before the first day of such
Interest Period in the case of Eurodollar Rate Loans.
(b) The Agent shall give prompt notice to the
Borrowers and the Lenders of the applicable interest rate determined by the
Agent for purposes of Section 2.9(a).
(c) If, with respect to Eurodollar Rate Loans, the
Majority Lenders notify the Agent that the Eurodollar Rate for any Interest
Period therefor will not adequately reflect the cost to such Majority Lenders
of making such
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Loans or funding or maintaining their respective Eurodollar Rate Loans for such
Interest Period, the Agent shall forthwith so notify the Borrowers and the
Lenders, whereupon
(i) each Eurodollar Rate Loan will
automatically, on the last day of the then existing Interest
Period therefor, convert into a Base Rate Loan; and
(ii) the obligations of the Lenders to make
Eurodollar Rate Loans or to convert Base Rate Loans into
Eurodollar Rate Loans shall be suspended until the Agent shall
notify the Borrowers that such Lenders have determined that
the circumstances causing such suspension no longer exist.
2.10. INCREASED COSTS. If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation (other than any change by way of imposition or increase of reserve
requirements included in determining the Eurodollar Rate Reserve Percentage) or
(ii) compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to any Lender of agreeing to make or making, funding
or maintaining any Eurodollar Rate Loans, then the Borrowers jointly and
severally agree to, from time to time, upon demand by such Lender (with a copy
of such demand to the Agent), pay to the Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such increased
cost. A certificate as to the amount of such increased cost, submitted to the
Borrowers and the Agent by such Lender, shall be conclusive and binding for all
purposes, absent manifest error. If the Borrowers so notify the Agent within
five Business Days after any Lender notifies the Borrowers of any increased
cost pursuant to the foregoing provisions of this Section 2.10, the Borrowers
may either (A) prepay in full all Eurodollar Rate Loans of such Lender then
outstanding in accordance with Section 2.6(b) and, additionally, reimburse such
Lender for such increased cost in accordance with this Section 2.10 or (B)
convert all Eurodollar Rate Loans of all Lenders then outstanding into Base
Rate Loans, in accordance with Section 2.7 and, additionally, reimburse such
Lender for such increased cost in accordance with this Section 2.10.
2.11. ILLEGALITY. Notwithstanding any other
provision of this Agreement, if the introduction of
or any
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change in or in the interpretation of any law or regulation shall make it
unlawful, or any central bank or other Governmental Authority shall assert that
it is unlawful, for any Lender or its Eurodollar Lending Office to make
Eurodollar Rate Loans or to continue to fund or maintain Eurodollar Rate Loans,
then, on notice thereof and demand therefor by such Lender to the Borrowers
through the Agent, (i) the obligation of such Lender to make or to continue
Eurodollar Rate Loans and to convert Base Rate Loans into Eurodollar Rate Loans
shall terminate and (ii) the Borrowers jointly and severally agree to forthwith
prepay in full all Eurodollar Rate Loans of such Lender then outstanding,
together with interest accrued thereon, unless the Borrowers, within five
Business Days of such notice and demand, convert all Eurodollar Rate Loans of
all Lenders then outstanding into Base Rate Loans.
2.12 CAPITAL ADEQUACY. If (i) the introduction of
or any change in or in the interpretation of any law or regulation, (ii)
compliance with any law or regulation, or (iii) compliance with any guideline
or request from any central bank or other Governmental Authority (whether or
not having the force of law) affects or would affect the amount of capital
required or expected to be maintained by any Lender or any corporation
controlling any Lender and such Lender reasonably determines that such amount
is based upon the existence of such Lender's Commitments, Loans and commitments
in respect of Letters of Credit and its other commitments and loans of such
type, including, without limitation, its other commitments in respect of
letters of credit (or similar contingent obligations) then, upon demand by such
Lender (with a copy of such demand to the Agent), the Borrowers jointly and
severally agree to pay to the Agent for the account of such Lender, from time
to time as specified by such Lender, additional amounts sufficient to
compensate such Lender in the light of such circumstances, to the extent that
such Lender reasonably determines such increase in capital to be allocable to
the existence of such Lender's Commitments, Loans and agreements herein with
respect to Letters of Credit. A certificate as to such amounts submitted to
the Borrowers and the Agent by such Lender shall be conclusive and binding for
all purposes absent manifest error.
2.13. PAYMENTS AND COMPUTATIONS. (a) The Borrowers
shall make each payment hereunder and under the Notes not later than 12:00 noon
(New York City time) on the day when due, in Dollars, to the Agent at its
address
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referred to in Section 10.2 in immediately available funds without set-off or
counterclaim. The Agent will promptly thereafter cause to be distributed
immediately available funds relating to the payment of principal or interest or
fees (other than amounts payable pursuant to Section 2.10, 2.11, 2.12, 2.14,
2.16 or 2.17) to the Lenders, in accordance with their respective Ratable
Portions, for the account of their respective Applicable Lending Offices, and
like funds relating to the payment of any other amount payable to any Lender to
such Lender for the account of its Applicable Lending Office, in each case to
be applied in accordance with the terms of this Agreement. Payment received by
the Agent after 12:00 noon (New York City time) shall be deemed to be received
on the next Business Day.
(b) Each Borrower hereby authorizes each of the
Agent, each Lender and Issuer, if and to the extent payment owed to the Agent,
such Lender or such Issuer is not made when due hereunder or under any Loan
held by the Agent, such Lender and Issuer, to charge from time to time against
any or all of the Borrowers' accounts (other than accounts used exclusively for
payroll) with the Agent, such Lender or such Issuer any amount so due. In
addition, each Borrower hereby authorizes the Swing Bank, if and to the extent
payment owed to the Agent, any Lender or any Issuer is not made when due
hereunder or under any Loan held by the Agent, such Lender and Issuer, to make
a Swing Loan to such Borrower in the amount of such payment owed to be paid to
the Agent to be used to pay such amount. The Agent, Lenders and Issuers each
agree promptly to notify the Borrowers after any such application made by the
Agent, such Lender or such Issuer (as the case may be); PROVIDED, HOWEVER, that
the failure to give such notice shall not affect the validity of the
application.
(c) All computations of interest and of fees shall
be made by the Agent on the basis of a year of 360 days for the actual number
of days (including the first day but excluding the last day) occurring in the
period for which such interest and fees are payable. Each determination by the
Agent of an interest calculation hereunder shall be conclusive and binding for
all purposes, absent manifest error.
(d) Whenever any payment hereunder or under the
Notes shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day, and such extension
of time shall in
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such case be included in the computation of payment of interest or fee, as the
case may be; PROVIDED, HOWEVER, that if such extension would cause payment of
interest on or principal of any Eurodollar Rate Loan to be made in the next
calendar month, such payment shall be made on the next preceding Business Day.
(e) Unless the Agent shall have received notice from
the Borrowers prior to the date on which any payment is due hereunder to the
Lenders that the Borrowers will not make such payment in full, the Agent may
assume that the Borrowers have made such payment in full to the Agent on such
date and the Agent may, in reliance upon such assumption, cause to be
distributed to each Lender on such due date an amount equal to the amount then
due such Lender. If and to the extent the Borrowers shall not have so made
such payment in full to the Agent, each Lender shall repay to the Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to
such Lender until the date such Lender repays such amount to the Agent, at the
Federal Funds Rate.
(f) If any Lender (a "Non-Funding Lender") has (x)
failed to make a Revolving Credit Loan required to be made by it hereunder, and
the Agent has determined that such Lender is not likely to make such Revolving
Credit Loan or (y) given notice to the Borrowers or the Agent that it will not
make, or that it has disaffirmed or repudiated any obligation to make,
Revolving Credit Loans, in each case by reason of the provisions of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 or
otherwise, any payment made on account of the principal of the Revolving Credit
Loans outstanding shall be made as follows:
(i) in the case of any such payment made
on any date when and to the extent that, in the determination
of the Agent, any Borrower would be able, under the terms and
conditions hereof, to reborrow the amount of such payment
under the Commitments and to satisfy any applicable conditions
precedent set forth in Section 6.2 to such reborrowing, such
payment shall be made on account of the outstanding Revolving
Credit Loans held by the Lenders other than the Non-Funding
Lender PRO RATA according to the respective outstanding
principal amounts of the Revolving Credit Loans of such
Lenders;
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(ii) otherwise, such payment shall be made
on account of the outstanding Revolving Credit Loans held by
the Lenders PRO RATA according to the respective outstanding
principal amounts of such Revolving Credit Loans; and
(iii) any payment made on account of interest on
the Revolving Credit Loans shall be made PRO RATA according to
the respective amounts of accrued and unpaid interest due and
payable on the Revolving Credit Loans with respect to which
such payment is being made.
2.14. TAXES. (a) Any and all payments by any
Borrower under each Loan Document shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding,
in the case of each Lender and the Agent, taxes measured by its net income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which such
Lender or the Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of each Lender, taxes measured by its net
income, and franchise taxes imposed on it, by the jurisdiction of such Lender's
Applicable Lending Office or any political subdivision thereof (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If any Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent (i) the sum payable shall be increased as
may be necessary so that after making all required deductions (including,
without limitation, deductions applicable to additional sums payable under this
Section 2.14) such Lender or the Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
such Borrower shall make such deductions, (iii) such Borrower shall pay the
full amount deducted to the relevant taxing authority or other authority in
accordance with applicable law, and (iv) such Borrower shall deliver to the
Agent evidence of such payment to the relevant taxation or other authority.
(b) In addition, each Borrower jointly and severally
agrees to pay any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies of the United States or any
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political subdivision thereof or any applicable foreign jurisdiction which
arise from any payment made under any Loan Document or from the execution,
delivery or registration of, or otherwise with respect to, any Loan Document
(collectively, "Other Taxes").
(c) Each Borrower jointly and severally agrees to
indemnify each Lender and the Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 2.14) paid by such Lender or
the Agent (as the case may be) and any liability (including, without
limitation, for penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. This indemnification shall be made within 30 days from the
date such Lender or the Agent (as the case may be) makes written demand
therefor.
(d) Within 30 days after the date of any payment of
Taxes or Other Taxes, the Borrowers will furnish to the Agent, at its address
referred to in Section 10.2, the original or a certified copy of a receipt
evidencing payment thereof.
(e) Without prejudice to the survival of any
other agreement of any Borrower hereunder, the agreements and obligations of
each Borrower contained in this Section 2.14 shall survive the payment in full
of the Obligations.
2.15. SHARING OF PAYMENTS, ETC. (a) If any Lender
(other than the Swing Advance Bank) shall obtain any payment (whether
voluntary, involuntary, through the exercise of any right of set off or
otherwise) on account of Loans made by it (other than pursuant to Section 2.10,
2.11, 2.12 or 2.14), and there is any Swing Advance outstanding in respect of
which the Swing Advance Bank has not received payment in full from the Lenders
pursuant to Section 2.18(c) or (d) or there is any Letter of Credit
Reimbursement Obligation outstanding in respect of which the relevant Issuer
has not received payment in full from the Lenders pursuant to Section 2.16(h),
such Lender (a "Purchasing Lender") shall purchase a participation in all such
Swing Advances and Reimbursement Obligations (pro rata as between each, if both
are then outstanding) in an amount equal to the lesser of such payment and the
amount of such Swing Advances and Reimbursement Obligations for which the Swing
Advance Bank and the relevant Issuer, as the case may be,
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has not so received payment in full. If, after giving effect to the foregoing,
any Lender shall obtain any payment (whether voluntary, involuntary, through
the exercise of any right of set-off, or otherwise) on account of the Loans
made by it (other than pursuant to Sections 2.10, 2.11, 2.12 or 2.14) in excess
of its Ratable Portion of payments on account of the Loans obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in their Loans as shall be necessary to cause such purchasing
Lender to share the excess payment ratably with each of them.
(b) If all or any portion of any payment
received by a Purchasing Lender is thereafter recovered from such purchasing
Lender, such purchase from each selling Lender described in paragraph (a) above
(a "Selling Lender") shall be rescinded and such Selling Lender shall repay to
the Purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Selling Lender's ratable share (according
to the proportion of (i) the amount of such Selling Lender's required repayment
to (ii) the total amount so recovered from the Purchasing Lender) of any
interest or other amount paid or payable by the Purchasing Lender in respect of
the total amount so recovered. The Borrowers agree that any Purchasing Lender
purchasing a participation from another Selling Lender pursuant to this Section
2.15 may, to the fullest extent permitted by law, exercise all its rights of
payment (including, without limitation, the right of set-off) with respect to
such participation as fully as if such Lender were the direct creditor of the
Borrowers in the amount of such participation.
2.16. LETTER OF CREDIT FACILITY. (a) All of the
Letters of Credit issued by Citibank under the Existing Barnett Facility shall
be deemed to be Letters of Credit hereunder. On the terms and subject to the
conditions contained in this Agreement, each Issuer agrees to issue one or more
Letters of Credit at the request of any Borrower for the account of such
Borrower (or Holdings in respect of Letters of Credit not to exceed $1,350,000
(which Letter(s) of Credit shall be deemed to be Letters of Credit of Barnett
Inc.)) from time to time during the period commencing on the Closing Date and
ending on the Termination Date; PROVIDED, HOWEVER, that no Issuer shall be
under any obligation to issue any Letter of Credit if:
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(i) any order, judgment or decree of any
Governmental Authority or arbitrator shall purport by its
terms to enjoin or restrain such Issuer from issuing such
Letter of Credit or any Requirement of Law applicable to such
Issuer or any request or directive (whether or not having the
force of law) from any Governmental Authority with
jurisdiction over such Issuer shall prohibit, or request that
such Issuer refrain from, the issuance of letters of credit
generally or such Letter of Credit in particular or shall
impose upon such Issuer with respect to such Letter of Credit
any restriction or reserve or capital requirement (for which
such Issuer is not otherwise compensated) not in effect on the
date hereof or result in any unreimbursed loss, cost or
expense which was not applicable, in effect or known to such
Issuer as of the date hereof and which such Issuer in good
faith deems material to it;
(ii) such Issuer shall have received
written notice from the Agent, any Lender or any Borrower, on
or prior to the Business Day prior to the requested date of
issuance of such Letter of Credit, that one or more of the
applicable conditions contained in Article III is not then
satisfied;
(iii) after giving effect to the issuance of
such Letter of Credit, the Letter of Credit Obligations exceed
$20,000,000;
(iv) the amount of the Letter of Credit
requested exceeds such Borrower's Available Credit;
(v) fees due in connection with a
requested issuance have not been paid; or
(vi) after giving effect to the issuance of
such Letter of Credit, the aggregate amount of all Loans and
Letter of Credit Obligations owed by all Borrowers is greater
than the sum of (A) the aggregate amount of the Borrowing
Bases of all of the Borrowers (calculated only with respect to
Eligible Accounts) and (B) $35,000,000.
None of the Lenders (other than the Issuers) shall have any obligation to issue
any Letter of Credit.
(b) In no event shall:
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(i) the expiration date of any Letter of
Credit fall after one year after the Termination Date; or
(ii) any Issuer issue any Letter of Credit
for the purpose of supporting the issuance of any letter of
credit by any other Person (other than those to be issued on
the Closing Date or as otherwise permitted by the Agent).
(c) Prior to the issuance of each Letter of Credit,
and as a condition of such issuance and of the participation of each Lender
(other than the Issuer thereof) in the Letter of Credit Obligations arising
with respect thereto, the Borrowers shall have delivered to the Issuer thereof
a letter of credit reimbursement agreement, in a form satisfactory to the
Issuer (a "Letter of Credit Reimbursement Agreement"), signed by such Borrower,
and such other documents or items as may be required pursuant to the terms
thereof. In the event of any conflict between the terms of any Letter of
Credit Reimbursement Agreement and this Agreement, the terms of this Agreement
shall govern.
(d) In connection with the issuance of each Letter
of Credit, such Borrower shall give the Issuer thereof and the Agent at least
three Business Days' prior written notice or such other notice acceptable to
the Issuer thereof (a "Letter of Credit Request"), in substantially the form of
Exhibit H, of the requested issuance of such Letter of Credit. Such notice
shall be irrevocable and shall specify the stated amount of the Letter of
Credit requested, which stated amount shall not be less than $2,500, the date
of issuance of such requested Letter of Credit (which day shall be a Business
Day), the date on which such Letter of Credit is to expire (which date shall be
a Business Day), and the Person for whose benefit the requested Letter of
Credit is to be issued. Such notice, to be effective, must be received by such
Issuer and the Agent not later than 12:00 noon (New York City time) on the last
Business Day on which notice can be given under the immediately preceding
sentence.
(e) Subject to the terms and conditions of this
Section 2.16 and provided that the applicable conditions set forth in Article
III are satisfied, such Issuer shall, on the requested date, issue a Letter of
Credit on behalf of the Borrower in accordance with the Issuer's usual and
customary business practices. On the date of the proposed
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issuance of the Letter of Credit, the Agent shall confirm to the Issuer of the
requested Letter of Credit that the applicable conditions in Article III are
satisfied.
(f) Immediately upon the issuance by an Issuer of a
Letter of Credit in accordance with the terms and conditions of this Agreement,
such Issuer shall be deemed to have sold and transferred to each Lender, and
each Lender shall be deemed irrevocably and unconditionally to have purchased
and received from such Issuer, without recourse or warranty, an undivided
interest and participation, to the extent of such Lender's Ratable Portion, in
such Letter of Credit and the obligations of the Borrowers with respect thereto
(including, without limitation, all Letter of Credit Obligations with respect
thereto) and any security therefor and guaranty (if any) pertaining thereto.
(g) In determining whether to pay under any Letter
of Credit, no Issuer shall have any obligation relative to the Lenders other
than to confirm that any documents required to be delivered under such Letter
of Credit appear to have been delivered and that they appear to comply on their
face with the requirements of such Letter of Credit. Any action taken or
omitted to be taken by any Issuer under or in connection with any Letter of
Credit, if taken or omitted in the absence of gross negligence or willful
misconduct, shall not put such Issuer under any resulting liability to any
Lender.
(h) In the event that any Issuer makes any payment
under any Letter of Credit and the Borrowers shall not have repaid such amount
to such Issuer pursuant to Section 2.16(l), such Issuer shall promptly notify
the Agent, which shall promptly notify each Lender of such failure, and each
Lender shall promptly and unconditionally pay to the Agent for the account of
such Issuer the amount of such Lender's Ratable Portion of such payment in
Dollars and in immediately available funds and the Agent shall make such
payment to the Issuer. If the Agent so notifies such Lender prior to 12:00
noon (New York City time) on any Business Day, such Lender shall make available
to the Agent for the account of such Issuer its Ratable Portion of the amount
of such payment on such Business Day in immediately available funds. If and to
the extent such Lender shall not have so made such Lender's Ratable Portion of
the amount of such payment available to the Agent for the account of such
Issuer, such Lender agrees to pay to the Agent for the account of such Issuer
forthwith on demand such amount
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together with interest thereon, for each day from such date until the date such
amount is repaid to the Agent for the account of such Issuer, at the Federal
Funds Rate. The failure of any Lender to make available to the Agent for the
account of such Issuer its Ratable Portion of any such payment shall not
relieve any other Lender of its obligation hereunder to make available to the
Agent for the account of such Issuer its Ratable Portion of any payment on the
date such payment is to be made, but no Lender shall be responsible for the
failure of any other Lender to make available to the Agent for the account of
any Issuer such other Lender's Ratable Portion of any such payment.
(i) Whenever any Issuer receives a payment of a
Reimbursement Obligation as to which the Agent has received for the account of
such Issuer any payment from a Lender pursuant to Section 2.15 or 2.16(h), the
Issuer shall pay to the Agent and the Agent shall promptly pay to each Lender,
in immediately available funds, an amount equal to such Lender's pro rata share
of such payment based on the respective amounts the Lenders have paid in
respect of such Reimbursement Obligation.
(j) Upon the request of any Lender, each Issuer
shall furnish to such Lender copies of any Letter of Credit Reimbursement
Agreement to which such Issuer is a party and such other documentation as may
reasonably be requested by such Lender.
(k) The obligations of the Lenders to make payments
to the Agent for the account of each Issuer with respect to Letters of Credit
shall be irrevocable and not subject to any qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of
this Agreement under all circumstances (except as expressly provided in Section
2.16(g)), including, without limitation, any of the following circumstances:
(i) any lack of validity or enforceability
of this Agreement or any of the Collateral Documents;
(ii) the existence of any claim, set-off,
defense or other right which the Borrowers may have at any
time against a beneficiary named in a Letter of Credit, any
transferee of any Letter of Credit (or any Person for whom any
such transferee may be acting), the Agent, any Issuer, any
Lender or any other Person, whether in connection with this
Agreement, any Letter
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of Credit, the transactions contemplated herein or any
unrelated transaction (including, without limitation, any
underlying transaction between the Borrowers and the
beneficiary named in any Letter of Credit);
(iii) any draft, certificate or any other
document presented under the Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any
respect;
(iv) the surrender or impairment of any
security for the performance or observance of any of the terms
of any of the Collateral Documents; or
(v) the occurrence of any Default or Event
of Default.
(l) The Borrower for whose account the Letter of
Credit was issued agrees to pay to each Issuer the amount of all Reimbursement
Obligations owing to such Issuer under any Letter of Credit immediately when
due, irrespective of any claim, set-off, defense or other right which such
Borrower may have at any time against such Issuer or any other Person. Such
Borrower agrees to reimburse each Issuer for all amounts which such Issuer pays
under such Letter of Credit no later than the time specified in such Letter of
Credit Reimbursement Agreement. If such Borrower does not pay (either from the
proceeds of a Borrowing or otherwise) any such Reimbursement Obligation when
due, such Reimbursement Obligation shall immediately constitute, without
necessity of further act or evidence, a loan to such Borrower made by the
relevant Issuer except to the extent the Agent has received payment from
Lenders for the account of such Issuer pursuant to Section 2.16(h). Upon the
making of such payment, such Lender shall be deemed to have made a Revolving
Credit Loan to such Borrower in the amount of such payment. The loan by such
Issuer shall be payable on demand with interest thereon computed from the date
on which such Reimbursement Obligation arose to the date of repayment in full
of such loan, at the rate of interest applicable to Revolving Credit Loans
bearing interest at a rate based on the Base Rate during such period
(including, if then applicable, any additional interest rate thereon). If any
payment made by or on behalf of such Borrower and received by an Issuer with
respect to any Letter of Credit is rescinded or must otherwise be returned by
such Issuer for any reason and if such Issuer has made payment to the Agent on
account
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thereof pursuant to Section 2.16(i), each Lender shall, upon notice by such
Issuer, forthwith pay over to such Issuer an amount equal to such Lender's pro
rata share of the amount which must be so returned by such Issuer based on the
respective amounts paid in respect thereof to the Lenders pursuant to Section
2.16(i).
(m) The Borrowers agree to pay the following amounts
with respect to Letters of Credit issued hereunder:
(i) to the Agent for the ratable benefit of the
Lenders, with respect to each Letter of Credit, a fee equal to
the Letter of Credit Fee Percentage of the maximum amount
available from time to time to be drawn under such Letter of
Credit, payable monthly in arrears on the first day of each
month; provided that during the continuance of an Event of
Default, such fee shall be increased by 2.00% per annum and
shall be payable on demand;
(ii) to the Agent for the benefit of the Issuer,
with respect to each Letter of Credit, a fee equal to .25% per
annum of the maximum amount available from time to time to be
drawn under such Letter of Credit, payable monthly in arrears
on the first day of each month; and
(iii) to each Issuer, with respect to the
issuance, amendment or transfer of each Letter of Credit and
each drawing made thereunder, documentary and processing
charges in accordance with such Issuer's standard schedule for
such charges in effect at the time of issuance, amendment,
transfer or drawing, as the case may be.
2.17. CASH COLLATERAL ACCOUNT. (a) Each Borrower
has established a Cash Collateral Account with Citibank in New York, New York
(collectively, the "Cash Collateral Accounts").
(b) As collateral security for the Obligations,
each Borrower hereby transfers, assigns and pledges to the Agent and grants to
the Agent a Lien on and security interest in, for the benefit of the Secured
Parties on a first priority basis, all of the right, title and interest of such
Borrower in its Cash Collateral Account and all cash, deposits, Cash
Equivalents and other instruments held in such Cash Collateral Account as
security for the
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Obligations. The Agent shall possess sole dominion and control over each Cash
Collateral Account. As long as any of the Obligations remain unpaid or any of
the Commitments are outstanding, neither the Borrowers nor any Person or entity
claiming by, through or under the Borrowers shall have any control over the use
of, or any right to effect a withdrawal from, any of the Cash Collateral
Accounts. All amounts in the Cash Collateral Accounts shall be applied to the
Obligations by the Agent as specified in Section 2.17(e).
(c) Each Borrower shall instruct its account debtors
to mail their remittances to one or more lockboxes or cause such amounts to be
deposited into blocked accounts approved by the Agent from time to time and
each Borrower agrees to take all steps necessary or desirable to cause such
Borrower's account debtors to mail their remittances to such lockbox for
processing for deposit in such Borrower's Cash Collateral Account.
(d) Each Borrower shall cause to be deposited in its
Cash Collateral Account all immediately available funds payable to it other
than through the lockbox. To the extent that any Borrower maintains a deposit
account (other than in connection with any lockbox), such Borrower shall, or
shall cause, all immediately available funds in such account to be wired to its
Cash Collateral Account on a regular basis and in no event less frequently than
as reasonably requested by Agent.
(e) Each Borrower agrees that all immediately
available funds in its Cash Collateral Account shall be applied first to
accrued and unpaid interest on the Loans to the extent due and payable, next to
the outstanding principal amount of the Swing Loans then outstanding and, if no
Swing Loans are outstanding, to the Revolving Credit Loans then outstanding and
finally to any other Obligations then due and payable. If there are no Loans
outstanding and no other Obligations then due and payable, then all such
immediately available funds in such Cash Collateral Account shall be retained
therein to cash collateralize the Letter of Credit Obligations owed, directly
or indirectly, by such Borrower then outstanding except that (i) if there is no
Default or Event of Default then continuing, the excess of the sum of such
funds in the Cash Collateral Account plus the Borrowing Base of such Borrower
over the Letter of Credit Obligations of such Borrower then outstanding shall
be released to such Borrower and (ii) as long as a Default
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or an Event of Default is continuing, no funds shall be released to the
Borrowers as long as any of the Obligations remain unpaid. If (A) the only
Loans outstanding are Eurodollar Rate Loans, (B) there are no Letter of Credit
Obligations immediately due and payable, (C) the application of such
immediately available funds will cause the Borrowers to incur an obligation
under Section 10.4 and (D) there is no Default or Event of Default then
continuing, then all such immediately available funds in the Cash Collateral
Account shall be retained therein until one of the conditions set forth in
clauses (A) through (D) are no longer met, in which case such immediately
available funds shall be applied in accordance with the first sentence of
Section 2.17(e).
2.18. SWING ADVANCES. (a) The Swing Advance Bank,
in its sole discretion, on the terms and subject to the conditions contained in
this Agreement, may make advances (each a "Swing Advance") to each Borrower
from time to time on any Business Day during the period from the date hereof
until the day preceding the Termination Date in an aggregate amount not to
exceed at any time outstanding the lesser of (i) the Available Credit for such
Borrower, and (ii) the difference between the Swing Advance Bank's Commitment
and the aggregate outstanding principal amount of the Swing Advances and the
Loans made by it and its Ratable Portion of all Letter of Credit Obligations
then outstanding. The Swing Advance Bank shall be entitled to rely on the most
recent Borrowing Base Certificate delivered to the Agent. Within the limits
set forth above, Swing Advances repaid may be reborrowed under this Section
2.18.
(b) Each Swing Advance shall be made upon such
notice as the Swing Loan Bank and the Borrowers shall agree. Upon fulfillment
of the applicable conditions set forth in Article III, the Swing Advance Bank
will make each Swing Advance available to the Borrowers at the Agent's address
referred to in Section 10.2. Unless the Borrowers advise the Swing Advance
Bank to the contrary, the Swing Advance Bank may make a Swing Advance to pay
any of the Obligations that are due and payable without notice or further
request from the Borrowers. All Swing Advances shall be made as Base Rate
Loans.
(c) The Agent shall notify each Lender no less
frequently than weekly, as determined by the Agent, of the amount of the Swing
Advances outstanding as of 3:00 P.M. (New York City time) as of such date (the
"Computation
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Date") and each Lender's Ratable Portion thereof. Each Lender shall before
12:00 noon (New York City time) on the next Business Day (the "Settlement
Date") make available to the Agent, in immediately available funds, the amount
of its Ratable Portion of the principal amount of all such Swing Advances.
Upon such payment by a Lender, such Lender shall be deemed to have made a
Revolving Credit Loan to the relevant Borrower in the amount of such payment.
The Agent shall use such funds to repay the Swing Advance to the Swing Advance
Bank. To the extent that any Lender fails to make such payment to the Swing
Advance Bank, the relevant Borrower shall repay such Swing Advance on demand
and in any event on the Termination Date.
(d) During the continuance of a Default under
Section 8.1(e), each Lender shall acquire, without recourse or warranty, an
undivided participation in each Swing Advance otherwise required to be repaid
by such Lender pursuant to the preceding paragraph, which participation shall
be in a principal amount equal to such Lender's Ratable Portion of such Swing
Advance, by paying to the Swing Advance Bank on the date on which such Lender
would otherwise have been required to make a payment in respect of such Swing
Advance pursuant to the preceding paragraph, in immediately available funds, an
amount equal to such Lender's Ratable Portion of such Swing Advance. If such
amount is not in fact made available to the Swing Advance Bank on the date when
the Swing Advance would otherwise be required to be made pursuant to the
preceding paragraph, the Swing Advance Bank shall be entitled to recover such
amount on demand from that Lender together with interest accrued from such date
at the Federal Funds Rate for three Business Days and thereafter at the rate of
interest then applicable to the Loans. From and after the date on which any
Lender purchases an undivided participation interest in a Swing Advance
pursuant to this paragraph (d), the Swing Advance Bank shall promptly
distribute to such Lender such Lender's Ratable Portion of all payments of
principal and of interest on such Swing Advance, other than those received from
a Lender pursuant to Section 2.16 or this or the preceding paragraph (c). If
any payment made by or on behalf of any Borrower and received by the Swing
Advance Bank with respect to any Swing Advance is rescinded or must otherwise
be returned by the Swing Advance Bank for any reason and the Swing Advance Bank
has made a payment to the Agent, on account thereof, each Lender shall, upon
notice to the Swing Advance Bank, forthwith pay over to the Swing Advance Bank
an amount equal to such Lender's pro rata share of the
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payment so rescinded or returned based on the respective amounts paid in
respect thereof to the Lenders pursuant to the preceding paragraph (c).
2.19. PAYMENT ON ACCOUNT OF COLLATERAL. Any cash
held by the Agent as Collateral and all cash proceeds received by the Agent in
respect of any sale of, collection from, or other realization upon all or any
part of the Collateral (after exercise by the Agent of its remedies under the
Collateral Documents) shall be applied by the Agent:
First, to the payment of the costs and expenses of
such sale, including, without limitation, reasonable expenses of the Agent and
its agents including the fees and expenses of its counsel, and all expenses,
liabilities and advances made or incurred by the Agent in connection therewith;
Next, to the Swing Loan Bank for the payment in full
of the accrued and unpaid interest on the Swing Loans and then to the principal
amount of the Swing Loans; and
Next, to the Lenders, PRO RATA, for the payment in
full of accrued and unpaid interest on the Revolving Credit Loans and then to
the principal amount of the Revolving Credit Loans; and
Next, to the Agent to cash collateralize any Letter
of Credit Obligations in accordance with Section 8.3; and
Next, to pay any other Obligations then due and
owing; and
Finally, subject to the terms of the Intercreditor
Agreement, after payment in full of all of the Obligations, to the payment to
the relevant Borrower or to whomsoever may be lawfully entitled to receive the
same as a court of competent jurisdiction may direct.
2.20. INTERCREDITOR AGREEMENT. Each of the parties
hereto agrees and acknowledges to be bound by the terms of the Intercreditor
Agreement.
ARTICLE III
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CONDITIONS OF LENDING
3.1. CONDITIONS PRECEDENT TO INITIAL LOANS AND
LETTERS OF CREDIT. The obligation of each Lender to make its initial Loan and
of each Issuer to issue its initial Letter of Credit is subject to satisfaction
of the conditions precedent that the Agent shall have received, on the Closing
Date, the following, each dated the Closing Date unless otherwise indicated, in
form and substance satisfactory to the Agent and (except for the Notes) in
sufficient copies for each Lender:
(a) The Notes to the order of the Lenders,
respectively.
(b) Certified copies of (i) the resolutions of the
Board of Directors of each Loan Party approving each Loan Document and each
Related Document to which it is a party, and (ii) all documents evidencing
other necessary corporate action and required governmental and third party
approvals, licenses and consents with respect to each Loan Document and each
Related Document and the transactions contemplated thereby.
(c) A copy of the articles or certificate of
incorporation of each Loan Party and of each of its Subsidiaries which is not a
Loan Party certified as of a recent date by the Secretary of State of the state
of incorporation of such Loan Party or Subsidiary, together with certificates
of such official attesting to the good standing of each such Loan Party and
Subsidiary, and a copy of the certificate of incorporation and the By-Laws of
each Loan Party and of each of its Subsidiaries certified as of the Closing
Date by the Secretary or an Assistant Secretary of each such Loan Party or
Subsidiary.
(d) A certificate of the Secretary or an Assistant
Secretary of each Loan Party certifying the names and true signatures of each
officer of such Loan Party who has been authorized to execute and deliver any
Loan Document or other document required hereunder to be executed and delivered
by or on behalf of such Loan Party.
(e) A copy of each Related Document, certified as
being complete and correct by a Responsible Officer of a Borrower.
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(f) The Security Agreement, duly executed by each of
the Borrowers, together with:
(i) acknowledgment copies of proper
Financing Statements (Form UCC-1) duly filed under the Uniform
Commercial Code of all jurisdictions as may be necessary or,
in the opinion of the Agent, desirable to perfect the Lien
created by the Security Agreement;
(ii) certified copies of Requests for
Information or Copies (Form UCC-11), or equivalent reports,
listing all effective financing statements which name each
Borrower or any Subsidiary of each Borrower (under its present
name or any previous name) as debtor and which are filed in
the jurisdictions referred to in said paragraph (i) above,
together with copies of such other financing statements (none
of which shall cover the Collateral purported to be covered by
the Security Agreement, other than the Liens permitted by
Section 7.1); and
(iii) evidence that the insurance required by the
terms of the Collateral Documents and by Section 6.4 is in
full force and effect.
(g) An Intellectual Property Security Agreement,
duly executed by each Borrower.
(h) Duly executed and acknowledged Mortgage, in
recordable form for each parcel of each Borrower's Real Estate specified on
Schedule 4.22(a), together with:
(i) ALTA mortgagee's title insurance
policies (the "Title Insurance Policies") issued by a title
company acceptable to the Agent, in such form and amounts as
are acceptable to the Agent, insuring that each such Mortgage
is a valid first priority Lien on the Real Estate, subject
only to such exceptions to title as shall be acceptable to the
Agent in its sole discretion and containing extended coverage
such endorsements and affirmative insurance as the Agent may
require and as are obtainable in the applicable jurisdiction
(together with copies of documents affecting title), and true
copies of each document, instrument or certificate required by
the terms of each such policy, Mortgage to be, or have been,
filed, recorded, executed or delivered in connection
therewith;
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(ii) opinions satisfactory to the Agent of
local counsel retained by the Borrowers with respect to the
validity and enforceability of such Mortgage and such other
matters as may be reasonably required by the Agent; and
(iii) duly executed UCC-1 Financing
Statements under the applicable Uniform Commercial Code to
be filed inconnection with such Mortgages, in form and
substance satisfactory to the Agent, to perfect the Lien
created by the applicable Mortgage;
(iv) surveys as to all Real Estate in
respect of which is delivered a Mortgage, or as may be
reasonably required by the Agent, certified to the Agent and
the title insurance company issuing the Title Insurance
Policies by a registered Land Surveyor no more than thirty
(30) days prior to the Closing Date and complying with the
minimum detail requirements for land title surveys as adopted
by the American Land Title Association and American Congress
on Surveying and Mapping each in form and substance
satisfactory to the Agent;
(v) proof of payment of all title insurance
premiums, documentary, stamp or intangible taxes, recording
fees and mortgage taxes payable in connection with the
recording of any of the Loan Documents or the issuance of the
Title Insurance Policies; and
(vi) copies of all Leases and amendments,
modifications and extensions with respect thereto.
(i) The following letters addressed to the Agent on
behalf of the Lenders and the Issuers: (i) a letter from Holdings stating that
the Agent and the Lenders may have access to the books and records of the
Borrowers as set forth in the Credit Agreement and the Loan Documents and (ii)
a letter from Aurora Investment Co., the landlord at the Bedford Heights, Ohio
warehouse stating that upon the occurrence and during the continuance of an
Event of Default, the Agent and the Lenders may use such warehouse to hold and
sell the Collateral and otherwise exercise its remedies under the Collateral
Documents for a rental payment equal to the lower of the rent due and payable
under the Lease covering such warehouse and the fair market value rent
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for such warehouse as agreed to by the Agent and such landlord.
(j) A favorable opinion of Shereff, Friedman,
Hoffman & Goodman, counsel to the Loan Parties, in substantially the form of
Exhibit F, and as to such other matters as any Lender through the Agent may
reasonably request.
(k) A Borrowing Base Certificate, executed by a
Responsible Officer of each Borrower, satisfactory to the Agent.
(l) A certificate of the treasurer or chief
financial officer of the Borrowers (attached to which shall be pro forma
balance sheets of each Borrower as of March 31, 1994), stating that each
Borrower is Solvent after giving effect to the initial Loans, the application
of the proceeds thereof in accordance with Section 6.10 and the payment of all
estimated legal, accounting and other fees related hereto and thereto.
(m) A certificate, signed by a Responsible Officer
of each Borrower, stating that each of the conditions specified in Sections
3.2(b) and (g), and 3.3(a) has been satisfied.
(n) A Perfection Certificate, executed by a
Responsible Officer of each Borrower, satisfactory to the Agent.
(o) A copy of a letter from the Borrowers'
independent public accountants regarding (i) the Lenders' reliance upon such
accountant's professional services and on the reports and other financial
information delivered by such accountants in connection with the extension of
credit from time to time under this Agreement and in connection with the
preparation, review, execution, delivery, amendment, modification,
administration, collection and/or enforcement of this Agreement or any of the
other Loan Documents and (ii) such other matters as shall be reasonably
requested by the Lenders, in form and substance satisfactory to the Agent.
(p) Blocked account agreement(s) from National City
Bank and from Barnett Bank, each in form and substance satisfactory to the
Agent.
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(q) The Pledge Agreement, duly executed by the parties
thereto, together with:
(i) certificates representing the Pledged
Shares (as defined in each Pledge Agreement) and undated stock
powers for such certificates executed in blank; and
(ii) evidence that all action necessary or, in
the opinion of the Agent, desirable to perfect and protect the
Lien created by each Pledge Agreement have been taken.
(r) The Intercorporate Agreement, the Tax Sharing
Agreement and the Trademark License Agreement shall be in form and substance
satisfactory to the Lenders.
(s) All documents necessary to effectuate the
transfer of assets and assumption of Indebtedness in connection with the
Reorganization shall be in form and substance satisfactory to the Lenders
(including, without limitation, the agreements, documents and instruments
relating to the termination of the Existing Waxman Industries Credit Agreement
and the release of the Liens thereunder).
(t) The Intercreditor Agreement, executed by the
parties thereto substantially in the form of Exhibit M hereto.
(u) Such additional documents, information and
materials as any Lender, through the Agent, may reasonably request.
3.2. ADDITIONAL CONDITIONS PRECEDENT TO INITIAL
LOANS AND LETTERS OF CREDIT. The obligation of each Lender to make its initial
Loan and of each Issuer to issue its initial Letter of Credit is subject to the
further conditions precedent that:
(a) Each of the Related Documents shall be in form
and substance satisfactory to the Lenders.
(b) On the Closing Date, the following statements
shall be true:
(i) There has been no change since June
30, 1993 in the corporate, capital or legal structure
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of Holdings, the Company or any Borrower or any of their
respective Subsidiaries except as set forth in the Disclosure
Document and the Public Filings without the consent of the
Lenders and the Agent;
(ii) All necessary governmental and third
party approvals required to be obtained by any Loan Party in
connection with the transactions contemplated hereby, its
obtaining the Loans and Letters of Credit, the issuance of the
Debentures to be issued on the Closing Date and the Corporate
Restructuring have been obtained (other than the consent
required pursuant to the Indenture relating to the Convertible
Debentures and pursuant to the Islip IRB);
(iii) There exists no claim, action, suit,
investigation or proceeding (including, without limitation,
shareholder or derivative litigation) pending or, to the
knowledge of Holdings, the Company or any Borrower, threatened
in any court or before any arbitrator or Governmental
Authority which relates to the financing hereunder, the
Exchange Offer and Consent Solicitation or the 12 1/4% Consent
Solicitation or which, if adversely determined, would have a
Material Adverse Effect;
(iv) Holdings shall have exchanged for at
least $50,000,000 of Existing Senior Subordinated Notes its
Exchange Notes and warrants to purchase Holdings' common stock
and the consents required under the Exchange Offer and Consent
Solicitation and the 12 1/4% Consent Solicitation shall have
been obtained;
(v) The Borrowers shall have received
$15,000,000 in proceeds from the Term Loan Lenders pursuant to
the Term Loan Credit Agreement; and
(vi) There shall exist no default (or event
which would constitute a default with the giving of notice or
lapse of time) under any existing debt instrument of Holdings,
the Company, any Borrower or any of its Subsidiaries (other
than those defaults previously disclosed to the Lenders and
set forth on Schedule 4.2).
(c) All costs and accrued and unpaid fees and
expenses (including, without limitation, legal fees and existing expenses)
required to be paid to the Lenders on or
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before the Closing Date, including, without limitation, those referred to in
Sections 2.4, 2.16 and 10.4, to the extent then due and payable, shall have
been paid.
(d) No Lender in its sole judgment exercised
reasonably shall have determined (i) that there has been any Material Adverse
Change since March 31, 1994 except as set forth in the Disclosure Document and
the Public Filings, or (ii) that there has occurred any adverse change which
such Lender deems material, in its sole judgment, exercised reasonably, in the
financial markets generally, since the date hereof.
(e) No Lender, in its sole judgment, exercised
reasonably, shall have determined that there is any claim, action, suit,
investigation, litigation or proceeding (including, without limitation,
shareholder or derivative litigation) pending or threatened in any court or
before any arbitrator or Governmental Authority which, if adversely determined,
would have a Material Adverse Effect.
(f) Each Lender shall be satisfied, in its sole
judgment, exercised reasonably, that the corporate, capital, legal and
management structure of Holdings, the Company, each Borrower and its
Subsidiaries, and that the nature and status of all Contractual Obligations,
securities, labor, tax, ERISA, employee benefit, environmental, health and
safety matters, in each case, involving or affecting Holdings, the Company,
each Borrower or any of its Subsidiaries is not different from that described
in the Disclosure Document or the Public Filings.
(g) After giving effect to the transactions
contemplated to occur on the Closing Date and after giving effect to the
payment of all of the fees incurred in connection therewith owing to the
Lenders and the underwriters (other than legal and other similar fees), the
excess of the lesser of (I) the Commitments hereunder and (II) the sum of the
Borrowing Bases of all of the Borrowers over the Loans and Letters of Credit
Obligations to be incurred hereunder on the Closing Date shall be no less than
$15,000,000.
3.3. CONDITIONS PRECEDENT TO EACH LOAN AND LETTER OF
CREDIT. The obligation of each Lender to make any Loan (including the Loan
being made by such Lender on the Closing Date) and of each Issuer to issue any
Letter of
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Credit shall be subject to the further conditions precedent that:
(a) The following statements shall be true on the
date of such Loan or issuance, before and after giving effect thereto and to
the application of the proceeds therefrom and to such issuance (and the
acceptance by the relevant Borrower of the proceeds of such Loan or such Letter
of Credit shall constitute a representation and warranty by the Borrowers that
on the date of such Loan or issuance such statements are true):
(i) The representations and warranties
contained in Article IV and of each Loan Party in the other
Loan Documents are correct on and as of such date as though
made on and as of such date; and
(ii) No Default or Event of Default exists or
will result from any Loan being made or Letter of Credit being
issued on such date.
(b) The making of the Loans or the issuance of such
Letter of Credit on such date does not violate any Requirement of Law and is
not enjoined, temporarily, preliminarily or permanently.
(c) The Agent shall have received such additional
documents, information and materials as any Lender or Issuer, through the
Agent, may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lenders and the Agent to enter into
this Agreement, the Company and each Borrower represents and warrants to the
Lenders and the Agent that:
4.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each
Loan Party and each of its Subsidiaries (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation; (ii) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where such qualification is
necessary, except for failures which could not in the aggregate have a
reasonable likelihood of having a Material Adverse Effect; (iii) has all
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requisite corporate power and authority and the legal right to own, pledge,
mortgage and operate its properties, to lease the property it operates under
lease and to conduct its business as now or currently proposed to be conducted;
(iv) is in compliance with its certificate of incorporation and by-laws; (v) is
in compliance with all other applicable Requirements of Law except for such
non-compliances which could not in the aggregate have a reasonable likelihood
of having a Material Adverse Effect; and (vi) has all necessary licenses,
permits, consents or approvals from or by, has made all necessary filings with,
and has given all necessary notices to, each Governmental Authority having
jurisdiction, to the extent required for such ownership, operation and conduct,
except for licenses, permits, consents or approvals which can be obtained by
the taking of ministerial action to secure the grant or transfer thereof or
failures which could not in the aggregate have a reasonable likelihood of
having a Material Adverse Effect.
4.2. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE
OBLIGATIONS. (a) The execution, delivery and performance by each Loan Party
of the Loan Documents to which it is a party and the consummation of the
transactions related to the financing contemplated hereby:
(i) are within such Loan Party's corporate
powers;
(ii) have been duly authorized by all necessary
corporate action, including, without limitation, the consent
of stockholders where required;
(iii) do not and will not (A) contravene any Loan
Party's or any of its Subsidiaries' respective certificate of
incorporation or by-laws or other comparable governing
documents, (B) violate any other applicable Requirement of Law
(including, without limitation, Regulations G, T, U and X of
the Board of Governors of the Federal Reserve System), or any
order or decree of any Governmental Authority or arbitrator,
(C) except as set forth on Schedule 4.2, conflict with or
result in the breach of, or constitute a default under, or
result in or permit the termination or acceleration of, any
Contractual Obligation of any Loan Party or any of its
Subsidiaries which provides for payments of more than
$1,000,000 in any one year of any Loan Party or any of its
Subsidiaries other
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than those which, in the aggregate,have no reasonable
likelihood of having a Material Adverse Effect, or (D) result
in the creation or imposition of any Lien upon any of the
property of any Loan Party or any of its Subsidiaries, other
than those in favor of the Agent pursuant to the Collateral
Documents; and
(iv) do not require the consent of,
authorization by, approval of, notice to, or filing or
registration with, any Governmental Authority or any other
Person, other than (A) those which have been obtained or made
and copies of which have been or will be delivered to the
Agent pursuant to Section 3.1, and each of which on the
Closing Date will be in full force and effect and (B) those
which if not obtained in the aggregate have no reasonable
likelihood of having a Material Adverse Effect.
(b) This Agreement has been, and each of the other
Loan Documents will have been upon delivery thereof pursuant to Section 3.1,
duly executed and delivered by each Loan Party thereto. This Agreement is, and
the other Loan Documents will be, when delivered hereunder, the legal, valid
and binding obligation of each Loan Party thereto, enforceable against it in
accordance with its terms, except that enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting the enforcement of creditor's rights and
remedies generally and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(c) The execution, delivery and performance by each
Loan Party of the Related Documents to which it is a party and the consummation
of the transactions contemplated thereby, including, without limitation, the
issuance of the Debentures:
(i) are within such Loan Party's respective
corporate powers;
(ii) have been duly authorized by all necessary
corporate action, including, without limitation, the consent
of stockholders where required;
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(iii) do not and will not (A) contravene or
violate any Loan Party's or any of its Subsidiaries'
respective certificate of incorporation or by-laws or other
comparable governing documents, (B) violate any other
Requirement of Law, or any order or decree of any Governmental
Authority or arbitrator, (C) conflict with or result in the
breach of, or constitute a default under, or result in or
permit the termination or acceleration of, any Contractual
Obligation of any Loan Party or any of its Subsidiaries,
except such as in the aggregate have no reasonable likelihood
of having a Material Adverse Effect or (D) result in the
creation or imposition of any Lien upon any of the property of
any Loan Party or any of its Subsidiaries; and
(iv) do not require the consent of,
authorization by, approval of, notice to, or filing or
registration with, any Governmental Authority or any other
Person, other than (A) those which will have been obtained at
the Closing Date, each of which will be in full force and
effect on the Closing Date, and (B) those which in the
aggregate, if not obtained, would have no reasonable
likelihood of having a Material Adverse Effect.
(d) Each of the Related Documents has been or at the
Closing Date will have been duly executed and delivered by each Loan Party
party thereto and at the Closing Date will be the legal, valid and binding
obligation of each Loan Party party thereto, enforceable against it in
accordance with its terms, except that enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting the enforcement of creditor's rights and
remedies generally and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
4.3. TAXES. All federal, state, local and foreign
tax returns, reports and statements (collectively, the "Tax Returns") required
to be filed by each Loan Party or any of its Tax Affiliates have been filed
with the appropriate governmental agencies in all jurisdictions in which such
Tax Returns, are required to be filed, except for inadvertent omissions which
could not in the aggregate have
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any Material Adverse Effect. All such Tax Returns are correct in all material
respects, and all taxes, charges and other impositions shown thereon to be due
and payable have been timely paid prior to the date on which any fine, penalty,
interest, late charge or loss may be added thereto for non-payment thereof,
except where contested in good faith and by appropriate proceedings if (i)
adequate reserves therefor have been established on the books of such Loan
Party or such Subsidiary in conformity with GAAP and (ii) all such non-payments
could not in the aggregate have any reasonable likelihood of having a Material
Adverse Effect. Proper and accurate amounts have been withheld by each Loan
Party and each of its respective Tax Affiliates from their respective employees
for all periods in full and complete compliance with the tax, social security
and unemployment withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the respective
Governmental Authorities. Except as set forth on Schedule 4.3, none of the
Loan Parties or any of their Tax Affiliates has (i) executed or filed with the
IRS or any other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any charges; (ii) agreed or been requested to make any adjustment
under Section 481(a) of the Code by reason of a change in accounting method or
otherwise; or (iii) any obligation under any written tax sharing agreement,
other than the Tax Sharing Agreement.
4.4. FULL DISCLOSURE. (a) The written statements
prepared or furnished by or on behalf of any Loan Party or any of its
Affiliates (other than the Ideal Subsidiaries) in connection with the Loan
Documents, the Related Documents and the consummation of the transactions
contemplated thereby, taken as a whole, do not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements contained herein or therein not misleading. All facts known to any
Loan Party which are material to an understanding of the financial condition,
business, properties or prospects of the Loan Parties and their Subsidiaries
taken as one enterprise have been disclosed to the Lenders. Each Lender hereby
acknowledges that it has received a copy of the Disclosure Document and the
Public Filings.
(b) The pro forma consolidated statements of
financial condition and pro forma consolidated statements of operations of the
Company and its Subsidiaries contained in
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the Disclosure Document are the unaudited consolidated financial statements of
the Company and its Subsidiaries, as of the dates and for the periods specified
therein, adjusted to give effect to certain events and assumptions as set forth
therein.
(c) The Company has delivered to each Lender a true,
complete and correct copy of the Disclosure Document. The Disclosure Document
complies as to form in all material respects with all applicable requirements
of all applicable state and Federal securities laws.
4.5. FINANCIAL MATTERS. (a) The consolidated
balance sheet of Holdings and its Subsidiaries as at June 30, 1993, and the
related consolidated statements of income, retained earnings and cash flows of
Holdings and its Subsidiaries for the fiscal year then ended, certified by
Arthur Andersen & Co., and the consolidated balance sheets of Holdings and its
Subsidiaries as at March 31, 1994, and the related consolidated statements of
income, retained earnings and cash flows of Holdings and its Subsidiaries for
the nine months then ended, certified by the chief financial officer of
Holdings, copies of which have been furnished to each Lender, fairly present,
subject, in the case of said balance sheets as at March 31, 1994, and said
statements of income, retained earnings and cash flows for the nine months then
ended, to year-end audit adjustments, the consolidated financial condition of
Holdings and its Subsidiaries as at such dates and the consolidated results of
the operations of Holdings and its Subsidiaries for the period ended on such
dates, all in conformity with GAAP.
(b) Since March 31, 1994, there has been no Material
Adverse Change and there have been no events or developments that could in the
aggregate reasonably be expected to have a Material Adverse Effect, other than
as set forth in the Disclosure Document and the Public Filings.
(c) None of Holdings nor any of its Subsidiaries had
at June 30, 1993 any material obligation, contingent liability or liability for
taxes, long-term leases or unusual forward or long-term commitment which is not
reflected in the balance sheet at such date referred to in subsection (a) above
or in the notes thereto.
(d) The unaudited pro forma consolidated balance
sheets of each Borrower and its consolidated Subsidiaries (the "Pro Forma
Balance Sheet"), copies of which have been
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delivered to each Lender, have been prepared as of March 31, 1994, reflect as
of such date, on a pro forma basis, the consolidated financial condition of
each Borrower and its Subsidiaries, and the Operating Plan was reasonably
based on the information available to Holdings, the Company and each Borrower
at the time so furnished and on the Closing Date.
(e) Each Borrower is, and on a consolidated basis
the Company and its Subsidiaries are, Solvent.
4.6. LITIGATION. There are no pending or, to the
knowledge of the Company or any Borrower, threatened actions, investigations or
proceedings affecting the Company or any of its Subsidiaries before any court,
Governmental Authority or arbitrator, other than those that in the aggregate,
if adversely determined, could not be reasonably expected to have a Material
Adverse Effect. None of the sale of any Debentures or the performance of any
action by any Loan Party required or contemplated by any of the Loan Documents
or the Related Documents is restrained or enjoined (either temporarily,
preliminarily or permanently), and no material adverse condition has been
imposed by any Governmental Authority or arbitrator upon any of the foregoing
transactions.
4.7. MARGIN REGULATIONS. No Borrower is engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System), and no proceeds of any Borrowing will
be used to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock.
4.8. OWNERSHIP OF BORROWER; SUBSIDIARIES. (a) The
authorized capital stock of the Company will consist of 9,000 shares of common
stock, $0.01 par value per share, of which 102 shares will be issued and
outstanding and 1,000 shares of Preferred Stock, $0.10 par value per share, of
which no shares will be issued and outstanding. All of the outstanding capital
stock of the Company has been validly issued, is fully paid and non-assessable
and is owned beneficially and of record by Holdings. No authorized but
unissued shares, no treasury shares and, to the best knowledge of the Company
or any Borrower, no other outstanding shares of capital stock of the Company
are subject to any option, warrant, right of conversion or purchase or any
similar right. There are no agreements or understandings
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with respect to the voting, sale or transfer of any shares of capital stock of
the Company, or to the best knowledge of the Company or any Borrower, any
agreement restricting the transfer or hypothecation of any such shares, other
than in respect of the pledges thereof and covenants pursuant to the Related
Documents or pursuant to the Indenture relating to the Existing 12 1/4% Senior
Secured Notes and the Existing Floating Rate Senior Secured Notes (or, after
the Proposed Restructuring, pursuant to the Indenture relating to the Proposed
Notes).
(b) Set forth on Schedule 4.8 hereto is a complete
and accurate list showing all Subsidiaries of the Company and, as to each such
Subsidiary, the jurisdiction of its incorporation, the number of shares of each
class of Stock authorized, the number outstanding on the date hereof and the
percentage of the outstanding shares of each such class owned (directly or
indirectly) by the Company. No Stock of any Subsidiary of the Company is
subject to any outstanding option, warrant, right of conversion or purchase or
any similar right. All of the outstanding capital Stock of each such
Subsidiary has been validly issued, is fully paid and non-assessable and is
owned by the Company, free and clear of all Liens, other than those granted or
to be granted pursuant to the Related Documents or the Indenture relating to
the Existing 12 1/4% Senior Secured Notes and the Existing Floating Rate Senior
Secured Notes (or, after the Proposed Restructuring, pursuant to the Indenture
relating to the Proposed Notes) in respect of the Company's direct
Subsidiaries. Neither the Company nor any such Subsidiary is a party to, or
has knowledge of, any agreement restricting the transfer or hypothecation of
any shares of Stock of any such Subsidiary, other than the Loan Documents and
the Related Documents. The Company does not own or hold, directly or
indirectly, any capital stock or equity security of, or any equity interest in,
any Person other than such Subsidiaries and the Investments permitted by
Section 7.6.
4.9. ERISA. (a) Schedule 4.9 lists all Plans
maintained or contributed to by any Loan Party or any of its Subsidiaries and
all Qualified Plans maintained or contributed to by any ERISA Affiliate and
separately identifies all Title IV Plans, all Multiemployer Plans, all
Qualified Plans, all unfunded Pension Plans, all multiple employer plans
subject to Section 4064 of ERISA and all Retiree Welfare Plans.
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(b) Each Qualified Plan has been determined by the
IRS to qualify under Section 401 of the Code, and the trusts created thereunder
have been determined to be exempt from tax under the provisions of Section 501
of the Code, and to the best knowledge of any Loan Party nothing has occurred
which would cause the loss of such qualification or tax-exempt status.
(c) Each Plan, Qualified Plan and Pension Plan is in
compliance in all material respects with its terms and with applicable
provisions of ERISA and the Code, including, without limitation, the filing of
reports required under ERISA or the Code which are true and correct in all
material respects as of the date filed, and with respect to each such plan,
other than a Qualified Plan, all required contributions and benefits have been
paid in accordance with the provisions of each such plan.
(d) None of any Loan Party, any of its Subsidiaries
or any ERISA Affiliate, with respect to any Qualified Plan, has failed to make
any contribution or pay any amount due as required by Section 412 of the Code
or Section 302 of ERISA or the terms of any such Qualified Plan.
(e) There are no Title IV Plans.
(f) There are no Retiree Welfare Plans.
(g) With respect to each Pension Plans, other than
Qualified Plans, the present value of the liabilities for all participants
under each such plan using the actuarial assumptions utilized by the PBGC upon
termination of plan does not exceed $500,000.
(h) Except as set forth on Schedule 4.9, there has
been no, nor is there reasonably expected to occur, any ERISA Event or event
described in Section 4062(e) of ERISA with respect to any Title IV Plan.
(i) Except as set forth on Schedule 4.9, there are
no pending or, to the knowledge of any Loan Party, threatened claims, actions
or lawsuits (other than claims for benefits in the normal course), asserted or
instituted against (i) any Plan, Pension Plan or Qualified Plan or its assets,
(ii) any fiduciary with respect to any Plan, Pension Plan or Qualified Plan or
(iii) any Loan Party, any of its
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Subsidiaries or any ERISA Affiliate with respect to any Plan.
(j) Except as set forth on Schedule 4.9, none of any
Loan Party, any of its Subsidiaries or any ERISA Affiliate has incurred or has
any reasonable likelihood of incurring any Withdrawal Liability under Section
4201 of ERISA as a result of a complete or partial withdrawal from a
Multiemployer Plan (and no event has occurred which, with the giving of notice
under Section 4219 of ERISA, would result in any such liability).
(k) Except as set forth on Schedule 4.9, within the
last five years no Loan Party, any of its Subsidiaries or any ERISA Affiliate
has engaged in a transaction which resulted in a Title IV Plan with Unfunded
Liabilities being transferred outside of the "controlled group" (within the
meaning of Section 4001(a)(14) of ERISA) of any such entity.
(l) Each Loan Party, each of its Subsidiaries and
each ERISA Affiliate has complied with the notice and continuation coverage
requirements of Section 4980B of the Code and the regulations thereunder,
except for non-compliances which could in the aggregate not be reasonably
expected to have a Material Adverse Effect.
(m) No Loan Party nor any of its Subsidiaries has
engaged in a prohibited transaction, as defined in Section 4975 of the Code or
Section 406 of ERISA, in connection with any Plan, Pension Plan or Qualified
Plan which would subject or has any reasonable likelihood of subjecting any
Loan Party or any of its Subsidiaries (after giving effect to any exemption) to
a tax on prohibited transactions imposed by Section 4975 of the Code or any
other liability which could reasonably be expected to have a Material Adverse
Effect.
(n) Except as set forth on Schedule 4.9, no
liability under any Plan, Pension Plan or Qualified Plan (whether terminated or
on-going) has been funded or satisfied through the purchase of a contract from
an insurance company that is not rated AA or better by Standard & Poor's
Corporation or any equivalent or higher rating by any other nationally
recognized rating agency.
(o) No Loan Party, none of its Subsidiaries and no
ERISA Affiliate has any liability under any terminated
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"employee benefit plan", as defined in Section 3(3) of ERISA.
(p) The present value of the liability, if any, with
respect to all unfunded Pension Plans of any Loan Party, each of its
Subsidiaries and each ERISA Affiliate is reflected on the most recent audited
financial statements delivered to the Lenders pursuant to this Agreement.
4.10. LIENS. As of the Closing Date, there are no
Liens of any nature whatsoever on any properties of any Borrower or any of its
Subsidiaries other than those permitted by Section 7.1. As of the Closing
Date, the Liens granted by the Borrowers to the Agent pursuant to the
Collateral Documents are fully perfected first priority Liens in and to the
Collateral (except for such Collateral for which the Agent has not taken
appropriate action to perfect with respect thereto).
4.11. RELATED DOCUMENTS; INDENTURES. None of the
Related Documents or any Indenture has been amended or modified in any respect
and no provision therein has been waived (except as contemplated by the
Exchange Offer and Consent Solicitation and the 12 1/4% Consent Solicitation),
and each of the representations and warranties therein are true and correct in
all material respects and no default or event which with the giving of notice
or lapse of time or both would be a default has occurred thereunder.
4.12. NO BURDENSOME RESTRICTIONS; NO DEFAULTS. (a)
No Loan Party nor any of its Subsidiaries (i) is a party to any Contractual
Obligation the compliance with which could reasonably be expected to have a
Material Adverse Effect or the performance of which by any thereof, either
unconditionally or upon the happening of an event, will result in the creation
of a Lien (other than a Lien granted pursuant to a Loan Document or Liens
permitted by Section 7.1) on the property or assets of any thereof, or (ii) is
subject to any charter or corporate restriction which could reasonably be
expected to have a Material Adverse Effect.
(b) No Loan Party or Subsidiary of any Loan Party is
in default under or with respect to any Contractual Obligation owed by it and,
to the knowledge of any Loan Party, no other party is in default under or with
respect to any Contractual Obligation owed to any Loan Party or to any
Subsidiary of a Loan Party, other than those defaults which
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could in the aggregate not be reasonably expected to have a Material Adverse
Effect.
(c) No Event of Default or Default has occurred and
is continuing.
(d) There is no Requirement of Law the compliance
with which by any Loan Party could reasonably be expected to have a Material
Adverse Effect.
4.13. NO OTHER VENTURES. Except as set forth on
Schedule 4.13, none of the Loan Parties or any of their Subsidiaries is engaged
in any joint venture or partnership with any other Person, except as permitted
by Section 7.6.
4.14. INVESTMENT COMPANY ACT. No Borrower is an
"investment company" or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended. The making of the Loans by the
Lenders, the application of the proceeds and repayment thereof by the Borrowers
and the consummation of the transactions contemplated by the Loan Documents
will not violate any provision of such Act or any rule, regulation or order
issued by the Securities and Exchange Commission thereunder.
4.15. INSURANCE. The Loan Parties and its
Subsidiaries have, in full force and effect policies of insurance including,
without limitation, policies of life, fire, theft, product liability, public
liability, property damage, other casualty, employee fidelity, workers'
compensation and employee health and welfare insurance, which are of a nature
and provide such coverage as is sufficient and as is customarily carried by
companies of the size and character of such Person. No Loan Party nor any of
its Subsidiaries has been refused insurance for which it applied or had any
policy of insurance terminated (other than at its request).
4.16. LABOR MATTERS. (a) There are no strikes,
work stoppages, slowdowns or lockouts pending or, to such Person's knowledge,
threatened against or involving any Loan Party or any of their respective
Subsidiaries, other than those which could in the aggregate not be reasonably
expected to have a Material Adverse Effect.
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(b) There are no arbitrations or grievances pending
against or involving any Loan Party or any of their respective Subsidiaries,
nor, to such Person's knowledge, are there any arbitrations or grievances
threatened involving any Loan Party or any of their respective Subsidiaries,
other than those which, in the aggregate, if resolved adversely to such Loan
Party or such Subsidiary, could not be reasonably expected to have a Material
Adverse Effect.
(c) Except as set forth on Schedule 4.16, as of the
Closing Date, no Loan Party nor any of its Subsidiaries is a party to, or has
any obligations under, any collective bargaining agreement.
(d) There is no organizing activity involving any
Loan Party or any of its Subsidiaries pending or, to such Person's knowledge,
threatened by any labor union or group of employees, other than those which
could in the aggregate not be reasonably expected to have a Material Adverse
Effect. There are no representation proceedings pending or threatened with the
National Labor Relations Board, and no labor organization or group of employees
of any Loan Party or any of its Subsidiaries has made a pending demand for
recognition, other than those which could in the aggregate not be reasonably
expected to have a Material Adverse Effect.
(e) There are no unfair labor practices charges,
grievances or complaints pending or in process or, to such Person's knowledge,
threatened by or on behalf of any current or former employee or group of
current or former employees of any Loan Party or any of their respective
Subsidiaries, other than those which in the aggregate, if adversely determined,
could not be reasonably expected to have a Material Adverse Effect.
(f) There are no complaints or charges against any
Loan Party or any of its Subsidiaries pending or, to the best of such Person's
knowledge, threatened to be filed with any federal, state or local court,
governmental agency or arbitrator based on, arising out of, in connection with,
or otherwise relating to the employment by such Loan Party or any of such
Subsidiaries of any individual, other than those which in the aggregate, if
resolved adversely, could not be reasonably expected to have a Material Adverse
Effect.
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(g) Each Loan Party and each of their respective
Subsidiaries are in compliance with all laws, and all orders of any court,
Governmental Authority or arbitrator, relating to the employment of labor,
including without limitation all such laws relating to wages, hours, collective
bargaining, discrimination, civil rights, and the payment of withholding and/or
social security and similar taxes, except for such non-compliances which could
in the aggregate not be reasonably expected to have a Material Adverse Effect.
4.17. FORCE MAJEURE. Neither the business nor the
properties of any Loan Party or any of their respective Subsidiaries are
currently suffering from the effects of any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or of the public enemy or other casualty (whether or not covered by
insurance), other than those which could in the aggregate not be reasonably
expected to have a Material Adverse Effect.
4.18. USE OF PROCEEDS. The proceeds of the Loans
are being used by the Loan Parties solely as follows: (a) to consummate the
Refinancing, for the payment of related transaction costs, fees and expenses,
for the payment of interest on the Loans and the Debentures; and (b) for
general working capital and corporate purposes; provided that no Loans may be
used to make any optional prepayments in respect of the Term Loan Agreement or
any repayment of the Loan on the Termination Date (as defined in the Term Loan
Agreement).
4.19. ENVIRONMENTAL PROTECTION. Except as disclosed
on Schedule 4.19:
(a) The operations of each Loan Party and each
of their respective Subsidiaries or tenants comply with all Environmental Laws
other than such non-compliance the consequences of which could in the aggregate
not be reasonably expected to have a Material Adverse Effect;
(b) Each Loan Party and each of their respective
Subsidiaries have obtained all environmental, health and safety Permits
necessary for their operations, and all such Permits are in good standing and
each Loan Party and each of their respective Subsidiaries are in compliance
with the terms and conditions of such Permits other than such non-compliance or
failure to obtain such Permits, the conse-
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quences of which could in the aggregate not be reasonably expected to have a
Material Adverse Effect;
(c) No Loan Party or any of their respective
Subsidiaries or any of their respective currently or previously owned or leased
property or operations is subject to any outstanding or to best of such
Person's knowledge, threatened, order from or agreement with any Governmental
Authority or other Person or is subject to any judicial or docketed
administrative proceeding respecting (i) Environmental Laws, (ii) Remedial
Action or (iii) any Environmental Liabilities and Costs arising from a Release
or threatened Release, other than those the consequences of which could in the
aggregate not be reasonably expected to have a Material Adverse Effect;
(d) To the best of the Loan Parties' or their
Subsidiaries' knowledge, there are no conditions or circumstances associated
with the currently or previously owned or leased properties or operations of
any Loan Party or any of their respective Subsidiaries or tenants which may
give rise to any Environmental Liabilities and Costs other than those which
could in the aggregate not be reasonably expected to have a Material Adverse
Effect;
(e) No Loan Party or any of their respective
Subsidiaries is a treatment, storage or disposal facility requiring a permit
under the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 ET
SEQ., the regulations thereunder or any state analog. Each Loan Party and each
of their respective Subsidiaries is in compliance with all applicable financial
responsibility requirements of all Environmental Laws, including, without
limitation, those contained in 40 C.F.R., parts 264 and 265, subpart H, and any
state equivalents;
(f) No Loan Party nor any of its Subsidiaries
has filed or failed to file any notice required under any applicable
Environmental Law reporting a Release;
(g) There are no conditions or circumstances
which may give rise to any Environmental Liabilities and Costs arising from the
operations of any Loan Party or any of its Subsidiaries, including, without
limitation, Environmental Liabilities and Costs, that have any reasonable
likelihood of exceeding $250,000 in the aggregate associated with any
operations of or ownership of property by any Loan Party or any of its
Subsidiaries;
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(h) No Environmental Lien and no unrecorded
Environmental Lien has attached to any property of any Loan Party or any of its
Subsidiaries;
(i) There is not now on or in the property owned,
leased or operated by any Loan Party or any of its Subsidiaries (i) any
underground storage tanks or surface impoundments, (ii) any asbestos-containing
material, or (iii) any polychlorinated biphenyls ("PCBs") used in electrical or
other equipment which has any reasonable likelihood of having a Material
Adverse Effect; and
(j) Each Loan Party has provided to the Agent a
complete and accurate copy of every report, audit, analysis, and investigation
prepared by it or on its behalf related to environmental and health and safety
matters conducted with respect to their currently or previously owned or leased
property or operations.
4.20. TRANSACTION COSTS AND FEES. The Loan Parties
have previously delivered to the Agent, in a form acceptable to the Agent, an
estimate and a description of all costs, fees and expenses of the Loan Parties
and their Subsidiaries in connection with the Reorganization and the financing
thereof.
4.21. INTELLECTUAL PROPERTY. The Loan Parties and
its Subsidiaries own or license or otherwise have the right to use all material
licenses, permits, patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, copyright applications,
franchises, authorizations and other intellectual property rights (including,
without limitation, all Intellectual Property as defined in the Intellectual
Property Security Agreement) that are necessary for the operations of their
respective businesses, without, to the best of its knowledge, infringement upon
or conflict with the rights of any other Person with respect thereto,
including, without limitation, all trade names associated with any private
label brands of any Loan Party or any of its Subsidiaries. To the best
knowledge of the Loan Parties, no slogan or other advertising device, product,
process, method, substance, part or component, or other material now employed,
or now contemplated to be employed, by any Loan Party or any of their
respective Subsidiaries infringes upon or conflicts with any rights owned by
any other Person, and no claim or litigation regarding any of the foregoing is
pending or, to the best of its knowledge, threatened.
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4.22. TITLE. (a) Each Borrower and their
respective Subsidiaries owns good and marketable fee simple absolute title to
all of the Real Estate purported to be owned by them, which Real Estate is at
the date hereof described in Schedule 4.22(a), and good and marketable title
to, or valid leasehold interests in, all other properties and assets purported
to be owned by any Borrower or any of their respective Subsidiaries, including,
without limitation, valid leasehold interests pursuant to the Leases and all
property reflected in the balance sheet referred to in Section 4.5(a), and none
of such properties and assets, including, without limitation, the Real Estate
and the Leases, is subject to any Lien, except Liens granted to the Agent on
behalf of and for the benefit of the Secured Parties pursuant to the Loan
Documents or permitted thereunder and those set forth on Schedule 4.22(a).
Each Borrower and their respective Subsidiaries have received all deeds,
assignments, waivers, consents, non-disturbance and recognition or similar
agreements, bills of sale and other documents, and have duly effected all
recordings, filings and other actions necessary to establish, protect and
perfect such Borrower's and their respective Subsidiaries' right, title and
interest in and to all such property.
(b) All real property leased at the date hereof by
each Borrower or any of their respective Subsidiaries is listed on Schedule
4.22(b), setting forth information regarding the commencement date, termination
date, renewal options (if any) and annual base rents for the Fiscal Years 1992
and 1993. Each of such leases is valid and enforceable in accordance with its
terms and is in full force and effect. Each Borrower has delivered to the
Agent true and complete copies of each of such leases and all documents
affecting the rights or obligations of such Borrower or any of its Subsidiaries
which is a party thereto, including, without limitation, any non-disturbance
and recognition agreements, subordination agreements, attornment agreements and
agreements regarding the term or rental of any of the leases. None of the
Borrowers nor any of its respective Subsidiaries nor, to the knowledge of any
Borrower, any other party to any such lease is in default of its obligations
thereunder or has delivered or received any notice of default under any such
lease, nor has any event occurred which, with the giving of notice, the passage
of time or both, would constitute a default under any such lease, except for
defaults which could in the aggregate not be reasonably expected to have a
Material Adverse Effect.
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(c) No Borrower or any of its respective
Subsidiaries owns or holds, or is obligated under or a party to, any option,
right of first refusal or other contractual right to purchase, acquire, sell,
assign or dispose of any real property.
(d) Except as permitted by Section 6.8, all water,
gas, electrical, steam, compressed air, telecommunication, sanitary and storm
sewage lines and systems and other similar systems serving the real property
owned or leased by any Borrower or any of their respective Subsidiaries are
installed and operating and are sufficient to enable the real property owned or
leased by any Borrower and their respective Subsidiaries to continue to be used
and operated in the manner currently being used and operated, and no Borrower
or any of its Subsidiaries has any knowledge of any factor or condition that
could result in the termination or material impairment of the furnishing
thereof. No improvements included within the real property owned or leased by
any Borrower or any of its respective Subsidiaries (collectively,
"Improvements") or portion thereof is dependent for its access, operation or
utility on any land, building or other Improvement not included in the real
property owned or leased by any Borrower or any of its Subsidiaries.
(e) All Permits required to have been issued or
appropriate to enable all real property owned or leased by any Borrower or any
of its Subsidiaries to be lawfully occupied and used for all of the purposes
for which they are currently occupied and used have been lawfully issued and
are in full force and effect, other than those which could in the aggregate not
be reasonably expected to have a Material Adverse Effect.
(f) No Borrower nor any of its Subsidiaries has
received any notice, or has any knowledge, of any pending, threatened or
contemplated condemnation proceeding affecting any real property owned or
leased by any Borrower or any of its Subsidiaries or any part thereof, or any
proposed termination or impairment of any parking at any such owned or leased
real property or of any sale or other disposition of any real property owned or
leased by any Borrower or any of its Subsidiaries or any part thereof in lieu
of condemnation.
(g) No portion of any real property owned or leased
by any Borrower or any of its Subsidiaries has
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suffered any material damage by fire or other casualty loss which has not
heretofore been completely repaired and restored to its original condition. No
portion of any real property owned or leased by any Borrower or any of its
Subsidiaries is located in a special flood hazard area as designated by any
Federal Governmental Authorities.
ARTICLE V
FINANCIAL COVENANTS
From and after the Closing Date and as long as any of
the Obligations or Commitments remain outstanding, unless the Majority Lenders
otherwise consent in writing, the Company and each Borrower agree with the
Lenders and the Agent that:
5.1. MAXIMUM LEVERAGE RATIO. The Company shall maintain at the end
of each Fiscal Quarter set forth below on a consolidated basis, a ratio of (a)
Total Liabilities to (b) EBITDA for the 12 months then ending (or in the case
of the Fiscal Quarter ending June 30, 1994, the product of four and EBITDA for
the three months then ending or in the case of the Fiscal Quarter ending
September 30, 1994, the product of two and EBITDA for the six months then
ending or, in the case of the Fiscal Quarter ending December 31, 1994, the
product of 1.333 and EBITDA for the nine months then ending) not in excess of
the ratio set forth below opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
For the
Fiscal Quarter Ending on Maximum Ratio
------------------------ -------------
<S> <C> <C>
June 30, 1994 7.0
September 30, 1994 7.0
December 31, 1994 7.0
March 31, 1995 7.0
June 30, 1995 and thereafter 6.5
</TABLE>
5.2. FIXED CHARGE COVERAGE RATIO. The Company shall maintain at the
end of each Fiscal Quarter set forth below, a ratio of (a) EBITDA LESS Capital
Expenditures (other than in respect of Capitalized Leases) LESS income taxes
paid to (b) Fixed Charges, in each case determined on the basis of the four
Fiscal Quarters ending on the date of determination (except that (i) in the
case of the Fiscal
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Quarter ending June 30, 1994, such determination shall be made based on the
three months then ending, (ii) in the case of the Fiscal Quarter ending
September 30, 1994, such determination shall be made based on the six months
then ending, and (iii) in the case of the Fiscal Quarter ending December 31,
1994, such determination shall be based on the nine months then ending), not
less than the ratio set forth below opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
For the
Fiscal Quarter Ending on Minimum Ratio
------------------------ -------------
<S> <C> <C>
June 30, 1994 1.05
September 30, 1994 1.10
December 31, 1994 1.10
March 31, 1995 1.05
June 30, 1995 1.05
September 30, 1995 1.00
December 31, 1995 1.00
March 31, 1996 1.00
June 30, 1996 1.00
September 30, 1996 1.00
December 31, 1996 1.00
March 31, 1997 1.00
June 30, 1997 and thereafter 1.30
</TABLE>
5.3. MAINTENANCE OF ADJUSTED NET WORTH. The Company shall maintain
at the end of each month set forth below an Adjusted Net Worth of not less than
the minimum amount set forth below for such month (it being understood that
(13,000,000) is less than (11,000,000)):
<TABLE>
<CAPTION>
For Each Month in the Minimum Adjusted
Fiscal Quarter Ending On Net Worth
------------------------ ------------------
<S> <C>
June 30, 1994 $20,000,000
September 30, 1994 20,600,000
December 31, 1994 21,250,000
March 31, 1995 22,000,000
June 30, 1995 22,800,000
September 30, 1995 23,500,000
December 31, 1995 24,100,000
</TABLE>
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<TABLE>
<S> <C>
March 31, 1996 24,700,000
June 30, 1996 25,500,000
September 30, 1996 26,500,000
December 31, 1996 27,350,000
March 31, 1997 28,200,000
June 30, 1997 29,000,000
September 30, 1997 30,000,000
December 31, 1997 31,000,000
March 31, 1998 32,000,000
</TABLE>
5.4. CAPITAL EXPENDITURES. The Borrowers shall not permit any
Capital Expenditures the result of which is that the Capital Expenditures for
the period from December 31, 1993 until such date is in excess of the maximum
amount set forth below for such Fiscal Quarter in which such date falls:
<TABLE>
<CAPTION>
Maximum Amount of
Fiscal Quarter Ending On Capital Expenditures
- ------------------------ --------------------
<S> <C>
June 30, 1994 $1,750,000
September 30, 1994 2,750,000
December 31, 1994 3,750,000
March 31, 1995 4,750,000
June 30, 1995 5,600,000
September 30, 1995 6,200,000
December 31, 1995 6,600,000
March 31, 1996 7,100,000
June 30, 1996 8,000,000
September 30, 1996 8,700,000
December 31, 1996 9,400,000
March 31, 1997 10,000,000
June 30, 1997 10,600,000
September 30, 1997 11,200,000
December 31, 1997 11,800,000
March 31, 1998 12,500,000
</TABLE>
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5.5. EBITDA TO TOTAL CASH INTEREST RATIO. The Company shall maintain
at the end of each Fiscal Quarter set forth below a ratio of EBITDA to Cash
Interest Expense, in each case determined based on the four Fiscal Quarters
ending on the date of determination (except that (i) in the case of the Fiscal
Quarter ending June 30, 1994, such determination shall be made based on the
three months then ending, (ii) in the case of the Fiscal Quarter ending
September 30, 1994, such determination shall be made based on the six months
then ending, and (iii) in the case of the Fiscal Quarter ending December 31,
1994, such determination shall be based on the nine months then ending) of not
less than the ratio set forth below for such Fiscal Quarter:
<TABLE>
<CAPTION>
For Each Fiscal Quarter
Ending On Minimum Ratio
------------- -------------
<S> <C> <C>
June 30, 1994 1.25
September 30, 1994 1.30
December 31, 1994 1.30
March 31, 1995 1.35
June 30, 1995 1.35
September 30, 1995 1.40
December 31, 1995 1.40
March 31, 1996 1.40
June 30, 1996 1.40
September 30, 1996 1.45
December 31, 1996 1.45
March 31, 1997 1.50
June 30, 1997 1.50
September 30, 1997 1.75
December 31, 1997 1.75
March 31, 1998 1.75
</TABLE>
ARTICLE VI
AFFIRMATIVE COVENANTS
As long as any of the Obligations or the Commitments
remain outstanding, unless the Majority Lenders otherwise consent in writing,
each of the Company and each Borrower agrees with the Lenders and the Agent
that:
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6.1. COMPLIANCE WITH LAWS, ETC. Each Loan Party
shall comply, and shall cause each of its Subsidiaries to comply in all
material respects with all Requirements of Law, Contractual Obligations and
Permits; PROVIDED, HOWEVER, that the Loan Parties shall not be deemed in
default of this Section 6.1 if all such non-compliances in the aggregate could
have no reasonable likelihood of having a Material Adverse Effect.
6.2. CONDUCT OF BUSINESS. Each Loan Party shall (a)
conduct, and shall cause each of its Subsidiaries to conduct, its business in
the ordinary course consistent with past practice; (b) use, and cause each of
its Subsidiaries to use, its reasonable efforts, in the ordinary course and
consistent with past practice, to (i) preserve its business and the goodwill
and business of the customers, advertisers, suppliers and others having
business relations with such Loan Party or any of its Subsidiaries, and (ii)
keep available the services and goodwill of its present employees; (c)
preserve, and cause each of its Subsidiaries to preserve, all registered
patents, trademarks, trade names, copyrights and service marks with respect to
its business; and (d) perform and observe, and cause each of its Subsidiaries
to perform and observe, all the terms, covenants and conditions required to be
performed and observed by it under its Contractual Obligations (including,
without limitation, to pay all rent and other charges payable under any lease
and all debts and other obligations as the same become due), and do, and cause
its Subsidiaries to do, all things necessary to preserve and to keep unimpaired
its rights under such Contractual Obligations; PROVIDED, HOWEVER, that, in the
case of each of clauses (a) through (d), such Loan Party shall not deemed in
default of this Section 6.2 if all such failures in the aggregate could have no
reasonable likelihood of having a Material Adverse Effect.
6.3. PAYMENT OF TAXES, ETC. Each Loan Party shall
pay and discharge, and shall cause each of its Subsidiaries to pay and
discharge, before the same shall become delinquent, all lawful governmental
claims, taxes, assessments, charges and levies, except where contested in good
faith, by proper proceedings, if adequate reserves therefor have been
established on the books of such Loan Party or the appropriate Subsidiary in
conformity with GAAP; PROVIDED, HOWEVER, that such Loan Party shall not be
deemed in default of this Section 6.3 if all such non-payments in
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the aggregate could have no reasonable likelihood of having a Material Adverse
Effect.
6.4. MAINTENANCE OF INSURANCE. Each Loan Party
shall maintain, and shall cause each of its Subsidiaries to maintain, insurance
with responsible and reputable insurance companies or associations in such
amounts and covering such risks as is usually carried by companies engaged in
similar businesses and owning similar properties in the same general areas in
which such Loan Party or such Subsidiary operates and as otherwise satisfactory
to the Agent, in its sole judgment exercised reasonably, and, in any event, all
insurance required by any Collateral Document. All insurance of the Borrowers
shall name the Agent and the Lenders as additional insured or loss payees as
its interest shall appear and shall not be cancelable except upon 30 days'
prior notice to the Secured Party, each as the Agent shall determine. The Loan
Parties will furnish to the Lenders from time to time such information as may
be requested as to such insurance.
6.5. PRESERVATION OF CORPORATE EXISTENCE, ETC. Each
Loan Party shall preserve and maintain, and shall cause each of its
Subsidiaries to preserve and maintain, its corporate existence, rights (charter
and statutory) and franchises (other than those of inactive Subsidiaries).
6.6. ACCESS. Each Borrower shall, at any reasonable
time and from time to time, permit the Agent or any of its designees, agents or
representatives thereof, to (a) during normal business hours examine and make
copies of and abstracts from the records and books of account of such Borrower
and each of its Subsidiaries, (b) during normal business hours visit the
properties of such Borrower and each of its Subsidiaries, (c) during normal
business hours discuss the affairs, finances and accounts of such Borrower and
each of its Subsidiaries with any of their respective officers or directors,
and (d) communicate directly with such Borrower's independent certified public
accountants. Except during the continuance of a Default or Event of Default,
such access shall be on reasonable advance notice. The Borrowers shall
authorize its independent certified public accountants to disclose to the Agent
or any Lender any and all financial statements and other information of any
kind, including, without limitation, copies of any management letter.
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6.7. KEEPING OF BOOKS. Each Loan Party shall keep,
and shall cause each of its Subsidiaries to keep, proper books of record and
account, in which full and correct entries shall be made of all financial
transactions and the assets and business of such Loan Party and each such
Subsidiary.
6.8. MAINTENANCE OF PROPERTIES, ETC. Each Loan
Party shall maintain and preserve, and shall cause each of its Subsidiaries to
maintain and preserve, (i) all of its properties which are necessary in the
conduct of its business in satisfactory working order and condition, and (ii)
all rights, permits, licenses, approvals and privileges (including, without
limitation, all Permits) which are necessary in the conduct of its business;
PROVIDED, HOWEVER, that such Loan Party shall not be deemed in default of this
Section 6.8 if all such failures in the aggregate could have no reasonable
likelihood of having a Material Adverse Effect.
6.9. PERFORMANCE AND COMPLIANCE WITH OTHER
COVENANTS. The Company and each Borrower shall perform and comply with, and
shall cause each of its Subsidiaries to perform and comply with, each of the
covenants and agreements set forth in the Related Documents and the Indentures
and under each other Contractual Obligation to which it or any of its
Subsidiaries is a party; PROVIDED, HOWEVER, that none of the Company or any
Borrower shall be deemed in default of this Section 6.9 if all such failures in
the aggregate could have no reasonable likelihood of having a Material Adverse
Effect.
6.10. APPLICATION OF PROCEEDS. The Loan Parties
shall use the entire amount of the proceeds of the Loans as provided in Section
4.18.
6.11. FINANCIAL STATEMENTS. The Company and the
Borrowers shall furnish to the Lenders:
(a) as soon as available and in any event within 30
days after the end of each of month, consolidated and consolidating balance
sheets of the Company and its Subsidiaries as of the end of such month and
consolidated and consolidating statements of income and cash flow of the
Company and its Subsidiaries for the period commencing at the end of the
previous Fiscal Year and ending with the end of such month, all prepared in
conformity with GAAP and certified by the chief financial officer of the
Company as
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fairly presenting the financial condition and results of operations of the
Company and its Subsidiaries at such date and for such period (subject to
ordinary year-end audit adjustments), together with (i) a certificate of said
officer stating that no Default or Event of Default has occurred and is
continuing or, if a Default or an Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action which the
Borrowers propose to take with respect thereto, and (ii) a schedule in form
satisfactory to the Agent of the computations used by the Company in
determining compliance with all financial covenants contained herein;
(b) as soon as available and in any event within 45
days after the end of each of the first three Fiscal Quarters of each Fiscal
Year, consolidated balance sheets of Holdings and its Subsidiaries and
consolidated and consolidating balance sheets of the Company and its
Subsidiaries as of the end of such quarter, and consolidated statements of
income and cash flow of Holdings and its Subsidiaries and consolidated and
consolidating statements of income and cash flow of the Company and its
Subsidiaries for the period commencing at the end of the previous Fiscal Year
and ending with the end of such Fiscal Quarter, all prepared in conformity with
GAAP and certified by the chief financial officer of Holdings or the Company as
fairly presenting the financial condition and results of operations of
Holdings, the Company and its Subsidiaries at such date and for such period
(subject to ordinary year-end audit adjustments), together with (i) a
certificate of said officer stating that no Default or Event of Default has
occurred and is continuing or, if a Default or an Event of Default has occurred
and is continuing, a statement as to the nature thereof and the action which
the Borrowers propose to take with respect thereto, (ii) a schedule in form
satisfactory to the Agent of the computations used by the Borrowers in
determining compliance with all financial covenants contained herein, and (iii)
a written discussion and analysis by the management of Holdings and the Company
of the financial statements furnished in respect of such Fiscal Quarter;
(c) as soon as available and in any event within 90
days after the end of each Fiscal Year, consolidated and consolidating balance
sheets of the Company and its Subsidiaries, and consolidated balance sheets of
Holdings and its Subsidiaries as of the end of such year and consolidated and
consolidating statements of income and cash flow
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of the Company and its Subsidiaries and consolidated statements of income and
cash flow of Holdings and its Subsidiaries for such Fiscal Year, all prepared
in conformity with GAAP and certified, in the case of such consolidated
financial statements, without qualification as to the scope of the audit by
Arthur Andersen & Co. or other independent public accountants of recognized
national standing, together with (i) a certificate of such accounting firm
stating that in the course of the regular audit of the business of the
Holdings, the Company and each Borrower and its Subsidiaries, which audit was
conducted by such accounting firm in accordance with generally accepted
auditing standards, such accounting firm has obtained no knowledge that a
Default or Event of Default has occurred and is continuing, or, if in the
opinion of such accounting firm, a Default or Event of Default has occurred and
is continuing, a statement as to the nature thereof, (ii) a schedule in form
satisfactory to the Agent of the computations used by such accountants in
determining, as of the end of such Fiscal Year, the Company's and the
Borrowers' compliance with all financial covenants contained herein, and (iii)
a written discussion and analysis by the management of Holdings and the Company
of the financial statements furnished in respect of such Fiscal Year;
(d) not later than the date on which the Borrowers
shall deliver to the Lenders the financial statements referred to in Section
6.11(c) for any Fiscal Year, a letter from the Borrowers' independent public
accountants in substantially the form and substance as the letter delivered on
the Closing Date pursuant to Section 3.1(o); and
(e) promptly after the same are received by
Holdings, the Company and each Borrower, a copy of each management letter
provided to Holdings, the Company and each Borrower (as the case may be) by its
independent certified public accountants which refers in whole or in part to
any inadequacy, defect, problem, qualification or other lack of fully
satisfactory accounting controls utilized by Holdings, the Company and each
Borrower (as the case may be) or any of its Subsidiaries.
6.12. REPORTING REQUIREMENTS. The Company and the
Borrowers shall furnish to Agent on behalf of the Lenders unless otherwise
specified:
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(a) a weekly Borrowing Base Certificate from each
Borrower (on such day of the week agreed to by the Agent and such Borrower),
such Borrowing Base Certificate to contain Eligible Receivables information as
of end of the previous week and, if the date of delivery of such Borrowing Base
Certificate falls on or after the 20th day of the month, Eligible Inventory
information as of the end of the immediately preceding month;
(b) to the extent practicable prior to any Asset
Sale anticipated to generate in excess of $500,000 in Asset Sales Proceeds, a
notice (i) describing the assets being sold and (ii) stating the estimated
Asset Sales Proceeds in respect of such Asset Sale;
(c) as soon as available and in any event prior to
the end of June and December of each Fiscal Year, a budget of the Company and
its Subsidiaries and each Borrower and its Subsidiaries for the next succeeding
twelve months, displaying on a monthly basis anticipated balance sheets,
forecasted revenues, net income and cash flow, each on a consolidated basis;
(d) prior to August 15, 1994, balance sheets of each
Borrower and TWI and each of their respective Subsidiaries as of March 31, 1994
(or, if later, the Closing Date), all prepared in conformity with GAAP and
certified by a Responsible Officer of such Borrower or TWI as fairly presenting
the financial condition of such Borrower or TWI, as the case may be, at such
date (subject to year-end audit adjustments).
(e) (i) promptly and in any event within 30 days
after any Loan Party, any of its Subsidiaries or any ERISA Affiliate knows or
has reason to know that any ERISA Event has occurred, and (ii) promptly and in
any event within 10 days after any Loan Party, any of its Subsidiaries or any
ERISA Affiliate knows or has reason to know that a request for a minimum
funding waiver under Section 412 of the Code has been filed or is reasonably
expected to be filed with respect to any Qualified Plan, a written statement of
the chief financial officer or other appropriate officer of such Loan Party
describing such ERISA Event or waiver request and the action, if any, which
such Loan Party, its Subsidiaries and ERISA Affiliates propose to take with
respect thereto and a copy of any notice filed with the PBGC or the IRS
pertaining thereto;
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(f) promptly and in any event within 30 days after
the filing thereof by any Loan Party, any of its Subsidiaries or any ERISA
Affiliate, a copy of each annual report (Form 5500 Series, including Schedule B
thereto) filed with respect to a Qualified Plan, and upon request by any Lender
through the Agent, with respect to any other Plan or Pension Plan;
(g) promptly and in any event within 20 days after
receipt thereof, a copy of any adverse notice, determination letter, ruling or
opinion any Loan Party, any of its Subsidiaries or any ERISA Affiliate receives
from the PBGC, DOL or IRS with respect to any Qualified Plan and, at the
request of any Lender, a copy of any favorable notice, determination letter,
ruling or opinion with respect thereto from any such Governmental Authority;
(h) promptly and in any event within 20 days after
receipt thereof, a copy of any correspondence any Loan Party, any of its
Subsidiaries or any ERISA Affiliate receives from the plan sponsor (as defined
by Section 4001 (a)(10) of ERISA) of any Multiemployer Plan concerning
potential Withdrawal Liability of any Loan Party, any of its Subsidiaries or
any ERISA Affiliate, or notice of any reorganization with respect to any
Multiemployer Plan, together with a written statement of the chief financial
officer or other appropriate officer of such Loan Party of the action which
such Loan Party, its Subsidiaries and ERISA Affiliates propose to take with
respect thereto;
(i) promptly and in any event within 30 days after
the adoption thereof, notice of (i) any amendment to a Title IV Plan which
could result or results in an increase in benefits or the adoption of any new
Title IV Plan, and (ii) any amendment to a, or adoption of a new, Retiree
Welfare Plan, which could result or results in new or increased benefits;
(j) promptly and in any event within 30 days after
receipt of written notice of commencement thereof, notice of any action, suit
or proceeding before any Governmental Authority or arbitrator affecting any
Loan Party, any of its Subsidiaries or any ERISA Affiliate with respect to any
Plan, Pension Plan or Qualified Plan except those which in the aggregate, if
adversely determined, could have no reasonable likelihood of having a Material
Adverse Effect;
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(k) promptly and in any event within 30 days after
notice or knowledge thereof, notice that any Loan Party or any of its
Subsidiaries has become or is likely to become subject to the tax on prohibited
transactions imposed by Section 4975 of the Code, together with a copy of Form
5330;
(l) promptly and in any event within 10 days after
receipt thereof by any Loan Party, any of its Subsidiaries or any ERISA
Affiliate, such Loan Party shall furnish to the Agent a copy of each notice
from the PBGC, received by such Loan Party, any of its Subsidiaries or any
ERISA Affiliate of the PBGC's intention to terminate any Pension Plan or to
have a trustee appointed to administer any Pension Plan;
(m) simultaneously with the date that any Loan
Party, any of its Subsidiaries or any ERISA Affiliate files a notice of intent
to terminate any Title IV Plan under a distress termination within the meaning
of Section 4041(c) of ERISA, such Loan Party shall furnish to the Agent a copy
of each such notice;
(n) simultaneously with the date that any Loan
Party, any of its Subsidiaries or any ERISA Affiliate files a notice of intent
to terminate any Title IV Plan, if such termination would require material
additional contributions in order to be considered a standard termination
within the meaning of Section 4041(b) of ERISA, such Loan Party shall furnish
to the Agent a copy of each notice;
(o) promptly after the commencement thereof, notice
of all actions, suits and proceedings before any domestic or foreign
Governmental Authority or arbitrator, affecting any Loan Party or any of its
Subsidiaries, except those which in the aggregate, if adversely determined,
could have no reasonable likelihood of having a Material Adverse Effect;
(p) promptly and in any event within two Business
Days after any Loan Party becomes aware of the existence of (i) any Default or
Event of Default, (ii) any breach or non-performance of, or any default under,
any Indenture or any Contractual Obligation which could have a reasonable
likelihood of having a Material Adverse Effect, (iii) any Material Adverse
Change or any event, development or other circumstance which has any reasonable
likelihood of causing or resulting in a Material Adverse Change,
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telephonic or telegraphic notice in reasonable detail specifying the nature of
the Default, Event of Default, breach, non-performance, default, event,
development or circumstance, including, without limitation, the anticipated
effect thereof, which notice shall be promptly confirmed in writing within five
days;
(q) promptly after the sending or filing thereof,
copies of all notices, certificates or reports delivered pursuant to any
Indenture;
(r) promptly after the sending or filing thereof,
copies of all reports which Holdings, the Company or any Borrower sends to its
security holders generally, and copies of all reports and registration
statements which Holdings, the Company, any Borrower or any of its Subsidiaries
files with the Securities and Exchange Commission or any national securities
exchange or the National Association of Securities Dealers, Inc.;
(s) upon the request of the Agent, copies of all
federal, state and local tax returns and reports filed by any Borrower or any
of its Subsidiaries in respect of taxes measured by income (excluding sales,
use and like taxes);
(t) promptly and in any event within 30 days of any
Borrower or any Subsidiary learning of any of the following, written notice to
the Agent of any of the following:
(i) any Borrower or any of its Subsidiaries
is or may be liable to any Person as a result of a Release or
threatened Release which could reasonably be expected to
subject any Borrower or any of its Subsidiaries to
Environmental Liabilities and Costs of $500,000 or more;
(ii) the receipt by any Borrower or any of its
Subsidiaries of notification that any real or personal
property of any Borrower or any of its Subsidiaries is subject
to any Environmental Lien;
(iii) the receipt by any Borrower or any of its
Subsidiaries of any notice of violation of, or knowledge by
any Borrower or any of its Subsidiaries that there exists a
condition which might reasonably result in a violation by any
Borrower or any of its Subsidiaries of, any Requirement of Law
involving
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environmental, health or safety matters, except for such
violations the consequence of which in the aggregate would
have no reasonable likelihood of subjecting any Borrower and
its Subsidiaries collectively to Environmental Liabilities and
Costs of $500,000 or more;
(iv) the commencement of any judicial or
administrative proceeding or investigation alleging a
violation of any Requirement of Law involving environmental,
health or safety matters, other than those the consequences of
which in the aggregate would have no reasonable likelihood of
subjecting any Borrower and its Subsidiaries collectively to
Environmental Liabilities and Costs of $500,000 or more;
(v) any proposed acquisition of stock,
assets or real estate, or any proposed leasing of property, or
any other action by any Borrower or any of its Subsidiaries
other than those the consequences of which in the aggregate
have no reasonable likelihood of subjecting any Borrower and
its Subsidiaries collectively to Environmental Liabilities and
Costs of $500,000 or more; and
(vi) any proposed action taken by any Borrower
or any of its Subsidiaries to commence, recommence or cease
manufacturing, industrial or other operations other than those
the consequences of which in the aggregate have no reasonable
likelihood of requiring any Borrower and its Subsidiaries to
obtain additional environmental, health or safety Permits that
collectively require the expenditure of $500,000 or more or
become subject to additional Environmental Liabilities and
Costs of $500,000 or more;
(u) upon written request by any Lender through the
Agent, a report providing an update of the status of any environmental, health
or safety compliance, hazard or liability issue identified in any notice or
report required pursuant to this Section 6.12 and any other environmental,
health or safety compliance obligation, remedial obligation or liability, other
than those which in the aggregate have no reasonable likelihood of subjecting
any Borrower and its Subsidiaries to Environmental Liabilities and Costs of
$500,000 or more; and
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(v) such other information respecting the business,
properties, condition, financial or otherwise, or operations of any Loan Party
or any of its Subsidiaries as any Lender through the Agent may from time to
time reasonably request.
6.13. NEW REAL ESTATE. If, at any time, any
Borrower or any of its Subsidiaries acquires any Real Estate not covered by a
Mortgage, such Borrower or such Subsidiary shall promptly execute, deliver and
record a first priority mortgage in favor of the Agent on behalf and for the
ratable benefit of the Secured Parties covering such Real Estate (subordinate
only to such Liens as are permitted hereunder), in form and substance
satisfactory to the Agent, and provide the Agent with a Title Insurance Policy
covering such Real Estate in an amount equal to the purchase price of such Real
Estate, and a current ALTA survey thereof, and a surveyor's certificate in form
and substance satisfactory to the Agent.
6.14. EMPLOYEE PLANS. (a) With respect to other
than a Multiemployer Plan, for each Qualified Plan hereafter adopted or
maintained by any Loan Party, any of its Subsidiaries or any ERISA Affiliate,
such Loan Party shall (i) seek, and cause such of its Subsidiaries and ERISA
Affiliates to seek, and receive determination letters from the IRS to the
effect that such Qualified Plan is qualified within the meaning of Section
401(a) of the Code; and (ii) from and after the adoption of any such Qualified
Plan, cause such plan to be qualified within the meaning of Section 401(a) of
the Code and to be administered in all material respects in accordance with the
requirements of ERISA and Section 401(a) of the Code.
(b) Each Loan Party shall comply, and cause such of
its Subsidiaries and ERISA Affiliates to comply, with the notice and
continuation coverage requirements of Section 4980B of the Code and the
applicable regulations thereunder.
6.15. FISCAL YEAR. The Company, each Borrower and
each of the Company's other Subsidiaries shall maintain as its Fiscal Year the
twelve month period ending on June 30 of each year provided that any of the
Company, each Borrower and each of the Company's other Subsidiaries may change
its Fiscal Year with the prior written consent of the Majority Lenders which
consent shall not be unreasonably withheld.
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6.16. ENVIRONMENTAL. Each of the Company, each
Borrower and each of the Company's other Subsidiaries shall, at its cost, upon
receipt of any notification or otherwise obtaining knowledge of any Release or
other event that could result in any such Person incurring Environmental
Liabilities and Costs in excess of $500,000, conduct or pay for consultants to
conduct, tests or assessments of environmental conditions at such operations or
properties, including, without limitation, the investigation and testing of
subsurface conditions, and shall take such remedial, investigational or other
action as required by Environmental Laws, as any Governmental Authority
requires or as is appropriate and consistent with good business practice.
6.17. BORROWING BASE DETERMINATION. (a) Each
Borrower shall conduct, or shall cause to be conducted, at its expense, and
upon request of the Agent, and present to the Agent for approval, such
investigations and reviews as the Agent shall reasonably request for the
purpose of determining the Borrowing Base of such Borrower, all upon reasonable
notice and at such reasonable times during normal business hours and as often
as may be reasonably requested. Each Borrower shall furnish to the Agent any
information which the Agent may reasonably request regarding the determination
and calculation of the Borrowing Base for such Borrower including, without
limitation, correct and complete copies of any invoices, underlying agreements,
instruments or other documents and the identity of all obligors.
(b) The Borrowers shall promptly notify the Agent in
writing in the event that at any time any Borrower or any of its Subsidiaries
receives or otherwise gains knowledge that (i) the sum of the Borrowing Bases
for all Borrowers is less than 110% of the Loans and Letter of Credit
Obligations outstanding, (ii) the aggregate Borrowing Base for all Borrowers is
10% less than the aggregate Borrowing Base for all Borrowers as of the last
reported Borrowing Base Certificate or (iii) the sum of Loans and Letters of
Credit Obligations outstanding at such time to any Borrower exceeds the
Borrowing Base of such Borrower as a result of any decrease in the Borrowing
Base of such Borrower, and the amount of such excess.
(c) The Agent may make test verifications of the
Accounts and physical verifications of the Inventory in any manner and through
any medium that the Agent considers advisable, and each Borrower shall furnish
all such assistance and information as the Agent may require in
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connection therewith. Except during a Default or Event of Default,
verifications of Inventory shall be made during normal business hours and with
reasonable advance notice.
6.18. CASH MANAGEMENT SYSTEM. The Borrowers shall
maintain a cash management system acceptable to the Agent, including, without
limitation, one or more lockboxes, which cash management system shall provide
for all funds received by the Borrowers or any of their Subsidiaries to be
deposited in the Cash Collateral Accounts.
ARTICLE VII
NEGATIVE COVENANTS
As long as any of the Obligations or Commitments
remain outstanding, without the written consent of the Majority Lenders, the
Company and each Borrower agrees with the Lenders and the Agent that:
7.1. LIENS, ETC. No Borrower shall create or suffer
to exist, nor shall it permit any of its Subsidiaries to create or suffer to
exist, any Lien upon or with respect to any of its or such Subsidiary's
properties, whether now owned or hereafter acquired, or assign, or permit any
of its Subsidiaries to assign, any right to receive income, except for (each
such exception being given independent effect):
(a) Liens created pursuant to the Loan Documents;
(b) (i) Purchase money Liens or purchase money
security interests upon or in any property (other than
Inventory and Accounts (other than Inventory purchased from
General Electric Company of the type in existence on the date
hereof)) acquired or held by any Borrower or any of its
Subsidiaries in the ordinary course of business to secure the
purchase price of such property or to secure Indebtedness
incurred in connection with financing the acquisition of such
property and (ii) Liens to secure Capitalized Lease
Obligations; PROVIDED, HOWEVER, that: (A) any such Lien is
created for the purpose of securing solely Indebtedness
representing, or incurred to finance, refinance or refund, the
cost (including, without limitation, the cost of construction)
of the property subject thereto, (B) the principal amount of
the Indebtedness secured
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by such Lien does not exceed 100% of such cost and (C) such
Lien does not extend to or cover any other property other than
such item of property and any improvements on such item;
PROVIDED, FURTHER, that the aggregate principal amount of the
Indebtedness secured by the Liens referred to in this clauses
(i) and (ii) above, together with Indebtedness incurred
pursuant to clause (ii) of Section 7.2(e), shall not exceed
the actual amount of Capital Expenditures made by the
Borrowers to the extent permitted hereunder;
(c) Any Lien securing the renewal, extension or
refunding of any Indebtedness or other Obligation secured by
any Lien permitted by subsections (b), (i), or (j) of this
Section 7.1 without any increase in the amount secured thereby
or in the assets subject to such Lien;
(d) Liens arising by operation of law in favor of
materialmen, mechanics, warehousemen, carriers, lessors or
other similar Persons incurred by any Borrower or any of its
Subsidiaries in the ordinary course of business which secure
its obligations to such Person; PROVIDED, HOWEVER, that (i)
such Borrower or such Subsidiary is not in default with
respect to such payment obligation to such Person, or (ii)
such Borrower or such Subsidiary is in good faith and by
appropriate proceedings diligently contesting such obligation
and adequate provision is made for the payment thereof;
(e) Liens (excluding Environmental Liens) securing
taxes, assessments or governmental charges or levies;
PROVIDED, HOWEVER, that neither the Borrowers nor any of their
Subsidiaries is in default in respect of any payment
obligation with respect thereto unless such Borrower or such
Subsidiary is in good faith and by appropriate proceedings
diligently contesting such obligation and adequate provision
is made for the payment thereof;
(f) Liens incurred or pledges and deposits made in
the ordinary course of business in connection with workers'
compensation, unemployment insurance, old-age pensions and
other social security benefits;
(g) Liens securing the performance of bids, tenders,
leases, contracts (other than for the
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repayment of borrowed money), statutory obligations, surety
and appeal bonds and other obligations of like nature,
incurred as an incident to and in the ordinary course of
business, and judgment liens; PROVIDED, HOWEVER, that all such
Liens (i) in the aggregate have no reasonable likelihood of
having a Material Adverse Effect and (ii) do not secure
directly or indirectly judgments in excess of $1,000,000;
(h) Zoning restrictions, easements, licenses,
reservations, restrictions on the use of real property or
minor irregularities incident thereto which do not in the
aggregate materially detract from the value or use of the
property or assets of the Borrowers or any of their
Subsidiaries or impair, in any material manner, the use of
such property for the purposes for which such property is held
by such Borrower or any such Subsidiary;
(i) Liens in favor of landlords securing operating
leases permitted by Section 7.3;
(j) Liens existing on the date of this Agreement and
disclosed on Schedule 7.1; and
(k) Liens in favor of the Secured Parties (as
defined in the Term Loan Credit Agreement).
7.2. INDEBTEDNESS. No Borrower shall create or
suffer to exist, nor permit any of its Subsidiaries to create or suffer to
exist, any Indebtedness except (each such exception being given independent
effect):
(a) the Obligations;
(b) Indebtedness with respect to Contingent
Obligations permitted by Section 7.13;
(c) current liabilities in respect of
taxes, assessments and governmental charges or levies
incurred, or claims for labor, materials, inventory, services,
supplies and rentals incurred, or for goods or services
purchased, in the ordinary course of business consistent with
the past practice;
(d) Indebtedness of any Borrower to (i) any
other Borrower or (ii) Holdings or the Company, representing
loans or advances made by such other
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Borrower, Holdings or the Company (as the case may be) in each
case evidenced by an Intercompany Note;
(e) (i) Indebtedness secured by Liens
permitted by Section 7.1(b) and (ii) additional unsecured
Indebtedness of the Borrower in an aggregate amount
outstanding which, when added to Indebtedness secured by Liens
permitted by Section 7.1(b) does not exceed the actual amount
of Capital Expenditures made by the Borrowers to the extent
permitted hereunder (such unsecured Indebtedness to be on
terms and conditions at least as favorable as those obtained
by comparable companies);
(f) Indebtedness existing on the date
hereof and listed on Schedule 7.2 and any Indebtedness used to
refinance or replace such Indebtedness provided such
refinancing or replacement Indebtedness is in an aggregate
principal amount and at a rate of interest not to exceed such
Indebtedness being refinanced or replaced (provided that such
Indebtedness used to refinance or replace such Indebtedness in
an aggregate amount up to $2,000,000 may be at an interest
rate in excess of such Indebtedness being refinanced or
replaced as long as such rate of interest is commercially
reasonable at the time such Indebtedness is incurred);
(g) Indebtedness in respect of reverse
repurchase agreements relating to marketable direct
obligations issued 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;
provided that the terms of such agreements comply with the
guidelines set forth in the Federal Financial Agreements of
Depository Institutions with Securities Dealers and Others, as
adopted by the Comptroller of the Currency;
(h) Indebtedness in respect of interest
rate contracts and foreign exchange agreements to the extent
entered into in the ordinary course of business on such terms
and with such counterparties acceptable to the Agent; and
(g) the Obligations (as defined in the Term
Loan Credit Agreement).
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7.3. LEASE OBLIGATIONS. (a) No Borrower shall
create or suffer to exist, nor permit any of its Subsidiaries to create or
suffer to exist, any obligations as lessee for the rental or hire of real or
personal property of any kind under other leases or agreements to lease (other
than Capitalized Leases) having an original term of one year or more which
would cause the direct or contingent liabilities of the Borrowers and their
Subsidiaries, on a consolidated basis, in respect of all such obligations to
exceed (i) $5,000,000 for the period from the Closing Date until the second
anniversary of the Closing Date and (ii) thereafter $6,000,000 payable in any
period of 12 consecutive months.
(b) No Borrower shall, nor shall it permit any of
its Subsidiaries to, become or remain liable as lessee or guarantor or other
surety with respect to any lease, whether an operating lease or a Capitalized
Lease, of any property (whether real or personal or mixed), whether now owned
or hereafter acquired, which (i) any Borrower or any of its Subsidiaries has
sold or transferred or is to sell or transfer to any other Person, or (ii) any
Borrower or any of its Subsidiaries intends to use for substantially the same
purposes as any other property which has been or is to be sold or transferred
by that entity to any other Person in connection with such lease provided that
the Borrowers may consummate sale-leaseback transactions in an aggregate amount
not to exceed $3,000,000.
7.4. RESTRICTED PAYMENTS. No Borrower shall,
nor shall it permit any of its Subsidiaries to:
(a) declare or make any dividend payment or other
distribution of assets, properties, cash, rights,
obligations or securities on account or in respect of
any of its Stock or Stock Equivalents other than (i)
dividends paid to any Borrower or any wholly-owned
Subsidiary of any Borrower by any wholly-owned
Subsidiary of any Borrower and (ii) so long as no
Default or Event of Default has occurred and is
continuing (or would result therefrom), (A) prior to
the consummation of the Proposed Restructuring, (I)
dividends or distributions to the Company or Holdings
necessary to make mandatory interest and scheduled
principal payments on the Existing 12 1/4% Senior
Secured Notes, the Existing Floating Rate
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Senior Secured Notes and the Existing Senior Subordinated
Notes, (II) dividends or distributions to the Company or
Holdings necessary to make payments for interest, principal
and redemption premiums on the Existing Convertible
Debentures, and (III) dividends or distributions to the
Company or Holdings necessary to pay fees and expenses related
to the Reorganization provided that if a Trigger Event has
occurred and is continuing (and no Default or Event of Default
has occurred and is continuing) dividends or distributions may
be made to the Company or Holdings pursuant to this clause (A)
solely to the extent necessary to make mandatory interest
payments on the Existing 12 1/4% Senior Secured Notes and the
Existing Floating Rate Senior Secured Notes, (B) after the
consummation of the Proposed Restructuring, dividends or
distributions to the Company or Holdings necessary to make
mandatory interest payments in respect of the Proposed Notes
and (C) dividends or distributions to the Company as set forth
in the Intercorporate Agreement and Tax Sharing Agreement as
in effect on the date hereof, and (iii) if the loans and all
other obligations under the Term Loan Credit Agreement have
been paid in full, additional dividends or distributions to
the Company made after that date in an aggregate amount not to
exceed at any time an amount equal to the $1,000,000 plus an
additional $1,000,000 for each full year since such date, or
(b) purchase, redeem, prepay, defease or otherwise
acquire for value or make any payment (other tan required
payments) on account or in respect of any principal amount of
Indebtedness for borrowed money, now or hereafter outstanding,
except (i) the Loans and (ii) payments on account of advances
made by Holdings or the Company to the Borrowers not to exceed
the amount advanced to the Borrowers from the proceeds from the
issuance of the Debentures.
7.5. MERGERS, STOCK ISSUANCES, SALE OF ASSETS, ETC.
(a) Except as set forth in Section 7.6, no Borrower shall nor shall it permit
any of its Subsidiaries to (i) merge with any Person, (ii) consolidate with any
Person, (iii) acquire all or substantially all of the Stock or Stock
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Equivalents of any Person, (iv) acquire all or substantially all of the assets
of any Person or all or substantially all of the assets constituting the
business of a division, branch or other unit operation of any Person, (v) enter
into any joint venture or partnership with any Person, or (vi) sell, lease,
transfer or otherwise dispose of, whether in one transaction or in a series of
transactions any substantial part of its assets, including, without limitation,
substantially all assets constituting the business of a division, branch or
other unit operation (other than a sale of any division, branch or other unit
of WOC Inc. in compliance with Section 7.5(c)(iv) below).
(b) No Borrower shall issue or transfer, nor permit
any of its Subsidiaries to issue or transfer, any Stock or Stock Equivalents
other than any such issuance or transfer (A) by a Subsidiary of any Borrower to
a wholly-owned Subsidiary of any Borrower or (B) by a wholly-owned Subsidiary
of any Borrower to any Borrower.
(c) No Borrower shall, nor shall it permit any of
its Subsidiaries to, sell, convey, transfer, lease or otherwise dispose of any
of its assets or any interest therein to any Person, or permit or suffer any
other Person to acquire any interest in any of the assets of any Borrower or
any such Subsidiary, except (i) the sale or disposition of assets in the
ordinary course of business or assets which have become obsolete or are
replaced in the ordinary course of business, (ii) leases of personal property
by any Borrower or any wholly-owned Subsidiary of any Borrower to any Borrower
or to any wholly-owned Subsidiary of any Borrower, (iii) the lease or sublease
of real property not constituting a sale and leaseback, to the extent not
otherwise prohibited by this Agreement, (iv) other sales of assets for Fair
Market Value for at least 75% in cash, Cash Equivalents and Indebtedness
assumed by the purchaser thereof and on such other terms as are commercially
reasonable (provided that asset sales after the date hereof in an aggregate
amount of not more than $1,000,000 may be sold for Fair Market Value without
regard to the requirement of a purchase price of at least 75% in cash, Cash
Equivalents and Indebtedness assumed by the purchaser thereof).
(d) No Borrower shall sell or otherwise dispose of,
or factor at maturity or collection, or permit any of its Subsidiaries to sell
or otherwise dispose of, or factor at maturity or collection, any Accounts.
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7.6. INVESTMENTS IN OTHER PERSONS. No Borrower
shall, directly or indirectly, make or maintain, nor permit any of its
Subsidiaries to make or maintain, any loan or advance to any Person or own,
purchase or otherwise acquire, or permit any of its Subsidiaries to own,
purchase or otherwise acquire, any Stock, Stock Equivalents, other equity
interest, obligations or other securities of, or any assets constituting the
purchase of a business or line of business, or make or maintain, or permit any
of its Subsidiaries to make or maintain, any capital contribution to, or
otherwise invest in, any Person (any such transaction being an "Investment"),
except:
(a) Investments in Accounts, contract
rights and chattel paper, notes receivable and similar items
arising or acquired in the ordinary course of business
consistent with the past practice;
(b) loans or advances to employees of any
Borrower or any of its Subsidiaries, which loans and advances
shall not in the aggregate exceed $500,000 outstanding at any
time;
(c) Investments in Cash Equivalents; or
(d) Investments existing on the date hereof
and set forth on Schedule 7.6;
(e) Investments by any Borrower to any
other Borrower evidenced by an Intercompany Note; or
(f) (i) Investments in joint ventures,
newly created Subsidiaries or Subsidiaries acquired after the
Closing Date and (ii) loans or advances to TWI evidenced by an
Intercompany Note, in an aggregate amount for both clauses (i)
and (ii) not to exceed at any time an amount equal to $250,000
plus an additional $250,000 for each full year since the
Closing Date plus, after the Proposed Restructuring has been
consummated, an additional $1,750,000 for each full year after
the date of such consummation, provided that, after giving
effect to such Investment, the Available Credit of all of the
Borrowers is at least $5,000,000.
7.7. MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES. The
Company shall not sell or otherwise dispose of any shares of Stock or any Stock
Equivalent of any Subsidiary or
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permit any Subsidiary to issue, sell or otherwise dispose of any shares of its
Stock or any Stock Equivalent or the Stock or any Stock Equivalent of any other
Subsidiary (other than the options described in clauses (iv) and (v) of the
definition of "Change of Control" and inactive Subsidiaries of the Borrowers).
7.8. CHANGE IN NATURE OF BUSINESS. No Borrower
shall make, nor shall it permit any of its Subsidiaries to make, any material
change in the nature or conduct of its business as carried on at the date
hereof.
7.9. COMPLIANCE WITH ERISA. (a) No Loan Party
shall, directly or indirectly, nor shall it permit any of its Subsidiaries or
any ERISA Affiliate to, directly or indirectly, by reason of an amendment or
amendments to, or the adoption of, one or more Title IV Plans, permit the
present value of all benefit liabilities, as defined in Title IV of ERISA
(using the actuarial assumptions utilized by the PBGC upon termination of a
plan), (i) to increase by more than $250,000; PROVIDED, HOWEVER, that this
limitation shall not be applicable to the extent that the fair market value of
assets allocable to such benefits, all determined using actuarial assumptions
utilized by the PBGC upon termination of a plan, is in excess of the benefit
liabilities or (ii) to increase such liabilities such that security must be
provided under Section 401(a) of the Code. No Loan Party shall, nor shall any
of its Subsidiaries, establish or become obligated with respect to any new
Welfare Plan, or modify any existing Welfare Plan, which would result in the
present value of future liabilities under all such plans to increase by more
than $250,000. No Loan Party shall, nor shall any of its Subsidiaries,
establish or become obligated to contribute to any new unfunded Pension Plan,
or modify any existing unfunded Pension Plan, which would result in the present
value of future liabilities under all such plans to increase by more than
$250,000.
(b) No Loan Party shall, directly or indirectly,
nor shall it permit any of its Subsidiaries or any ERISA Affiliate, directly or
indirectly, to (i) satisfy any liability under any Qualified Plan with a policy
or other contract from an insurance company or (ii) invest the assets of any
Qualified Plan in or in an obligation of an insurance company, unless in each
case such insurance company is rated AA or better by Standard & Poor's
Corporation and the equivalent or higher rating of each other nationally
recognized rating agency.
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7.10. MODIFICATION OF RELATED DOCUMENTS AND
INDENTURES. The Company shall not, nor shall it permit any of its Subsidiaries
to, (i) alter, rescind, terminate, amend, supplement, waive or otherwise modify
any provision of or permit any breach or default to exist under any Related
Document or any Indenture, or take or fail to take any action thereunder if to
do so has a reasonable likelihood of having a Material Adverse Effect; or (ii)
amend, modify or change, or consent or agree to any amendment, modification or
change to, any of the terms relating to the payment or prepayment of principal
of, or premium or interest on, any Debenture (other than any such amendment,
modification or change which would extend the maturity or reduce the amount of
any payment of principal thereof or which would reduce the rate or extend the
date for payment of interest thereon).
7.11. MODIFICATION OF MATERIAL AGREEMENTS. (a) No
Borrower shall, nor shall it permit any of its Subsidiaries to, alter, amend,
modify, rescind, terminate or waive any of their respective rights under, or
fail to comply in all material respects with, any of its material Contractual
Obligations, except in the ordinary course of business consistent with past
practice; PROVIDED, HOWEVER, that, with respect to any Contractual Obligation,
the Borrowers shall not be deemed in default of this Section 7.11 if all such
failures in the aggregate could have no reasonable likelihood of having a
Material Adverse Effect; and PROVIDED, FURTHER, that in the event of any such
breach or event of default by a Person other than the Borrowers or any of their
Subsidiaries, the Borrowers shall promptly notify the Agent of any such breach
or event of default.
(b) The Borrowers shall not, nor shall they permit,
any amendment, modification or supplement to the Tax Sharing Agreement, the
Intercorporate Agreement or the Trademark License Agreement the effect of which
in whole or in part is adverse to any of the Borrowers or its Subsidiaries.
7.12. ACCOUNTING CHANGES. No Borrower shall make,
nor shall it permit any of its Subsidiaries to make, any change in accounting
treatment and reporting practices or tax reporting treatment, except as
permitted by GAAP and disclosed to the Lenders and the Agent.
7.13. CONTINGENT OBLIGATIONS. No Borrower shall,
nor shall it permit any of its Subsidiaries to,
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incur, assume, endorse, be or become liable for, or guarantee, directly or
indirectly, or permit or suffer to exist, any Contingent Obligation, except
for:
(i) Contingent Obligations evidenced by a
Loan Document;
(ii) guarantees by any Borrower of
Indebtedness of any of its Subsidiaries, to the extent such
underlying Indebtedness is permitted hereunder; and
(iii) guarantees by Subsidiaries of
Indebtedness of any Borrower or other Subsidiaries of any
Borrower, to the extent such underlying Indebtedness is
permitted by Section 7.2.
7.14. TRANSACTIONS WITH AFFILIATES. No Borrower
shall nor shall it permit any of its Subsidiaries, to enter into any
transaction directly or indirectly with or for the benefit of any Affiliate of
any Borrower, except (each exception to be given independent effect) for (A)
transactions in the ordinary course of business on a basis no less favorable to
such Borrower or such Subsidiary as would be obtained in a comparable arm's
length transaction with a Person not an Affiliate, (B) salaries and other
employee compensation to officers or directors of any Borrower or any of its
Subsidiaries commensurate with current compensation levels or commensurate with
companies engaged in similar businesses or as approved by a majority of the
members of the Board of Directors of such Borrower or such Subsidiary who are
not receiving such compensation, (C) payments made to the Company or Holdings
in respect of corporate overhead, interest payments and other dividends solely
to the extent expressly set forth in Section 7.4(a), (D) lease of certain
facilities from Holdings and its Affiliates to WOC Inc. and Waxman Consumer
Products Group Inc. on terms acceptable to Agent and (E) the transactions
contemplated by the Tax Sharing Agreement, the Intercorporate Agreement and the
Trademark License Agreement.
7.15. CANCELLATION OF INDEBTEDNESS OWED TO IT. No
Borrower shall cancel, nor shall it permit any of its Subsidiaries to cancel,
any claim or Indebtedness owed to it except (a) in the case of a claim or
Indebtedness owed to any Person who is an Affiliate of such Borrower, for
adequate consideration and in the ordinary course of business or (b) in the
case of a claim or Indebtedness owed to any
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Person who is not an Affiliate of such Borrower, for adequate consideration or
in the ordinary cause of business.
7.16. NO NEW SUBSIDIARIES. No Borrower shall, nor
shall it permit any of the Subsidiaries to, (I) incorporate or otherwise
organize any Subsidiary which was not in existence on the Closing Date or (II)
acquire any Stock of any Person such that such Person becomes a new Subsidiary
of such Borrower or such Subsidiary, except as permitted by Section 7.6;
provided that (a) if such new Subsidiary is not a foreign Subsidiary, such new
Subsidiary shall execute and deliver to the Agent (i) a guaranty in form and
substance reasonably satisfactory to the Agent, (ii) a security agreement in
substantially the form of Exhibit D, (iii) if appropriate, a pledge agreement
in substantially the form of Exhibit L, pledging 100% (or 65% of any foreign
Subsidiaries of such new Subsidiary) of the Stock owned by such new Subsidiary,
(iv) if appropriate, any mortgages or leasehold mortgages required pursuant to
Section 6.13 and (v) take any and all action necessary or desirable to pledge
and perfect a security interest in all of such Subsidiary's assets and (b) the
Borrower (or its Subsidiary) owning such new Subsidiary execute and deliver to
the Agent a pledge agreement in substantially the form of Exhibit L, pledging
100% (or 65% of such new Subsidiary if such new Subsidiary is a foreign
Subsidiary) of all Stock owned by such Person of such new Subsidiary, each with
such modifications as are acceptable to the Agent.
7.17. CAPITAL STRUCTURE. No Borrower shall make,
nor shall it permit any of its Subsidiaries to, make, any change in its capital
structure (including, without limitation, in the terms of its outstanding
Stock) or amend its certificate of incorporation or by-laws other than for
changes or amendments which in the aggregate have no Material Adverse Effect.
7.18. NO SPECULATIVE TRANSACTIONS. No Borrower
shall, nor shall permit any of its Subsidiaries to, engage in any speculative
transaction or in any transaction involving commodity options or futures
contracts except for the sole purpose of hedging in the normal course of
business and consistent with industry practices.
7.19. ENVIRONMENTAL. No Borrower shall, nor
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shall it permit any of its Subsidiaries, any lessee or any other Person to,
dispose of any Contaminant in violation of any Environmental Law by placing it
in or on the ground or waters of any property owned or leased by any Borrower
or any of its Subsidiaries or any other Person; PROVIDED, HOWEVER, that the
Borrowers shall not be deemed in violation of this Section 7.19 if, as the
consequence of all such disposals, the Borrowers and their Subsidiaries would
not incur Environmental Liabilities and Costs in excess of $1,000,000.
ARTICLE VIII
EVENTS OF DEFAULT
8.1. EVENTS OF DEFAULT. Each of the following
events shall be an Event of Default:
(a) Any Borrower shall fail to pay any principal
(including, without limitation, mandatory prepayments of
principal) of, or interest on, any Loan, any fee, any other
amount due hereunder or under the other Loan Documents or
other of the Obligations when the same becomes due and
payable; or
(b) Any representation or warranty made or deemed
made by any Loan Party in any Loan Document or by any Loan
Party (or any of its officers) in connection with any Loan
Document shall prove to have been incorrect in any material
respect when made or deemed made; or
(c) Any Loan Party shall fail to perform or observe
(i) any term, covenant or agreement contained in Articles VI
or VII, or (ii) any other term, covenant or agreement
contained in this Agreement or in any other Loan Document if
such failure under this clause (ii) shall remain unremedied
for ten days after the earlier of the date on which (A) a
Responsible Officer of any Borrower becomes aware of such
failure or (B) written notice thereof shall have been given to
the Borrowers by the Agent or any Lender; or
(d) (i) Holdings or any of its Subsidiaries (other
than Ideal Subsidiaries) shall fail to pay any principal of or
premium or interest on any Indebtedness of Holdings or such
Subsidiary having a principal
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amount of $5,000,000 or more (excluding Indebtedness evidenced
by the Notes), when the same becomes due and payable (whether
by scheduled maturity, required prepayment, acceleration,
demand or otherwise); or (ii) any other event shall occur or
condition shall exist under any agreement or instrument
relating to any such Indebtedness, if the effect of such event
or condition is to accelerate, or to permit the acceleration
of (after the expiration of any applicable period of grace),
the maturity of such Indebtedness; or (iii) any such
Indebtedness shall become or be declared to be due and
payable, or required to be prepaid (other than by a regularly
scheduled required prepayment), or Holdings or any of its
Subsidiaries (other than the Ideal Subsidiaries) shall be
required to repurchase or offer to repurchase such
Indebtedness, prior to the stated maturity thereof; provided
that no Event of Default shall be deemed to occur under clause
(i) hereof if such non-payment occurs because the Borrowers
were prohibited from making distributions or dividends to the
Company or Holdings pursuant to Section 7.4(a) solely as a
result of the occurrence of a Trigger Event; or
(e) Holdings or any of its Subsidiaries (other than
the Ideal Subsidiaries) shall generally not pay its debts as
such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment
for the benefit of creditors, or any proceeding shall be
instituted by or against Holdings or any of its Subsidiaries
(other than the Ideal Subsidiaries) seeking to adjudicate it
a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment
of a custodian, receiver, trustee or other similar official
for it or for any substantial part of its property and, in the
case of any such proceedings instituted against Holdings or
any of its Subsidiaries (other than the Ideal Subsidiaries)
(but not instituted by Holdings or such Subsidiary (other than
the Ideal Subsidiaries)), either such proceedings shall remain
undismissed or unstayed for a period of 60 days or any of the
actions sought in such proceedings shall occur; or Holdings or
any of its Subsidiaries (other than the
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Ideal Companies) shall take any corporate action to authorize
any of the actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money
in excess of $500,000 to the extent not fully covered by
insurance subject to reasonable deductions shall be rendered
against any Loan Party or any of its Subsidiaries and either
(i) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order, or (ii) there shall be
any period of 30 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(g) (i) With respect to any Plan, a prohibited
transaction within the meaning of Section 4975 of the Code or
Section 406 of ERISA shall occur which in the reasonable
determination of the Agent has a reasonable likelihood of
resulting in direct or indirect liability to any Loan Party or
any of its Subsidiaries, (ii) with respect to any Title IV
Plan, the filing of a notice to voluntarily terminate any such
plan in a distress termination, (iii) with respect to any
Multiemployer Plan, any Loan Party, any of it Subsidiaries or
any ERISA Affiliate shall incur any Withdrawal Liability, (iv)
with respect to any Qualified Plan, any Loan Party, any of its
Subsidiaries or any ERISA Affiliate shall incur an accumulated
funding deficiency or request a funding waiver from the IRS,
or (v) with respect to any Title IV Plan or Multiemployer Plan
which has an ERISA Event not described in clauses (i) through
(iv) hereof, in the reasonable determination of the Agent
there is a reasonable likelihood for termination of any such
plan by the PBGC; PROVIDED, HOWEVER, that the events listed in
clauses (i) through (v) hereof shall constitute Events of
Default only if the liability, deficiency or waiver request of
any Loan Party, any of its Subsidiaries or any ERISA
Affiliate, whether or not assessed, equals or exceeds
$1,000,000 in any case set forth in (i) through (v) above,
equals or exceeds, $1,000,000 in the aggregate for all such
cases;
(h) Any material provision of any Collateral
Document after delivery thereof under Section 3.1 shall for
any reason cease to be valid and binding on
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any Loan Party party thereto, or any Loan Party shall so state
in writing; or
(i) Any Collateral Document after delivery thereof
pursuant to Section 3.1 shall, for any reason, cease to create
a valid Lien on any of the Collateral purported to be covered
thereby, or such Lien shall cease to be a perfected and first
priority Lien, or any Loan Party shall so state in writing; or
(j) There shall occur any Change of Control; or
(k) There shall occur any Default or Event of Default as
such terms are defined in the Term Loan Credit Agreement; or
(l) There shall occur a Material Adverse Change or an
event which would have a Material Adverse Effect; or
(m) Holdings shall have (i) altered, rescinded,
terminated, amended, supplemented, waived or otherwise
modified any provision of or permitted any breach or default
to exist under any Indenture, or taken or failed to take any
action thereunder if to do so has a reasonable likelihood of
having a Material Adverse Effect; or (ii) amended, modified or
changed, or consented or agreed to any amendment, modification
or change to, any of the terms relating to the payment or
prepayment of principal of, or premium or interest on, any
Debenture (other than any such amendment, modification or
change which would extend the maturity or reduce the amount of
any payment of principal thereof or which would reduce the
rate or extend the date for payment of interest thereon); or
(n) Any material provision of the Intercreditor
Agreement after delivery thereof under Section 3.1 shall for
any reason cease to be valid and binding on the parties
thereto.
8.2. REMEDIES. If there shall occur and be
continuing any Event of Default, the Agent (i) shall at the request, or may
with the consent, of the Majority Lenders by notice to the Borrowers, declare
the obligation of each Lender to make Loans and each Issuer to issue a Letter
of Credit to be terminated, whereupon the same shall forthwith
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terminate, and (ii) shall at the request, or may with the consent, of the
Majority Lenders by notice to the Borrowers, declare the Loans, all interest
thereon and all other amounts and Obligations payable under this Agreement to
be forthwith due and payable, whereupon the Notes, all such interest and all
such amounts and Obligations shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Borrowers; PROVIDED, HOWEVER, that
upon the occurrence of the Event of Default specified in subparagraph (e)
above, (A) the obligation of each Lender to make Loans and of each Issuer to
issue Letters of credit shall automatically be terminated and (B) the Loans,
all such interest and all such amounts and Obligations shall automatically
become and be due and payable, without presentment, demand, protest or any
notice of any kind, all of which are hereby expressly waived by the Borrowers.
In addition to the remedies set forth above, the Agent may exercise any
remedies provided for by the Collateral Documents in accordance with the terms
thereof or any other remedies provided by applicable law.
8.3 ACTIONS IN RESPECT OF LETTERS OF CREDIT. (a)
Upon the Termination Date, the Borrowers jointly and severally agree to pay to
the Agent in immediately available funds at the Agent's office specified in the
Notes, for deposit in a special non-interest- bearing cash collateral account
(the "L/C Cash Collateral Account") to be maintained with and in the name of
the Agent on behalf of the Secured Parties at such place as shall be designated
by the Agent, an amount equal to all outstanding Letter of Credit Obligations.
(b) The Borrowers hereby pledge, and grant to the
Agent a Lien on all of their right, title and interest in and to all funds held
in the L/C Cash Collateral Account from time to time, and all proceeds thereof,
as security for the payment of all amounts due and to become due from the
Borrowers to the Lenders and Issuers under the Loan Documents.
(c) The Agent shall, from time to time after funds
are deposited in the L/C Cash Collateral Account, apply funds then held in the
L/C Cash Collateral Account to the payment of any amounts, in such order as the
Agent may elect, as shall have become or shall become due and payable by the
Borrowers to the Issuers or Lenders in respect of the Letter of Credit
Obligations.
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(d) Except as set forth in Section 8.3(g), none of
the Borrowers nor any Person claiming on behalf of or through the Borrowers
shall have any right to withdraw any of the funds held in the L/C Cash
Collateral Account.
(e) The Borrowers agree that they will not (i) sell
or otherwise dispose of any interest in the L/C Cash Collateral Account or any
funds held therein or (ii) create or permit to exist any Lien upon or with
respect to the L/C Cash Collateral Account or any funds held therein, except as
provided in or contemplated by this Agreement.
(f) The Agent may also exercise, in its sole
discretion, in respect of the L/C Cash Collateral Account, in addition to the
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party upon default under the Uniform
Commercial Code in effect in the State of New York at that time, and the Agent
may, without notice except as specified below, sell the L/C Cash Collateral
Account or any part thereof.
(g) Any cash held in the L/C Cash Collateral
Account, and all cash proceeds received by the Agent in respect of any sale of,
collection from or other realization upon all or any part of the L/C Cash
Collateral Account, may, in the discretion of the Agent, then or at any time
thereafter be applied (after all payments provided for in Section 8.3(c), the
expiration of all outstanding Letters of Credit and the payment of any amounts
payable pursuant to Section 10.4) in whole or in part by the Agent against all
or any part of the other Obligations in such order as the Agent shall elect.
Any surplus of such cash or cash proceeds held by the Agent and remaining after
the cash payment in full of all of the Obligations shall be paid over to the
Borrowers or to whomsoever may be lawfully entitled to receive such surplus.
ARTICLE IX
THE AGENT
9.1. AUTHORIZATION AND ACTION. (a) Each Lender
hereby appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated
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to the Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. Without limitation of the foregoing, each
Lender hereby authorizes the Agent to execute and deliver, and to perform its
obligations under, each of the Loan Documents to which the Agent is a party,
and to exercise all rights, powers and remedies that the Agent may have under
such Loan Documents. Each Lender authorizes the Agent to execute and deliver
any and all documents and instruments as are reasonably incidental to any
release of Collateral to the extent that the sale of such Collateral is
permitted hereby.
(b) As to any matters not expressly provided for by
this Agreement and the other Loan Documents (including, without limitation,
enforcement or collection of the Notes), the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Majority Lenders, and such
instructions shall be binding upon all Lenders and all holders of Notes;
PROVIDED, HOWEVER, that the Agent shall not be required to take any action
which the Agent in good faith believes exposes it to personal liability or is
contrary to this Agreement or applicable law. The Agent agrees to give to each
Lender prompt notice of each notice given to it by any Loan Party pursuant to
the terms of this Agreement or the other Loan Documents.
9.2. AGENT'S RELIANCE, ETC. Neither the Agent, nor
any of its Affiliates or any of the respective directors, officers, agents or
employees of the Agent or any such Affiliate shall be liable for any action
taken or omitted to be taken by it, him, her or them under or in connection
with this Agreement or the other Loan Documents, except for its, his, her or
their own gross negligence or wilful misconduct. Without limitation of the
generality of the foregoing, the Agent (i) may treat the payee of any Note as
the holder thereof until such Note has been assigned in accordance with Section
10.7; (ii) may rely on the Register to the extent set forth in Section 10.7(c);
(iii) may consult with legal counsel (including, without limitation, counsel to
the Borrowers or any other Loan Party), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (iv) makes no warranty or representation to
any Lender and shall not be
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responsible to any Lender for any statements, warranties or representations
made in or in connection with this Agreement or any of the other Loan
Documents; (v) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or any of the other Loan Documents on the part of the Borrowers or
any other Loan Party or to inspect the property (including, without limitation,
the books and records) of the Borrowers or any other Loan Party; (vi) shall not
be responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any of
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (vii) shall incur no liability under or in respect of
this Agreement or any of the other Loan Documents by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telegram,
cable, telex or facsimile transmission) believed by it to be genuine and signed
or sent by the proper party or parties.
9.3. CITICORP AND AFFILIATES. With respect to its
Commitment, the Loans made by it and each Note issued to it and Letters of
Credit issued by it, Citicorp shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
the Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include Citicorp in its individual capacity. Citicorp and its
affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, the Borrowers
or any other Loan Party or any of their respective Subsidiaries and any Person
who may do business with or own securities of the Borrowers or any other Loan
Party or any of their respective Subsidiaries, all as if Citicorp were not the
Agent and without any duty to account therefor to the Lenders.
9.4. LENDER CREDIT DECISION. Each Lender
acknowledges that it has, independently and without reliance upon the Agent or
any other Lender and based on the financial statements referred to in Article
IV and such other documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each Lender
also acknowledges that it will, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time,
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continue to make its own credit decisions in taking or not taking action under
this Agreement and other Loan Documents.
9.5. INDEMNIFICATION. The Lenders agree to
indemnify the Agent and its Affiliates, and their respective directors,
officers, employees, agents and advisors (to the extent not reimbursed by the
Borrowers or other Loan Parties), ratably according to the respective unpaid
principal amounts of the Notes then held by each of them and Letter of Credit
Obligations (including, without limitation, participations therein) owing to
them (or if no Notes and Letter of Credit Obligations are at the time
outstanding, ratably according to the respective amounts of the aggregate of
their Commitments), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel) of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against, the Agent (in such capacity) in any way
relating to or arising out of this Agreement or the other Loan Documents or any
action taken or omitted by the Agent under this Agreement or the other Loan
Documents; PROVIDED, HOWEVER, that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's or such
Affiliate's gross negligence or wilful misconduct. Without limitation of the
foregoing, each Lender agrees to reimburse the Agent promptly upon demand for
its ratable share of any out-of-pocket expenses (including, without limitation,
reasonable fees and disbursements of legal counsel) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of its rights or
responsibilities under, this Agreement or the other Loan Documents, to the
extent that the Agent is not reimbursed for such expenses by the Borrowers or
another Loan Party.
9.6. SUCCESSOR AGENT. The Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrowers. Upon
any such resignation, the Majority Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Majority Lenders, and shall have accepted such appointment, within 30 days
after the retiring Agent's giving of notice of resignation, then the retiring
Agent may, on behalf of
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the Lenders, appoint a successor Agent, which shall be (a) a Lender or (b) if
no Lender accepts such appointment, a commercial bank organized under the laws
of the United States of America or of any State thereof and having a combined
capital and surplus of at least $50,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under this Agreement and the other Loan
Documents. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article IX shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement and
the other Loan Documents.
ARTICLE X
MISCELLANEOUS
10.1. AMENDMENTS, ETC. (a) Subject to the terms of
the Intercreditor Agreement, no amendment or waiver of any provision of this
Agreement or the Intercreditor Agreement nor consent to any departure by the
Company or the Borrowers therefrom shall in any event be effective unless the
same shall be in writing and signed by the Majority Lenders, and then any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; PROVIDED, HOWEVER, that no amendment, waiver
or consent shall, unless in writing and signed by all the Lenders, do any of
the following: (i) amend or waive any of the conditions specified in Sections
3.1 and 3.2; (ii) increase the individual or aggregate Commitments of the
Lenders or subject the Lenders to any additional obligations; (iii) reduce the
principal of, or interest on, the Loans or any fees or other amounts payable
hereunder (other than the waiver of the right to receive default interest or
any waiver, amendment or consent, the effect of which is to cure any Default or
Event of Default which, in turn, results in the lower rates set forth in the
definitions of "Applicable Base Rate Margin", "Applicable Eurodollar Margin" or
"Letter of Credit Fee Percentage"); (iv) postpone any date fixed for any
payment of principal of, or interest on, the Loans or any fees or other amounts
payable hereunder; (v) change the percentage of the Commitments, the aggregate
unpaid principal amount of
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the Loans or Letter of Credit Obligations, which shall be required for the
Lenders or any of them to take any action hereunder; (vi) release Collateral in
excess of 10% of the value of all such Collateral on the date hereof, except as
shall otherwise be provided herein or in the Collateral Documents; or (vii)
amend Section 8.1(e) or this Section 10.1; and PROVIDED, FURTHER, that no
amendment, waiver or consent shall, unless in writing and signed by the Agent
in addition to the Lenders required above to take such action, affect the
rights or duties of the Agent under this Agreement or the other Loan Documents.
(b) Each Lender and each Loan Party hereby
acknowledges that the Agent has the authority to increase or decrease any
advance rate from time to time; provided, however that the Agent may not
increase any advance rate above those set forth herein without the written
consent of all of the Lenders.
(c) Each Lender grants to the Agent the right (which
right shall be assignable by the Agent to any Eligible Assignee) to purchase
all (but not less than all) of such Lender's Commitments, Commitment to issue
Letters of Credit, the Loans and Letter of Credit Obligations owing to it and
the Notes held by it and all of its rights and obligations hereunder and under
the other Loan Documents at a price equal to the aggregate amount of
outstanding Loans and Letter of Credit Obligations owed to such Lender
(together with all accrued and unpaid interest and fees owed to such Lender),
which right may be exercised by the Agent if such Lender refuses to execute any
amendment, waiver or consent which requires the written consent of all of the
Lenders and to which the Majority Lenders, the Agent and the Borrowers have
agreed. Each Lender agrees that if the Agent exercises its option hereunder,
it shall promptly execute and deliver all agreements and documentation
necessary to effectuate such assignment as set forth in Section 10.7.
10.2. NOTICES, ETC. All notices and other
communications provided for hereunder shall be in writing (including, without
limitation, telegraphic, telex, telecopy or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered by hand, if to any
Borrower, at its address at c/o Waxman Industries, Inc., 24460 Aurora Road,
Bedford Heights, Ohio 44146 (telecopy no.: 216-439- 4909) (telephone number:
216-439-1830), Attention: Neal Restivo; if to any Lender, at its Domestic
Lending Office specified opposite its name on Schedule II; if to any Issuer
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at its address set forth on Schedule III; and if to the Agent, at its address
at 399 Park Avenue, 6th Floor, New York, NY 10043 (telecopy number:
212-793-1290) (telephone number: 212-559-3149), Attention: Keith Karako; or, as
to any Borrower or the Agent, at such other address as shall be designated by
such party in a written notice to the other parties and, as to each other
party, at such other address as shall be designated by such party in a written
notice to such Borrower and the Agent. All such notices and communications
shall, when mailed, telegraphed, telexed, telecopied, cabled or delivered, be
effective three days after deposited in the mails, or when delivered to the
telegraph company, confirmed by telex answerback, telecopied with confirmation
of receipt, delivered to the cable company or delivered by hand to the
addressee or its agent, respectively, except that notices and communications to
the Agent pursuant to Article II or IX shall not be effective until received by
the Agent. Any notice given to any Borrower shall be deemed to be given to all
Borrowers.
10.3. NO WAIVER; REMEDIES. No failure on the part
of any Lender or the Agent to exercise, and no delay in exercising, any right
hereunder or under any Note or any Letter of Credit Reimbursement Agreement
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
10.4. COSTS; EXPENSES; INDEMNITIES. (a) Each
Borrower jointly and severally agree to pay on demand (i) all costs and
expenses of the Agent in connection with the preparation, execution, delivery,
administration, modification and amendment of this Agreement, each of the other
Loan Documents and each of the other documents to be delivered hereunder and
thereunder, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel, accountants, appraisers, consultants or
industry experts retained by the Agent with respect thereto and, as to the
Agent, with respect to advising it as to its rights and responsibilities under
this Agreement and the other Loan Documents, (ii) all reasonable fees, costs
and expenses of counsel retained by each Lender in connection with the
preparation, execution and delivery of this Agreement, each of the other Loan
Documents and each of the other documents to be delivered hereunder and
thereunder in an amount not to exceed $10,000 for each Lender, and (iii) all
costs and
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expenses of the Agent or any of the Lenders and each Lender (including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel,
accountants, appraisers, consultants or industry experts retained by the Agent
or any Lender) in connection with the restructuring or enforcement (whether
through negotiation, legal proceedings or otherwise) of this Agreement and the
other Loan Documents.
(b) Each of the Company, and each Borrower jointly
and severally agrees to indemnify and hold harmless the Agent and each Lender
and their respective Affiliates, and the directors, officers, employees,
agents, attorneys, consultants and advisors of or to any of the foregoing
(including, without limitation, those retained in connection with the
satisfaction or attempted satisfaction of any of the conditions set forth in
Article III) (each of the foregoing being an "Indemnitee") from and against any
and all claims, damages, liabilities, obligations, losses, penalties, actions,
judgments, suits, costs, disbursements and expenses of any kind or nature
(including, without limitation, fees and disbursements of counsel to any such
Indemnitee) which may be imposed on, incurred by or asserted against any such
Indemnitee in connection with or arising out of any investigation, litigation
or proceeding, whether or not any such Indemnitee is a party thereto, whether
direct, indirect, or consequential and whether based on any federal, state or
local law or other statutory regulation, securities or commercial law or
regulation, or under common law or in equity, or on contract, tort or
otherwise, in any manner relating to or arising out of this Agreement, any
other Loan Document, any Obligation, any Letter of Credit, any Disclosure
Document, any Related Document, any Indenture, or any act, event or transaction
related or attendant to any thereof, including, without limitation, (i) all
Environmental Liabilities and Costs arising from or connected with the past,
present or future operations of any Borrower or any of its Subsidiaries
involving any property subject to a Collateral Document, or damage to real or
personal property or natural resources or harm or injury alleged to have
resulted from any Release of Contaminants on, upon or into such property or any
contiguous real estate; (ii) any costs or liabilities incurred in connection
with any Remedial Action concerning any Borrower or any of its Subsidiaries;
(iii) any costs or liabilities incurred in connection with any Environmental
Lien; (iv) any costs or liabilities incurred in connection with any other
matter under any Environmental Law, including, without limitation, CERCLA and
applicable state property transfer laws, whether,
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with respect to any of the foregoing, such Indemnitee is a mortgagee pursuant
to any leasehold mortgage, a mortgagee in possession, the successor in interest
to any Borrower or any of its Subsidiaries, or the owner, lessee or operator of
any property of any Borrower or any of its Subsidiaries by virtue of
foreclosure, except, with respect to any of the foregoing referred to in
clauses (i), (ii), (iii) and (iv), to the extent incurred following (A)
foreclosure by the Agent or any Lender, or the Agent or any Lender having
become the successor in interest to any Borrower or any of its Subsidiaries,
and (B) attributable primarily to acts of the Agent or such Lender or any agent
on behalf of the Agent or such Lender; or (v) the use or intended use of the
proceeds of the Loans or Letters of Credit or in connection with any
investigation of any potential matter covered hereby (collectively, the
"Indemnified Matters"); PROVIDED, HOWEVER, that any Borrower shall not have any
obligation under this Section 10.4(b) to an Indemnitee with respect to any
Indemnified Matter caused by or resulting from the gross negligence or willful
misconduct of that Indemnitee, as determined by a court of competent
jurisdiction in a final non-appealable judgment or order.
(c) Each Borrower jointly and severally agrees to
indemnify the Agent and the Lenders for, and hold the Agent and the Lenders
harmless from and against, any and all claims for brokerage commissions, fees
and other compensation made against the Agent and the Lenders for any broker,
finder or consultant with respect to any agreement, arrangement or
understanding made by or on behalf of any Loan Party or any of its Subsidiaries
in connection with the transactions contemplated by this Agreement.
(d) Each Borrower agrees that any indemnification or
other protection provided to any Indemnitee pursuant to this Agreement
(including, without limitation, pursuant to this Section 10.4) or any other
Loan Document shall (i) survive payment of the Obligations and (ii) inure to
the benefit of any Person who was at any time an Indemnitee under this
Agreement or any other Loan Document.
10.5. RIGHT OF SET-OFF. Upon the occurrence and
during the continuance of any Event of Default each Lender is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender to or for the
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credit or the account of any Borrower against any and all of the Obligations
now or hereafter existing whether or not such Lender shall have made any demand
under this Agreement or any Note or any other Loan Document and although such
Obligations may be unmatured. Each Lender agrees promptly to notify the
Borrowers after any such set-off and application made by such Lender; PROVIDED,
HOWEVER, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Lender under this Section are
in addition to the other rights and remedies (including, without limitation,
other rights of set-off) which such Lender may have.
10.6. BINDING EFFECT. This Agreement shall become
effective when it shall have been executed by the Company, each Borrower and
the Agent and when the Agent shall have been notified by each Lender that such
Lender has executed it and thereafter shall be binding upon and inure to the
benefit of each Borrower, the Agent and each Lender and their respective
successors and assigns, except that none of the Company or the Borrowers shall
not have the right to assign its rights hereunder or any interest herein
without the prior written consent of the Lenders.
10.7. ASSIGNMENTS AND PARTICIPATIONS. (a) Each
Lender may sell, transfer, negotiate or assign to one or more other Lenders or
Eligible Assignees all or a portion of its Commitments, Commitment to issue
Letters of Credit, the Loans and Letter of Credit Obligations owing to it and
the Notes held by it and a commensurate portion of its rights and obligations
hereunder and under the other Loan Documents; PROVIDED, HOWEVER, that (i) each
such assignment shall be of a constant, and not a varying, percentage of all of
the assigning Lender's rights and obligations under this Agreement, (ii) each
assignee hereunder shall also be an Eligible Assignee approved by the Agent,
which consent shall not be unreasonably withheld; (iii) such assignment, if to
a Person who is an Affiliate of any Lender and who does not otherwise qualify
as an Eligible Assignee, shall be with the consent of the Borrowers and the
Agent, which consent shall not be unreasonably withheld; (iv) such assignment,
together with all such assignments being executed contemporaneously with such
assignment to the assignee (and its Affiliates) shall be not less than 9.09% of
the then outstanding Commitments and (v) if such assignment is an assignment in
part, after giving effect thereto, the assigning Lender, together with its
Affiliates owns not less than 9.09% of the then outstanding Commitments. The
parties to each
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assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with a fee of
$3,000 and the Notes (or an Affidavit of Loss and Indemnity with respect to
such Notes satisfactory to the Agent) subject to such assignment. Upon such
execution, delivery, acceptance and recording, from and after the effective
date specified in such Assignment and Acceptance, (A) the assignee thereunder
shall become a party hereto and, to the extent that rights and obligations
under the Loan Documents have been assigned to such assignee pursuant to such
Assignment and Acceptance, have the rights and obligations of a Lender, and if
such Lender was an Issuer, of an Issuer hereunder and thereunder, and (B) the
assignor thereunder shall, to the extent that rights and obligations under this
Agreement have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights (except those which survive the payment in full of the
Obligations) and be released from its obligations under the Loan Documents
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under the Loan
Documents, such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and
Acceptance, the Lender assignor thereunder and the assignee thereunder confirm
to and agree with each other and the other parties hereto as follows: (i)
other than as provided in such Assignment and Acceptance, such assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to any of the statements, warranties or representations made in or in
connection with this Agreement or any other Loan Document furnished pursuant
thereto or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document or any other
instrument or document furnished pursuant hereto or thereto; (ii) such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Loan Party or the
performance or observance by any Loan Party of any of its obligations under
this Agreement or any other Loan Document or of any other instrument or
document furnished pursuant hereto or thereto; (iii) such assigning Lender
confirms that it has delivered to the assignee and the assignee confirms that
it has received a copy of this Agreement and each of the Loan Documents
together with a copy of the most recent financial statements delivered by the
Borrowers to the Lenders pursuant to each of the clauses
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of Section 6.11 (or if no such statements have been delivered, the financial
statements referred to in Section 4.5 of this Agreement) and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement and the other Loan Documents as are
delegated to the Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations
which by the terms of this Agreement are required to be performed by it as a
Lender and if such assignor Lender was an Issuer, as an Issuer.
(c) The Agent shall maintain at its address referred
to in Section 10.2 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Commitments of and principal amount of the Loans owing to
each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and
the Loan Parties, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender or Issuer, as the case may be, for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrowers, the Agent or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an assignee representing that it is an
Eligible Assignee, together with the fee set forth in Section 10.7(a) and the
Notes subject to such assignment, the Agent shall, if such Assignment and
Acceptance has been completed, (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Borrowers. Within five Business Days after its
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receipt of such notice, the Borrowers, at their own expense, shall execute and
deliver to the Agent, in exchange for such surrendered Notes, new Notes to the
order of such Eligible Assignee in an amount equal to the Commitments assumed
by it pursuant to such Assignment and Acceptance and, if the assigning Lender
has retained Commitments hereunder, new Notes to the order of the assigning
Lender in an amount equal to the Commitments retained by it hereunder. Such
new Notes shall be dated the same date as the Surrendered Notes and be in
substantially the form of Exhibit A hereto, as applicable.
(e) In addition to the other assignment rights
provided in this Section 10.7, each Lender may assign, as collateral or
otherwise, any of its rights under this Agreement (including, without
limitation, rights to payments of principal or interest on the Loans) to any
Federal Reserve Bank without notice to or consent of the Borrowers or the
Agent; PROVIDED, HOWEVER, that no such assignment shall release the assigning
Lender from any of its obligations hereunder. The terms and conditions of any
such assignment and the documentation evidencing such assignment shall be in
form and substance satisfactory to the assigning Lender and the assignee
Federal Reserve Bank.
(f) Each Lender may sell participations to one or
more banks or other Persons in or to all or a portion of its rights and
obligations under the Loan Documents (including, without limitation, all or a
portion of its Commitments, commitment to issue Letters of Credit, the Letter
of Credit Obligations owing to it, the Loans owing to it and the Notes held by
it). The terms of such participation shall not, in any event, require the
participant's consent to any amendments, waivers or other modifications of any
provision of any Loan Documents, the consent to any departure by any Loan Party
therefrom, or to the exercising or refraining from exercising any powers or
rights which such Lender may have under or in respect of the Loan Documents
(including, without limitation, the right to enforce the obligations of the
Loan Parties), except if any such amendment, waiver or other modification or
consent would (i) reduce the amount, or postpone any date fixed for, any amount
(whether of principal, interest or fees) payable to such participant under the
Loan Documents, to which such participant would otherwise be entitled under
such participation or (ii) result in the release of all or substantially all of
the Collateral other than in accordance with the Collateral Documents.
Notwithstanding the sale of
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any participation by any Lender, (i) such Lender's obligations under the Loan
Documents (including, without limitation, its Commitments and commitment
hereunder to issue Letters of Credit) shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) such Lender shall remain the holder of such Notes
and Obligations for all purposes of this Agreement, (iv) such Lender shall
disclose to the Agent the identity of each bank or other entity purchasing a
participation within a reasonable time after the sale and purchase of such
participation, and (v) the Borrowers, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and may assume all of such
Lender's actions are properly authorized.
(g) Each Issuer may at any time assign its
rights and obligations hereunder to any other Issuer or to any Lender by an
instrument in form and substance satisfactory to the Agent and the parties
thereto.
10.8. GOVERNING LAW; SEVERABILITY. This Agreement
and the Notes and the rights and obligations of the parties hereto and thereto
shall be governed by, and construed and interpreted in accordance with, the law
of the State of New York.
10.9. SUBMISSION TO JURISDICTION; SERVICE OF
PROCESS. (a) Any legal action or proceeding with respect to this Agreement or
the Notes or any document related thereto may be brought in the courts of the
State of New York or of the United States of America for the Southern District
of New York, and, by execution and delivery of this Agreement, each Borrower
hereby accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The parties hereto
hereby irrevocably waive any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of FORUM NON
CONVENIENS, which any of them may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions.
(b) Each Borrower irrevocably consents to the
service of process of any of the aforesaid courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the borrower at its address provided herein.
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(c) Nothing contained in this Section 10.9 shall
affect the right of the agent, any Lender or any holder of a Note to serve
process in any other manner permitted by law or commence legal proceedings or
otherwise proceed against any Borrower in any other jurisdiction.
10.10. SECTION TITLES. The Section titles contained
in this Agreement are and shall be without substantive meaning or content of
any kind whatsoever and are not a part of the agreement between the parties
hereto.
10.11. EXECUTION IN COUNTERPARTS. This Agreement
may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement.
10.12. ENTIRE AGREEMENT. This Agreement, together
with all of the other Loan Documents and all certificates and documents
delivered hereunder or thereunder, and the fee letter between the Company and
Citibank embody the entire agreement of the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof.
10.13. CONFIDENTIALITY. Each Lender and the Agent
agree to keep information obtained by it pursuant hereto and the other Loan
Documents confidential in accordance with such Lender's or the Agent's, as the
case may be, customary practices and agrees that it will only use such
information in connection with the transactions contemplated by this Agreement
and not disclose any of such information other than (i) to such Lender's or the
Agent's, as the case may be, employees, representatives and agents who are or
are expected to be involved in the evaluation of such information in connection
with the transactions contemplated by this Agreement and who are advised of the
confidential nature of such information, (ii) to the extent such information
presently is or hereafter becomes available to such Lender or the Agent, as the
case may be, on a non-confidential basis from a source other than any Borrower,
(iii) to the extent disclosure is required by law, regulation or judicial order
or requested or required by bank regulators or auditors, or (iv) to assignees
or participants or potential assignees or participants who agree to be bound by
the provisions of this sentence.
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10.14. WAIVER OF JURY TRIAL. Each of the parties
hereto waives any right it may have to trial by jury in respect of any
litigation based on, or arising out of, under or in connection with this
Agreement or any other Loan Document, or any course of conduct, course of
dealing, verbal or written statement or action of any party hereto.
10.15. JOINT AND SEVERAL OBLIGATIONS. (a) Any
term or provision of this Agreement or any other Loan Document to the contrary
notwithstanding, the maximum aggregate amount of the Obligations for which any
Borrower (which Obligations are not direct borrowings or direct obligations of
such Borrower) (the "Non-Direct Obligations") shall be liable shall not exceed
the maximum amount for which such Borrower can be liable without rendering such
Non-Direct Obligations, as they relate to such Borrower, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer.
(b) To the extent that any Borrower shall be required
hereunder to pay a portion of its Non-Direct Obligations which shall exceed the
greater of (i) the amount of the economic benefit actually received by such
Borrower from the Loans and Letters of Credit in respect of such Non-Direct
Obligations and (ii) the amount which such Borrower would otherwise have paid
if such Borrower had paid the aggregate amount of the Non-Direct Obligations of
such Borrower (excluding the amount thereof repaid by the other Borrowers) in
the same proportion as such Borrower's net worth at the date enforcement
hereunder is sought bears to the aggregate net worth of all the Borrowers at
the date enforcement hereunder is sought, then such Borrower shall be
reimbursed by the other Borrowers for the amount of such excess, pro rata based
on the respective net worths of the Borrowers at the date enforcement hereunder
is sought.
10.16. CONSENT TO PROPOSED RESTRUCTURING; AMENDMENT
TO COVENANTS. (a) The parties hereto agree that all provisions relating to
the Proposed Restructuring and the Proposed Notes shall become effective upon
the consummation of the Proposed Restructuring provided that (i) the terms of
the Indenture or other agreement governing the Proposed Notes are no less
favorable to the Company and the Borrowers than as set forth on Exhibit N
hereto, (ii) no scheduled principal payments shall be due under the Indenture
governing the Proposed Notes until the fifth anniversary of the consummation of
the Proposed Restructuring, (iii) the Proposed Notes shall be unsecured or
secured only by the
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Stock of the Company and/or its direct Subsidiaries, (iv) the average weighted
interest rate of such Proposed Notes (taking into account any discount or
premium with respect to such Proposed Notes) shall be no more than 12 1/2%; (v)
the principal amount of the Proposed Notes shall not exceed the sum of (A) the
principal amount of the Existing 12 1/4% Senior Secured Notes, the Existing
Floating Rate Senior Secured Notes, the Existing Senior Subordinated Notes, the
Existing Convertible Debentures, if any, and the Term Loan so being refinanced
or repaid in connection therewith and (B) $25,000,000; provided that the
proceeds of the Proposed Notes in excess of the sum of the amount in clause (A)
and the amount of all transaction fees, costs and expenses, accrued interest
and redemption premiums related thereto shall be contributed to the Borrowers
as an equity contribution; and (vi) the covenants contained in Article V hereof
are modified pursuant to Section 10.16(b).
(b) Upon the consummation of the Proposed
Restructuring pursuant to this Section 10.16, the parties hereto agree to
negotiate in good faith to modify the financial covenants in Article V to give
effect to the Proposed Restructuring.
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IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
WAXMAN USA INC.
By:_______________________________
Title:
BORROWERS
---------
BARNETT INC.
By:_______________________________
Title:
WOC INC.
By:_______________________________
Title:
WAXMAN CONSUMER PRODUCTS GROUP INC.
By:_______________________________
Title:
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AGENT
CITICORP USA, INC.
as Agent
By:_______________________________
Title: Vice-President
LENDERS
-------
CITICORP USA, INC.
By:_______________________________
Title: Vice-President
ISSUERS
-------
CITIBANK, N.A.
as Issuer
By:_______________________________
Title: Vice-President
HELLER FINANCIAL, INC.
By:_______________________________
Title:
SANWA BUSINESS CREDIT CORPORATION
By:_______________________________
Title:
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ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. DEFINED TERMS . . . . . . . . . . . . . . . . . . . . 1
1.2. COMPUTATION OF TIME PERIODS . . . . . . . . . . . . . 41
1.3. ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . 41
1.4. CERTAIN TERMS . . . . . . . . . . . . . . . . . . . . 41
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
2.1. THE REVOLVING CREDIT LOANS . . . . . . . . . . . . . 41
2.2. MAKING THE LOANS . . . . . . . . . . . . . . . . . . 42
2.3. FEES . . . . . . . . . . . . . . . . . . . . . . . . 44
2.4. REDUCTION AND TERMINATION OF THE COMMITMENTS . . . . 44
2.5. REPAYMENT . . . . . . . . . . . . . . . . . . . . . . 45
2.6. PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . 45
2.7. CONVERSION/CONTINUATION OPTION . . . . . . . . . . . 46
2.8. INTEREST . . . . . . . . . . . . . . . . . . . . . . 47
2.9. INTEREST RATE DETERMINATION AND PROTECTION . . . . . 47
2.10. INCREASED COSTS . . . . . . . . . . . . . . . . . . . 48
2.11. ILLEGALITY . . . . . . . . . . . . . . . . . . . . . 48
2.12 CAPITAL ADEQUACY. . . . . . . . . . . . . . . . . . . 49
2.13. PAYMENTS AND COMPUTATIONS . . . . . . . . . . . . . . 49
2.14. TAXES . . . . . . . . . . . . . . . . . . . . . . . . 52
2.15. SHARING OF PAYMENTS, ETC . . . . . . . . . . . . . . 53
2.16. LETTER OF CREDIT FACILITY . . . . . . . . . . . . . 54
2.17. CASH COLLATERAL ACCOUNT . . . . . . . . . . . . . . 60
2.18. SWING ADVANCES . . . . . . . . . . . . . . . . . . . 62
2.19. PAYMENT ON ACCOUNT OF COLLATERAL . . . . . . . . . . 64
2.20. INTERCREDITOR AGREEMENT . . . . . . . . . . . . . . . 64
ARTICLE III
CONDITIONS OF LENDING
3.1. CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTERS OF
CREDIT . . . . . . . . . . . . . . . . . . . . . . 64
3.2. ADDITIONAL CONDITIONS PRECEDENT TO INITIAL LOANS
AND LETTERS OF CREDIT. . . . . . . . . . . . . . . 69
3.3. CONDITIONS PRECEDENT TO EACH LOAN AND LETTER
OF CREDIT . . . . . . . . . . . . . . . . . . . . 71
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW . . . . . . 72
i
<PAGE> 144
4.2. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS 73
4.3. TAXES . . . . . . . . . . . . . . . . . . . . . . . . 75
4.4. FULL DISCLOSURE . . . . . . . . . . . . . . . . . . . 76
4.5. FINANCIAL MATTERS . . . . . . . . . . . . . . . . . . 77
4.6. LITIGATION . . . . . . . . . . . . . . . . . . . . . 78
4.7. MARGIN REGULATIONS . . . . . . . . . . . . . . . . . 78
4.8. OWNERSHIP OF BORROWER; SUBSIDIARIES. . . . . . . . . . 78
4.9. ERISA . . . . . . . . . . . . . . . . . . . . . . . . 79
4.10. LIENS . . . . . . . . . . . . . . . . . . . . . . . . 82
4.11. RELATED DOCUMENTS; INDENTURES . . . . . . . . . . . . 82
4.12. NO BURDENSOME RESTRICTIONS; NO DEFAULTS . . . . . . . 82
4.13. NO OTHER VENTURES . . . . . . . . . . . . . . . . . . 83
4.14. INVESTMENT COMPANY ACT . . . . . . . . . . . . . . . 83
4.15. INSURANCE . . . . . . . . . . . . . . . . . . . . . 83
4.16. LABOR MATTERS . . . . . . . . . . . . . . . . . . . 83
4.17. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . 85
4.18. USE OF PROCEEDS . . . . . . . . . . . . . . . . . . 85
4.19. ENVIRONMENTAL PROTECTION . . . . . . . . . . . . . . 85
4.20. TRANSACTION COSTS AND FEES. . . . . . . . . . . . . . 87
4.21. INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . 87
4.22. TITLE . . . . . . . . . . . . . . . . . . . . . . . 88
ARTICLE V
FINANCIAL COVENANTS
5.1. MAXIMUM LEVERAGE RATIO . . . . . . . . . . . . . . . 90
5.2. FIXED CHARGE COVERAGE RATIO . . . . . . . . . . . . . 90
5.3. MAINTENANCE OF ADJUSTED NET WORTH . . . . . . . . . . 91
5.4. CAPITAL EXPENDITURES . . . . . . . . . . . . . . . . 92
5.5. EBITDA TO TOTAL CASH INTEREST RATIO . . . . . . . . . 93
ARTICLE VI
AFFIRMATIVE COVENANTS
6.1. COMPLIANCE WITH LAWS, ETC . . . . . . . . . . . . . . 94
6.2. CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . 94
6.3. PAYMENT OF TAXES, ETC . . . . . . . . . . . . . . . . 94
6.4. MAINTENANCE OF INSURANCE . . . . . . . . . . . . . . 95
6.5. PRESERVATION OF CORPORATE EXISTENCE, ETC . . . . . . . 95
6.6. ACCESS . . . . . . . . . . . . . . . . . . . . . . . 95
6.7. KEEPING OF BOOKS . . . . . . . . . . . . . . . . . . 96
6.8. MAINTENANCE OF PROPERTIES, ETC . . . . . . . . . . . . 96
6.9. PERFORMANCE AND COMPLIANCE WITH OTHER COVENANTS . . . 96
6.10. APPLICATION OF PROCEEDS . . . . . . . . . . . . . . . 96
6.11. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . 96
6.12. REPORTING REQUIREMENTS. . . . . . . . . . . . . . . . 98
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6.13. NEW REAL ESTATE. . . . . . . . . . . . . . . . . . . 104
6.14. EMPLOYEE PLANS . . . . . . . . . . . . . . . . . . . 104
6.15. FISCAL YEAR . . . . . . . . . . . . . . . . . . . . 104
6.16. ENVIRONMENTAL . . . . . . . . . . . . . . . . . . . 105
6.17. BORROWING BASE DETERMINATION. . . . . . . . . . . . 105
6.18. CASH MANAGEMENT SYSTEM. . . . . . . . . . . . . . . 106
ARTICLE VII
NEGATIVE COVENANTS
7.1. LIENS, ETC . . . . . . . . . . . . . . . . . . . . . 106
7.2. INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . 108
7.3. LEASE OBLIGATIONS . . . . . . . . . . . . . . . . . . 110
7.4. RESTRICTED PAYMENTS . . . . . . . . . . . . . . . . . 110
7.5. MERGERS, STOCK ISSUANCES, SALE OF ASSETS,ETC . . . . . 111
7.6. INVESTMENTS IN OTHER PERSONS . . . . . . . . . . . . 113
7.7. MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES . . . . . . . 113
7.8. CHANGE IN NATURE OF BUSINESS . . . . . . . . . . . . . 114
7.10. MODIFICATION OF RELATED DOCUMENTS AND INDENTURES. . . 115
7.11. MODIFICATION OF MATERIAL AGREEMENTS . . . . . . . . . 115
7.12. ACCOUNTING CHANGES . . . . . . . . . . . . . . . . . 115
7.13. CONTINGENT OBLIGATIONS . . . . . . . . . . . . . . . 115
7.14. TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . 116
7.15. CANCELLATION OF INDEBTEDNESS OWED TO IT . . . . . . 116
7.16. NO NEW SUBSIDIARIES . . . . . . . . . . . . . . . . 117
7.17. CAPITAL STRUCTURE . . . . . . . . . . . . . . . . . 117
7.18. NO SPECULATIVE TRANSACTIONS . . . . . . . . . . . . 117
7.19. ENVIRONMENTAL . . . . . . . . . . . . . . . . . . . 117
ARTICLE VIII
EVENTS OF DEFAULT
8.1. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . 118
8.2. REMEDIES . . . . . . . . . . . . . . . . . . . . . . 121
8.3 ACTIONS IN RESPECT OF LETTERS OF CREDIT. . . . . . . . 122
ARTICLE IX
THE AGENT
9.1. AUTHORIZATION AND ACTION . . . . . . . . . . . . . . 123
9.2. AGENT'S RELIANCE, ETC . . . . . . . . . . . . . . . 124
9.3. CITICORP AND AFFILIATES . . . . . . . . . . . . . . . 125
9.4. LENDER CREDIT DECISION . . . . . . . . . . . . . . . 125
9.5. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . 126
9.6. SUCCESSOR AGENT . . . . . . . . . . . . . . . . . . . 126
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ARTICLE X
MISCELLANEOUS
10.1. AMENDMENTS, ETC . . . . . . . . . . . . . . . . 127
10.2. NOTICES, ETC . . . . . . . . . . . . . . . . . . 128
10.3. NO WAIVER; REMEDIES . . . . . . . . . . . . . . 129
10.4. COSTS; EXPENSES; INDEMNITIES . . . . . . . . . . 129
10.5. RIGHT OF SET-OFF . . . . . . . . . . . . . . . . 131
10.6. BINDING EFFECT . . . . . . . . . . . . . . . . . 132
10.7. ASSIGNMENTS AND PARTICIPATIONS . . . . . . . . . 132
10.8. GOVERNING LAW; SEVERABILITY . . . . . . . . . . . 136
10.9. SUBMISSION TO JURISDICTION; SERVICE OF
PROCESS . . . . . . . . . . . . . . . . . . . . . 136
10.10. SECTION TITLES . . . . . . . . . . . . . . . . 137
10.11. EXECUTION IN COUNTERPARTS . . . . . . . . . . . 137
10.12. ENTIRE AGREEMENT . . . . . . . . . . . . . . . 137
10.13. CONFIDENTIALITY . . . . . . . . . . . . . . . . 137
10.14. WAIVER OF JURY TRIAL . . . . . . . . . . . . . 138
10.15. JOINT AND SEVERAL OBLIGATIONS . . . . . . . . . 138
10.16. CONSENT TO PROPOSED RESTRUCTURING; AMEND-
MENT TO COVENANTS . . . . . . . . . . . . . . . . 138
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<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule I - Commitments
Schedule II - Applicable Lending Offices and
Addresses for Notices
Schedule 4.2 - Defaults
Schedule 4.3 - Taxes
Schedule 4.8 - Subsidiaries
Schedule 4.9 - ERISA
Schedule 4.13 - Joint Ventures
Schedule 4.16 - Labor
Schedule 4.19 - Environmental Protection
Schedule 4.22(a) - Borrower's Owned Real Estate
Schedule 4.22(b) - Borrower's Leased Real Estate
Schedule 7.1 - Existing Liens
Schedule 7.2 - Existing Indebtedness
Schedule 7.6 - Existing Investments
</TABLE>
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<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Conversion or Continuation
Exhibit D - Form of Security Agreement
Exhibit E - Form of Intellectual Property Security
Agreement
Exhibit F - Form of Opinion of Counsel for the
Loan Parties
Exhibit G - Form of Assignment and Acceptance
Exhibit H - Form of Letter of Credit Request
Exhibit I - Form of Borrowing Base Certificate
Exhibit J - Form of Mortgage
Exhibit K - Form of Intercompany Note
Exhibit L - Form of Stock Pledge Agreement
Exhibit M - Form of Intercreditor Agreement
Exhibit N - Terms of Proposed Notes
</TABLE>
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SECURITY AGREEMENT
SECURITY AGREEMENT, dated May 20, 1994, made by Barnett
Inc. , a Delaware corporation (the "Grantor"), in favor of Citicorp USA, Inc.,
as agent for the financial institutions party to the Credit Agreement referred
to below (in such capacity, the "Agent").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Grantor has entered into a Credit Agreement,
dated as of May 20, 1994, with Barnett Inc., WOC Inc., Waxman Consumer
Products Group Inc., Waxman USA Inc., and the financial institutions party
thereto (the "Lenders") and the Agent (said Agreement, as it may be amended or
otherwise modified from time to time, being the "Credit Agreement" and
capitalized terms not defined herein but defined therein being used herein as
therein defined); and
WHEREAS, it is a condition precedent to the making of the
Loans and the issuance of the Letters of Credit that the Grantor shall have
entered into this Agreement;
NOW, THEREFORE, in consideration of the premises and in order
to induce the Lenders to make the Loans and the Issuers to issue the Letters of
Credit the Grantor hereby agrees with the Agent on behalf and for the ratable
benefit of the Secured Parties as follows:
1. DEFINED TERMS. As used in this Agreement, the following
terms have the meanings specified below (such meanings being equally applicable
to both the singular and plural forms of the terms defined):
"ACCOUNT" means any "account," as such term is
defined in Section 9-106 of the UCC, now owned or hereafter
acquired by the Grantor and, in any event, includes, without
limitation, (i) all accounts receivable, book debts and other
forms of obligations (other than forms of obligations
evidenced by Chattel Paper, Documents or Instruments) now
owned or hereafter received or acquired by or belonging or
owing to the Grantor (including, without limitation, under any
trade name, style or division thereof) whether arising out of
goods sold or services rendered by the Grantor or from any
other transaction, whether or not the same involves the sale
of goods or services by the Grantor (including, without
limitation, any such obligation which might be characterized
as an account or contract right under the UCC), (ii) all of
Grantor's rights in, to and under all purchase orders or
receipts now owned or hereafter acquired by it for goods or
services, and all of Grantor's rights to any goods represented
by any of the foregoing (including, without limitation, unpaid
seller's rights of rescission, replevin, reclama
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tion and stoppage in transit and rights to returned, reclaimed
or repossessed goods), (iii) all moneys due or to become due
to the Grantor under all contracts for the sale of goods or
the performance of services or both by the Grantor (whether or
not yet earned by performance on the part of the Grantor or in
connection with any other transaction), now in existence or
hereafter occurring, including, without limitation, the right
to receive the proceeds of said purchase orders and contracts,
and (iv) all collateral security and guarantees of any kind
given by any Person with respect to any of the foregoing.
"ACCOUNT DEBTOR" means any "account debtor," as such
term is defined in Section 9-105(1)(a) of the UCC.
"CHATTEL PAPER" means any "chattel paper," as such
term is defined in Section 9-105(1)(b) of the UCC, now owned
or hereafter acquired by the Grantor.
"COLLATERAL" has the meaning assigned to such term in
Section 2 of this Agreement.
"CONTRACTS" means all contracts, undertakings or
other agreements (other than Chattel Paper, Documents or
Instruments) in or under which the Grantor may now or
hereafter have any right, title or interest, including,
without limitation, with respect to an Account, any agreement
relating to the terms of payment or the terms of performance
thereof.
"DOCUMENTS" means any "document," as such term is
defined in Section 9-105(1)(f) of the UCC, now owned or
hereafter acquired by the Grantor.
"EQUIPMENT" means any "equipment," as such term is
defined in Section 9-109(2) of the UCC, now owned or hereafter
acquired by the Grantor and, in any event, includes, without
limitation, all machinery, equipment, furnishings, fixtures,
vehicles, computers and other electronic data-processing and
office equipment now owned or hereafter acquired by the
Grantor and any and all additions, substitutions and
replacements of any of the foregoing, wherever located,
together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto.
"GENERAL INTANGIBLES" means any "general
intangibles," as such term is defined in Section 9-106 of
the UCC, now owned or hereafter acquired by the Grantor and,
in any event, includes, without limitation, all customer
lists, trademarks, patents, rights intintellectual property,
licenses, permits, copyrights, trade secrets, proprietary or
confidential information, inventions (whether patented or
patentable or not) and technical information, procedures,
designs, know
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ledge, know-how, software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials and
records, goodwill, rights of indemnification and all right,
title and interest which the Grantor may now or hereafter have
in or under any Contract, now owned or hereafter acquired by
the Grantor.
"INSTRUMENT" means any "instrument," as such term is
defined in Section 9-105(1)(i) of the UCC, now owned or
hereafter acquired by the Grantor, other than instruments that
constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"INVENTORY" means any "inventory," as such term is
defined in Section 9-109(4) of the UCC, now owned or hereafter
acquired by the Grantor, and wherever located, and, in any
event, includes, without limitation, all inventory,
merchandise, goods and other personal property now owned or
hereafter acquired by the Grantor which are held for sale or
lease or are furnished or are to be furnished under a contract
of service or which constitute raw materials, work in process
or materials used or consumed or to be used or consumed in the
Grantor's business, or the processing, packaging, delivery or
shipping of the same, and all finished goods.
"PERMITTED LIENS" means Liens permitted by Section
7.1 of the Credit Agreement existing as of the date hereof or
to be created hereafter.
"PROCEEDS" means "proceeds," as such term is defined
in Section 9-306(1) of the UCC, and, in any event, shall
include, without limitation, (i) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to the
Grantor from time to time with respect to any of the
Collateral, (ii) any and all payments (in any form whatsoever)
made or due and payable to the Grantor from time to time in
connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by
any Governmental Authority (or any Person acting under color
of Governmental Authority), and (iii) any and all other
amounts from time to time paid or payable under or in
connection with any of the Collateral.
"UCC" means the Uniform Commercial Code as the same
may, from time to time, be in effect in the State of New York;
PROVIDED, HOWEVER, in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection or
priority of the Agent's and the Secured Parties' security
interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the
State of New York, the term "UCC" shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for
pur
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poses of the provisions hereof relating to such attachment,
perfection or priority and for purposes of definitions related
to such provisions.
2. GRANT OF SECURITY INTEREST.
(a) As collateral security for the full and prompt payment
when due (whether at stated maturity, by acceleration or otherwise)
of, and the performance of, all the Obligations and to induce the
Lenders to make the Loans and the Issuers to issue the Letters of
Credit pursuant to the Credit Agreement, the Grantor hereby assigns,
conveys, mortgages, pledges, hypothecates and transfers to the Agent,
on behalf and for the ratable benefit of the Secured Parties, and
hereby grants to the Agent, on behalf and for the ratable benefit of
the Secured Parties, a security interest in, all of the Grantor's
right, title and interest in, to and under (subject, as to priority,
to any Permitted Liens) the following (all of which being
hereinafter collectively called the "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts and any and all claims of the Grantor
for damages arising out of or for breach of or a default under
any Contract and the right of the Grantor to perform or to
compel performance under any Contract and to exercise all
remedies thereunder;
(iv) all Documents;
(v) all Equipment;
(vi) all General Intangibles;
(vii) all Instruments;
(viii) all Inventory;
(ix) all bank accounts;
(x) all other goods and personal property of the Grantor
whether tangible or intangible or whether now owned or
hereafter acquired by the Grantor and wherever located; and
(xi) to the extent not otherwise included, all Proceeds of
each of the foregoing and all accessions to, substitutions and
replacements for, and rents, profits and products of, each of
the foregoing.
(b) In addition, as collateral security for the prompt and
complete payment when due of the Obligations, each Secured Party is
hereby granted a lien and security interest in all property of the
Grantor held by such Secured Party, including, without limitation, all
property of every description, now or hereafter in
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the possession or custody of or in transit to such Secured Party for
any purpose, including safekeeping, collection or pledge, for the
account of the Grantor, or as to which the Grantor may have any right
or power.
3. RIGHTS OF THE SECURED PARTIES; LIMITATIONS ON SECURED
PARTIES' OBLIGATIONS.
(a) It is expressly agreed by the Grantor that, anything
herein to the contrary notwithstanding, the Grantor shall remain
liable under each of the Contracts to observe and perform all the
conditions and obliga-tions to be observed and performed by it
thereunder and the Grantor shall perform all of its duties and
obligations thereunder, all in accordance with and pursuant to the
terms and provisions of each such Contract provided that the Grantor
shall not be deemed in default of this Section 3(a) if all breaches
under such Contracts in the aggregate have no reasonable likelihood of
having a Material Adverse Effect. Neither the Agent nor any Lender
shall have any obligation or liability under any Contract by reason of
or arising out of this Agreement or the granting of a security
interest in any contract to the Agent on behalf and for the ratable
benefit of and the Secured Parties of a security interest therein or
the receipt by the Agent or any Lender of any payment relating to any
Contract pursuant hereto, nor shall the Agent or any Lender be
required or obligated in any manner to perform or fulfill any of the
obligations of the Grantor under or pursuant to any Contract, or to
make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any
performance by any party under any Contract, or to present or file any
claim, or to take any action to collect or enforce any performance or
the payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.
(b) The Agent authorizes the Grantor to (and the Grantor
agrees to) collect its Accounts, Chattel Paper and Instruments in a
prudent and businesslike manner, and the Agent may, upon the
occurrence and during the continuance of any Event of Default and
without notice, limit or terminate said authority at any time. If
required by the Agent at any time during the continuance of any Event
of Default, any Proceeds, when first collected by the Grantor,
received in payment of any such Account or in payment for any of its
Inventory or on account of any of its Contracts, shall be promptly
deposited by the Grantor in precisely the form received (with all
necessary indorsements) in a special bank account maintained by the
Agent and subject to withdrawal only by the Agent, as hereinafter
provided, and until so turned over shall be deemed to be held in trust
by the Grantor for and as the Agent's property and shall not be
commingled with the Grantor's other funds or properties. Such
Proceeds, when deposited, shall continue to be collateral security for
all of the Obligations and shall not constitute payment thereof until
applied as hereinafter provided. The Agent shall
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<PAGE> 154
upon the request of the Majority Lenders apply all or a part of the
funds on deposit in said special account to the principal of or
interest on or both in respect of any of the Obligations in accordance
with the provisions of Section 8(d) hereof and any part of such funds
which the Majority Lenders elect not so to apply and deem not required
as collateral security for the Obligations shall be paid over from
time to time by the Agent to the Grantor. If an Event of Default has
occurred and is continuing, at the request of the Agent the Grantor
shall deliver to the Agent all original and other documents
evidencing, and relating to, the sale and delivery of such Inventory
or the performance of labor or service which created such Accounts,
including, without limitation, all original orders, invoices and
shipping receipts; and, prior to the occurrence of an Event of Default
the Grantor shall deliver photocopies thereof to the Agent at its
reasonable request.
(c) The Agent may at any time, upon the occurrence and during
the continuance of any Default or Event of Default, after first
notifying the Grantor of its intention to do so, notify Account
Debtors of the Grantor, parties to Contracts of the Grantor, obligors
of Instruments of the Grantor and obligors in respect of Chattel Paper
of the Grantor that the Accounts and the right, title and interest of
the Grantor in and under such Contracts, such Instruments and such
Chattel Paper have been assigned to the Agent and that payments shall
be made directly to the Agent. Upon the request of the Agent, the
Grantor will so notify such Account Debtors, parties to such
Contracts, obligors of such Instruments and obligors in respect of
such Chattel Paper. Upon the occurrence and during the continuance of
an Event of Default, the Agent may in its own name or in the name of
others communicate with such Account Debtors, parties to such
Contracts, obligors of such Instruments and obligors in respect of
such Chattel Paper to verify with such Persons to the Agent's
satisfaction the existence, amount and terms of any such Accounts,
Contracts, Instruments or Chattel Paper.
(d) Upon reasonable prior notice to the Grantor (unless a
Default or Event of Default has occurred and is continuing, in which
case no notice is necessary), the Agent shall have the right to make
test verifications of the Accounts and physical verifications of the
Inventory in any manner and through any medium that it considers
advisable, and the Grantor agrees to furnish all such assistance and
information as the Agent may require in connection therewith. The
Grantor, at its own cost and expense, will cause certified independent
public accountants reasonably satisfactory to the Agent to prepare and
deliver to the Agent, annually in connection with their annual audit
and, upon the occurrence and during the continuance of an Event of
Default at any time and from time to time promptly upon the Agent's
reasonable request, which shall not be so frequently as to be unduly
burdensome the following reports: (i) a reconciliation of all its
Accounts, (ii) an aging of all its Accounts, (iii) trial
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balances, and (iv) a test verification of such Accounts as the Agent
may request. The Grantor, at its expense, will cause certified
independent public accountants satisfactory to the Agent to prepare
and deliver to the Agent the results of physical verifications of its
Inventory made or observed by such accountants, which physical
verifications shall be made no less frequently than on an annual
basis.
4. REPRESENTATIONS AND WARRANTIES. The Grantor hereby
represents and warrants to the Secured Parties as follows:
(a) The Grantor is the sole owner of each item of the
Collateral in which it purports to grant a security interest
hereunder, having good title thereto, free and clear of any and all
Liens, except for the security interest granted pursuant to this
Agreement and other Permitted Liens. No material amounts payable
under or in connection with any of its Accounts or Contracts are
evidenced by Instruments which have not been delivered to the Agent.
(b) No effective security agreement, financing statement,
equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of record in
any public office, except such as may have been filed by the Grantor
in favor of the Agent pursuant to this Agreement or such as relate to
other Permitted Liens.
(c) Appropriate financing statements having been filed in the
jurisdictions listed on Schedule I hereto, and this Agreement is
effective to create a valid and continuing first priority Lien on and
prior to all other Liens except Permitted Liens. All action necessary
or desirable to protect and perfect such security interest in each
item of the Collateral that may be subject to a perfected Lien by
filing under the UCC has been duly taken.
(d) The Grantor's principal place of business and the place
where its records concerning the Collateral are kept and the location
of its Inventory and Equipment are set forth on Schedule II hereto.
(e) The amount represented by the Grantor to the Agent from
time to time as owing by each Account Debtor or by all Account Debtors
in respect of the Accounts of the Grantor will at such time be the
correct amount actually owing by such Account Debtors thereunder.
5. COVENANTS. The Grantor covenants and agrees with the
Agent and the Lenders that from and after the date of this Agreement and until
the Obligations are fully satisfied:
(a) FURTHER DOCUMENTATION; PLEDGE OF INSTRUMENTS. At any
time and from time to time, upon the written request of the Agent, and
at the sole expense of the Grantor, the Grantor will promptly and duly
execute and deliver any and all such further instruments and docu
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ments and take such further action as the Agent may reasonably deem
desirable to obtain the full benefits of this Agreement and of the
rights and powers herein granted, including, without limitation, using
its best efforts to secure to the extent required by the Credit
Agreement all consents and approvals necessary or appropriate for the
assignment to the Agent of any Contract held by the Grantor or in
which the Grantor has any rights not heretofore assigned, the filing
of any financing or continuation statements under the UCC with respect
to the Liens and security interests granted hereby, transferring
Collateral to the Agent's possession (if a security interest in such
Collateral can only be perfected by possession) and placing the
interest of the Agent as lienholder on the certificate of title of any
vehicle. The Grantor also hereby authorizes the Agent to file any
such financing or continuation statement without the signature of the
Grantor to the extent permitted by applicable law. If any of the
Collateral shall be or become evidenced by any Instrument, the Grantor
agrees to pledge such Instrument to the Agent and shall duly endorse
such Instrument in a manner satisfactory to the Agent and deliver the
same to the Agent.
(b) MAINTENANCE OF RECORDS. The Grantor will keep and
maintain at its own cost and expense satisfactory and complete records
of the Collateral, including, without limitation, a record of all
payments received and all credits granted with respect to the
Collateral and all other dealings with the Collateral. At the request
of Agent, the Grantor will mark its books and records pertaining to
the Collateral to evidence this Agreement and the Lien and security
interests granted hereby. At the request of Agent, all Chattel Paper
will be marked with the following legend: "This writing and the
obligations evidenced or secured hereby are subject to the security
interest of Citibank, N.A., as the Agent". If requested by the Agent,
the security interest of the Agent shall be noted on the certificate
of title of each vehicle. For the Agent's and the Lenders' further
security, the Grantor agrees that the Agent and the Lender shall have
a special property interest in all of the Grantor's books and records
pertaining to the Collateral and, upon the occurrence and during the
continuance of any Event of Default, the Grantor shall deliver and
turn over copies of any such books and records to the Agent or to its
representatives at any time on demand of the Agent. Prior to the
occurrence of an Event of Default and upon reasonable notice from the
Agent, the Grantor shall permit any representative of the Agent to
inspect such books and records and will provide photocopies thereof to
the Agent during normal business hours.
(c) INDEMNIFICATION. In any suit, proceeding or action
brought by the Agent or any Lender relating to any Account, Chattel
Paper, Contract, General Intangible or Instrument for any sum owing
thereunder, or to enforce any provision of any Account, Chattel Paper,
Contract, General Intangible or Instrument, the Grantor will save,
indemnify and keep each of the Agent and the
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Lenders harmless from and against all expense, loss or damage suffered
by reason of any defense, set-off, counterclaim, recoupment or
reduction of liability whatsoever of the obligor thereunder, arising
out of a breach by the Grantor of any obligation thereunder or arising
out of any other agreement, Indebtedness or liability at any time
owing to, or in favor of, such obligor or its successors from the
Grantor, and all such obligations of the Grantor shall be and remain
enforceable against and only against the Grantor and shall not be
enforceable against the Agent or the Lenders, except to the extent any
such expense, loss or damage results primarily from the gross
negligence or willful misconduct of the Agent or the Lenders.
(d) COMPLIANCE WITH LAWS, ETC. The Grantor will comply, in
all material respects, with all acts, rules, regulations, orders,
decrees and directions of any Governmental Authority, applicable to
the Collateral or any part thereof;PROVIDED, HOWEVER, that the Grantor
may contest any act, regulation, order, decree or direction in any
reasonable manner which shall not, in the sole opinion of the Agent,
materially adversely affect the Agent's rights hereunder or materially
adversely affect the first priority of its Lien on and security
interest in the Collateral.
(e) PAYMENT OF OBLIGATIONS. The Grantor will pay promptly
when due all taxes, assessments and governmental charges or levies
imposed upon the Collateral or in respect of its income or profits
therefrom and all claims of any kind (including, without limitation,
claims for labor, materials and supplies), except that no such charge
need be paid if (i) such non-payment does not involve any substantial
danger of the sale, forfeiture or loss of any material amount of the
Collateral or any interest therein, and (ii) such charge is adequately
reserved against in accordance with and to the extent required by
GAAP.
(f) COMPLIANCE WITH TERMS OF ACCOUNTS, ETC. In all material
respects, the Grantor will comply with and perform with all
obligations, covenants, conditions and agreements with respect to any
Account, Chattel Paper, Contract, License and all other agreements to
which it is a party or by which it is bound except where the
noncompliance or failure to perform does not, in the aggregate, have a
reasonable likelihood of resulting in a Material Adverse Effect.
(g) LIMITATION ON LIENS ON COLLATERAL. The Grantor will not
create, permit or suffer to exist, and will defend the Collateral
against and take such other action as is necessary to remove, any Lien
on the Collateral except Permitted Liens, and will defend the right,
title and interest of the Agent and the Lenders in and to any of the
Grantor's rights under the Chattel Paper, Contracts, Documents,
General Intangibles and Instruments and to the Equipment and Inventory
and in and to the Proceeds thereof against the claims and demands of
all Persons whomsoever.
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(h) LIMITATIONS ON MODIFICATIONS OF ACCOUNTS. Upon the
occurrence and during the continuance of any Default or Event of
Default, the Grantor will not, without the Agent's prior written
consent, grant any extension of the time of payment of any of the
Accounts, Chattel Paper or Instruments, or compromise, compound or
settle the same for less than the full amount thereof, or release,
wholly or partly, any Person liable for the payment thereof, or allow
any credit or discount whatsoever thereon, in each case except in the
ordinary course of business.
(i) MAINTENANCE OF INSURANCE. The Grantor will maintain,
with responsible and reputable companies, insurance policies (i)
insuring its Inventory and Equipment against loss by fire, explosion,
theft and such other casualties as are usually insured against by
companies engaged in the same or similar businesses and (ii) insuring
the Grantor and the Agent and the Banks against liability for personal
injury and property damage relating to such Inventory and Equipment,
such policies to be in such amounts and against at least such risks
as are usually insured against in the same general area by companies
engaged in the same or a similar business, naming the Agent as an
additional insured with a lender loss payable clause in favor of the
Agent on behalf and for the ratable benefit of the Secured Parties.
The Grantor shall, if so requested by the Agent, deliver to the Agent
as often as the Agent may reasonably request, a report of a reputable
insurance broker reasonably satisfactory to the Agent with respect to
the insurance on its Inventory and Equipment. All insurance with
respect to the Inventory and Equipment shall (i) contain a clause
which provides that the Secured Parties' interest under the policy
will not be invalidated by any act or omission of, or any breach of
warranty by, the insured, or by any change in the title, ownership or
possession of the insured property, or by the use of the property for
purposes more hazardous than is permitted in the policy, and (ii)
provide that no cancellation, reduction in amount or change in
coverage thereof shall be effective until at least ten days after
receipt by the Agent of written notice thereof.
(j) LIMITATIONS ON DISPOSITION. The Grantor will not sell,
lease, transfer or otherwise dispose of any
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of the Collateral, or attempt or contract to do so, if prohibited by
the Credit Agreement.
(k) FURTHER IDENTIFICATION OF COLLATERAL. The Grantor will,
if so requested by the Agent, furnish to the Agent, as often as the
Agent reasonably requests, statements and schedules further
identifying and describing the Collateral and such other reports in
connection with the Collateral as the Agent may reasonably request,
all in reasonable detail.
(l) NOTICES. The Grantor will advise the Agent promptly, in
reasonable detail, (i) of any material Lien or claim made or asserted
against any material amount of the Collateral, (ii) of any material
change in the composition of the Collateral, and (iii) of the
occurrence of any other event which would have a material adverse
effect on the aggregate value of the Collateral or in the security
interests created hereunder.
(m) RIGHT OF INSPECTION. Upon reasonable notice to the
Grantor (unless a Default or an Event of Default has occurred and is
continuing, in which case no notice is necessary), the Agent shall at
all times have full and free access during normal business hours to
all the books and records and non-privileged correspondence of the
Grantor, and the Agent or its representatives may examine the same,
take extracts therefrom and make photocopies thereof, and the Grantor
agrees to render to the Agent, at the Grantor's cost and expense, such
clerical and other assistance as may be reasonably requested with
regard thereto. Upon reasonable notice to the Grantor (unless a
Default or an Event of Default has occurred and is continuing, in
which case no notice is necessary), the Agent and its representatives
shall also have the right during normal business hours to enter into
and upon any premises where any of the Equipment or Inventory is
located for the purpose of inspecting the same, observing its use or
otherwise taking actions reasonably required to protect its interests
therein.
(n) MAINTENANCE OF EQUIPMENT. The Grantor will keep and
maintain the Equipment in satisfactory operating condition sufficient
for the continuation of the business conducted by the Grantor on a
basis consistent with past practices, and the Grantor will
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provide all maintenance and service and all repairs necessary for such
purpose.
(o) CONTINUOUS PERFECTION. The Grantor will not change its
name, identity or corporate structure in any manner which might make
any financing or continuation statement filed in connection herewith
seriously misleading within the meaning of Section 9-402(7) of the UCC
(or any other then applicable provision of the UCC) unless the Grantor
shall have given the Agent at least 30 days' prior written notice
thereof and shall have taken all action (or made arrangements to take
such action substantially simultaneously with such change if it is
impossible to take such action in advance) necessary or reasonably
requested by the Agent to amend such financing statement or
continuation statement so that it is not seriously misleading. The
Grantor will not change its principal place of business or remove its
records or change the location of its Inventory and Equipment, each as
set forth on Schedule II hereto, unless it gives the Agent at least 30
days' prior written notice thereof and has taken such action as is
necessary to cause the security interest of the Agent in the
Collateral to continue to be perfected.
6. THE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) The Grantor hereby irrevocably constitutes and appoints
the Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Grantor
and in the name of the Grantor or in its own name, from time to time
in the Agent's discretion, for the purpose of carrying out the terms
of this Agreement, to take any and all appropriate action and to
execute and deliver any and all documents and instruments which the
Agent may deem necessary or desirable to accomplish the purposes of
this Agreement and, without limiting the generality of the foregoing,
hereby gives the Agent the power and right, on behalf of the Grantor,
without notice to or assent by the Grantor to do the following:
(i) to ask, demand, collect, receive and give
acquittances and receipts for any and all moneys due and to
become due under any Collateral and, in the name of the
Grantor or in its own name or otherwise, to take possession of
and endorse
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and collect any checks, drafts, notes, acceptances or other
Instruments for the payment of moneys due under any Collateral
and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by the Agent for the purpose of collecting any and
all such moneys due under any Collateral whenever payable and
to file any claim or to take any other action or proceeding in
any court of law or equity or otherwise deemed appropriate by
the Agent for the purpose of collecting any and all such
moneys due under any Collateral whenever payable;
(ii) to pay or discharge taxes, Liens, security
interests or other encumbrances levied or placed on or
threatened against the Collateral, to effect any repairs or
any insurance called for by the terms of this Agreement and to
pay all or any part of the premiums therefor and the costs
thereof; and
(iii) (A) to direct any party liable for any payment
under any of the Collateral to make payment of any and all
moneys due, and to become due thereunder, directly to the
Agent or as the Agent shall direct; (B) to receive payment
of and receipt for any and all moneys, claims and other
amounts due, and to become due at any time, in respect of or
arising out of any Collateral; (C) to sign and indorse any
invoices, freight or express bills, bills of lading, storage
or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts and
other Documents constituting or relating to the Collateral;
(D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and
to enforce any other right in respect of any Collateral; (E)
to defend any suit, action or proceeding brought against the
Grantor with respect to any Collateral; (F) to settle,
compromise or adjust any suit, action or proceeding described
above and, in connection therewith, to give such discharges or
releases as the Agent may deem appropriate; (G) to license or,
to the extent permitted by an applicable license, sublicense,
whether general, special or otherwise, and whether
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on an exclusive or non-exclusive basis, any patent or
trademark, throughout the world for such term or terms, on
such conditions, and in such manner, as the Agent shall in its
sole discretion determine; and (H) generally to sell,
transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and
completely as though the Agent were the absolute owner thereof
for all purposes, and to do, at the Agent's option and the
Grantor's expense, at any time, or from time to time, all acts
and things which the Agent reasonably deems necessary to
protect, preserve or realize upon the Collateral and the
Agent's and the Banks' Lien therein, in order to effect the
intent of this Agreement, all as fully and effectively as the
Grantor might do.
(b) The Agent agrees that, except upon the occurrence and
during the continuance of any Default or Event of Default, it will
forbear from exercising the power of attorney or any rights granted to
the Agent pursuant to this Section 6. The Grantor hereby ratifies, to
the extent permitted by law, all that any said attorney shall lawfully
do or cause to be done by virtue hereof. The power of attorney
granted pursuant to this Section 6, being coupled with an interest,
shall be irrevocable until the Obligations are indefeasibly paid in
full.
(c) The powers conferred on the Agent hereunder are solely to
protect the Agent's and the Lenders' interests in the Collateral and
shall not impose any duty upon it to exercise any such powers. The
Agent shall be accountable only for amounts that it actually receives
or releases as a result of the exercise of such powers and neither it
nor any of its officers, directors, employees or agents shall be
responsible to the Grantor for any act or failure to act, except for
its own gross negligence or willful misconduct.
(d) The Grantor also authorizes the Agent, at any time and
from time to time upon the occurrence and during the continuance of a
Default or Event of Default, (i) to communicate in its own name with
any party to any Contract with regard to the assignment of the right,
title and interest of the Grantor in and under the Contracts hereunder
and other matters relating thereto and (ii) to execute, in connection
with the
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sale provided for in Section 8 hereof, any endorsements, assignments
or other instruments of conveyance or transfer with respect to the
Collateral.
7. PERFORMANCE BY THE AGENT OF THE GRANTOR'S OBLIGATIONS. If
the Grantor fails to perform or comply with any of its agreements contained
herein and the Agent, as provided for by the terms of this Agreement, shall
itself perform or comply, or otherwise cause performance or compliance, with
such agreement, the reasonable expenses of the Agent incurred in connection
with such performance or compliance, together with interest thereon at the
highest rate then in effect in respect of the Loans, shall be payable by the
Grantor to the Agent on demand and shall constitute Obligations secured hereby.
8. REMEDIES, RIGHTS UPON AN EVENT OF DEFAULT.
(a) If any Default or Event of Default shall occur and be
continuing, the Agent shall, at the request of the Majority Lenders,
or may with the consent of the Majority Lenders, exercise in addition
to all other rights and remedies granted to it in this Agreement and
in any other instrument or agreement securing, evidencing or relating
to the Obligations, all rights and remedies of a secured party under
the UCC. Without limiting the generality of, but subject to, the
foregoing, the Grantor expressly agrees that in any such event the
Agent, without demand of performance or other demand, advertisement or
notice of any kind (except the notice specified below of time and
place of public or private sale) to or upon the Grantor or any other
Person (all and each of which demands, advertisements and/or notices
are hereby expressly waived to the maximum extent permitted by the UCC
and other applicable law), may, to the extent commercially reasonable,
forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give an option or options to purchase, or sell or otherwise
dispose of and deliver said Collateral (or contract to do so), or any
part thereof, in one or more parcels at public or private sale or
sales, at any exchange or broker's board or any of the Agent's offices
or elsewhere at such prices as it may deem best, for cash or on credit
or for future delivery without assumption of any credit risk. The
Agent or any Lender shall have the right upon any such public sale or
sales, and, to the extent
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permitted by law, upon any such private sale or sales, to purchase the
whole or any part of said Collateral so sold, free of any right or
equity of redemption, which equity of redemption the Grantor hereby
releases. The Grantor further agrees, at the Agent's request to
assemble the Collateral and make it available to the Agent at places
which the Agent shall reasonably select, whether at the Grantor's
premises or elsewhere. The Agent shall apply the net proceeds of any
such collection, recovery receipt, appropriation, realization or sale,
as provided in Section 8(d) hereof, the Grantor remaining liable for
any deficiency remaining unpaid after such application, and only after
so paying over such net proceeds and after the payment by the Agent of
any other amount required by any provision of law, including Section
9-504(1)(c) of the UCC, need the Agent account for the surplus, if
any, to the Grantor. To the maximum extent permitted by applicable
law, the Grantor waives all claims, damages, and demands against the
Secured Parties arising out of the repossession, retention or sale of
the Collateral. The Grantor agrees that the Agent need not give more
that ten days' notice of the time and place of any public sale or of
the time after which a private sale may take place and that such
notice is reasonable notification of such matters. The Grantor shall
remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all amounts to
which the Secured Parties are entitled, the Grantor also being liable
for the fees and expenses of any attorneys employed by the Agent and
the Lenders to collect such deficiency.
(b) The Grantor also agrees to pay all costs of the Agent and
the Lenders, including, without limitation, reasonable attorneys'
fees, incurred in connection with the enforcement of any of its rights
and remedies hereunder.
(c) The Grantor hereby waives presentment, demand, protest or
any notice (to the maximum extent permitted by applicable law) of any
kind in connection with this Agreement or any Collateral.
(d) The Proceeds of any sale, disposition or other realization
upon all or any part of the Collateral shall be distributed by the
Agent as provided in Section 2.19 of the Credit Agreement.
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9. LIMITATION ON THE SECURED PARTIES' DUTY IN RESPECT OF
COLLATERAL. No Secured Party shall have any duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee
of it or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto, except that each Secured Party
shall use reasonable care with respect to the Collateral in its possession or
under its control. Upon request of the Grantor, the Agent shall account for
any moneys received by it in respect of any foreclosure on or disposition of
the Collateral.
10. NOTICES. All notices and other communications provided
for hereunder shall be in writing (including telegraphic, telex, telecopy, or
cable communication) and mailed, telegraphed, telexed, telecopied, cabled or
delivered by hand, if to the Grantor, addressed to it c/o Waxman Industries,
Inc.,24460 Aurora Road,Bedford Heights, Ohio 44146,Attention: Neal Restivo,
Treasurer, and if to any Secured Party, addressed to it at the address of such
Secured Party specified in the Credit Agreement, or, as to each party, at such
other address as shall be designated by such party in a written notice to each
other party complying as to delivery with the terms of this Section. All such
notices and other communications shall, when mailed, telegraphed, telexed,
telecopied, cabled or delivered, be effective three days after being deposited
in the mails or when delivered to the telegraph company, confirmed by telex
answerback, telecopied with confirmation or receipt, delivered to the cable
company, or delivered by hand to the addressee or its agent, respectively.
11. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Grantor
therefrom shall in any event be effective unless the same shall be in writing,
approved by the Majority Lenders (except where under Section 10.1 of the Credit
Agreement, the approval of each Lender is required) and signed by the Agent,
and then any such waiver or consent shall only be effective in the specific
instance and for the specific purpose for which given.
12. NO WAIVER; REMEDIES. (a) No failure on the part of any
Secured Party to exercise, and no delay in exercising any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies
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herein provided are cumulative, may be exercised singly or concurrently, and
are not exclusive of any remedies provided by law or any of the other Loan
Documents.
(b) Failure by any of the Secured Parties at any time or
times hereafter to require strict performance by the Grantor or any other
Person of any of the provisions, warranties, terms or conditions contained in
any of the Loan Documents now or at any time or times hereafter executed by the
Grantor or any such other Person and delivered to any of the Secured Parties
shall not waive, affect or diminish any right of any of the Secured Parties at
any time or times hereafter to demand strict performance thereof, and such
right shall not be deemed to have been modified or waived by any course of
conduct or knowledge of any of the Secured Parties, or any agent, officer or
employee of any Secured Party.
13. SUCCESSORS AND ASSIGNS. This Agreement and all
obligations of the Grantor hereunder shall be binding upon the successors and
assigns of the Grantor, and shall, together with the rights and remedies of the
Agent hereunder, inure to the benefit of the Agent, the Banks, and their
respective successors and assigns.
14. GOVERNING LAW. This Agreement shall be governed by,
and be construed and interpreted in accordance with, the law of the State of
New York. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity and without invalidating the remaining provisions of
this Agreement.
15. WAIVER OF JURY TRIAL. The Grantor waives any right it
may have to trial by jury in any action or proceeding to enforce or defend any
rights or remedies hereunder, under the Credit Agreement or under any of the
other Loan Documents or any other document relating to any of the foregoing.
16. FURTHER INDEMNIFICATION. The Grantor agrees to pay, and
to save the Agent and each Bank harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all excise, sales or
other similar taxes which may be payable or determined to be
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payable with respect to any of the Collateral or in connection with any of the
transactions contemplated by this Agreement.
17. SECTION TITLES. The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of this Agreement.
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IN WITNESS WHEREOF, The Grantor has caused this Agreement to be
executed and delivered by its duly authorized officer on the date first above
written.
BARNETT INC.
By: ________________________
Title:
Accepted and acknowledged by:
CITICORP USA, INC. as Agent
By: ________________________
Name: Keith Karako
Title: Vice President
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SCHEDULE I TO SECURITY AGREEMENT
FILINGS
-------
JURISDICTION FILING OFFICE
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SCHEDULE II
SCHEDULE II TO SECURITY AGREEMENT
LOCATION OF RECORDS AND CERTAIN COLLATERAL
------------------------------------------
Principal Place of
Business and
Location of Records
- -------------------
Location of
Inventory
and Equipment
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EXHIBIT L
FORM OF
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated May __, 1994, made by TWI,
International, Inc., a Delaware corporation (the "Pledgor"), to Citicorp USA,
Inc., as agent for the financial institutions party to the Credit Agreement
referred to below (in such capacity, the "Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Barnett Inc., WOC Inc., Waxman Consumer Products
Group Inc. and Waxman USA Inc. have entered into a Credit Agreement, dated as
of May __, 1994, with the financial institutions party thereto and the Agent
(said agreement, as it may hereafter be amended or otherwise modified from time
to time, being the "Credit Agreement" and the terms defined therein and not
otherwise defined herein being used herein having the meanings therein
assigned); and
WHEREAS, the Pledgor is the legal and beneficial owner of the
shares of capital stock described in Schedule I hereto and issued by the
issuers named therein (the "Pledged Shares"); and
WHEREAS, it is a condition precedent under the Credit
Agreement to the making of the Loans and the issuance of Letters of Credit that
the Pledgor shall have made the pledge contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises and to induce
the Lenders to make the Loans and the Issuers to issue Letters of Credit, the
Pledgor hereby agrees with the Agent on behalf and for the benefit of the
Secured Parties as follows:
SECTION 1. PLEDGE. The Pledgor hereby pledges to the Agent
on behalf and for the benefit of the Secured Parties, and grants to the Agent
on behalf and for the benefit of the Secured Parties a security interest in,
the following (the "Pledged Collateral"):
(i) all of the Pledged Shares;
<PAGE> 172
(ii) all additional shares of stock or other securities
of any issuer of the Pledged Shares from time to time acquired
by the Pledgor in any manner (any such shares being
"Additional Shares"), provided, that Additional Shares shall
be limited to 65% of such additional stock or other securities
in the case of a foreign issuer or a domestic holding company
for such a foreign issuer;
(iii) the certificates representing the shares referred to
in clauses (i) and (ii) above;
(iv) all dividends, cash, instruments and other property
or proceeds, from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or
all of the foregoing.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures
and the Pledged Collateral is security for the full and prompt payment when due
(whether at stated maturity, by acceleration or otherwise) of, and the
performance of, the Obligations under the Credit Agreement whether now or
hereafter existing and whether for principal, interest, fees, expenses or
otherwise.
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All certificates
or instruments representing or evidencing the Pledged Collateral shall be
delivered to and held by or on behalf of the Agent pursuant hereto and shall be
in suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Agent. Upon the occurrence and during the
continuance of an Event of Default, the Agent shall have the right, at any time
in its discretion and without notice to the Pledgor, to transfer to or to
register in its name or in the name of any of its nominees any or all of the
Pledged Collateral. In addition, the Agent shall have the right at any time to
exchange certificates or instruments representing or evidencing any of the
Pledged Collateral for certificates or instruments of smaller or larger
denominations.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Pledgor makes
the following representations:
L - 2
<PAGE> 173
(a) The Pledged Shares (i) have been duly authorized and
validly issued; (ii) are fully paid and non-assessable; and (iii) constitute
100% (65% in the case of a foreign issuer or a domestic holding company of such
a foreign issuer) of the issued and outstanding shares of stock of the
respective issuers thereof.
(b) The Pledgor is the legal and beneficial owner of the
Pledged Collateral free and clear of any Lien, except for the Lien created by
this Agreement and the Lien in favor of the agent for the Term Loan Lenders.
(c) The pledge of the Pledged Shares pursuant to this
Agreement creates a valid and perfected first priority security interest in the
Pledged Collateral, in favor of the Agent on behalf and for the ratable benefit
of the Secured Parties securing the payment of all of the Obligations except to
the extent of any requirements, limitation or prohibition contained in the laws
of the jurisdiction of incorporation of a foreign issuer.
(d) No consent, authorization, approval, or other action by,
and no notice to or filing with, any Governmental Authority is required either
(i) for the pledge by the Pledgor of the Pledged Collateral pursuant to this
Agreement or for the due execution, delivery or performance of this Agreement
by the Pledgor, or (ii) for the exercise by the Agent of the voting or other
rights provided for in this Agreement or of the remedies in respect of the
Pledged Collateral pursuant to this Agreement, except as may be required in
connection with the disposition of the Pledged Collateral by laws affecting the
offering and sale of securities generally.
(e) The issuers listed on Schedule I are the only direct
Subsidiaries of the Pledgor.
SECTION 5. FURTHER ASSURANCES, ETC. (a) The Pledgor agrees
that at any time and from time to time, at the cost and expense of the Pledgor,
the Pledgor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that the Agent may request, in order to perfect and protect the Lien granted or
purported to be granted hereby or to enable the Agent to exercise and enforce
its rights and remedies hereunder with respect to any Pledged Collateral.
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(b) The Pledgor agrees to defend the title to the Pledged
Collateral and the Lien thereon of the Agent against the claim of any other
Person and to maintain and preserve such Lien until indefeasible payment in
full of all of the Secured Obligations.
SECTION 6. VOTING RIGHTS; DIVIDENDS; ETC.
(a) As long as no Event of Default shall have occurred and be
continuing (or, in the case of subsection (a)(i) of this Section 6, as long as
no notice thereof shall have been given by the Agent to the Pledgor):
(i) The Pledgor shall be entitled to exercise any
and all voting and other consensual rights pertaining to the
Pledged Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement or any other
Loan Document; PROVIDED, HOWEVER, that the Pledgor shall not
exercise or shall refrain from exercising any such right if,
in the Agent's judgment, exercised reasonably, such action
would have a material adverse effect on the value of the
Pledged Collateral or any part thereof.
(ii) The Pledgor shall be entitled to receive and retain
any and all dividends paid in respect of the Pledged
Collateral, other than any and all
(A) dividends paid or payable other than in
cash in respect of, and instruments and other
property received, receivable or otherwise
distributed in respect of, or in exchange for, any
Pledged Collateral,
(B) dividends and other distributions paid
or payable in cash in respect of any Pledged Shares
or Additional Pledged Shares in connection with a
partial or total liquidation or dissolution or in
connection with a reduction of capital, capital
surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise
distributed in redemption of, or in exchange for, any
Pledged Collateral,
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all of which shall be forthwith delivered to the Agent to hold
as Pledged Collateral and shall, if received by the Pledgor,
be received in trust for the benefit of the Agent, be
segregated from the other property or funds of the Pledgor,
and be forthwith delivered to the Agent as Pledged Collateral
in the same form as so received (with any necessary
indorsement).
(iii) The Agent shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and
other instruments as the Pledgor may reasonably request for
the purpose of enabling the Pledgor to exercise the voting and
other rights which it is entitled to exercise pursuant to
paragraph (i) above and to receive the dividends which it is
authorized to receive and retain pursuant to paragraph (ii)
above.
(b) Upon the occurrence and during the continuance of an
Event of Default:
(i) Upon notice by the Agent to the Pledgor, all
rights of the Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to
exercise pursuant to Section 6(a)(i) above shall cease, and
all such rights shall thereupon become vested in the Agent who
shall thereupon have the sole right to exercise such voting
and other consensual rights.
(ii) All rights of the Pledgor to receive the dividends
which it would otherwise be authorized to receive and retain
pursuant to Section 6(a)(ii) above shall cease, and all such
rights shall thereupon become vested in the Agent who shall
thereupon have the sole right to receive and hold as Pledged
Collateral such dividends.
(iii) All dividends which are received by the Pledgor
contrary to the provisions of paragraph (ii) of this Section
6(b) shall be received in trust for the benefit of the Agent,
shall be segregated from other funds of the Pledgor and shall
be forthwith paid over to the Agent as Pledged Collateral in
the same form as so received (with any necessary indorsement).
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(iv) The Pledgor shall, if necessary to permit the Agent
to exercise the voting and other rights which it may be
entitled to exercise pursuant to Section 6(b)(i) above and to
receive all dividends and distributions which it may be
entitled to receive under Section 6(b)(ii) above, execute and
deliver to the Agent, from time to time and upon written
notice of the Agent, appropriate proxies, dividend payment
orders and other instruments as the Agent may reasonably
request. The foregoing shall not in any way limit the Agent's
power and authority granted pursuant to Section 8 hereof.
SECTION 7. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES. (a)
The Pledgor agrees that it will not (i) sell or otherwise dispose of, or grant
any option or warrant with respect to, any of the Pledged Collateral, or (ii)
create or permit to exist any Lien upon or with respect to any of the Pledged
Collateral, except for the Lien created pursuant to this Agreement.
(b) The Pledgor agrees that it will (i) cause each issuer of
the Pledged Shares not to issue any shares of stock or other securities in
addition to or in substitution for the Pledged Shares, except, with the written
consent of the Majority Lenders, to the Pledgor, (ii) pledge hereunder,
immediately upon its acquisition (directly or indirectly) thereof, any and all
Additional Shares, and (iii) promptly (and in any event within three Business
Days) deliver to the Agent a Pledge Amendment, duly executed by the Pledgor, in
substantially the form of Schedule II hereto (a "Pledge Amendment"), in respect
of the Additional Shares, together with all certificates or other instruments
representing or evidencing the same. The Pledgor hereby (i) authorizes the
Agent to attach each Pledge Amendment to this Pledge Agreement, (ii) agrees
that all Additional Shares listed on any Pledge Amendment delivered to the
Agent shall for all purposes hereunder constitute Pledged Shares, and (iii) is
deemed to have made, upon such delivery, the representations and warranties
contained in Section 4 hereof with respect to such Pledged Collateral.
SECTION 8. AGENT APPOINTED ATTORNEY-IN-FACT AND PROXY. The
Pledgor hereby irrevocably constitutes and appoints the Agent and any officer
or agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact and proxy with full irrevocable power and
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authority in the place and stead of the Pledgor and in the name of the Pledgor
or in its own name, from time to time in the Agent's discretion, for the
purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute and deliver any and all documents and
instruments which the Agent may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, to receive, indorse
and collect all instruments made payable to the Pledgor representing any
dividend or other distribution or payment in respect of the Pledged Collateral
or any part thereof, to give full discharge for the same, and to vote or grant
any consent in respect of the Pledged Shares authorized by Section 6(b) hereof.
The Pledgor hereby ratifies, to the extent permitted by law, all that any said
attorney shall lawfully do or cause to be done by virtue hereof. This power,
being coupled with an interest, is irrevocable until the Secured Obligations
are paid in full.
SECTION 9. AGENT MAY PERFORM. If the Pledgor fails to
perform any agreement contained herein, the Agent may itself perform, or cause
performance of, such agreement, and the expenses of the Agent incurred in
connection therewith shall be payable by the Pledgor under Section 12 hereof
and constitute Secured Obligations secured hereby.
SECTION 10. REASONABLE CARE. The Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equal to that which the Agent accords its own property, it being
understood that neither the Agent nor any other Secured Party shall have
responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Agent or any other Secured Party has or
is deemed to have knowledge of any such matter, or (ii) taking any necessary
steps to preserve rights against any Person with respect to any Pledged
Collateral.
SECTION 11. REMEDIES UPON DEFAULT. If any Event of Default
shall have occurred and be continuing:
(a) The Agent may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party after
default under
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the Uniform Commercial Code (the "Code") in effect in the State of New York at
that time, and the Agent may also, without notice except as specified below,
sell the Pledged Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange, broker's board or at any office of the
Agent or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the are commercially reasonable. The Pledgor agrees that, to
the extent notice of sale shall be required by law, at least ten days' notice
to the Pledgor of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification. The
Agent shall not be obligated to make any sale of Pledged Collateral regardless
of notice of sale having been given. The Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. The Pledgor hereby waives any claims
against the Agent arising by reason of the fact that the price at which any
Pledged Collateral may have been sold at such a private sale was less than the
price which might have been obtained at a public sale, even if the Agent
accepts the first offer received and does not offer such Pledged Collateral to
more than one offeree.
(b) The Pledgor recognizes that, by reason of the
aforementioned requirements and certain prohibitions contained in the
Securities Act of 1933, as amended (the "Act") and applicable state securities
laws, the Agent may be compelled, with respect to any sale of all or any part
of the Pledged Collateral, to limit purchasers to those who will agree, among
other things, to acquire such securities for their own account, for investment,
and not with a view to the distribution or resale thereof. The Pledgor
acknowledges and agrees that any such sale may result in prices and other terms
less favorable to the seller than if such sale were a public sale without such
restrictions and, notwithstanding such circumstances, agrees that any such sale
shall be deemed to have been made in a commercially reasonable manner. The
Agent shall be under no obligation to delay the sale of any of the Pledged
Collateral for the period of time necessary to permit the Pledgor to register
such securities for public sale under the Securities Act, or under applicable
state securities laws, even if the Pledgor would agree to do so.
(c) If the Agent determines to exercise its right to sell any
or all of the Pledged Collateral, upon written
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request, the Pledgor shall, from time to time, furnish to the Agent all such
information as the Agent may request in order to determine the number of shares
and other instruments included in the Pledged Collateral which may be sold by
the Agent as exempt transactions under the Act and rules of the Securities and
Exchange Commission thereunder, as the same are from time to time in effect.
(d) Any cash held by the Agent as Pledged Collateral and all
cash proceeds received by the Agent in respect of any sale of, collection from,
or other realization upon all or any part of the Pledged Collateral shall be
applied by the Agent as set forth in Section 2.19 of the Credit Agreement.
SECTION 12. EXPENSES. The Pledgor will upon demand pay to
the Agent the amount of any and all reasonable expenses, including, without
limitation, the reasonable fees and expenses of the Agent's counsel and of any
experts and agents, which the Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody or preservation of, sale of,
collection from, or other realization upon, any of the Pledged Collateral,
(iii) the exercise or enforcement of any of the rights and remedies hereunder
of the Agent and the Secured Parties, or (iv) the failure by the Pledgor to
perform or observe any of the provisions hereof.
SECTION 13. SECURITY INTEREST ABSOLUTE. All rights of the
Agent and security interests hereunder, and all obligations of the Pledgor
hereunder, shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of any
provision of the Credit Agreement, the Notes or any other Loan
Document or any other agreement or instrument relating
thereto;
(ii) any change in the time, manner or place of
payment of, or in any other term of, or any increase in the
amount of, all or any of the Secured Obligations, or any other
amendment or waiver of any term of, or any consent to any
departure from any requirement of, the Credit Agreement, the
Notes or any other Loan Document;
(iii) any exchange, release or non-perfection of any
Lien on any other collateral, or any
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release or amendment or waiver of any term of any guaranty of,
or consent to departure from any requirement of any guaranty
of, all or any of the Secured Obligations; or
(iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, a
borrower or a pledgor.
SECTION 14. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Pledgor
herefrom shall in any event be effective unless the same shall be in writing,
approved by the Majority Lenders and signed by the Agent, and then such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 15. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic, telex, telecopy or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered by hand, if to the Pledgor or any
Secured Party, addressed to the Pledgor c/o the Borrowers or such Secured
Party, as the case may be, at the Borrowers' or such Secured Party's address
specified in the Credit Agreement, or, as to each party, at such other address
as shall be designated by such party in a written notice to each other party
complying as to delivery with the terms of this Section. All such notices and
other communications shall, be effective three days after being mailed or when
telegraphed, telexed, telecopied, cabled or delivered by hand to the addressee
or its agent, respectively.
SECTION 16. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES
OR OBLIGATIONS. This Pledge Agreement shall create a continuing security
interest in the Pledged Collateral and shall (i) remain in full force and
effect until payment in full of the Obligations, (ii) be binding upon the
Pledgor, its successors and assigns, and (iii) inure, together with the rights
and remedies of the Agent hereunder, to the benefit of and be enforceable by
the Secured Parties and their respective successors, transferees and assigns.
Without limiting the generality of the foregoing clause (iii), any Lender may
assign or otherwise transfer any Note held by it or Obligation owing to it to
any other Person, and such other Person shall thereupon become vested with all
the rights in respect thereof granted to such Lender herein or otherwise with
respect to such of the Notes or Obligations
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so transferred or assigned, subject, however, to compliance with the provisions
of Section 10.7 of the Credit Agreement in respect of assignments. Upon the
payment in full (after the Termination Date) of the Obligations, the Pledgor
shall be entitled to the return, upon its request and at its expense, of such
of the Pledged Collateral as shall not have been sold or otherwise applied
pursuant to the terms hereof.
SECTION 17. GOVERNING LAW; SEVERABILITY; TERMS. This
Agreement shall be governed by, and be construed and interpreted in accordance
with, the law of the State of New York. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity and without
invalidating the remaining provisions of this Agreement. Unless otherwise
defined herein or in the Credit Agreement, terms defined in Article 9 of the
Uniform Commercial Code as in effect in the State of New York are used herein
as therein defined.
SECTION 18. WAIVER OF JURY TRIAL. The Pledgor waives any
right it may have to a trial by jury in respect of any litigation based on, or
arising out of, under or in connection with, this Agreement or any other loan
document, or any course of conduct, course of dealing, verbal or written
statement or other action of any loan party or any secured party.
SECTION 19. SECTION TITLES. The Section titles contained in
this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not part of this Agreement.
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to
be duly executed and delivered by its duly authorized officer on the date first
above written.
TWI, INTERNATIONAL, INC.
By:____________________________
Title:
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Accepted and Acknowledged:
CITICORP USA, INC., as Agent
By: ______________________________________
Name: Keith Karako
Title: Vice President
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SCHEDULE I TO PLEDGE AGREEMENT
Attached to and forming a part of that certain
Pledge Agreement, dated May __, 1994, by TWI,
INTERNATIONAL, INC. to Citicorp USA, Inc., as Agent.
Stock
Certificate Number
Stock Issuer Class of Stock No(s). Par Value of Shares
- ------------ -------------- ------------ --------- ---------
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SCHEDULE II TO PLEDGE AGREEMENT
PLEDGE AMENDMENT
----------------
This Pledge Amendment, dated ___________, 19__, is
delivered pursuant to Section 7 of the Pledge Agreement referred to
below. The undersigned hereby agrees that this Pledge Amendment may
be attached to the Pledge Agreement, dated May __, 1994, between the
undersigned and Citicorp USA, Inc., as Agent on behalf of and for the
ratable benefit of the Secured Parties referred to therein and that
the Additional Shares listed on this Pledge Amendment shall be and
become part of the Pledged Collateral referred to in the Pledge
Agreement and shall secure all Secured Obligations of the undersigned.
The terms defined in the Pledge Agreement or Credit Agreement are
being used herein as therein defined.
TWI, INTERNATIONAL, INC.
By: _______________________________________________
Title:
Stock
Certificate Number
Issuer Class of Stock No(s). Par Value of Shares
- ------ -------------- ----------- --------- ---------
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EXHIBIT A
FORM OF
REVOLVING CREDIT NOTE
U.S. $ ____________ Dated: ________________ 1994
FOR VALUE RECEIVED, the undersigned, Barnett Inc., a Delaware
corporation, WOC Inc., a Delaware corporation, and Waxman Consumer Products
Group Inc., a Delaware corporation (the "Borrowers"), HEREBY JOINTLY AND
SEVERALLY PROMISE TO PAY to the order of ______________ (the "Lender") the
principal sum of ____________ United States Dollars ($__________), or, if less,
the aggregate unpaid principal amount of all Revolving Credit Loans (as defined
in the Credit Agreement referred to below) of the Lender to the Borrowers,
payable at such times, and in such amounts, as are specified in the Credit
Agreement.
The Borrowers jointly and severally promise to pay interest on
the unpaid principal amount of the Revolving Credit Loans from the date made
until such principal amount is paid in full, at such interest rates, and
payable at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Citicorp USA, Inc., as Agent, at 399 Park Avenue,
New York, New York 10043, in immediately available funds. The Revolving
Credit Loans made by the Lender to the Borrowers, and all payments made on
account of the principal thereof, shall be recorded by the Lender and, prior to
any transfer hereof, endorsed on this Note.
This Note is one of the Revolving Credit Notes referred to in,
and is entitled to the benefits of, the Credit Agreement, dated as of May __,
1994 (said Agreement, as it may be amended or otherwise modified from time to
time, being the "Credit Agreement"), among the Borrowers, Waxman USA Inc., the
Lender, the other financial institutions referred to therein and CITICORP USA,
INC., as agent for the Lender and such other financial institutions, and the
other Loan Documents referred to therein and entered into pursuant thereto.
The Credit Agreement, among other things, (i) provides for the making of
Revolving Credit Loans by the Lender to the Borrowers in an aggregate amount
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not to exceed at any time outstanding the United States dollar amount first
above mentioned, the indebtedness of the Borrowers resulting from such
Revolving Credit Loans being evidenced by this Note, and (ii) contains
provisions for acceleration of the maturity of the unpaid principal amount of
this Note upon the happening of certain stated events and also for prepayments
on account of the principal hereof prior to the maturity hereof upon the terms
and conditions therein specified.
This Note is secured as provided in the Loan Documents (as
defined in the Credit Agreement).
Demand, presentment, protest and notice of nonpayment and
protest are hereby waived by the Borrowers.
This Note shall be governed by, and construed and interpreted
in accordance with, the law of the State of New York.
BARNETT INC.
By: ____________________
Title:
WOC INC.
By: ____________________
Title:
WAXMAN CONSUMER PRODUCTS
GROUP INC.
By: ____________________
Title:
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LOANS AND PAYMENTS OF PRINCIPAL
-------------------------------
Amount of
Amount Principal Paid Notation
Date of Loan or Prepaid Made by
- ---- ------- -------------- --------
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EXHIBIT E
FORM OF
INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT, dated ____________, 1994, made by
[ ], a ________ corporation (the "Grantor"), in favor of
Citicorp USA, Inc., as agent for the financial institutions party to the Credit
Agreement referred to below (in such capacity, the "Agent").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Grantor has entered into a Credit Agreement, dated as of May
__, 1994, with Barnett Inc., WOC Inc., Waxman Consumer Products Group Inc.,
Waxman USA Inc., the financial institutions party thereto and the Agent (said
agreement, as it may hereafter be amended or otherwise modified from time to
time, being the "Credit Agreement" and the terms defined therein and not
otherwise defined herein being used herein having the meanings therein
assigned); and
WHEREAS, it is a condition precedent to the making of the Loans and the
issuance of the Letters of Credit that the Borrower shall have entered into
this Agreement;
NOW, THEREFORE, in consideration of the premises and in order to induce the
Lenders to make the Loans and the Issuers to issue the Letters of Credit the
Grantor hereby agrees as follows:
1. DEFINED TERMS. The following terms have the following meanings (such
meanings being equally applicable to both the singular and the plural forms of
the terms defined):
"AGREEMENT" means this Intellectual Property Security Agreement, as the same
may from time to time be amended, modified or supplemented, and shall refer to
this Intellectual Property Security Agreement as in effect on the date such
reference becomes operative.
"COPYRIGHTS" means copyrights, registrations and applications therefor, and
any and all (i) renewals and extensions thereof, (ii) income, royalties,
damages and payments now and hereafter due or payable or both with respect
thereto, including, without limitation, damages and payments for past or future
infringements or misappropriations thereof, (iii) rights to sue for
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past, present and future infringements or misappropriations thereof, and (iv)
all other rights corresponding thereto throughout the world.
"INTELLECTUAL PROPERTY COLLATERAL" has the meaning assigned to such term in
Section 2 of this Agreement.
"LICENSES" means license agreements in which the Grantor grants or receives
a grant of any interest in Copyrights, Trademarks, Patents and Trade Secrets
(all as defined herein) and other intellectual property and any and all (i)
renewals, extensions, supplements, amendments and continuations thereof, (ii)
income, royalties, damages and payments now and hereafter due or payable to the
Grantor with respect thereto, including, without limitation, damages and
payments for past or future violations or infringements or misappropriations
thereof, and (iii) rights to sue for past, present and future violations or
infringements thereof.
"PATENTS" means patents and patent applications along with any and all (i)
inventions and improvements described and claimed therein, (ii) reissues,
divisions, continuations, renewals, extensions and continuations-in-part
thereof, (iii) income, royalties, damages and payments now and hereafter due
and/or payable to the Grantor with respect thereto, including, without
limitation, damages and payments for past or future infringements or
misappropriations thereof, (iv) rights to sue for past, present and future
infringements or misappropriations thereof, and (v) all other rights
corresponding thereto throughout the world.
"TRADEMARKS" means trademarks (including service marks and trade names,
whether registered or at common law), registrations and applications therefor,
and the entire product lines and goodwill of Grantor's business symbolized
thereby and sufficient to produce or procure goods connected therewith,
together with any and all (i) renewals thereof, (ii) income, royalties, damages
and payments now and hereafter due or payable or both with respect thereto,
including, without limitation, damages and payments for past or future
infringements or misappropria- tions thereof, (iii) rights to sue for past,
present and future infringements or misappropriations thereof, and (iv) all
other rights corresponding thereto throughout the world.
"TRADE SECRETS" means trade secrets, along with any and all (i) income,
royalties, damages and payments now and hereafter due and/or payable to the
Grantor with respect thereto, including, without limitation, damages and
payments for past or
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future infringements or misappropriations thereof, (ii) rights to sue for past,
present and future infringements or misappropriations thereof, and (iii) all
other rights corresponding thereto throughout the world.
The words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, including the Exhibits and Schedules
hereto, and not to any particular section, subsection or clause contained in
this Agreement.
2. GRANT OF SECURITY INTEREST IN INTELLECTUAL PROPERTY COLLATERAL. In
order to secure the complete and due and punctual payment of all of the
Obligations, the Grantor hereby grants and conveys to the Agent on behalf and
for the ratable benefit of the Secured Parties as collateral security, a
continuing security interest in all of the Grantor's entire right, title and
interest in and to intellectual property rights now owned or existing and
hereafter acquired or arising in the following assets, subject to the provisos
set forth below in this Section 2 (all of which being hereinafter referred to
as the "Intellectual Property Collateral"):
(a) all Trademarks of the Grantor, including, without limitation, the
Trademarks listed on Schedule A hereto;
(b) all Copyrights of the Grantor, including, without limitation, the
Copyrights listed on Schedule B hereto;
(c) all Licenses of the Grantor, including, without limitation, the
Licenses listed on Schedule C hereto;
(d) all Patents of the Grantor, including, without limitation, the
Patents listed on Schedule D hereto;
(e) all Trade Secrets of the Grantor; and
(f) the entire goodwill of the Grantor's business connected with the
use of and symbolized by the Trademarks;
PROVIDED, HOWEVER, that nothing hereunder constitutes or shall be deemed to
constitute the grant of a security interest in favor of the Agent with respect
to any Intellectual Property Collateral to the extent prohibited by applicable
law.
3. REPRESENTATIONS AND WARRANTIES. The Grantor represents and
warrants that:
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(a) The Trademarks, Copyrights, Licenses, Patents and Trade Secrets
are subsisting and have not been adjudged invalid or unenforceable, in whole or
in part;
(b) The Grantor has not previously assigned, transferred, conveyed or
otherwise encumbered such right, title and interest;
(c) The Grantor is the sole and exclusive owner of the Intellectual
Property Collateral, all of which is free and clear of any Liens, charges and
encumbrances, and, to its knowledge, no other person or entity has any claim
with respect to the Intellectual Property Collateral whatsoever, except
pursuant to the Trademark License Agreement;
(d) Schedules A, B, C and D attached hereto list all Trademarks,
registered Copyrights, and Licenses and Patents related to the Intellectual
Property Collateral;
(e) The Intellectual Property Collateral is sufficient for the purpose
of producing or procuring goods, performing services and otherwise carrying on
the business of the Grantor;
(f) To the best of the Grantor's knowledge, the Intellectual Property
Collateral does not infringe any rights owned or possessed by any third party;
(g) There are no claims, judgments or settlements to be paid by the
Grantor or pending claims or litigation relating to the Intellectual Property
Collateral, except as set forth on Schedule E hereto;
(h) No effective security agreement, financing statement, equivalent
security or lien instrument or continuation statement covering all or any part
of the Intellectual Property Collateral is on file or of record in any public
office, except such as may have been filed by the Grantor in favor of the Agent
for the benefit of itself and the Lenders pursuant to this Agreement or such as
relate to other Permitted Liens; and
(i) All appropriate documents have been delivered to the Agent for
filing with the United States Patent and Trademark Office and the United States
Copyright Office and any appropriate filing offices located in foreign
countries, and when filed this Agreement is effective to create a valid and
continuing first priority lien on and first priority security interest in the
Intellectual Property Collateral in favor of the Agent for the benefit of
itself and the Lenders. All action necessary or
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desirable to protect and create such security interest in each item of the
Intellectual Property Collateral has been duly taken.
4. RIGHTS AND REMEDIES; APPLICATION OF MONIES.
(a) Upon the occurrence and during the continuation of a Default or an
Event of Default, the Agent may to the fullest extent permitted by applicable
law, upon ten days' notice to Grantor (which notice shall be deemed reasonable
hereunder), and without advertisement, hearing or process of law in any kind,
(i) subject to Section 4(f) hereof, exercise any and all rights as beneficial
and legal owner of the Intellectual Property Collateral, including, without
limitation, any and all consensual rights and powers with respect to the
Intellectual Property Collateral, and (ii) sell or assign or grant a license or
franchise to use, or cause to be sold or assigned or granted a license or
franchise to use, any or all of the Intellectual Property Collateral, in each
case, free of all rights and claims of Grantor therein and thereto (but
subject, in each case, to the rights of others heretofore granted or created by
Grantor in the ordinary course of business). Upon the occurrence and during
the continuation of an Event of Default, the Agent may (i) sell or assign the
Intellectual Property Collateral, or any part thereof, for cash upon credit as
the Agent may reasonably deem appropriate or (ii) grant licenses or franchises
or both to use the Intellectual Property Collateral on such terms and
conditions as the Agent shall reasonably determine. In connection therewith,
the Agent shall have the right to impose such limitations and restrictions on
the sale or assignment of the Intellectual Property Collateral as the Agent may
deem to be necessary or appropriate to comply with any law, rule or regulation
(Federal, state, local or that of a foreign country) having applicability to
any such sale and requirements for any necessary governmental approvals.
(b) It is expressly understood that, anything herein to the contrary
notwithstanding, the Grantor shall remain liable under each of its Contracts
(as such term is defined in the Grantor Security Agreement) and each of its
Licenses to observe and perform all the conditions and obligations to be
observed by it thereunder and the Grantor shall perform all of its duties and
obligations thereunder, all in accordance with and pursuant to the terms and
provisions of each such Contract or License except for such non-observance or
non-performance as in the aggregate has no reasonable likelihood of resulting
in a Material Adverse Effect. Neither Agent nor any Lender shall have any
obligation or liability under any Contract or License by reason of or arising
out of this Agreement or the granting to Agent and the Lenders of a security
interest herein, nor shall Agent or any
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Lender be required or obligated in any manner to perform or fulfill any of the
obligations of the Grantor under or pursuant to any Contract or License, or to
make any payment, or to make any inquiry as to the nature or the sufficiency of
any payment received by it or the sufficiency of any performance by any party
under any Contract or License, or to present or file any claim, or to take any
action to collect or enforce any performance or the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time
or times.
(c) Except as provided in this Section 4, Grantor hereby expressly
waives, to the fullest extent permitted by applicable law, any and all notices,
advertisements, hearings or process of law in connection with the exercise by
the Agent of any of its rights and remedies hereunder. The Agent shall not be
liable to any Person for any incorrect or improper payment made pursuant to
this Section 4, in the absence of gross negligence or willful misconduct.
(d) Notwithstanding any provisions of this Agreement to the contrary,
if, after giving effect to any sale, transfer, assignment or other disposition
of any or all of the Intellectual Property Collateral pursuant hereto and after
the application of the proceeds hereunder to Obligations, any Obligations
remain unpaid or unsatisfied, Grantor shall remain liable for the unpaid and
unsatisfied amount of such Obligations.
(e) This Agreement is made to provide for and secure repayment of the
Obligations of the Grantor in the following order of priority indicated:
First, to the payment of the costs and expenses of such sale, transfer,
assignment or other disposition, including, without limitation, all expenses
and liabilities (including reasonable compensation to the agents of, and
counsel to, to the Agent and the Lenders) and advances made or incurred by the
Agent and the Lenders in connection therewith or pursuant to Section 15 or 19
hereof;
Next, to the Lenders and the Agent, pro rata, for the payment in full
of the Obligations;
Finally, after payment in full of all of the Obligations, to the
payment to the Grantor, or its successors or assigns, or to whosoever may be
lawfully entitled to receive the same or as a court of competent jurisdiction
may direct, of any surplus then remaining from such proceeds.
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(f) Upon the declaration of an Event of Default, the Grantor agrees
that it will promptly (and in any event within three Business Days) deliver to
the Agent or its designee an assignment of the Intellectual Property
Collateral, duly executed by the Grantor, in substantially the form of Schedule
F annexed hereto. The Grantor agrees that the Agent may duly execute such an
assignment as Grantor's true and lawful attorney-in-fact pursuant to Section 16
hereof.
5. SECURITY INTEREST ABSOLUTE. All rights of the Agent and the
Lenders and security interests granted herein, and all obligations of the
Grantor pursuant hereto, shall be absolute and unconditional irrespective of:
(a) the lack of validity or enforceability of any provisions in the
Credit Agreement, the Notes or any other Loan Document or any other agreement
or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Credit Agreement, the Notes or any
other Loan Document;
(c) any exchange, release or non-perfection of any Collateral other
than the Intellectual Property Collateral, or any release or amendment or
waiver of or consent to departure from any guaranty, for all or any of the
Obligations; or
(d) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Grantor or a third-party grantor.
6. TERMINATION OF SECURITY INTEREST. This Agreement, and the security
interests created or granted hereby or thereby, shall terminate when the later
of the following shall have occurred: (a) the date that the last Obligations
shall have been fully and indefeasibly paid and satisfied and (b) the date as
of which the last of the Commitments and any other obligations that any of the
Secured Parties have under any of the Loan Documents or related documents and
instruments have terminated, at which time the Agent (without recourse upon, or
any warranty whatsoever by, the Agent) shall execute and deliver to Grantor,
for filing in each office in which any security agreement, notice or other
filing, or any part thereof, shall have been filed, an instrument releasing the
Agent's security interest in the Intellectual Property Collateral, and such
other documents and instruments to terminate any security interest of the Agent
granted hereby as Grantor may reasonably request, all without recourse upon, or
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warranty whatsoever by, the Agent, except that the same shall be free and clear
of any claims, liens or encumbrances created by or in respect of the Agent, and
at the cost and expense of Grantor.
7. USE AND PROTECTION OF INTELLECTUAL PROPERTY COLLATERAL. (a)
Notwithstanding anything to the contrary contained herein, unless an Event of
Default has occurred and is continuing, the Grantor may continue to exploit,
license, franchise, use, enjoy and protect (whether in the United States of
America or any foreign jurisdiction) the Intellectual Property Collateral in
the ordinary course of business and the Agent shall from time to time execute
and deliver, upon written request of Grantor and at Grantor's sole cost and
expense, any and all instruments, certificates or other documents, in the form
so requested, necessary or appropriate in the judgment of Grantor to enable
Grantor to do so.
(b) In order to more fully protect the Intellectual Property
Collateral in respect of which security interests have been granted to the
Agent by the Grantor hereunder, the Grantor may hereafter transfer to the Agent
such additional rights, privileges, marks and licenses as Grantor may in its
discretion determine to be necessary and appropriate to the continuing
exploitation, licensing, use, enjoyment and protection (whether in the United
States of America or any foreign jurisdiction) of the Intellectual Property
Collateral.
8. DUTIES OF GRANTOR. The Grantor shall have the duty to preserve and
maintain all rights in the Intellectual Property Collateral (including, without
limitation, the duty to use, for the duration of this Agreement, consistent
standards of quality in respect of the products sold by it under the
Trademarks) in respect of which a failure to be able to continue to use the
same would have a Material Adverse Effect in a manner substantially consistent
with its present practices. The Grantor shall take all action reasonably
requested by the Agent to register, record and/or perfect the Agent's rights
hereunder. Such duties shall include, but not be limited to, the following:
(a) The Grantor shall take appropriate action at its expense to halt
the infringement of any of the Intellectual Property if such infringement would
have a Material Adverse Effect;
(b) The Grantor shall not amend, modify, terminate or waive any
provisions of any other contract to which the Grantor is a party in any manner
which might have a Material Adverse Effect.
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9. PAYMENT OF OBLIGATIONS. The Grantor will pay promptly when due all
taxes, assessments and governmental charges or levies imposed upon the
Intellectual Property Collateral or in respect of its income or profits
therefrom and all claims of any kind, except that no such charge need be paid
if (i) such non-payment does not involve any danger of forfeiture or loss of
any of the Intellectual Property Collateral or any interest therein and (ii)
such charge is adequately reserved against in accordance with and to the extent
required by GAAP.
10. THE AGENT'S RIGHT TO SUE. Whenever an Event of Default shall have
occurred and be continuing, the Agent shall have the right, but shall in no way
be obligated, to bring suit in its own name (subject to Section 4(f)) to
protect or enforce the Trademarks, Copyrights, Licenses, Patents and Trade
Secrets, and, if the Agent shall commence any such suit, Grantor shall, at the
request of the Agent, do any and all lawful acts and execute any and all proper
documents required by the Agent in aid of such protection or enforcement.
11. MAINTENANCE OF RECORDS. The Grantor will keep and maintain at its
own cost and expense satisfactory and complete records of the Intellectual
Property Collateral. For the Agent's and the Lenders' further security, the
Grantor agrees that the Agent and the Lenders shall have a special property
interest in all of the Grantor's books and records pertaining to the
Intellectual Property Collateral and, upon the occurrence and during the
continuation of any Event of Default, the Grantor shall deliver and turn over
copies of any such books and records to the Agent or its representatives at any
time on demand of the Agent. Prior to the occurrence of an Event of Default and
upon reasonable notice from the Agent, the Grantor shall permit any
representative of the Agent to inspect such books and records as set forth in
Section 12.
12. RIGHT OF INSPECTION. Upon reasonable notice to the Grantor
(unless an Event of Default has occurred and is continuing, in which case no
notice is necessary), the Agent shall at all times have full and free access
during normal business hours to all the books and records and correspondence of
the Grantor, and the Agent or its representatives may examine the same, take
extracts therefrom and make photocopies thereof, and the Grantor agrees to
render to the Agent, at the Grantor's cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto.
13. NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of the
Agent to exercise, and no delay on the part of the
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Agent in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy by the Agent preclude other or further exercise of any other
right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies that may be available to the Agent whether at
law, in equity or otherwise.
14. NOTICES, ETC. All notices and other communications provided for
hereunder shall be in writing (including telegraphic, telex, telecopy, or cable
communication) and mailed, telegraphed, telexed, telecopied, cabled or
delivered by hand, if to the Grantor, addressed to it c/o Waxman Industries,
Inc., 24460 Aurora Road, Bedford Heights, Ohio 44146, Attention: Neal Restivo,
Treasurer, and if to any Secured Party, addressed to it at the address of such
Secured Party specified in the Credit Agreement, or, as to each party, at such
other address as shall be designated by such party in a written notice to each
other party complying as to delivery with the terms of this Section. All such
notices and other communications shall, when mailed, telegraphed, telexed,
telecopied, cabled or delivered, be effective when deposited in the mails,
delivered to the telegraph company, confirmed by telex answerback, telecopied
with confirmation or receipt, delivered to the cable company, or delivered by
hand to the addressee or its agent, respectively.
15. EXPENSES OF COLLECTION. The Grantor hereby agrees to pay all
expenses of the Agent, including reasonable attorneys' fees, incurred with
respect to the collection of any of the Intellectual Property Collateral and
the enforcement of the respective rights of the Agent and the Lenders hereunder
(together with interest thereon from and after the date of payment of such
expenses by the Agent in accordance with the rate then in effect for Loans
under the Credit Agreement), which expenses together with interest thereon as
aforesaid shall constitute Obligations.
16. AGENT APPOINTED ATTORNEY-IN-FACT. Grantor hereby irrevocably
constitutes and appoints the Agent and any officer or agent thereof, with full
power of substitution, as Grantor's true and lawful attorney-in-fact, for the
purpose of taking such action and executing agreements, instruments and other
documents, in the name of Grantor or otherwise, not inconsistent with the
express provisions of this Agreement, as the Agent may deem necessary or
advisable to accomplish the purposes hereof, which appointment is an agency
coupled with an interest and is irrevocable until payment in full of all
Obligations. The Agent agrees that until the occurrence and continuation of an
Event of
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Default, it will forbear from exercising the power of attorney or any rights
granted to the Agent pursuant to this Section 16.
17. GOVERNING LAW; BINDING EFFECT; ASSIGNMENT. This agreement shall
be governed by and construed in accordance with the law of the State of New
York. This Agreement shall be binding upon Grantor and the Agent and their
respective successors and assigns and shall inure to the benefit of Grantor and
the Agent and their respective successors and assigns; PROVIDED, HOWEVER, that
Grantor may not assign its rights or obligations hereunder or in connection
herewith or any interest herein (voluntarily, by operation of law or otherwise)
without the prior written consent of the Agent. Except as provided in Section
2, no other Person (including, without limitation, any other creditor of
Grantor) shall have any interest herein or any right or benefit with respect
hereto and this Agreement shall not be construed so as to confer any right or
benefit upon any Person other than the parties to this Agreement and each of
their respective successors and assigns.
18. FURTHER INDEMNIFICATION. The Grantor agrees to pay, and save the
Agent harmless from, any and all liabilities with respect to, or resulting from
any delay in paying (other than a delay caused by the gross negligence or
willful misconduct of the Agent), any and all excise, sales or other similar
taxes which may be payable with respect to any of the Intellectual Property
Collateral or in connection with any of the transactions contemplated by this
Agreement.
19. AGENT MAY PERFORM. If the Grantor fails to perform any agreement
contained herein, the Agent may, but shall not be obligated to, itself perform,
or cause performance of, such agreement, and the expenses of the Agent incurred
in connection therewith shall be payable by the Grantor pursuant to Section 15
hereof or, if not so paid, shall become Obligations.
20. NEW INTELLECTUAL PROPERTY. In the event, prior to the time the
Obligations have been paid in full, the Grantor shall (i) obtain any rights to
or interests in any new inventions whether or not patentable, patents, patent
applications or any reissue, divisions, continuations, renewals, extensions, or
continuations-in-part of any patent or improvement of any patent, trademarks,
trade names, service marks, and registrations or applications therefor,
copyrights and registrations or applications therefor, or licenses, or (ii)
become entitled to the benefit of any patent, copyright or trademark, or any
registrations or applications therefor, license, license renewal, trade secret
or copyright renewal, the provisions of this Agreement
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shall automatically apply thereto and anything enumerated in clause (i) or (ii)
of this Section 20 shall constitute Intellectual Property Collateral. The
Grantor agrees, promptly following the written request by the Agent, to amend
this Agreement by amending any or all of Schedules A, B, C, D and E, as
applicable, to include any such future trademarks, trademark registrations,
trademark applications, trade names, service marks, copyrights and licenses
which would be Intellectual Property Collateral, and to immediately prepare,
execute and record with all appropriate foreign country, Federal, state and/or
local offices and authorities a Security Agreement for any such new
Intellectual Property Collateral, in form and substance similar to this
Agreement, and to deliver to the Agent reasonable proof of such recordation.
21. WAIVER OF JURY TRIAL. The grantor and the agent hereby
irrevocably waive to the fullest extent permitted by law any and all right to
trial by jury of (a) any dispute arising under, out of or in connection with
this agreement, or (b) any other disputes between the grantor and any Lender or
the agent arising out of or in connection with such Lender's or agent's actions
or status as either (x) a Lender to the grantor under the credit agreement or
(y) a beneficiary of the security interest granted hereby.
22. AMENDMENTS, ETC. No amendment or waiver of any provision of this
Agreement, nor consent to any departure by the Grantor herefrom, shall in any
event be effective unless the same shall be in writing and signed by the Agent,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
23. FURTHER DOCUMENTATION. The Grantor agrees that at any time and
from time to time, at the expense of the Grantor, the Grantor will promptly
execute and deliver such further instruments and documents, and take such
further action, as may be necessary or desirable, or as the Agent may request,
in order to perfect and protect any security interests granted or purported to
be granted hereby or to enable the Agent to exercise and enforce the rights and
remedies pursuant hereto with respect to any of the Intellectual Property
Collateral.
24. SEVERABILITY OF PROVISIONS. Any provision of this Agreement which
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 or
affect-ing the
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validity or enforceability of such provision in any other jurisdiction.
25. SECTION TITLES. The Section titles contained in this Agreement are and
shall be without substantive meaning or content of any kind whatsoever and are
not part of this Agreement.
26. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be executed and
delivered by its duly authorized officer, on the date first above written.
[ ]
By _______________________
Title:
Accepted and Acknowledged:
CITICORP USA, INC., as Agent
By: __________
Name: Keith Karako
Title: Vice President
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SCHEDULE A
TRADEMARKS
----------
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SCHEDULE B
COPYRIGHTS
----------
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SCHEDULE C
LICENSES
--------
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SCHEDULE D
PATENTS
-------
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SCHEDULE E
LITIGATION
----------
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SCHEDULE F
ASSIGNMENT OF INTELLECTUAL PROPERTY COLLATERAL
----------------------------------------------
AGREEMENT made this _______ day of _________, 19__, by
and between ______________ (the "Assignor") and Citicorp USA, Inc. (the
"Agent") for the benefit of itself and the Lenders (as defined in the Credit
Agreement referred to below).
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Assignor and the Agent are parties to the Credit Agreement
dated as of May __, 1994 (said Agreement, as it hereafter may be amended or
otherwise modified from time to time, being referred to as the "Credit
Agreement") and the Intellectual Property Security Agreement dated
_____________ (the "Security Agreement") which provides that upon the
occurrence of certain events specified therein Assignor and the Agent shall
execute this Assignment; and
WHEREAS, the aforementioned events have occurred;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties agree as follows:
1. INCORPORATION. This Assignment is made pursuant to and subject to
the terms of the Credit Agreement and the Security Agreement, each of which is
deemed incorporated herein by this reference and shall constitute part of this
Assignment as if fully set forth herein.
2. ASSIGNMENT. Assignor hereby conveys, sells, assigns, transfers and
sets over to the Agent all of Assignor's entire right, title and interest in
and to the Intellectual Property Collateral (as defined in the Security
Agreement).
3. NOTICES. All notices hereunder to the parties hereto shall be made
in the manner and to the addresses specified in the Security Agreement.
4. FURTHER INSTRUMENTS. The parties agree to promptly execute and
deliver all further instruments necessary or desirable to carry out the
purposes of this Agreement.
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5. SCHEDULES. The terms and conditions of the Schedules referred to
herein are incorporated herein by this reference and shall constitute part of
this Assignment as if fully set forth herein.
6. HEADINGS. The headings in this Assignment are for purposes of
reference only and shall not in any way limit or otherwise affect the meaning
or interpretation of any of the terms hereof.
IN WITNESS WHEREOF, the parties have executed this Assignment as of the
date first written above.
ASSIGNOR
By _______________________
Title:
AGENT
By _______________________
Title:
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STATE OF )
ss.:
COUNTY OF )
On this _____ day of ___________, 19__, before me came
__________________________, to me known to be an officer of ______________, the
company described in and which executed the above instrument, and duly
acknowledged that he executed the same.
____________________________
NOTARY PUBLIC
STATE OF )
ss.:
COUNTY OF )
On this ______ day of ___________, 19__, before me came ________________, to
me known to be an officer of ___________, the company described in and which
executed the above instrument, and duly acknowledged that he executed the same.
_____________________________
NOTARY PUBLIC
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<PAGE> 1
EXHIBIT 10.9
U.S. $15,000,000
TERM LOAN CREDIT AGREEMENT
Dated as of May 20, 1994
Among
WAXMAN USA INC.,
as the Company
--------------
and
BARNETT INC.
WAXMAN CONSUMER PRODUCTS GROUP INC.
and
WOC INC.
as Borrowers
------------
and
THE LENDERS PARTY HERETO
and
CITIBANK, N.A.
as Agent
--------
<PAGE> 2
TERM LOAN CREDIT AGREEMENT, dated as of May 20, 1994, among
WAXMAN USA INC. (the "Company"), BARNETT INC., WAXMAN CONSUMER PRODUCTS GROUP
INC. and WOC INC. (the "Borrowers"), each a Delaware corporation, the financial
institutions listed on the signature pages hereof listed under the caption of
"Lender" (each individually a "Lender" and collectively the "Lenders") and
CITIBANK, N.A. ("Citibank"), as agent for the Lenders (in such capacity, the
"Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrowers have requested that the Lenders make
term loans of up to $15,000,000 in aggregate principal amount for the purposes
hereinafter specified; and
WHEREAS, the Lenders are willing to make funds available for
such purposes upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. DEFINED TERMS. As used in this Agreement, the following
terms have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"ACCOUNTS" has the meaning specified in the Section 9-106 of
the UCC.
"ADJUSTED NET WORTH" of any Person means, at any date, the Net
Worth of such Person at such date, EXCLUDING, HOWEVER, from the determination
of the Total Assets of such Person at such date, (i) all goodwill,
organizational expenses, research and development expenses, trademarks, trade
names, copyrights, patents, patent applications, licenses and rights in any
thereof, and other similar intangibles, (ii) all unamortized debt discount and
expense, (iii) all reserves carried and not deducted from assets, (iv) treasury
stock and capital stock, obligations or other securities of, or capital
contributions to, or investments in, any Subsidiary of such Person, (v)
securities which are
1
<PAGE> 3
not readily marketable, (vi) cash held in a sinking or other analogous fund
established for the purpose of redemption, retirement, defeasance or prepayment
of any Stock or Indebtedness, to the extent that such Stock or Indebtedness is
not reflected on the balance sheet of such Person, (vii) any write-up in the
book value of any asset resulting from a revaluation thereof, and (viii) any
items not included in clauses (i) through (vii) above which are treated as
intangibles in conformity with GAAP.
"AFFILIATE" means, as to any Person, any Subsidiary of such
Person and any other Person which, directly or indirectly, controls, is
controlled by or is under common control with such Person and includes each
executive officer or director or general partner of such Person, and each
Person who is the beneficial owner of 5% or more of any class of voting Stock
of such Person. For the purposes of this definition, "control" means the
possession of the power to direct or cause the direction of management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"AGREEMENT" means this Credit Agreement, together with all
Exhibits and Schedules hereto, as the same may be amended, supplemented or
otherwise modified from time to time.
"APPLICABLE BASE RATE MARGIN" means three and one-half percent
(3.50%).
"APPLICABLE EURODOLLAR RATE MARGIN" means five percent (5%).
"APPLICABLE LENDING OFFICE" means, with respect to each
Lender, its Domestic Lending Office in the case of a Base Rate Loan and its
Eurodollar Lending Office in the case of a Eurodollar Rate Loan.
"ASSET SALE" means any sale or other disposition, or series of
sales or other dispositions (including, without limitation, by merger or
consolidation, and whether by operation of law or otherwise), made on or after
the Closing Date by any Borrower or any of its Subsidiaries to any Person of
(i) all or substantially all of the outstanding Stock of any of its
Subsidiaries, (ii) all or substantially all of its assets or the assets of any
division of any Borrower or any of its Subsidiaries, or (iii) any other asset
or assets which, when taken together with all sales or
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<PAGE> 4
other dispositions of assets not covered by the foregoing clauses (i) and (ii)
yield proceeds or involve assets having a Fair Market Value in excess of
$1,000,000 in any twelve-month period; PROVIDED, HOWEVER, that any sale
permitted pursuant to clauses (i), (ii) or (iii) of Section 7.5(c) shall not
constitute an Asset Sale for purposes of this Agreement.
"ASSET SALE PROCEEDS" means payments in Dollars or freely
convertible into Dollars received by any Borrower or any of its Subsidiaries
(including, without limitation, any cash payments received by way of deferred
payment of principal pursuant to a note or receivable or otherwise, but only as
and when received) from any Asset Sale (the "Payments") in each case net of the
amount of (i) brokerage commissions and other reasonable fees and expenses
(including fees and expenses of counsel and investment bankers) payable other
than to an Affiliate of such Borrower in connection with such Asset Sale, (ii)
provisions for all taxes payable within one year as a result of such Asset
Sale, (iii) payments made to retire Indebtedness secured by the assets subject
to such Asset Sale to the extent required pursuant to the terms of the
Indebtedness, (iv) appropriate amounts to be provided by such Borrower or any
of its Subsidiaries as a reserve, in accordance with GAAP, against liabilities
associated with such Asset Sale and retained by such Borrower or any of its
Subsidiaries after such Asset Sale; PROVIDED, HOWEVER, that the amount of any
such reserve at such time that such amount is no longer required to be provided
as is not applied to the liability for which such reserve was established shall
be deemed Asset Sale Proceeds, (v) any amount required to be paid to any Person
(other than such Borrower and any of its Subsidiaries) owning a beneficial
interest in the property or assets sold; PROVIDED, FURTHER, that such Payments
shall not be deemed to be Asset Sale Proceeds until one year after such Asset
Sale and only to the extent that the Borrowers have not used such Payments to
acquire or construct assets in lines of business related to the Borrowers'
lines of business on the Closing Date. For the purposes of this definition,
Asset Sale Proceeds shall be deemed to include, without limitation, any award
of compensation for any asset or property or group thereof taken by
condemnation or eminent domain and insurance proceeds for the loss of or damage
to any asset or property if such award or proceeds equals or exceeds $1,000,000
(in the aggregate) and within one year after the receipt thereof replacement or
repair of such asset or property has not commenced, except that in the event
that at any time such
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replacement or repair is abandoned or is otherwise discontinued or is not
diligently pursued, the remaining award or proceeds, as the case may be, shall
constitute Asset Sale Proceeds at such time.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the Agent,
in substantially the form of Exhibit G.
"BASE RATE" means, for any period, a fluctuating interest rate
per annum as shall be in effect from time to time, which rate per annum shall
be equal at all times to the highest of:
(a) the rate of interest announced publicly by Citibank in New
York, New York, from time to time, as Citibank's base rate;
(b) the sum (adjusted to the nearest 1/4 of one percent or, if
there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent)
of (i) 1/2 of one percent per annum, PLUS (ii) the rate per annum obtained by
dividing (A) the latest three-week moving average of secondary market morning
offering rates in the United States for three-month certificates of deposit of
major United States money market banks, such three-week moving average being
determined weekly on each Monday (or, if any such day is not a Business Day, on
the next succeeding Business Day) for the three-week period ending on the
previous Friday by Citibank on the basis of such rates reported by certificate
of deposit dealers to and published by the Federal Reserve Bank of New York or,
if such publication shall be suspended or terminated, on the basis of
quotations for such rates received by Citibank from three New York certificate
of deposit dealers of recognized standing selected by Citibank, by (B) a
percentage equal to 100% MINUS the average of the daily percentages specified
during such three-week period by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other marginal
reserve requirement) for Citibank in respect of liabilities consisting of or
including (among other liabilities) three-month U.S. dollar nonpersonal time
deposits in the United States, PLUS (iii) the average during such three-week
period of the maximum annual assessment rates payable to the Federal Deposit
Insurance Corporation (or any successor) by banks which are members of the Bank
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<PAGE> 6
Insurance Fund for insuring U.S. dollar deposits in the United States; and
(c) the sum (adjusted to the nearest 1/4 of one percent or, if
there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent)
of (i) 1/2 of one percent per annum PLUS (ii) the Federal Funds Rate.
"BASE RATE LOAN" means any outstanding principal amount of the
Loans of any Lender that bears interest with reference to the Base Rate.
"BORROWING" means a borrowing consisting of Loans made by the
Lenders on the Closing Date.
"BUSINESS DAY" means a day of the year on which banks are not
required or authorized to close in New York City and, if the applicable
Business Day relates to a Eurodollar Rate Loan, a day on which dealings are
also carried on in the London interbank market.
"CAPITAL EXPENDITURES" means, for any Person for any period,
the aggregate of (i) all expenditures by such Person and its consolidated
Subsidiaries, except interest capitalized during construction, during such
period for property, plant or equipment, including, without limitation,
renewals, improvements, replacements and capitalized repairs, that would be
reflected as additions to property, plant or equipment on a consolidated
balance sheet of such Person and its Subsidiaries prepared in conformity with
GAAP and (ii) without duplication, the principal amount of all Indebtedness
incurred or assumed to finance any such additions to property, plant and
equipment. For the purpose of this definition, the purchase price of equipment
which is acquired simultaneously with the trade-in of existing equipment owned
by such Person or any of its Subsidiaries or with insurance proceeds shall be
included in Capital Expenditures only to the extent of the gross amount of such
purchase price less the credit granted by the seller of such equipment being
traded in at such time or the amount of such proceeds, as the case may be.
"CAPITALIZED LEASE" means, as to any Person, any lease of
property by such Person as lessee which would be capitalized on a balance sheet
of such Person prepared in conformity with GAAP.
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"CAPITALIZED LEASE OBLIGATIONS" means, as to any Person, the
capitalized amount of all obligations of such Person or any of its Subsidiaries
under Capitalized Leases, as determined on a consolidated basis in conformity
with GAAP.
"CASH EQUIVALENTS" means (i) securities with maturities of one
year or less from the date of acquisition issued or fully guaranteed or insured
by the United States government or any agency or instrumentality thereof, (ii)
certificates of deposit, eurodollar time deposits, overnight bank deposits and
bankers' acceptances of any Lender having maturities of one year or less from
the date of acquisition, (iii) commercial paper of an issuer rated at least
"A-1" by Standard & Poor's Corporation or "P-1" 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 (iii) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued 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; provided, however, that the terms of
such agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions with Securities Dealers and Others, as
adopted by the Comptroller of the Currency.
"CASH INTEREST EXPENSE" means, for any Person for any period,
the Net Interest Expense of such Person for such period, PLUS (a) interest
expense capitalized during construction for such period to the extent deducted
in the determination of such Net Interest Expense, LESS (b) Non-Cash Interest
Expense of such Person for such period; provided that "Cash Interest Expense"
for the Company for any period shall include, without duplication, the Cash
Interest Expense of Holdings with respect to the Debentures for such period.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events: (i) the direct or indirect, sale, lease, exchange or other
transfer of all or substantially all of the assets of Holdings to any Person or
entity or group of Persons or entities acting in concert as a partnership or
other group (a "Group of Persons") other than Permitted Holders, (ii) the
merger or consolidation of
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<PAGE> 8
Holdings with or into another corporation with the effect that the then
existing shareholders of Holdings or their Affiliates, together with the
Permitted Holders, hold less than 50% of the Voting Stock of the surviving
corporation of such merger or the corporation resulting from such consolidation
and do not otherwise have the right or ability by contract or otherwise to
elect a majority of the Board of Directors of such surviving corporation, (iii)
the replacement of a majority of the Board of Directors of Holdings from the
directors who constituted the Board of Directors on the Closing Date, and such
replacement shall not have been approved by a majority of the members of the
Board of Directors of Holdings then still in office either (x) who were members
of the Board of Directors on the Closing Date or (y) whose election as a member
of the Board of Directors was approved in the manner provided in this clause
(iii), (iv) a Person or Group of Persons shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases or
otherwise, have become the beneficial owner (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934, as amended) of securities of
Holdings representing 35% or more of the Voting Stock of Holdings and, at such
time Permitted Holders are not the beneficial owners (as so defined) of a
greater percentage of such Voting Stock and do not otherwise have the right or
ability by contract or otherwise to elect a majority of the Board of Directors
of Holdings, (v) Holdings shall fail to own all of the issued and outstanding
Stock of the Company (other than those options in respect of the Stock of the
Company issued by the Company to employees or directors of Holdings or any of
its Subsidiaries in an aggregate amount not to exceed 10% of the total
outstanding Stock of the Company, such options not to be exercisable until an
initial public offering of the Company's Common Stock); (vi) the Company shall
fail to own all of the issued and outstanding Stock of each of the Borrowers or
TWI (other than options to purchase Stock of such Borrower or TWI, as the case
may be, issued to employees or directors of Holdings or any of its
Subsidiaries, by such Borrower or TWI, as the case may be, in an aggregate
amount not to exceed 10% of the outstanding Stock of such Borrower or TWI, as
the case may be, which options may not be exercised until an initial public
offering of common stock of such Borrower or TWI, as the case may be), or (vii)
a change of control shall occur under any Indenture.
"CITIBANK" means Citibank, N.A.
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"CLOSING DATE" means the date on which the Loans are made
hereunder.
"CODE" means the Internal Revenue Code of 1986 (or any
successor legislation thereto), as amended from time to time.
"COLLATERAL" means all property and interests in property and
proceeds thereof now owned or hereafter acquired by any Loan Party in or upon
which a Lien is granted under any of the Collateral Documents.
"COLLATERAL DOCUMENTS" means the Security Agreements, the
Intellectual Property Security Agreements, the Mortgage, the Pledge Agreements
and any other document executed and delivered by a Loan Party granting a Lien
on any of its property to secure payment of the Obligations.
"COMMITMENT" means, as to each Lender, the commitment of such
Lender to make Loans to the Borrowers pursuant to Section 2.1 in the aggregate
principal amount outstanding not to exceed the amount set forth opposite such
Lender's name on Schedule I under the caption "Commitment", as such amount may
be reduced or modified pursuant to this Agreement.
"COMMITMENT FEE" has the meaning specified in Section 2.3(a).
"CONTAMINANT" means any substance regulated or forming the
basis of liability under any Environmental Law, including, without limitation,
any waste, pollutant, hazardous substance, toxic substance, hazardous waste,
special waste, petroleum or petroleum-derived substance or waste, or any
constituent of any such substance or waste.
"CONTINGENT OBLIGATION" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of such Person with
respect to any Indebtedness or Contractual Obligation of another Person, if the
purpose or intent of such Person in incurring the Contingent Obligation is to
provide assurance to the obligee of such Indebtedness or Contractual Obligation
that such Indebtedness or Contractual Obligation will be paid or discharged, or
that any agreement relating thereto will be complied with, or that any holder
of such Indebtedness or Contractual Obligation will be protected (in whole or
in part) against loss in respect thereof. Contingent Obligations of a Person
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<PAGE> 10
include, without limitation, (without duplication) (a) the direct or indirect
guarantee, endorsement (other than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or sale with recourse
by such Person of an obligation of another Person, and (b) any liability of
such Person for an obligation of another Person through any agreement
(contingent or otherwise) (i) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of a loan, advance, stock
purchase, capital contribution or otherwise), (ii) to maintain the solvency or
any balance sheet item, level of income or financial condition of another
Person, (iii) to make take-or-pay or similar payments, if required, regardless
of non-performance by any other party or parties to an agreement, (iv) to
purchase, sell or lease (as lessor or lessee) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of
such obligation or to assure the holder of such obligation against loss, or (v)
to supply funds to or in any other manner invest in such other Person
(including, without limitation, to pay for property or services irrespective of
whether such property is received or such services are rendered), if in the
case of any agreement described under subclause (i), (ii), (iii), (iv) or (v)
of this sentence the primary purpose or intent thereof is as described in the
preceding sentence. The amount of any Contingent Obligation shall be equal to
the amount of the obligation so guaranteed or otherwise supported.
"CONTRACTUAL OBLIGATION" of any Person means any obligation,
agreement, undertaking or similar provision of any security issued by such
Person or of any agreement, undertaking, contract, lease, indenture, mortgage,
deed of trust or other instrument to which such Person is a party or by which
it or any of its property is bound or to which any of its properties is
subject, excluding a Loan Document but including without limitation the
requirements to make contributions to or pay benefits under any Employee
Benefit Plan.
"CORPORATE RESTRUCTURING" means the transactions by which
Holdings will restructure its operations such that the Company will become a
holding company for all of Holdings' Subsidiaries that comprise and support its
domestic operations (but not the Ideal Subsidiaries).
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"DEBENTURES" means the Exchange Notes, the Existing 12 1/4%
Senior Secured Notes, the Existing Floating Rate Senior Secured Notes, the
Existing Senior Subordinated Notes and the Existing Convertible Debentures.
"DEFAULT" means any event which with the passing of time or
the giving of notice or both would become an Event of Default.
"DISCLOSURE DOCUMENT" means the Offer to Exchange and Consent
Solicitation relating to the Existing Senior Subordinated Notes, dated April
21, 1994, and the Consent Solicitation relating to the Existing 12 1/4% Senior
Secured Notes and the Existing Floating Rate Senior Secured Notes dated April
21, 1994, as each may be amended, supplemented or modified from time to time.
"DOL" means the United States Department of Labor, or any
successor thereto.
"DOLLARS" and the sign "$" each mean the lawful money of the
United States of America.
"DOMESTIC LENDING OFFICE" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule II or such other office of such Lender as such Lender may
from time to time specify to the Borrowers and the Agent.
"EBITDA" means, for any Person for any period, the Net Income
(Loss) of such Person for such period taken as a single accounting period, PLUS
(a) the sum of the following amounts of such Person and its Subsidiaries for
such period determined on a consolidated basis in conformity with GAAP to the
extent included in the determination of such Net Income (Loss) (without
duplication): (i) depreciation expense, (ii) amortization expense, (iii) Net
Interest Expense, (iv) income tax expense, (v) extraordinary losses (and other
losses on Asset Sales not otherwise included in extraordinary losses determined
on a consolidated basis in conformity with GAAP) and (vi) non-recurring non-
cash write-offs to the extent that such write-offs do not require any present
or future cash expenditures; LESS (b) the sum of the following amounts of such
Person and its Subsidiaries determined on a consolidated basis in conformity
with GAAP to the extent included in the determination of such Net Income (Loss)
(without duplication): (i) extraordinary gains (and in the case of any
Borrower, other gains on Asset
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<PAGE> 12
Sales not otherwise included in extraordinary gains determined on a
consolidated basis in conformity with GAAP), (ii) the Net Income (Loss) of any
other Person that is accounted for by the equity method of accounting except to
the extent of the amount of dividends or distributions paid to such Person, and
(iii) the Net Income (Loss) of any other Person acquired by such Person or a
Subsidiary of such Person in a transaction accounted for as a pooling of
interests for any period prior to the date of such acquisition.
"ENVIRONMENTAL LAWS" means all foreign, federal, state and
local laws, statutes, ordinances and regulations, now or hereafter in effect,
and in each case as amended or supplemented from time to time, and any judicial
or administrative interpretation thereof, including, without limitation, any
judicial or administrative order, consent decree or judgment relating to the
regulation and protection of human health, safety, the environment or natural
resources (including, without limitation, ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic
species and vegetation).
"ENVIRONMENTAL LIABILITIES AND COSTS" means, as to any Person,
all liabilities, obligations, responsibilities, Remedial Actions, losses,
damages, punitive damages, consequential damages, treble damages, costs and
expenses (including, without limitation, all fees, disbursements and expenses
of counsel, experts and consultants and costs of investigation and feasibility
studies), fines, penalties, sanctions and interest incurred as a result of any
claim or demand by any other Person, whether based in contract, tort, implied
or express warranty, strict liability, criminal or civil statute, including,
without limitation, any thereof arising under any Environmental Law, Permit,
order or agreement with any Governmental Authority or other Person, and which
relate to any environmental, health or safety condition, or a Release or
threatened Release, and result from the past, present or future operations of,
or ownership of property by, such Person or any of its Subsidiaries.
"ENVIRONMENTAL LIEN" means any Lien in favor of any
Governmental Authority for Environmental Liabilities and Costs.
"ERISA" means the Employee Retirement Income Security Act of
1974 (or any successor legislation thereto),
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as amended from time to time and any applicable regulations promulgated
thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) under common control with any Loan Party or any of its
Subsidiaries and which, together with any Loan Party or any of its
Subsidiaries, are treated as a single employer within the meaning of Section
414 (b), (c), (m) or (o) of the Code.
"ERISA EVENT" means (i) a Reportable Event with respect to a
Title IV Plan or a Multiemployer Plan; (ii) the withdrawal of any Loan Party,
any of its Subsidiaries or any ERISA Affiliate from a Title IV Plan subject to
Section 4063 of ERISA during a plan year in which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (iii) the complete or
partial withdrawal of any Loan Party, any of its Subsidiaries or any ERISA
Affiliate from any Multiemployer Plan; (iv) the filing of a notice of intent to
terminate a Title IV Plan or the treatment of a plan amendment as a termination
under Section 4041 of ERISA; (v) the institution of proceedings to terminate a
Title IV Plan or Multiemployer Plan by the PBGC; (vi) the failure to make any
required contribution to a Qualified Plan; or (vii) any other event or
condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Title IV Plan or Multiemployer Plan or the imposition of any
liability under Title IV of ERISA, other than for PBGC premiums due but not
delinquent under Section 4007 of ERISA.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
"EURODOLLAR LENDING OFFICE" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office" opposite
its name on Schedule II (or, if no such office is specified, its Domestic
Lending Office) or such other office of such Lender as such Lender may from
time to time specify to the Borrowers and the Agent.
"EURODOLLAR RATE" means, for any Interest Period, an interest
rate per annum equal to the rate per annum obtained by dividing (a) the rate of
interest determined by
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the Agent to be the average (rounded upward to the nearest whole multiple of
1/16 of 1% per annum, if such average is not such a multiple) of the rate per
annum at which deposits in U.S. dollars are offered by the principal office of
Citibank in London, England to prime banks in the London interbank market at
11:00 A.M. (London time) two Business Days before the first day of such
Interest Period in an amount substantially equal to the Eurodollar Rate Loan of
Citibank during such Interest Period and for a period equal to such Interest
Period by (b) a percentage equal to 100% MINUS the Eurodollar Rate Reserve
Percentage for such Interest Period.
"EURODOLLAR RATE LOAN" means any outstanding principal amount
of the Loans of any Lender to a Borrower that, for an Interest Period, bears
interest at a rate determined with reference to the Eurodollar Rate.
Eurodollar Rate Loans made on the same date with the same Interest Period to
different Borrowers shall be deemed to be separate Eurodollar Rate Loans and
must each meet the criteria set forth herein.
"EURODOLLAR RATE RESERVE PERCENTAGE" for any Interest Period
means the reserve percentage applicable two Business Days before the first day
of such Interest Period under regulations issued from time to time by the Board
of Governors of the Federal Reserve System for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or
other marginal reserve requirement) for a member bank of the Federal Reserve
System in New York City with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other category of
liabilities which includes deposits by reference to which the Eurodollar Rate
is determined) having a term equal to such Interest Period.
"EVENT OF DEFAULT" has the meaning specified in Section 8.1.
"EXCHANGE NOTES" means the 12-3/4% Senior Secured Deferred
Coupon Notes due 2004 of Holdings issued pursuant to the Indenture, dated as of
May 20, 1994, by and between Holdings and The Huntington National Bank, as
trustee, as amended, modified or supplemented from time to time in accordance
with the provisions of this Agreement.
"EXCHANGE OFFER AND CONSENT SOLICITATION" means the Offer to
Exchange and Consent Solicitation in respect of
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the Existing Senior Subordinated Notes dated April 21, 1994 relating to (i)
Holdings' offer to exchange for $50,000,000 aggregate principal amount of its
Existing Senior Subordinated Notes its Exchange Notes and warrants to purchase
Holdings' common stock and (ii) consents to consummate the Corporate
Restructuring and the Refinancing, each as more particularly described in the
Disclosure Document.
"EXISTING BARNETT FACILITY" means the $5,000,000 Credit
Agreement, dated as of December 30, 1993, by and among Barnett Inc. as
borrower, Citicorp USA Inc. as lender and secured party and Citibank, N.A. as
issuer, as amended or supplemented through the date hereof.
"EXISTING CONVERTIBLE DEBENTURES" means the 9 1/2% Convertible
Debentures due 2007 of Holdings issued pursuant to the Indenture, dated as of
March 15, 1987 by and between Holdings and The Huntington National Bank, as
trustee, as amended or supplemented through the date hereof.
"EXISTING FLOATING RATE SENIOR SECURED NOTES" means the
Floating Rate Senior Secured Notes due 1998 of Holdings issued pursuant to the
Indenture, dated as of September 1, 1991, by and between Holdings and United
States Trust Company of New York, as trustee, as amended or supplemented
through the date hereof.
"EXISTING 12 1/4% SENIOR SECURED NOTES" means the 12 1/4%
Fixed Rate Senior Secured Notes due 1998 of Holdings issued pursuant to the
Indenture, dated as of September 1, 1991, by and between Holdings and United
States Trust Company of New York, as trustee.
"EXISTING SENIOR SUBORDINATED NOTES" means the 13 3/4% Senior
Subordinated Notes due 1999 of Holdings issued pursuant to the Indenture, dated
as of June 1, 1989, by and between Holdings and AmeriTrust Company National
Association (now known as Society National Bank), as trustee, as amended or
supplemented through the date hereof.
"EXISTING WAXMAN INDUSTRIES CREDIT AGREEMENT" means the
amended and restated revolving credit facility, dated as of April 1, 1993, by
and among Holdings as borrower, the financial institutions party thereto as
lender and National City Bank as agent, as amended or supplemented through the
date hereof.
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"FAIR MARKET VALUE" means (i) with respect to any asset (other
than a marketable security) at any date, the value of the consideration
obtainable in a sale of such asset at such date assuming a sale by a willing
seller to a willing purchaser dealing at arm's length and arranged in an
orderly manner over a reasonable period of time having regard to the nature and
characteristics of such asset or, if such asset shall have been the subject of
a relatively contemporaneous appraisal by an independent third party appraiser,
the basic assumptions underlying which have not materially changed since its
date, as set forth in such appraisal, and (ii) with respect to any marketable
security at any date, the closing sale price of such security on the business
day (on which any national securities exchange is open for the normal
transaction of business) next preceding such date, as appearing in any
published list of any national securities exchange or in the National Market
List of the National Association of Securities Dealers, Inc. or, if there is no
such closing sale price of such security, the final price for the purchase of
such security at face value quoted on such business day by a financial
institution of recognized standing which regularly deals in securities of such
type.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of the quotations
for such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by it.
"FISCAL QUARTER" means each of the three month periods ending
on March 31, June 30, September 30 and December 31.
"FISCAL YEAR" means the twelve month period ending on June 30.
"FIXED CHARGES" means, for any Person for any period, the sum
of (without duplication) (i) the Cash Interest Expense of such Person and each
of its Subsidiaries for such period, (ii) the principal amount of Indebtedness
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<PAGE> 17
for borrowed money of such Person and each of its Subsidiaries determined on a
consolidated basis in conformity with GAAP having a scheduled due date during
such period and (iii) all amounts having a scheduled due date during such
period payable by such Person and each of its Subsidiaries determined on a
consolidated basis in conformity with GAAP, on Capitalized Lease Obligations;
provided that "Fixed Charges" for the Company for any period shall include,
without duplication, the Cash Interest Expense of Holdings with respect to the
Debentures for such period and the principal amount of the Debentures of
Holdings having a scheduled due date during such period.
"GAAP" means 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 Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board, or in such other statements by
such other entity as may be in general use by significant segments of the
accounting profession, which are applicable to the circumstances as of the date
of determination except that, for purposes of Article V, 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 audited financial
statements referred to in Section 4.5.
"GOVERNMENTAL AUTHORITY" means 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.
"HOLDINGS" means Waxman Industries, Inc., a Delaware
corporation.
"IDEAL SUBSIDIARIES" means Ideal Holding Group, Inc. and its
Subsidiaries.
"IMPROVEMENTS" has the meaning specified in Section 4.22(d).
"INDEBTEDNESS" of any Person means, without duplication, (i)
all indebtedness of such Person for borrowed money (including, without
limitation, reimbursement and all other obligations with respect to surety
bonds, letters of credit and bankers' acceptances, whether or not matured) or
16
<PAGE> 18
for the deferred purchase price of property or services, (ii) all obligations
of such Person evidenced by notes, bonds, debentures or similar instruments,
(iii) all indebtedness of such Person 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), (iv) all Capitalized Lease Obligations of such Person, (v) all
Contingent Obligations of such Person, (vi) all obligations of such Person to
purchase, redeem, retire, defease or otherwise acquire for value any Stock or
Stock Equivalents of such Person, valued, in the case of redeemable preferred
stock, at the greater of its voluntary or involuntary liquidation preference
plus accrued and unpaid dividends, and (vii) all Indebtedness of the types
referred to in clause (i), (ii), (iii), (iv), (v) or (vi) above secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including, without
limitation, accounts and general intangibles) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness to the extent of the lesser of the amount of the Indebtedness so
secured or the fair value of the property so secured, (viii) in the case of any
Borrower, the Obligations and (ix) all liabilities of such Person that would be
shown on a balance sheet of such Person prepared in conformity with GAAP.
"INDEMNITEES" has the meaning specified in Section 10.4.
"INDENTURES" means the indentures relating to each of the
Debentures.
"INTELLECTUAL PROPERTY SECURITY AGREEMENT" means a security
agreement made by each of the Borrowers, in substantially the form of Exhibit
E, as such agreement may be amended, supplemented or otherwise modified from
time to time.
"INTERCOMPANY NOTE" shall mean any intercompany note,
substantially in the form of Exhibit I, made by any Borrower to any other
Borrower or by any Borrower to the Company or Holdings.
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<PAGE> 19
"INTERCORPORATE AGREEMENT" means the Intercorporate Agreement
among Holdings, the Company and the Borrowers dated on or about the Closing
Date.
"INTERCREDITOR AGREEMENT" means the intercreditor agreement by
and among the agent for the Revolving Credit Lenders and the Agent
substantially in the form of Exhibit K hereto, as the same may be amended,
supplemented or otherwise modified from time to time.
"INTEREST PERIOD" means, (a) initially, the period commencing
on the date such Eurodollar Rate Loan is made or on the date of conversion of a
Base Rate Loan to such Eurodollar Rate Loan and ending one, two, three or six
months thereafter, as selected by the Borrowers in the Notice of Borrowing or
Notice of Conversion or Continuation given to the Agent pursuant to Section 2.2
or 2.7, and (b) thereafter, if such Loan is continued, in whole or in part, as
a Eurodollar Rate Loan pursuant to Section 2.7, a period commencing on the last
day of the immediately preceding Interest Period therefor and ending one, two,
three or six months thereafter, as selected by the Borrowers in the Notice of
Conversion or Continuation given to the Agent pursuant to Section 2.7;
PROVIDED, HOWEVER, that all of the foregoing provisions relating to Interest
Periods in respect of Eurodollar Rate Loans are subject to the following:
(i) if any Interest Period would otherwise end on a
day which 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 extend 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 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;
(iii) the Borrowers may not select any Interest
Period which ends after the date of a scheduled principal
payment on the Loans as set forth in Article II unless, after
giving effect to such selection, the aggregate unpaid
principal
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<PAGE> 20
amount of the Loans for which Interest Periods end after such
scheduled principal payment shall be equal to or less than the
principal amount to which the Loans are required to be reduced after
such scheduled principal payment is made;
(iv) the Borrowers may not select any Interest
Period in respect of Loans having an aggregate principal
amount of less than $3,500,000; and
(v) there shall be outstanding at any one time no
more than two Interest Periods in the aggregate.
"INVENTORY" has the meaning specified in Section 9-109(4) of
the UCC.
"INVESTMENTS" has the meaning specified in Section 7.6.
"IRS" means the Internal Revenue Service, or any successor
thereto.
"ISLIP IRB" means the Lease Agreement, dated as of December 1,
1986, between the Town of Islip Industrial Development Authority and Holdings,
as amended, supplemented or modified from time to time and each of the
agreements, documents and instruments executed in connection therein.
"LEASES" means, with respect to any Borrowers or any of their
Subsidiaries, all of those leasehold estates in real property owned by such
Borrower or such Subsidiary, as lessee, as such may be amended, supplemented or
otherwise modified from time to time to the extent permitted by this Agreement.
"LIEN" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), security interest or preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever intended to assure
payment of any Indebtedness or other obligation, including, without limitation,
any conditional sale or other title retention agreement, the interest of a
lessor under a Capitalized Lease Obligation, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing,
under the Uniform Commercial Code or
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<PAGE> 21
comparable law of any jurisdiction, of any financing statement naming the owner
of the asset to which such Lien relates as debtor.
"LOAN" means a Loan made by a Lender to a Borrower pursuant to
Section 2.1.
"LOAN DOCUMENTS" means, collectively, this Agreement, the
Notes, the Collateral Documents, the Intercreditor Agreement and each
certificate, agreement or document executed by any Loan Party.
"LOAN PARTY" means each Borrower and each Subsidiary or
Affiliate which executes a Loan Document.
"MAJORITY LENDERS" means, at any time, Lenders holding at
least 51% of the then aggregate unpaid principal amount of the Loans or, if no
Loans are then outstanding, Lenders having at least 51% of the Commitments.
"MATERIAL ADVERSE CHANGE" and "MATERIAL ADVERSE EFFECT" mean a
material adverse change in or effect on, as the case may be, any of (i) the
condition (financial or otherwise), business, performance, prospects,
operations or properties of any Loan Party or any Loan Party and its
Subsidiaries taken as one enterprise, (ii) the legality, validity or
enforceability of any Loan Document, (iii) the perfection or priority of the
Liens granted pursuant to the Collateral Documents, (iv) the ability of any
Borrower to repay the Obligations or of any Loan Party to perform its
obligations under any Loan Document, or (v) the rights and remedies of the
Lenders or the Agent under the Loan Documents.
"MORTGAGE" means the Mortgage made by any Borrower in
substantially the form of Exhibit H, as such mortgage may be amended,
supplemented or otherwise modified from time to time.
"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, and to which any Loan Party, any of its
Subsidiaries or any ERISA Affiliate is making, is obligated to make, has made
or been obligated to make, contributions on behalf of participants who are or
were employed by any of them.
"NET INCOME (LOSS)" means, for any Person for any period, the
aggregate of net income (or loss) of such Person
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<PAGE> 22
and its Subsidiaries for such period, determined on a consolidated basis in
conformity with GAAP.
"NET INTEREST EXPENSE" means, for any Person for any period,
gross interest expense of such Person and its Subsidiaries for such period
determined on a consolidated basis in conformity with GAAP, LESS the following
for such Person and its Subsidiaries determined on a consolidated basis in
conformity with GAAP: (a) the sum of (i) interest capitalized during
construction for such period, (ii) interest income for such period, and (iii)
gains for such period on interest rate contracts (to the extent not included in
interest income above and to the extent not deducted in the calculation of such
gross interest expense) and (iv) to the extent included in such gross interest
expense, consent fees paid in connection with the Exchange Offer and Consent
Solicitation and the 12 1/4% Consent Solicitation, PLUS the following for such
Person and its Subsidiaries determined on a consolidated basis in conformity
with GAAP: (b) the sum of (i) losses for such period on interest rate
contracts (to the extent not included in such gross interest expense), and (ii)
the amortization of upfront costs or fees for such period associated with
Interest Rate Contracts (to the extent not included in gross interest expense).
"NET WORTH" of any Person means, at any date, the excess of the
Total Assets of such Person at such date over the Total Liabilities of such
Person at such date.
"NON-CASH INTEREST EXPENSE" means, for any Person for any
period, the sum of the following amounts to the extent included in Net Interest
Expense of such Person for such period: (i) the amount of amortized debt
discount, (ii) charges relating to write-ups or write-downs in the book or
carrying value of existing Indebtedness and (iii) (iii) amortization of
deferred financing costs.
"NOTE" means a promissory note of the Borrowers payable to the
order of any Lender in a principal amount equal to the amount of such Lender's
Commitment as originally in effect, in substantially the form of Exhibit A,
evidencing the aggregate Indebtedness of the Borrowers to such Lender resulting
from the Loans made by such Lender.
"NOTICE OF BORROWING" has the meaning specified in Section
2.2(a).
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<PAGE> 23
"OBLIGATIONS" means the Loans and all other advances, debts,
liabilities, obligations, covenants and duties owing by the Borrowers to the
Agent, any Lender, any Affiliate of any of them or any Indemnitee, of every
type and description, present or future, whether or not evidenced by any note,
guaranty or other instrument, arising under this Agreement or under any other
Loan Document, whether or not for the payment of money, whether arising by
reason of an extension of credit, loan, guaranty, indemnification, foreign
exchange transaction or in any other manner, whether direct or indirect
(including, without limitation, those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising and however
acquired. The term "Obligations" includes, without limitation, all interest,
charges, expenses, fees, attorneys' fees and disbursements and any other sum
chargeable to the Borrowers under this Agreement or any other Loan Document.
"OPERATING PLAN" means those financial plans dated March 7,
1994 covering the Fiscal Years ending in 1994 through 1998, inclusive,
delivered to the Lenders by the Borrowers.
"OTHER TAXES" has the meaning specified in Section 2.14(b).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PENSION PLAN" means an employee pension benefit plan, as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan), which is
not an individual account plan, as defined in Section 3(34) of ERISA, and which
any Loan Party, any of its Subsidiaries or, if a Title IV Plan, any ERISA
Affiliate maintains, contributes to or has an obligation to contribute to on
behalf of participants who are or were employed by any of them.
"PERFECTION CERTIFICATE" means a certificate, in form
satisfactory to the Agent, executed by a Responsible Officer of each Borrower.
"PERMIT" means any permit, approval, authorization, license,
variance or permission required from a Governmental Authority under an
applicable Requirement of Law.
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<PAGE> 24
"PERMITTED HOLDERS" means Armond Waxman, Melvin Waxman, trusts
for the benefit of any of Armond Waxman, Melvin Waxman or members of their
families, the heirs or administrators or executors for the respective estates
of Armond Waxman or Melvin Waxman or any Person, entity or group of Persons
controlled by any of the foregoing.
"PERSON" means an individual, partnership, corporation
(including, without limitation, a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a Governmental
Authority.
"PLAN" means an employee benefit plan, as defined in Section
3(3) of ERISA, which any Loan Party, any of its Subsidiaries or any ERISA
Affiliate maintains, contributes to or has an obligation to contribute to on
behalf of participants who are or were employed by any Loan Party or any of its
Subsidiaries.
"PLEDGE AGREEMENT" means the pledge agreement executed by TWI
pledging 100% of the outstanding Stock of each of its direct domestic
Subsidiaries and 65% of the outstanding Stock of each of its direct foreign
Subsidiaries, in substantially the form of Exhibit J, as such pledge agreement
may be amended, supplemented or otherwise modified from time to time.
"PROPOSED RESTRUCTURING" (A) the redemption, repayment or
defeasance of (i) all of the Existing 12 1/4% Senior Secured Notes and the
Existing Floating Rate Senior Secured Notes outstanding, (ii) all of the
Existing Senior Subordinated Notes outstanding, (iii) the Existing Convertible
Debentures, if any, outstanding and (iv) the Obligations, (B) the offering of
notes of Holdings and/or the Company the proceeds of which, in the aggregate,
are sufficient to finance the transactions described in clause (A) above and
(C) the contribution by Holdings or the Company to the Borrowers of funds
sufficient to pay the Obligations.
"PUBLIC FILINGS" means the Report on Form 10-K of Holdings for
the year ended June 30, 1993, and the quarterly Reports on Form 10-Q of
Holdings for the fiscal quarters ended September 30, 1993 and December 31,
1993, in each case as amended through the date hereof.
"QUALIFIED PLAN" means an employee pension benefit plan, as
defined in Section 3(2) of ERISA, which is intended
23
<PAGE> 25
to be tax-qualified under Section 401(a) of the Code, and which any Loan Party,
any of its Subsidiaries or any ERISA Affiliate maintains, contributes to or has
an obligation to contribute to on behalf of participants who are or were
employed by any of them.
"RATABLE PORTION" or "RATABLY" means, with respect to any
Lender, the quotient obtained by dividing the Commitment of such Lender by the
Commitments of all Lenders provided that, (i) payments of principal of the
Loans and interest on the Loans shall be made pro rata in accordance with the
respective unpaid principal amounts of the Loans held by the Lenders and (ii)
payments of interest on the Loans shall be made pro rata in accordance with the
respective amounts of unpaid interest on the Loans in respect of which such
interest is being paid owed to all the Lenders.
"REAL ESTATE" means all of those plots, pieces or parcels of
land now owned or hereafter acquired by any Borrower or any of its Subsidiaries
(the "Land"), including, without limitation, those listed on Schedule 4.22(a)
and described in the Mortgages, together with the right, title and interest of
such Borrower or such Subsidiary, if any, in and to the streets, the land lying
in the bed of any streets, roads or avenues, opened or proposed, in front of,
adjoining or abutting the Land to the center line thereof, the air space and
development rights pertaining to the Land and the right to use such air space
and development rights, all rights of way, privileges, liberties, tenements,
hereditaments and appurtenances belonging or in any way appertaining thereto,
all fixtures, all easements now or hereafter benefiting the Land and all
royalties and rights appertaining to the use and enjoyment of the Land,
including, without limitation, all alley, vault, drainage, mineral, water, oil
and gas rights, together with all of the buildings and other improvements now
or hereafter erected on the Land, and any fixtures appurtenant thereto.
"REFINANCING" means (i) the repayment of the Indebtedness of
Holdings owed pursuant to the Existing Waxman Industries Credit Agreement
assumed by one or more Borrowers and the collateralization of the letters of
credit thereunder and (ii) the repayment of the Indebtedness of Barnett owed
pursuant to the Existing Barnett Facility and the assumption hereunder of the
letters of credit issued thereunder by Citibank, as disclosed in the Disclosure
Document.
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"REGISTER" has the meaning specified in Section 10.7.
"RELATED DOCUMENTS" means (a) the Indenture relating to the
Exchange Notes, (b) the amendments to the Indentures relating to the Existing
12 1/4% Senior Secured Notes and the Existing Floating Rate Senior Secured
Notes and the Existing Senior Subordinated Notes, (c) the Revolving Credit
Agreement and (d) each document and instrument executed in connection with the
Corporate Restructuring.
"RELEASE" means, as to any Person, any release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration, in each case of any Contaminant, into the indoor or
outdoor environment or into or out of any property owned by such Person,
including, without limitation, the movement of Contaminants through or in the
air, soil, surface water, ground water or property which forms the basis of
Environmental Costs and Liabilities.
"REMEDIAL ACTION" means all actions required to (i) clean up,
remove, treat or in any other way address Contaminants in the indoor or outdoor
environment, (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants so they do not migrate or endanger or threaten
to endanger public health or welfare or the indoor or outdoor environment, or
(iii) perform pre-remedial studies and investigations and post-remedial
monitoring and care.
"REORGANIZATION" shall mean the following transactions: (i)
the Exchange Offer and Consent Solicitation and the 12 1/4% Consent
Solicitation, (ii) the Corporate Restructuring, (iii) the execution of this
Credit Agreement and the Revolving Credit Agreement, and (iv) the Refinancing,
as described in the Disclosure Document.
"REPORTABLE EVENT" means any of the events described in
Sections 4043(b)(1), (2), (3), (5), (6), (8) or (9) of ERISA.
"REQUIREMENT OF LAW" means, as to any Person, the certificate
of incorporation and by-laws or other organizational or governing documents of
such Person, and all federal, state and local laws, rules and regulations,
including, without limitation, federal, state or local
25
<PAGE> 27
securities, antitrust and licensing laws, any federal, state or local laws or
regulations concerning physicians, nurses and psychologists, all food, health
and safety laws, and all applicable trade laws and requirements, including,
without limitation, all disclosure requirements of Environmental Laws, ERISA
and all orders, judgments, decrees or other determinations of any Governmental
Authority or arbitrator, 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" means, with respect to any Person, any
of the principal executive officers (including treasurer) or any other officer
or employee of such Person selected by such Person as a Responsible Officer
hereunder and notification of whose selection is made in writing to the Agent.
"RETIREE WELFARE PLAN" means any Welfare Plan providing for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant's termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the Code and at the
sole expense of the participant or the beneficiary of the participant.
"REVOLVING CREDIT LENDERS" means the lenders party to the
Revolving Credit Agreement.
"REVOLVING CREDIT AGREEMENT" means the Credit Agreement, dated
as of May 20, 1994, by and among the financial institutions party thereto and
Citicorp USA, Inc. as agent pursuant to which the financial institutions will
make loans and issue letters of credit to the Borrowers in an aggregate amount
not to exceed $55,000,000.
"SECURED PARTIES" means the Lenders and the Agent.
"SECURITY AGREEMENT" means an agreement, in substantially the
form of Exhibit E, executed by each of the Borrowers, as such agreement may be
amended, supplemented or modified from time to time.
"SOLVENT" means, with respect to any Person, that the value of
the assets of such Person (both at fair value and present fair saleable value)
is, on the date of determination, greater than the total amount of liabilities
(including, without limitation, contingent and unliquidated
26
<PAGE> 28
liabilities) of such Person as of such date and that, as of such date, such
Person is able to pay all liabilities of such Person as such liabilities mature
and does not have unreasonably small capital. In computing the amount of
contingent or unliquidated liabilities at any time, such liabilities will be
computed at the amount which, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
"STOCK" means shares of capital stock, beneficial or
partnership interests, participations or other equivalents (regardless of how
designated) of or in a corporation or equivalent entity, whether voting or
non-voting, and includes, without limitation, common stock and preferred stock.
"STOCK EQUIVALENTS" means all securities convertible into or
exchangeable for Stock and all warrants, options or other rights to purchase or
subscribe for any stock, whether or not presently convertible, exchangeable or
exercisable.
"SUBSIDIARY" means, with respect to any Person, any
corporation, partnership or other business entity of which an aggregate of 50%
or more of the outstanding Stock having ordinary voting power to elect a
majority of the board of directors, managers, trustees or other controlling
persons, is, at the time, directly or indirectly, owned or controlled by such
Person and/or one or more Subsidiaries of such Person (irrespective of whether,
at the time, Stock of any other class or classes of such entity shall have or
might have voting power by reason of the happening of any contingency).
"TAX AFFILIATE" means, as to any Person, (i) any Subsidiary of
such Person, and (ii) any Affiliate of such Person with which such Person files
or is eligible to file consolidated, combined or unitary tax returns.
"TAX RETURN" has the meaning specified in Section 4.3.
"TAXES" has the meaning specified in Section 2.14(a).
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"TAX SHARING AGREEMENT" means the tax sharing agreement, dated
on or about the Closing Date by and among Holdings and its domestic
Subsidiaries.
"TERMINATION DATE" means the earliest of (i) June 1, 1994,
unless the Closing Date occurs prior thereto, (ii) the third anniversary of the
Closing Date and (iii) the date of the consummation of the Proposed
Restructuring.
"TITLE INSURANCE POLICIES" has the meaning specified in
Section 3.1(h).
"TITLE IV PLAN" means a Pension Plan which is covered by Title
IV of ERISA.
"TOTAL ASSETS" of any Person means, at any date, the total
assets of such Person and its Subsidiaries at such date determined on a
consolidated basis in conformity with GAAP.
"TOTAL LIABILITIES" of any Person means, at any date, all
obligations which in conformity with GAAP would be included in determining
total liabilities as shown on the liabilities side of a consolidated balance
sheet of such Person and its Subsidiaries at such date.
"TRADEMARK LICENSE AGREEMENT" means the Trademark License
Agreement by and among Holdings, the Company and the Borrowers dated on or
about the Closing Date.
"TRIGGER EVENT" means the failure of the Company to maintain
at the end of each Fiscal Quarter set forth below a ratio of EBITDA to Cash
Interest Expense, in each case determined based on the four Fiscal Quarters
ending on the date of determination (except that (i) in the case of the Fiscal
Quarter ending June 30, 1994, such determination shall be made based on the
three months then ending, (ii) in the case of the Fiscal Quarter ending
September 30, 1994, such determination shall be made based on the six months
then ending, and (iii) in the case of the Fiscal Quarter ending December 31,
1994, such determination shall be based on the nine months then ending) of not
less than the ratio set forth below for such Fiscal Quarter:
28
<PAGE> 30
<TABLE>
<CAPTION>
For Each Fiscal Quarter
Ending on Minimum Ratio
------------- -------------
<S> <C>
June 30, 1994 1.28
September 30, 1994 1.32
December 31, 1994 1.33
March 31, 1995 1.36
June 30, 1995 1.39
September 30, 1995 1.42
December 31, 1995 1.43
March 31, 1996 1.43
June 30, 1996 1.43
September 30, 1996 1.46
December 31, 1996 1.47
March 31, 1997 1.52
June 30, 1997 1.54
September 30, 1997 1.85
December 31, 1997 1.85
March 31, 1998 1.85
</TABLE>
A Trigger Event shall be deemed to occur at the end of the Fiscal Quarter for
which the Company fails to maintain the ratio as described above and shall
continue until the end of the first Fiscal Quarter in which the Company does
maintain such ratio.
"12 1/4% CONSENT SOLICITATION" means the Consent Solicitation
in respect of the Existing 12 1/4% Senior Secured Notes and the Existing
Floating Rate Senior Secured Notes relating to consents to amend the indenture
in respect thereof to permit the Corporate Restructuring and the Refinancing.
"TWI" mean TWI, International, Inc., a Delaware corporation.
"UNFUNDED PENSION LIABILITY" means the aggregate amount, if
any, of the sum of (i) the amount by which the present value of all accrued
benefits under each Title IV Plan exceeds the fair market value of all assets
of such Title IV Plan allocable to such benefits in accordance with Title IV of
ERISA, all determined as of the most recent valuation date for each such Title
IV Plan using the
29
<PAGE> 31
actuarial assumptions in effect under such Title IV Plan, and (ii) for a period
of five years following a transaction reasonably likely to be covered by
Section 4069 of ERISA, the liabilities (whether or not accrued) that could be
avoided by any Loan Party, any of its Subsidiaries or any ERISA Affiliate as a
result of such transaction.
"VOTING STOCK" means, with reference to the Company, Stock of
any class or classes if the holders of such Stock are ordinarily, in the
absence of contingencies, entitled to vote for the election of the directors
(or Persons performing similar functions) of the Company, even though the right
so to vote has been suspended by the happening of such a contingency.
"WELFARE PLAN" means an employee welfare plan, as defined in
Section 3(1) of ERISA, to which any Loan Party or any of its Subsidiaries
maintains, contributes to or has an obligation to contribute to, on behalf of
any participants (or their beneficiaries) who are or were employed by any of
them.
"WITHDRAWAL LIABILITY" means, as to any Loan Party at any
time, the aggregate amount of the liabilities of any Loan Party, any of its
Subsidiaries or any ERISA Affiliate pursuant to Section 4201 of ERISA, and any
increase in contributions required to be made pursuant to Section 4243 of
ERISA, with respect to all Multiemployer Plans.
1.2. COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding" and the word "through" means "to and including".
1.3. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in conformity with GAAP and all accounting
determinations required to be made pursuant hereto shall, unless expressly
otherwise provided herein, be made in conformity with GAAP.
1.4. CERTAIN TERMS. (a) The words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole, and not to any particular Article, Section, subsection or clause in this
Agreement. References herein to an Exhibit, Schedule, Article, Section,
subsection or clause refer to the
30
<PAGE> 32
appropriate Exhibit or Schedule to, or Article, Section, subsection or clause
in this Agreement.
(b) The terms "Lender" and "Agent" include their respective
successors and the term "Lender" include each assignee of such Lender who
becomes a party hereto pursuant to Section 10.7.
(c) Upon the appointment of any successor Agent pursuant to
Section 9.6, references to Citibank in Section 9.3 and in the definition of
Eurodollar Rate shall be deemed to refer to the successor then acting as the
Agent.
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
2.1. THE LOANS. On the terms and subject to the conditions
contained in this Agreement, each Lender severally agrees to make a loan (each
a "Loan") to the Borrowers on the Closing Date, in an amount not to exceed the
amount set opposite such Lender's name on Schedule II as its Commitment (such
Lender's "Commitment"). Amounts prepaid pursuant to Section 2.6 may not be
reborrowed under this Section 2.1. The Loan of each Lender shall be evidenced
by the Note to the order of such Lender.
2.2. MAKING THE LOANS. (a) The Borrowing shall be made upon
receipt of a Notice of Borrowing, given by the Borrowers to the Agent not later
than 12:00 noon (New York City time) on the third Business Day prior to the
Closing Date. The Notice of Borrowing shall specify therein (i) the Closing
Date, (ii) the aggregate amount of such proposed Borrowing, (iii) the amount
thereof, if any, requested to be Eurodollar Rate Loans, and (iv) the initial
Interest Period or Periods for such Eurodollar Rate Loans and (v) the amount to
be borrowed by each Borrower. The Loans shall be made as Base Rate Loans
unless (subject to Section 2.11) the Notice of Borrowing specifies that all or
a pro rata portion thereof in an aggregate amount not less than $3,500,000 or
an integral multiple of $500,000 in excess thereof shall be Eurodollar Rate
Loans having the same Interest Period.
(b) The Agent shall give to each Lender prompt notice of the
Agent's receipt of the Notice of Borrowing and, if Eurodollar Rate Loans are
properly requested in such Notice of Borrowing, the applicable interest rate
under
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Section 2.8(b). Each Lender shall, before 3:00 P.M. (New York City time) on
the date of the proposed Borrowing, make available for the account of its
Applicable Lending Office to the Agent at its address referred to in Section
10.2, in immediately available funds, such Lender's Ratable Portion of such
proposed Borrowing. After the Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article III, the Agent
will make such funds available to such Borrower at the Agent's aforesaid
address.
(c) The Notice of Borrowing shall be irrevocable and binding
on the Borrower so making the request. In the case of any proposed Borrowing
which the related Notice of Borrowing specifies is to be comprised of
Eurodollar Rate Loans, the Borrowers shall jointly and severally indemnify each
Lender against any loss, cost or expense incurred by such Lender as a result of
any failure to fulfill on or before the date specified in such Notice of
Borrowing for such proposed Borrowing the applicable conditions set forth in
Article III, including, without limitation, any loss (including, without
limitation, loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund any Eurodollar Rate Loan to be made by such Lender as part of
such proposed Borrowing when such Eurodollar Rate Loan, as a result of such
failure, is not made on such date.
(d) Unless the Agent shall have received notice from a Lender
prior to the time of any proposed Borrowing that such Lender will not make
available to the Agent such Lender's Ratable Portion of such Borrowing, the
Agent may assume that such Lender has made such Ratable Portion available to
the Agent on the date of such Borrowing in accordance with this Section 2.2 and
the Agent may, in reliance upon such assumption, make available to the Borrower
requesting the Borrowing on such date a corresponding amount. If and to the
extent that such Lender shall not have so made such Ratable Portion available
to the Agent, such Lender and such Borrower severally agree to repay to the
Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to such
Borrower until the date such amount is repaid to the Agent, at (i) in the case
of such Borrower, the interest rate applicable at the time to the Loans
comprising such Borrowing and (ii) in the case of such Lender, the Federal
Funds Rate. If such Lender shall repay to the Agent such corresponding amount,
such
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amount so repaid shall constitute such Lender's Loan as part of such Borrowing
for purposes of this Agreement. If such Borrower shall repay to the Agent such
corresponding amount, such payment shall not relieve such Lender of any
obligation it may have to such Borrower hereunder.
(e) The failure of any Lender to make the Loan to be made by
it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Loan on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Loan to be made by such other Lender on the date of any Borrowing.
2.3. FEES. (a) The Borrowers shall pay to the Agent for the
ratable benefit of the Lenders $300,000 on the Closing Date. If any
Obligations are outstanding on the six month anniversary of the Closing Date,
the Borrowers shall pay to the Agent for the ratable benefit of the Lenders an
additional $150,000.
(b) The Borrowers have agreed to pay additional fees, the
amount and dates of payment of which are embodied in a separate agreement
between the Company and Citibank.
2.4. [omitted]
2.5. REPAYMENT. The Borrowers shall repay the Loans on the
first day of every third month (beginning with the first day of the tenth full
month following the Closing Date) in an amount equal to $1,000,000; PROVIDED,
HOWEVER, that the Borrowers shall repay the entire unpaid principal amount of
the Loans on the Termination Date.
2.6. PREPAYMENTS. (a) The Borrowers shall have no right to
prepay the principal amount of any Loan other than as provided in this Section
2.6.
(b) Any Borrower may, upon at least three Business Days'
prior notice to the Agent, stating the proposed date and aggregate principal
amount of the prepayment, prepay the outstanding principal amount of the Loans
made to it in whole or ratably in part. If such Borrower is making payment in
whole, such payment shall be paid together with accrued interest to the date of
such prepayment on the principal amount prepaid. Upon the giving of such
notice of prepayment, the principal amount of the Loans specified to
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be prepaid shall become due and payable on the date specified for such
prepayment.
(c) (i) Subject to the terms of the Intercreditor Agreement,
the Borrowers shall forthwith prepay the Loans in an amount equal to 75% of all
Asset Sale Proceeds received by the Borrowers or their Subsidiaries.
(ii) Subject to the terms of the Intercreditor Agreement,the
Borrowers shall, upon receipt of any reversion from a defined benefit plan,
prepay the Loans, in an amount equal to the amount of such reversion so
received. For purposes of this subsection (ii), reversion is defined as the
amount of surplus assets which, upon the termination of any defined benefit
plan, revert to any Borrower or any of its Subsidiaries (net of any taxes,
after taking into account any available tax credits or deductions, and excise
taxes or penalties thereon).
(iii) All prepayments of the Loans made pursuant to this
subsection (c) shall be applied to the remaining installments of the Loans in
the inverse order of maturity.
2.7. CONVERSION/CONTINUATION OPTION. The Borrowers may elect
(i) at any time to convert Base Rate Loans or any portion thereof to Eurodollar
Rate Loans or (ii) at the end of any Interest Period with respect thereto, to
convert Eurodollar Rate Loans or any portion thereof into Base Rate Loans or to
continue such Eurodollar Rate Loans or any portion thereof for an additional
Interest Period; PROVIDED, HOWEVER, that the aggregate of the Eurodollar Loans
for each Interest Period therefor must be in the amount of $3,500,000 or an
integral multiple of $500,000 in excess thereof. Each conversion or
continuation shall be allocated among the Loans of all Lenders in accordance
with their Ratable Portion. Each such election shall be in substantially the
form of Exhibit C hereto (a "Notice of Conversion or Continuation") and shall
be made by giving the Agent at least three Business Days' prior written notice
thereof specifying (A) the amount and type of conversion or continuation, (B)
in the case of a conversion to or a continuation of Eurodollar Rate Loans, the
Interest Period therefor, and (C) in the case of a conversion, the date of
conversion (which date shall be a Business Day and, if a conversion from
Eurodollar Rate Loans, shall also be the last day of the Interest Period
therefor). The Agent shall promptly notify each Lender of its receipt of a
Notice of Conversion or Continuation and of the contents thereof.
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Notwithstanding the foregoing, no conversion in whole or in part of Base Rate
Loans to Eurodollar Rate Loans, and no continuation in whole or in part of
Eurodollar Rate Loans upon the expiration of any Interest Period therefor,
shall be permitted at any time at which a Default or an Event of Default shall
have occurred and be continuing. If, within the time period required under the
terms of this Section 2.7, the Agent does not receive a Notice of Conversion or
Continuation from the Borrowers containing a permitted election to continue any
Eurodollar Rate Loans for an additional Interest Period or to convert any such
Loans, then, upon the expiration of the Interest Period therefor, such Loans
will be automatically converted to Base Rate Loans. Each Notice of Conversion
or Continuation shall be irrevocable.
2.8. INTEREST. The Borrowers jointly and severally agree to
pay interest on the unpaid principal amount of each Loan from the date thereof
until the principal amount thereof shall be paid in full, at the following
rates per annum:
(a) For Base Rate Loans, at a rate per annum equal
at all times to the Base Rate in effect from time to time PLUS the
Applicable Base Rate Margin, payable monthly on the first day of each
month and on the Termination Date; PROVIDED, HOWEVER, that during the
continuance of an Event of Default, all Base Rate Loans shall bear
interest, payable on demand, at a rate per annum equal at all times to
2% per annum above the sum of the Applicable Base Rate Margin and the
Base Rate in effect from time to time.
(b) For Eurodollar Rate Loans, at a rate per annum
equal at all times during the applicable Interest Period for each
Eurodollar Rate Loan to the sum of the Eurodollar Rate for such
Interest Period PLUS the Applicable Eurodollar Rate Margin in effect on
the first day of such Interest Period, payable monthly and on the
Termination Date; PROVIDED, HOWEVER, that during the continuance of an
Event of Default, all Eurodollar Rate Loans shall bear interest,
payable on demand, at a rate per annum equal at all times to 2% above
the sum of the Eurodollar Rate and the Applicable Eurodollar Rate
Margin per annum in effect from time to time.
2.9. INTEREST RATE DETERMINATION AND PROTECTION. (a) The
Eurodollar Rate for each Interest Period for
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Eurodollar Rate Loans shall be determined by the Agent two Business Days before
the first day of such Interest Period in the case of Eurodollar Rate Loans.
(b) The Agent shall give prompt notice to the Borrowers and
the Lenders of the applicable interest rate determined by the Agent for
purposes of Section 2.9(a).
(c) If, with respect to Eurodollar Rate Loans, the Majority
Lenders notify the Agent that the Eurodollar Rate for any Interest Period
therefor will not adequately reflect the cost to such Majority Lenders of
making such Loans or funding or maintaining their respective Eurodollar Rate
Loans for such Interest Period, the Agent shall forthwith so notify the
Borrowers and the Lenders, whereupon
(i) each Eurodollar Rate Loan will automatically, on
the last day of the then existing Interest Period therefor, convert
into a Base Rate Loan; and
(ii) the obligations of the Lenders to make Eurodollar
Rate Loans or to convert Base Rate Loans into Eurodollar Rate Loans
shall be suspended until the Agent shall notify the Borrowers that
such Lenders have determined that the circumstances causing such
suspension no longer exist.
2.10. INCREASED COSTS. If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation (other than any change by way of imposition or increase of reserve
requirements included in determining the Eurodollar Rate Reserve Percentage) or
(ii) compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to any Lender of agreeing to make or making, funding
or maintaining any Eurodollar Rate Loans, then the Borrowers jointly and
severally agree to, from time to time, upon demand by such Lender (with a copy
of such demand to the Agent), pay to the Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such increased
cost. A certificate as to the amount of such increased cost, submitted to the
Borrowers and the Agent by such Lender, shall be conclusive and binding for all
purposes, absent manifest error. If the Borrowers so notify the Agent within
five Business Days after any Lender notifies the Borrowers of any increased
cost pursuant to the
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foregoing provisions of this Section 2.10, the Borrowers may either (A) prepay
in full all Eurodollar Rate Loans of such Lender then outstanding in accordance
with Section 2.6(b) and, additionally, reimburse such Lender for such increased
cost in accordance with this Section 2.10 or (B) convert all Eurodollar Rate
Loans of all Lenders then outstanding into Base Rate Loans, in accordance with
Section 2.7 and, additionally, reimburse such Lender for such increased cost in
accordance with this Section 2.10.
2.11. ILLEGALITY. Notwithstanding any other provision of
this Agreement, if the introduction of or any change in or in the
interpretation of any law or regulation shall make it unlawful, or any central
bank or other Governmental Authority shall assert that it is unlawful, for any
Lender or its Eurodollar Lending Office to make Eurodollar Rate Loans or to
continue to fund or maintain Eurodollar Rate Loans, then, on notice thereof and
demand therefor by such Lender to the Borrowers through the Agent, (i) the
obligation of such Lender to make or to continue Eurodollar Rate Loans and to
convert Base Rate Loans into Eurodollar Rate Loans shall terminate and (ii) the
Borrowers jointly and severally agree to forthwith prepay in full all
Eurodollar Rate Loans of such Lender then outstanding, together with interest
accrued thereon, unless the Borrowers, within five Business Days of such notice
and demand, convert all Eurodollar Rate Loans of all Lenders then outstanding
into Base Rate Loans.
2.12 CAPITAL ADEQUACY. If (i) the introduction of or any
change in or in the interpretation of any law or regulation, (ii) compliance
with any law or regulation, or (iii) compliance with any guideline or request
from any central bank or other Governmental Authority (whether or not having
the force of law) affects or would affect the amount of capital required or
expected to be maintained by any Lender or any corporation controlling any
Lender and such Lender reasonably determines that such amount is based upon the
existence of such Lender's Commitments and Loans and its other commitments and
loans of such type, including, without limitation, its other commitments in
respect of letters of credit (or similar contingent obligations) then, upon
demand by such Lender (with a copy of such demand to the Agent), the Borrowers
jointly and severally agree to pay to the Agent for the account of such Lender,
from time to time as specified by such Lender, additional amounts sufficient to
compensate such Lender in the light of such circumstances, to the extent that
such Lender reasonably determines such
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increase in capital to be allocable to the existence of such Lender's
Commitments and Loans. A certificate as to such amounts submitted to the
Borrowers and the Agent by such Lender shall be conclusive and binding for all
purposes absent manifest error.
2.13. PAYMENTS AND COMPUTATIONS. (a) The Borrowers shall
make each payment hereunder and under the Notes not later than 12:00 noon (New
York City time) on the day when due, in Dollars, to the Agent at its address
referred to in Section 10.2 in immediately available funds without set-off or
counterclaim. The Agent will promptly thereafter cause to be distributed
immediately available funds relating to the payment of principal or interest or
fees (other than amounts payable pursuant to Section 2.10, 2.11, 2.12 or 2.14)
to the Lenders, in accordance with their respective Ratable Portions, for the
account of their respective Applicable Lending Offices, and like funds relating
to the payment of any other amount payable to any Lender to such Lender for the
account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Payment received by the Agent
after 12:00 noon (New York City time) shall be deemed to be received on the
next Business Day.
(b) Each Borrower hereby authorizes each of the Agent and
each Lender, if and to the extent payment owed to the Agent or such Lender is
not made when due hereunder or under any Loan held by the Agent and such
Lender, to charge from time to time against any or all of the Borrowers'
accounts (other than accounts used exclusively for payroll) with the Agent or
such Lender any amount so due. The Agent and the Lenders each agree promptly
to notify the Borrowers after any such application made by the Agent or such
Lender (as the case may be); PROVIDED, HOWEVER, that the failure to give such
notice shall not affect the validity of the application.
(c) All computations of interest and of fees shall be made by
the Agent on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring in the period
for which such interest and fees are payable. Each determination by the Agent
of an interest calculation hereunder shall be conclusive and binding for all
purposes, absent manifest error.
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(d) Whenever any payment hereunder or under the Notes shall
be stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest or fee, as the
case may be; PROVIDED, HOWEVER, that if such extension would cause payment of
interest on or principal of any Eurodollar Rate Loan to be made in the next
calendar month, such payment shall be made on the next preceding Business Day.
(e) Unless the Agent shall have received notice from the
Borrowers prior to the date on which any payment is due hereunder to the
Lenders that the Borrowers will not make such payment in full, the Agent may
assume that the Borrowers have made such payment in full to the Agent on such
date and the Agent may, in reliance upon such assumption, cause to be
distributed to each Lender on such due date an amount equal to the amount then
due such Lender. If and to the extent the Borrowers shall not have so made
such payment in full to the Agent, each Lender shall repay to the Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to
such Lender until the date such Lender repays such amount to the Agent, at the
Federal Funds Rate.
(f) If any Lender (a "Non-Funding Lender") has (x) failed to
make a Loan required to be made by it hereunder, and the Agent has determined
that such Lender is not likely to make such Loan or (y) given notice to the
Borrowers or the Agent that it will not make, or that it has disaffirmed or
repudiated any obligation to make, Loans, in each case by reason of the
provisions of the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 or otherwise, any payment made on account of the principal of the Loans
outstanding shall be made as follows:
(i) in the case of any such payment made on any
date when and to the extent that, in the determination of the Agent,
any Borrower would be able, under the terms and conditions hereof, to
reborrow the amount of such payment under the Commitments and to
satisfy any applicable conditions precedent set forth in Section 6.2
to such reborrowing, such payment shall be made on account of the
outstanding Loans held by the Lenders other than the Non-Funding
LenderPRO RATA
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according to the respective outstanding principal amounts of the Loans
of such Lenders;
(ii) otherwise, such payment shall be made on
account of the outstanding Loans held by the Lenders PRO RATA
according to the respective outstanding principal amounts of such
Loans; and
(iii) any payment made on account of interest on the
Loans shall be made PRO RATA according to the respective amounts of
accrued and unpaid interest due and payable on the Loans with respect
to which such payment is being made.
2.14. TAXES. (a) Any and all payments by any Borrower
under each Loan Document shall be made free and clear of and without deduction
for any and all present or future taxes, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto, excluding, in the
case of each Lender and the Agent, taxes measured by its net income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which such
Lender or the Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of each Lender, taxes measured by its net
income, and franchise taxes imposed on it, by the jurisdiction of such Lender's
Applicable Lending Office or any political subdivision thereof (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If any Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent (i) the sum payable shall be increased as
may be necessary so that after making all required deductions (including,
without limitation, deductions applicable to additional sums payable under this
Section 2.14) such Lender or the Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
such Borrower shall make such deductions, (iii) such Borrower shall pay the
full amount deducted to the relevant taxing authority or other authority in
accordance with applicable law, and (iv) such Borrower shall deliver to the
Agent evidence of such payment to the relevant taxation or other authority.
(b) In addition, each Borrower jointly and severally agrees
to pay any present or future stamp or documentary taxes or any other excise or
property taxes,
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charges or similar levies of the United States or any political subdivision
thereof or any applicable foreign jurisdiction which arise from any payment
made under any Loan Document or from the execution, delivery or registration
of, or otherwise with respect to, any Loan Document (collectively, "Other
Taxes").
(c) Each Borrower jointly and severally agrees to indemnify
each Lender and the Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 2.14) paid by such Lender or
the Agent (as the case may be) and any liability (including, without
limitation, for penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. This indemnification shall be made within 30 days from the
date such Lender or the Agent (as the case may be) makes written demand
therefor.
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes, the Borrowers will furnish to the Agent, at its address referred
to in Section 10.2, the original or a certified copy of a receipt evidencing
payment thereof.
(e) Without prejudice to the survival of any other
agreement of any Borrower hereunder, the agreements and obligations of each
Borrower contained in this Section 2.14 shall survive the payment in full of
the Obligations.
2.15. SHARING OF PAYMENTS, ETC. If any Lender shall obtain
any payment (whether voluntary, involuntary, through the exercise of any right
of set-off, or otherwise) on account of the Loans made by it (other than
pursuant to Section 2.10, 2.11, 2.12 or 2.14) in excess of its Ratable Portion
of payments on account of the Loans obtained by all the Lenders, such Lender
shall forthwith purchase from the other Lenders such participations in their
Loans as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; PROVIDED, HOWEVER, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lender the purchase price to the extent of such
recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to
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(ii) the total amount so recovered from the purchasing Lender) of any interest
or other amount paid or payable by the purchasing Lender in respect of the
total amount so recovered. The Borrowers agree that any Lender so purchasing a
participation from another Lender pursuant to this Section 2.15 may, to the
fullest extent permitted by law, exercise all its rights of payment (including,
without limitation, the right of set-off) with respect to such participation as
fully as if such Lender were the direct creditor of the Borrowers in the amount
of such participation.
2.16. PAYMENT ON ACCOUNT OF COLLATERAL. Subject to the
terms of the Intercreditor Agreement, any cash held by the Agent as Collateral
and all cash proceeds received by the Agent in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
(after exercise by the Agent of its remedies under the Collateral Documents)
shall be applied by the Agent:
First, to the payment of the costs and expenses of such sale,
including, without limitation, reasonable expenses of the Agent and its agents
including the fees and expenses of its counsel, and all expenses, liabilities
and advances made or incurred by the Agent in connection therewith;
Next, to the Lenders, PRO RATA, for the payment in full of
accrued and unpaid interest on the Loans and then to the principal amount of
the Loans; and
Next, to pay any other Obligations then due and owing; and
Finally, after payment in full of all of the Obligations, to
the payment to the relevant Borrower or to whomsoever may be lawfully entitled
to receive the same as a court of competent jurisdiction may direct.
2.17. INTERCREDITOR AGREEMENT. Each of the parties hereto
agrees and acknowledges to be bound by the terms of the Intercreditor
Agreement. Among other matters, the Intercreditor Agreement provides that the
Liens granted to the Secured Parties under the Collateral Documents are
subordinate to the Liens granted to the secured parties under the Revolving
Credit Agreement.
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ARTICLE III
CONDITIONS OF LENDING
3.1. CONDITIONS PRECEDENT TO THE LOANS. The obligation of
each Lender to make its Loan is subject to satisfaction of the conditions
precedent that the Agent shall have received, on the Closing Date, the
following, each dated the Closing Date unless otherwise indicated, in form and
substance satisfactory to the Agent and (except for the Notes) in sufficient
copies for each Lender:
(a) The Notes to the order of the Lenders, respectively.
(b) Certified copies of (i) the resolutions of the Board of
Directors of each Loan Party approving each Loan Document and each Related
Document to which it is a party, and (ii) all documents evidencing other
necessary corporate action and required governmental and third party approvals,
licenses and consents with respect to each Loan Document and each Related
Document and the transactions contemplated thereby.
(c) A copy of the articles or certificate of incorporation of
each Loan Party and of each of its Subsidiaries which is not a Loan Party
certified as of a recent date by the Secretary of State of the state of
incorporation of such Loan Party or Subsidiary, together with certificates of
such official attesting to the good standing of each such Loan Party and
Subsidiary, and a copy of the certificate of incorporation and the By-Laws of
each Loan Party and of each of its Subsidiaries certified as of the Closing
Date by the Secretary or an Assistant Secretary of each such Loan Party or
Subsidiary.
(d) A certificate of the Secretary or an Assistant Secretary
of each Loan Party certifying the names and true signatures of each officer of
such Loan Party who has been authorized to execute and deliver any Loan
Document or other document required hereunder to be executed and delivered by
or on behalf of such Loan Party.
(e) A copy of each Related Document, certified as being
complete and correct by a Responsible Officer of a Borrower.
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(f) The Security Agreement, duly executed by each of the
Borrowers, together with:
(i) acknowledgment copies of proper Financing
Statements (Form UCC-1) duly filed under the Uniform Commercial Code
of all jurisdictions as may be necessary or, in the opinion of the
Agent, desirable to perfect the Lien created by the Security
Agreement;
(ii) certified copies of Requests for Information or
Copies (Form UCC-11), or equivalent reports, listing all effective
financing statements which name each Borrower or any Subsidiary of
each Borrower (under its present name or any previous name) as debtor
and which are filed in the jurisdictions referred to in said paragraph
(i) above, together with copies of such other financing statements
(none of which shall cover the Collateral purported to be covered by
the Security Agreement, other than the Liens permitted by Section
7.1); and
(iii) evidence that the insurance required by the terms of
the Collateral Documents and by Section 6.4 is in full force and
effect.
(g) An Intellectual Property Security Agreement, duly
executed by each Borrower.
(h) Duly executed and acknowledged Mortgage, in recordable
form for each parcel of each Borrower's Real Estate specified on Schedule
4.22(a), together with:
(i) ALTA mortgagee's title insurance policies (the
"Title Insurance Policies") issued by a title company acceptable to
the Agent, in such form and amounts as are acceptable to the Agent,
insuring that each such Mortgage is a valid first priority Lien on the
Real Estate, subject only to such exceptions to title as shall be
acceptable to the Agent in its sole discretion and containing extended
coverage such endorsements and affirmative insurance as the Agent may
require and as are obtainable in the applicable jurisdiction (together
with copies of documents affecting title), and true copies of each
document, instrument or certificate required by the terms of each such
policy, Mortgage to be, or have been, filed, recorded, executed or
delivered in connection therewith;
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(ii) opinions satisfactory to the Agent of local
counsel retained by the Borrowers with respect to the validity and
enforceability of such Mortgage and such other matters as may be
reasonably required by the Agent; and
(iii) duly executed UCC-1 Financing Statements under
the applicable Uniform Commercial Code to be filed in connection with
such Mortgages, in form and substance satisfactory to the Agent, to
perfect the Lien created by the applicable Mortgage;
(iv) surveys as to all Real Estate in respect of
which is delivered a Mortgage, or as may be reasonably required by the
Agent, certified to the Agent and the title insurance company issuing
the Title Insurance Policies by a registered Land Surveyor no more
than thirty (30) days prior to the Closing Date and complying with the
minimum detail requirements for land title surveys as adopted by the
American Land Title Association and American Congress on Surveying and
Mapping each in form and substance satisfactory to the Agent;
(v) proof of payment of all title insurance
premiums, documentary, stamp or intangible taxes, recording fees and
mortgage taxes payable in connection with the recording of any of the
Loan Documents or the issuance of the Title Insurance Policies; and
(vi) copies of all Leases and amendments,
modifications and extensions with respect thereto.
(i) The following letters addressed to the Agent on behalf of
the Lenders: (i) a letter from Holdings stating that the Agent and the Lenders
may have access to the books and records of the Borrowers as set forth in the
Credit Agreement and the Loan Documents and (ii) a letter from Aurora
Investment Co., the landlord at the Bedford Heights, Ohio warehouse stating
that upon the occurrence and during the continuance of an Event of Default, the
Agent and the Lenders may use such warehouse to hold and sell the Collateral
and otherwise exercise its remedies under the Collateral Documents for a rental
payment equal to the lower of the rent due and payable under the Lease covering
such warehouse and the fair market value rent for such warehouse as agreed to
by the Agent and such landlord.
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(j) A favorable opinion of Shereff, Friedman, Hoffman &
Goodman, counsel to the Loan Parties, in substantially the form of Exhibit F,
and as to such other matters as any Lender through the Agent may reasonably
request.
(k) A certificate of the treasurer or chief financial officer
of the Borrowers (attached to which shall be pro forma balance sheets of each
Borrower as of March 31, 1994), stating that each Borrower is Solvent after
giving effect to the initial Loans, the application of the proceeds thereof in
accordance with Section 6.10 and the payment of all estimated legal, accounting
and other fees related hereto and thereto.
(l) A certificate, signed by a Responsible Officer of each
Borrower, stating that each of the conditions specified in Section 3.2(b) and
3.3(a) has been satisfied.
(m) A copy of a letter from the Borrowers' independent public
accountants regarding (i) the Lenders' reliance upon such accountant's
professional services and on the reports and other financial information
delivered by such accountants in connection with the extension of credit from
time to time under this Agreement and in connection with the preparation,
review, execution, delivery, amendment, modification, administration,
collection and/or enforcement of this Agreement or any of the other Loan
Documents and (ii) such other matters as shall be reasonably requested by the
Lenders, in form and substance satisfactory to the Agent.
(n) The Pledge Agreement, duly executed by the parties
thereto, together with:
(i) evidence that certificates representing the Pledged
Shares (as defined in each Pledge Agreement) and undated stock powers
for such certificates executed in blank have been delivered to the
agent under the Revolving Credit Agreement as bailee for the Agent and
the Lenders hereunder; and
(ii) evidence that all action necessary or, in the
opinion of the Agent, desirable to perfect and protect the Lien
created by each Pledge Agreement have been taken.
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(o) The Intercorporate Agreement, the Tax Sharing Agreement
and the Trademark License Agreement shall be in form and substance satisfactory
to the Lenders.
(p) All documents necessary to effectuate the transfer of
assets and assumption of Indebtedness in connection with the Reorganization
shall be in form and substance satisfactory to the Lenders (including, without
limitation, the agreements, documents and instruments relating to the
termination of the Existing Waxman Industries Credit Agreement and the release
of the Liens thereunder).
(q) The Intercreditor Agreement, executed by the parties
thereto.
(r) A letter, executed by Holdings and the Company, stating
that upon the consummation of the Proposed Restructuring, they will contribute
to the Borrowers immediately available funds in an amount sufficient to repay
the Obligations.
(s) Such additional documents, information and materials as
any Lender, through the Agent, may reasonably request.
3.2. ADDITIONAL CONDITIONS PRECEDENT TO THE LOANS. The
obligation of each Lender to make its Loan is subject to the further conditions
precedent that:
(a) Each of the Related Documents shall be in form and
substance satisfactory to the Lenders.
(b) On the Closing Date, the following statements shall be
true:
(i) There has been no change since June 30, 1993 in
the corporate, capital or legal structure of Holdings, the Company or
any Borrower or any of their respective Subsidiaries except as set
forth in the Disclosure Document and the Public Filings without the
consent of the Lenders and the Agent;
(ii) All necessary governmental and third party
approvals required to be obtained by any Loan Party in connection with
the transactions contemplated hereby, its obtaining the Loans, the
issuance of the Debentures to be issued on the Closing Date and the
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Corporate Restructuring have been obtained (other than the consent
required pursuant to the Indenture relating to the Convertible
Debentures and pursuant to the Islip IRB);
(iii) There exists no claim, action, suit,
investigation or proceeding (including, without limitation,shareholder
or derivative litigation) pending or, to the knowledge of Holdings,
the Company or any Borrower, threatened in any court or before any
arbitrator or Governmental Authority which relates to the financing
hereunder, the Exchange Offer and Consent Solicitation or the 12 1/4%
Consent Solicitation or which, if adversely determined, would have a
Material Adverse Effect;
(iv) Holdings shall have exchanged for at least
$50,000,000 of Existing Senior Subordinated Notes its Exchange Notes
and warrants to purchase Holdings' common stock and consents required
under the Exchange Offer and Consent Solicitation and the 12 1/4%
Consent Solicitation shall have been obtained;
(v) The conditions precedent to the Revolving Credit
Agreement shall have been satisfied and the Revolving Credit Agreement
shall be effective; and
(vi) There shall exist no default (or event which
would constitute a default with the giving of notice or lapse of time)
under any existing debt instrument of Holdings, the Company, any
Borrower or any of its Subsidiaries (other than those defaults
previously disclosed to the Lenders and set forth on Schedule 4.2).
(c) All costs and accrued and unpaid fees and expenses
(including, without limitation, legal fees and existing expenses) required to
be paid to the Lenders on or before the Closing Date, including, without
limitation, those referred to in Sections 2.3, 2.14 and 10.4, to the extent
then due and payable, shall have been paid.
(d) No Lender in its sole judgment exercised reasonably shall
have determined (i) that there has been any Material Adverse Change since March
31, 1994 except as set forth in the Disclosure Document and the Public Filings,
or (ii) that there has occurred any adverse change which such
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Lender deems material, in its sole judgment, exercised reasonably, in the
financial markets generally, since the date hereof.
(e) No Lender, in its sole judgment, exercised reasonably,
shall have determined that there is any claim, action, suit, investigation,
litigation or proceeding (including, without limitation, shareholder or
derivative litigation) pending or threatened in any court or before any
arbitrator or Governmental Authority which, if adversely determined, would have
a Material Adverse Effect.
(f) Each Lender shall be satisfied, in its sole judgment,
exercised reasonably, that the corporate, capital, legal and management
structure of Holdings, the Company, each Borrower and its Subsidiaries, and
that the nature and status of all Contractual Obligations, securities, labor,
tax, ERISA, employee benefit, environmental, health and safety matters, in each
case, involving or affecting Holdings, the Company, each Borrower or any of its
Subsidiaries is not different from that described in the Disclosure Document or
the Public Filings.
3.3. CONDITIONS PRECEDENT TO THE LOAN. The obligation of
each Lender to make the Loan shall be subject to the further conditions
precedent that:
(a) The following statements shall be true on the date of the
Loans, before and after giving effect thereto and to the application of the
proceeds therefrom and to such issuance (and the acceptance by the relevant
Borrower of the proceeds of such Loan shall constitute a representation and
warranty by the Borrowers that on the date of such Loan such statements are
true):
(i) The representations and warranties contained in
Article IV and of each Loan Party in the other Loan Documents are
correct on and as of such date as though made on and as of such date;
and
(ii) No Default or Event of Default exists or will
result from any Loan being made on such date.
(b) The making of the Loans on such date does not violate any
Requirement of Law and is not enjoined, temporarily, preliminarily or
permanently.
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(c) The Agent shall have received such additional documents,
information and materials as any Lender, through the Agent, may reasonably
request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lenders and the Agent to enter into this
Agreement, the Company and each Borrower represents and warrants to the Lenders
and the Agent that:
4.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Loan
Party and each of its Subsidiaries (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation; (ii) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where such qualification is
necessary, except for failures which could not in the aggregate have a
reasonable likelihood of having a Material Adverse Effect; (iii) has all
requisite corporate power and authority and the legal right to own, pledge,
mortgage and operate its properties, to lease the property it operates under
lease and to conduct its business as now or currently proposed to be conducted;
(iv) is in compliance with its certificate of incorporation and by-laws; (v) is
in compliance with all other applicable Requirements of Law except for such
non-compliances which could not in the aggregate have a reasonable likelihood
of having a Material Adverse Effect; and (vi) has all necessary licenses,
permits, consents or approvals from or by, has made all necessary filings with,
and has given all necessary notices to, each Governmental Authority having
jurisdiction, to the extent required for such ownership, operation and conduct,
except for licenses, permits, consents or approvals which can be obtained by
the taking of ministerial action to secure the grant or transfer thereof or
failures which could not in the aggregate have a reasonable likelihood of
having a Material Adverse Effect.
4.2. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
(a) The execution, delivery and performance by each Loan Party of the Loan
Documents to which it is a party and the consummation of the transactions
related to the financing contemplated hereby:
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(i) are within such Loan Party's corporate powers;
(ii) have been duly authorized by all necessary corporate
action, including, without limitation, the consent of stockholders
where required;
(iii) do not and will not (A) contravene any Loan Party's
or any of its Subsidiaries' respective certificate of incorporation or
by-laws or other comparable governing documents, (B) violate any other
applicable Requirement of Law (including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal
Reserve System), or any order or decree of any Governmental Authority
or arbitrator, (C) except as set forth on Schedule 4.2, conflict with
or result in the breach of, or constitute a default under, or result
in or permit the termination or acceleration of, any Contractual
Obligation of any Loan Party or any of its Subsidiaries which provides
for payments of more than $1,000,000 in any one year of any Loan Party
or any of its Subsidiaries other than those which, in the aggregate,
have no reasonable likelihood of having a Material Adverse Effect, or
(D) result in the creation or imposition of any Lien upon any of the
property of any Loan Party or any of its Subsidiaries, other than
those in favor of the Agent pursuant to the Collateral Documents; and
(iv) do not require the consent of, authorization by,
approval of, notice to, or filing or registration with, any
Governmental Authority or any other Person, other than (A) those which
have been obtained or made and copies of which have been or will be
delivered to the Agent pursuant to Section 3.1, and each of which on
the Closing Date will be in full force and effect and (B) those which
if not obtained in the aggregate have no reasonable likelihood of
having a Material Adverse Effect.
(b) This Agreement has been, and each of the other Loan
Documents will have been upon delivery thereof pursuant to Section 3.1, duly
executed and delivered by each Loan Party thereto. This Agreement is, and the
other Loan Documents will be, when delivered hereunder, the legal, valid and
binding obligation of each Loan Party thereto, enforceable against it in
accordance with its terms, except that enforceability may be limited by
applicable bankruptcy,
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insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting the enforcement of creditor's rights and remedies generally and
subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(c) The execution, delivery and performance by each Loan
Party of the Related Documents to which it is a party and the consummation of
the transactions contemplated thereby, including, without limitation, the
issuance of the Debentures:
(i) are within such Loan Party's respective
corporate powers;
(ii) have been duly authorized by all necessary corporate
action, including, without limitation, the consent of stockholders
where required;
(iii) do not and will not (A) contravene or violate any
Loan Party's or any of its Subsidiaries' respective certificate of
incorporation or by-laws or other comparable governing documents, (B)
violate any other Requirement of Law, or any order or decree of any
Governmental Authority or arbitrator, (C) conflict with or result in
the breach of, or constitute a default under, or result in or permit
the termination or acceleration of, any Contractual Obligation of any
Loan Party or any of its Subsidiaries, except such as in the aggregate
have no reasonable likelihood of having a Material Adverse Effect or
(D) result in the creation or imposition of any Lien upon any of the
property of any Loan Party or any of its Subsidiaries; and
(iv) do not require the consent of, authorization by,
approval of, notice to, or filing or registration with, any
Governmental Authority or any other Person, other than (A) those which
will have been obtained at the Closing Date, each of which will be in
full force and effect on the Closing Date, and (B) those which in the
aggregate, if not obtained, would have no reasonable likelihood of
having a Material Adverse Effect.
(d) Each of the Related Documents has been or at the Closing
Date will have been duly executed and delivered
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by each Loan Party party thereto and at the Closing Date will be the legal,
valid and binding obligation of each Loan Party party thereto, enforceable
against it in accordance with its terms, except that enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting the enforcement of
creditor's rights and remedies generally and subject, as to enforceability, to
general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4.3. TAXES. All federal, state, local and foreign tax
returns, reports and statements (collectively, the "Tax Returns") required to
be filed by each Loan Party or any of its Tax Affiliates have been filed with
the appropriate governmental agencies in all jurisdictions in which such Tax
Returns, are required to be filed, except for inadvertent omissions which could
not in the aggregate have any Material Adverse Effect. All such Tax Returns
are correct in all material respects, and all taxes, charges and other
impositions shown thereon to be due and payable have been timely paid prior to
the date on which any fine, penalty, interest, late charge or loss may be added
thereto for non-payment thereof, except where contested in good faith and by
appropriate proceedings if (i) adequate reserves therefor have been established
on the books of such Loan Party or such Subsidiary in conformity with GAAP and
(ii) all such non-payments could not in the aggregate have any reasonable
likelihood of having a Material Adverse Effect. Proper and accurate amounts
have been withheld by each Loan Party and each of its respective Tax Affiliates
from their respective employees for all periods in full and complete compliance
with the tax, social security and unemployment withholding provisions of
applicable federal, state, local and foreign law and such withholdings have
been timely paid to the respective Governmental Authorities. Except as set
forth on Schedule 4.3, none of the Loan Parties or any of their Tax Affiliates
has (i) executed or filed with the IRS or any other Governmental Authority any
agreement or other document extending, or having the effect of extending, the
period for assessment or collection of any charges; (ii) agreed or been
requested to make any adjustment under Section 481(a) of the Code by reason of
a change in accounting method or otherwise; or (iii) any obligation under any
written tax sharing agreement, other than the Tax Sharing Agreement.
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4.4. FULL DISCLOSURE. (a) The written statements prepared
or furnished by or on behalf of any Loan Party or any of its Affiliates (other
than the Ideal Subsidiaries) in connection with the Loan Documents, the Related
Documents and the consummation of the transactions contemplated thereby, taken
as a whole, do not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements contained herein or
therein not misleading. All facts known to any Loan Party which are material
to an understanding of the financial condition, business, properties or
prospects of the Loan Parties and their Subsidiaries taken as one enterprise
have been disclosed to the Lenders. Each Lender hereby acknowledges that it
has received a copy of the Disclosure Document and the Public Filings.
(b) The pro forma consolidated statements of financial
condition and pro forma consolidated statements of operations of the Company
and its Subsidiaries contained in the Disclosure Document are the unaudited
consolidated financial statements of the Company and its Subsidiaries, as of
the dates and for the periods specified therein, adjusted to give effect to
certain events and assumptions as set forth therein.
(c) The Company has delivered to each Lender a true, complete
and correct copy of the Disclosure Document. The Disclosure Document complies
as to form in all material respects with all applicable requirements of all
applicable state and Federal securities laws.
4.5. FINANCIAL MATTERS. (a) The consolidated balance sheet
of Holdings and its Subsidiaries as at June 30, 1993, and the related
consolidated statements of income, retained earnings and cash flows of Holdings
and its Subsidiaries for the fiscal year then ended, certified by Arthur
Andersen & Co., and the consolidated balance sheets of Holdings and its
Subsidiaries as at March 31, 1994, and the related consolidated statements of
income, retained earnings and cash flows of Holdings and its Subsidiaries for
the nine months then ended, certified by the chief financial officer of
Holdings, copies of which have been furnished to each Lender, fairly present,
subject, in the case of said balance sheets as at March 31, 1994, and said
statements of income, retained earnings and cash flows for the nine months then
ended, to year-end audit adjustments, the consolidated financial condition of
Holdings and its Subsidiaries as at such dates and the consolidated results of
the operations of
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Holdings and its Subsidiaries for the period ended on such dates, all in
conformity with GAAP.
(b) Since March 31, 1994, there has been no Material Adverse
Change and there have been no events or developments that could in the
aggregate reasonably be expected to have a Material Adverse Effect, other than
as set forth in the Disclosure Document and the Public Filings.
(c) None of Holdings nor any of its Subsidiaries had at June
30, 1993 any material obligation, contingent liability or liability for taxes,
long-term leases or unusual forward or long-term commitment which is not
reflected in the balance sheet at such date referred to in subsection (a) above
or in the notes thereto.
(d) The unaudited pro forma consolidated balance sheets of
each Borrower and its consolidated Subsidiaries (the "Pro Forma Balance
Sheet"), copies of which have been delivered to each Lender, have been prepared
as of March 31, 1994, reflect as of such date, on a pro forma basis, the
consolidated financial condition of each Borrower and its Subsidiaries, and
the Operating Plan was reasonably based on the information available to
Holdings, the Company and each Borrower at the time so furnished and on the
Closing Date.
(e) Each Borrower is, and on a consolidated basis the Company
and its Subsidiaries are, Solvent.
4.6. LITIGATION. There are no pending or, to the knowledge
of the Company or any Borrower, threatened actions, investigations or
proceedings affecting the Company or any of its Subsidiaries before any court,
Governmental Authority or arbitrator, other than those that in the aggregate,
if adversely determined, could not be reasonably expected to have a Material
Adverse Effect. None of the sale of any Debentures or the performance of any
action by any Loan Party required or contemplated by any of the Loan Documents
or the Related Documents is restrained or enjoined (either temporarily,
preliminarily or permanently), and no material adverse condition has been
imposed by any Governmental Authority or arbitrator upon any of the foregoing
transactions.
4.7. MARGIN REGULATIONS. No Borrower is engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the Board of Governors of
the Federal
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Reserve System), and no proceeds of any Borrowing will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
4.8. OWNERSHIP OF BORROWER; SUBSIDIARIES. (a) The
authorized capital stock of the Company will consist of 9,000 shares of common
stock, $0.01 par value per share, of which 102 shares will be issued and
outstanding and 1,000 shares of Preferred Stock, $0.10 par value per share, of
which no shares will be issued and outstanding. All of the outstanding capital
stock of the Company has been validly issued, is fully paid and non-assessable
and is owned beneficially and of record by Holdings. No authorized but
unissued shares, no treasury shares and, to the best knowledge of the Company
or any Borrower, no other outstanding shares of capital stock of the Company
are subject to any option, warrant, right of conversion or purchase or any
similar right. There are no agreements or understandings with respect to the
voting, sale or transfer of any shares of capital stock of the Company, or to
the best knowledge of the Company or any Borrower, any agreement restricting
the transfer or hypothecation of any such shares, other than in respect of the
pledges thereof and covenants pursuant to the Related Documents or pursuant to
the indenture relating to the Existing 12 1/4% Senior Secured Notes and the
Existing Floating Rate Senior Secured Notes.
(b) Set forth on Schedule 4.8 hereto is a complete and
accurate list showing all Subsidiaries of the Company and, as to each such
Subsidiary, the jurisdiction of its incorporation, the number of shares of each
class of Stock authorized, the number outstanding on the date hereof and the
percentage of the outstanding shares of each such class owned (directly or
indirectly) by the Company. No Stock of any Subsidiary of the Company is
subject to any outstanding option, warrant, right of conversion or purchase or
any similar right. All of the outstanding capital Stock of each such
Subsidiary has been validly issued, is fully paid and non-assessable and is
owned by the Company, free and clear of all Liens, other than those granted or
to be granted pursuant to the Related Documents or the indenture relating to
the Existing 12 1/4% Senior Secured Notes and the Existing Floating Rate Senior
Secured Notes in respect of the Company's direct Subsidiaries. Neither the
Company nor any such Subsidiary is a party to, or has knowledge of, any
agreement restricting the transfer or hypothecation of any shares of Stock of
any such Subsidiary, other than the Loan
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Documents and the Related Documents. The Company does not own or hold,
directly or indirectly, any capital stock or equity security of, or any equity
interest in, any Person other than such Subsidiaries and the Investments
permitted by Section 7.6.
4.9. ERISA. (a) Schedule 4.9 lists all Plans maintained or
contributed to by any Loan Party or any of its Subsidiaries and all Qualified
Plans maintained or contributed to by any ERISA Affiliate and separately
identifies all Title IV Plans, all Multiemployer Plans, all Qualified Plans,
all unfunded Pension Plans, all multiple employer plans subject to Section 4064
of ERISA and all Retiree Welfare Plans.
(b) Each Qualified Plan has been determined by the IRS to
qualify under Section 401 of the Code, and the trusts created thereunder have
been determined to be exempt from tax under the provisions of Section 501 of
the Code, and to the best knowledge of any Loan Party nothing has occurred
which would cause the loss of such qualification or tax-exempt status.
(c) Each Plan, Qualified Plan and Pension Plan is in
compliance in all material respects with its terms and with applicable
provisions of ERISA and the Code, including, without limitation, the filing of
reports required under ERISA or the Code which are true and correct in all
material respects as of the date filed, and with respect to each such plan,
other than a Qualified Plan, all required contributions and benefits have been
paid in accordance with the provisions of each such plan.
(d) None of any Loan Party, any of its Subsidiaries or any
ERISA Affiliate, with respect to any Qualified Plan, has failed to make any
contribution or pay any amount due as required by Section 412 of the Code or
Section 302 of ERISA or the terms of any such Qualified Plan.
(e) There are no Title IV Plans.
(f) There are no Retiree Welfare Plans.
(g) With respect to each Pension Plans, other than Qualified
Plans, the present value of the liabilities for all participants under each
such plan using the
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actuarial assumptions utilized by the PBGC upon termination of plan does not
exceed $500,000.
(h) Except as set forth on Schedule 4.9, there has been no,
nor is there reasonably expected to occur, any ERISA Event or event described
in Section 4062(e) of ERISA with respect to any Title IV Plan.
(i) Except as set forth on Schedule 4.9, there are no pending
or, to the knowledge of any Loan Party, threatened claims, actions or lawsuits
(other than claims for benefits in the normal course), asserted or instituted
against (i) any Plan, Pension Plan or Qualified Plan or its assets, (ii) any
fiduciary with respect to any Plan, Pension Plan or Qualified Plan or (iii) any
Loan Party, any of its Subsidiaries or any ERISA Affiliate with respect to any
Plan.
(j) Except as set forth on Schedule 4.9, none of any Loan
Party, any of its Subsidiaries or any ERISA Affiliate has incurred or has any
reasonable likelihood of incurring any Withdrawal Liability under Section 4201
of ERISA as a result of a complete or partial withdrawal from a Multiemployer
Plan (and no event has occurred which, with the giving of notice under Section
4219 of ERISA, would result in any such liability).
(k) Except as set forth on Schedule 4.9, within the last five
years no Loan Party, any of its Subsidiaries or any ERISA Affiliate has engaged
in a transaction which resulted in a Title IV Plan with Unfunded Liabilities
being transferred outside of the "controlled group" (within the meaning of
Section 4001(a)(14) of ERISA) of any such entity.
(l) Each Loan Party, each of its Subsidiaries and each ERISA
Affiliate has complied with the notice and continuation coverage requirements
of Section 4980B of the Code and the regulations thereunder, except for
non-compliances which could in the aggregate not be reasonably expected to have
a Material Adverse Effect.
(m) No Loan Party nor any of its Subsidiaries has engaged in
a prohibited transaction, as defined in Section 4975 of the Code or Section 406
of ERISA, in connection with any Plan, Pension Plan or Qualified Plan which
would subject or has any reasonable likelihood of subjecting any Loan Party or
any of its Subsidiaries (after giving effect to any exemption) to a tax on
prohibited transactions imposed by
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Section 4975 of the Code or any other liability which could reasonably be
expected to have a Material Adverse Effect.
(n) Except as set forth on Schedule 4.9, no liability under
any Plan, Pension Plan or Qualified Plan (whether terminated or on-going) has
been funded or satisfied through the purchase of a contract from an insurance
company that is not rated AA or better by Standard & Poor's Corporation or any
equivalent or higher rating by any other nationally recognized rating agency.
(o) No Loan Party, none of its Subsidiaries and no ERISA
Affiliate has any liability under any terminated "employee benefit plan", as
defined in Section 3(3) of ERISA.
(p) The present value of the liability, if any, with respect
to all unfunded Pension Plans of any Loan Party, each of its Subsidiaries and
each ERISA Affiliate is reflected on the most recent audited financial
statements delivered to the Lenders pursuant to this Agreement.
4.10. LIENS. As of the Closing Date, there are no Liens of
any nature whatsoever on any properties of any Borrower or any of its
Subsidiaries other than those permitted by Section 7.1. As of the Closing
Date, the Liens granted by the Borrowers to the Agent pursuant to the
Collateral Documents are fully perfected second priority Liens in and to the
Collateral (except for such Collateral for which the Agent has not taken
appropriate action to perfect with respect thereto).
4.11. RELATED DOCUMENTS; INDENTURES. None of the Related
Documents or any Indenture has been amended or modified in any respect and no
provision therein has been waived (except as contemplated by the Exchange Offer
and Consent Solicitation and the 12 1/4% Consent Solicitation), and each of the
representations and warranties therein are true and correct in all material
respects and no default or event which with the giving of notice or lapse of
time or both would be a default has occurred thereunder.
4.12. NO BURDENSOME RESTRICTIONS; NO DEFAULTS. (a) No Loan
Party nor any of its Subsidiaries (i) is a party to any Contractual Obligation
the compliance with which could reasonably be expected to have a Material
Adverse Effect or the performance of which by any thereof, either
unconditionally or upon the happening of an event,
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will result in the creation of a Lien (other than a Lien granted pursuant to a
Loan Document or Liens permitted by Section 7.1) on the property or assets of
any thereof, or (ii) is subject to any charter or corporate restriction which
could reasonably be expected to have a Material Adverse Effect.
(b) No Loan Party or Subsidiary of any Loan Party is in
default under or with respect to any Contractual Obligation owed by it and, to
the knowledge of any Loan Party, no other party is in default under or with
respect to any Contractual Obligation owed to any Loan Party or to any
Subsidiary of a Loan Party, other than those defaults which could in the
aggregate not be reasonably expected to have a Material Adverse Effect.
(c) No Event of Default or Default has occurred and is
continuing.
(d) There is no Requirement of Law the compliance with which
by any Loan Party could reasonably be expected to have a Material Adverse
Effect.
4.13. NO OTHER VENTURES. Except as set forth on Schedule
4.13, none of the Loan Parties or any of their Subsidiaries is engaged in any
joint venture or partnership with any other Person, except as permitted by
Section 7.6.
4.14. INVESTMENT COMPANY ACT. No Borrower is an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company", as such terms are defined in the Investment
Company Act of 1940, as amended. The making of the Loans by the Lenders, the
application of the proceeds and repayment thereof by the Borrowers and the
consummation of the transactions contemplated by the Loan Documents will not
violate any provision of such Act or any rule, regulation or order issued by
the Securities and Exchange Commission thereunder.
4.15. INSURANCE. The Loan Parties and its Subsidiaries have,
in full force and effect policies of insurance including, without limitation,
policies of life, fire, theft, product liability, public liability, property
damage, other casualty, employee fidelity, workers' compensation and employee
health and welfare insurance, which are of a nature and provide such coverage
as is sufficient and as is customarily carried by companies of the size and
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character of such Person. No Loan Party nor any of its Subsidiaries has been
refused insurance for which it applied or had any policy of insurance
terminated (other than at its request).
4.16. LABOR MATTERS. (a) There are no strikes, work
stoppages, slowdowns or lockouts pending or, to such Person's knowledge,
threatened against or involving any Loan Party or any of their respective
Subsidiaries, other than those which could in the aggregate not be reasonably
expected to have a Material Adverse Effect.
(b) There are no arbitrations or grievances pending against
or involving any Loan Party or any of their respective Subsidiaries, nor, to
such Person's knowledge, are there any arbitrations or grievances threatened
involving any Loan Party or any of their respective Subsidiaries, other than
those which, in the aggregate, if resolved adversely to such Loan Party or such
Subsidiary, could not be reasonably expected to have a Material Adverse Effect.
(c) Except as set forth on Schedule 4.16, as of the Closing
Date, no Loan Party nor any of its Subsidiaries is a party to, or has any
obligations under, any collective bargaining agreement.
(d) There is no organizing activity involving any Loan Party
or any of its Subsidiaries pending or, to such Person's knowledge, threatened
by any labor union or group of employees, other than those which could in the
aggregate not be reasonably expected to have a Material Adverse Effect. There
are no representation proceedings pending or threatened with the National Labor
Relations Board, and no labor organization or group of employees of any Loan
Party or any of its Subsidiaries has made a pending demand for recognition,
other than those which could in the aggregate not be reasonably expected to
have a Material Adverse Effect.
(e) There are no unfair labor practices charges, grievances
or complaints pending or in process or, to such Person's knowledge, threatened
by or on behalf of any current or former employee or group of current or former
employees of any Loan Party or any of their respective Subsidiaries, other than
those which in the aggregate, if adversely determined, could not be reasonably
expected to have a Material Adverse Effect.
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(f) There are no complaints or charges against any Loan Party
or any of its Subsidiaries pending or, to the best of such Person's knowledge,
threatened to be filed with any federal, state or local court, governmental
agency or arbitrator based on, arising out of, in connection with, or otherwise
relating to the employment by such Loan Party or any of such Subsidiaries of
any individual, other than those which in the aggregate, if resolved adversely,
could not be reasonably expected to have a Material Adverse Effect.
(g) Each Loan Party and each of their respective Subsidiaries
are in compliance with all laws, and all orders of any court, Governmental
Authority or arbitrator, relating to the employment of labor, including without
limitation all such laws relating to wages, hours, collective bargaining,
discrimination, civil rights, and the payment of withholding and/or social
security and similar taxes, except for such non-compliances which could in the
aggregate not be reasonably expected to have a Material Adverse Effect.
4.17. FORCE MAJEURE. Neither the business nor the properties
of any Loan Party or any of their respective Subsidiaries are currently
suffering from the effects of any fire, explosion, accident, strike, lockout or
other labor dispute, drought, storm, hail, earthquake, embargo, act of God or
of the public enemy or other casualty (whether or not covered by insurance),
other than those which could in the aggregate not be reasonably expected to
have a Material Adverse Effect.
4.18. USE OF PROCEEDS. The proceeds of the Loans are being
used by the Loan Parties or Holdings solely for the payment of related
transaction costs, fees and expenses incurred in connection with the Related
Documents and for general corporate purposes.
4.19. ENVIRONMENTAL PROTECTION. Except as disclosed on
Schedule 4.19:
(a) The operations of each Loan Party and each of their
respective Subsidiaries or tenants comply with all Environmental Laws other
than such non-compliance the consequences of which could in the aggregate not
be reasonably expected to have a Material Adverse Effect;
(b) Each Loan Party and each of their respective Subsidiaries
have obtained all environmental, health and safety Permits necessary for their
operations, and all such
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<PAGE> 64
Permits are in good standing and each Loan Party and each of their respective
Subsidiaries are in compliance with the terms and conditions of such Permits
other than such non-compliance or failure to obtain such Permits, the
consequences of which could in the aggregate not be reasonably expected to have
a Material Adverse Effect;
(c) No Loan Party or any of their respective Subsidiaries
or any of their respective currently or previously owned or leased property or
operations is subject to any outstanding or to best of such Person's knowledge,
threatened, order from or agreement with any Governmental Authority or other
Person or is subject to any judicial or docketed administrative proceeding
respecting (i) Environmental Laws, (ii) Remedial Action or (iii) any
Environmental Liabilities and Costs arising from a Release or threatened
Release, other than those the consequences of which could in the aggregate not
be reasonably expected to have a Material Adverse Effect;
(d) To the best of the Loan Parties' or their
Subsidiaries' knowledge, there are no conditions or circumstances associated
with the currently or previously owned or leased properties or operations of
any Loan Party or any of their respective Subsidiaries or tenants which may
give rise to any Environmental Liabilities and Costs other than those which
could in the aggregate not be reasonably expected to have a Material Adverse
Effect;
(e) No Loan Party or any of their respective Subsidiaries
is a treatment, storage or disposal facility requiring a permit under the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 ET SEQ., the
regulations thereunder or any state analog. Each Loan Party and each of their
respective Subsidiaries is in compliance with all applicable financial
responsibility requirements of all Environmental Laws, including, without
limitation, those contained in 40 C.F.R., parts 264 and 265, subpart H, and any
state equivalents;
(f) No Loan Party nor any of its Subsidiaries has filed
or failed to file any notice required under any applicable Environmental Law
reporting a Release;
(g) There are no conditions or circumstances which may
give rise to any Environmental Liabilities and Costs arising from the
operations of any Loan Party or any of its Subsidiaries, including, without
limitation,
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Environmental Liabilities and Costs, that have any reasonable likelihood of
exceeding $250,000 in the aggregate associated with any operations of or
ownership of property by any Loan Party or any of its Subsidiaries;
(h) No Environmental Lien and no unrecorded Environmental
Lien has attached to any property of any Loan Party or any of its Subsidiaries;
(i) There is not now on or in the property owned, leased or
operated by any Loan Party or any of its Subsidiaries (i) any underground
storage tanks or surface impoundments, (ii) any asbestos-containing material,
or (iii) any polychlorinated biphenyls ("PCBs") used in electrical or other
equipment which has any reasonable likelihood of having a Material Adverse
Effect; and
(j) Each Loan Party has provided to the Agent a complete and
accurate copy of every report, audit, analysis, and investigation prepared by
it or on its behalf related to environmental and health and safety matters
conducted with respect to their currently or previously owned or leased
property or operations.
4.20. TRANSACTION COSTS AND FEES. The Loan Parties have
previously delivered to the Agent, in a form acceptable to the Agent, an
estimate and a description of all costs, fees and expenses of the Loan Parties
and their Subsidiaries in connection with the Reorganization and the financing
thereof.
4.21. INTELLECTUAL PROPERTY. The Loan Parties and its
Subsidiaries own or license or otherwise have the right to use all material
licenses, permits, patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, copyright applications,
franchises, authorizations and other intellectual property rights (including,
without limitation, all Intellectual Property as defined in the Intellectual
Property Security Agreement) that are necessary for the operations of their
respective businesses, without, to the best of its knowledge, infringement upon
or conflict with the rights of any other Person with respect thereto,
including, without limitation, all trade names associated with any private
label brands of any Loan Party or any of its Subsidiaries. To the best
knowledge of the Loan Parties, no slogan or other advertising device, product,
process, method, substance, part or component, or other material now
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<PAGE> 66
employed, or now contemplated to be employed, by any Loan Party or any of their
respective Subsidiaries infringes upon or conflicts with any rights owned by
any other Person, and no claim or litigation regarding any of the foregoing is
pending or, to the best of its knowledge, threatened.
4.22. TITLE. (a) Each Borrower and their respective
Subsidiaries owns good and marketable fee simple absolute title to all of the
Real Estate purported to be owned by them, which Real Estate is at the date
hereof described in Schedule 4.22(a), and good and marketable title to, or
valid leasehold interests in, all other properties and assets purported to be
owned by any Borrower or any of their respective Subsidiaries, including,
without limitation, valid leasehold interests pursuant to the Leases and all
property reflected in the balance sheet referred to in Section 4.5(a), and none
of such properties and assets, including, without limitation, the Real Estate
and the Leases, is subject to any Lien, except Liens granted to the Agent on
behalf of and for the benefit of the Secured Parties pursuant to the Loan
Documents or permitted thereunder and those set forth on Schedule 4.22(a).
Each Borrower and their respective Subsidiaries have received all deeds,
assignments, waivers, consents, non-disturbance and recognition or similar
agreements, bills of sale and other documents, and have duly effected all
recordings, filings and other actions necessary to establish, protect and
perfect such Borrower's and their respective Subsidiaries' right, title and
interest in and to all such property.
(b) All real property leased at the date hereof by each
Borrower or any of their respective Subsidiaries is listed on Schedule 4.22(b),
setting forth information regarding the commencement date, termination date,
renewal options (if any) and annual base rents for the Fiscal Years 1992 and
1993. Each of such leases is valid and enforceable in accordance with its
terms and is in full force and effect. Each Borrower has delivered to the
Agent true and complete copies of each of such leases and all documents
affecting the rights or obligations of such Borrower or any of its Subsidiaries
which is a party thereto, including, without limitation, any non-disturbance
and recognition agreements, subordination agreements, attornment agreements and
agreements regarding the term or rental of any of the leases. None of the
Borrowers nor any of its respective Subsidiaries nor, to the knowledge of any
Borrower, any other party to any such lease is in default of its obligations
thereunder or has delivered or received any notice of
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default under any such lease, nor has any event occurred which, with the giving
of notice, the passage of time or both, would constitute a default under any
such lease, except for defaults which could in the aggregate not be reasonably
expected to have a Material Adverse Effect.
(c) No Borrower or any of its respective Subsidiaries owns or
holds, or is obligated under or a party to, any option, right of first refusal
or other contractual right to purchase, acquire, sell, assign or dispose of any
real property.
(d) Except as permitted by Section 6.8, all water, gas,
electrical, steam, compressed air, telecommunication, sanitary and storm sewage
lines and systems and other similar systems serving the real property owned or
leased by any Borrower or any of their respective Subsidiaries are installed
and operating and are sufficient to enable the real property owned or leased by
any Borrower and their respective Subsidiaries to continue to be used and
operated in the manner currently being used and operated, and no Borrower or
any of its Subsidiaries has any knowledge of any factor or condition that could
result in the termination or material impairment of the furnishing thereof. No
improvements included within the real property owned or leased by any Borrower
or any of its respective Subsidiaries (collectively, "Improvements") or portion
thereof is dependent for its access, operation or utility on any land, building
or other Improvement not included in the real property owned or leased by any
Borrower or any of its Subsidiaries.
(e) All Permits required to have been issued or appropriate
to enable all real property owned or leased by any Borrower or any of its
Subsidiaries to be lawfully occupied and used for all of the purposes for which
they are currently occupied and used have been lawfully issued and are in full
force and effect, other than those which could in the aggregate not be
reasonably expected to have a Material Adverse Effect.
(f) No Borrower nor any of its Subsidiaries has received any
notice, or has any knowledge, of any pending, threatened or contemplated
condemnation proceeding affecting any real property owned or leased by any
Borrower or any of its Subsidiaries or any part thereof, or any proposed
termination or impairment of any parking at any such owned or leased real
property or of any sale or other disposition
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of any real property owned or leased by any Borrower or any of its Subsidiaries
or any part thereof in lieu of condemnation.
(g) No portion of any real property owned or leased by any
Borrower or any of its Subsidiaries has suffered any material damage by fire or
other casualty loss which has not heretofore been completely repaired and
restored to its original condition. No portion of any real property owned or
leased by any Borrower or any of its Subsidiaries is located in a special flood
hazard area as designated by any Federal Governmental Authorities.
ARTICLE V
FINANCIAL COVENANTS
From and after the Closing Date and as long as any of the
Obligations or Commitments remain outstanding, unless the Majority Lenders
otherwise consent in writing, the Company and each Borrower agree with the
Lenders and the Agent that:
5.1. MAXIMUM LEVERAGE RATIO. The Company shall maintain at the end
of each Fiscal Quarter set forth below on a consolidated basis, a ratio of (a)
Total Liabilities to (b) EBITDA for the 12 months then ending (or in the case
of the Fiscal Quarter ending June 30, 1994, the product of four and EBITDA for
the three months then ending or in the case of the Fiscal Quarter ending
September 30, 1994, the product of two and EBITDA for the six months then
ending or, in the case of the Fiscal Quarter ending December 31, 1994, the
product of 1.333 and EBITDA for the nine months then ending) not in excess of
the ratio set forth below opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
For the
FISCAL QUARTER ENDING ON MAXIMUM RATIO
------------------------ -------------
<S> <C>
June 30, 1994 7.0
September 30, 1994 7.0
December 31, 1994 7.0
March 31, 1994 7.0
June 30, 1995 and thereafter 6.5
</TABLE>
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<PAGE> 69
5.2. FIXED CHARGE COVERAGE RATIO. The Company shall maintain at the
end of each Fiscal Quarter set forth below, a ratio of (a) EBITDA LESS Capital
Expenditures (other than in respect of Capitalized Leases) LESS income taxes
paid to (b) Fixed Charges, in each case determined on the basis of the four
Fiscal Quarters ending on the date of determination (except that (i) in the
case of the Fiscal Quarter ending June 30, 1994, such determination shall be
made based on the three months then ending, (ii) in the case of the Fiscal
Quarter ending September 30, 1994, such determination shall be made based on
the six months then ending, and (iii) in the case of the Fiscal Quarter ending
December 31, 1994, such determination shall be based on the nine months then
ending), not less than the ratio set forth below opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
For the
FISCAL QUARTER ENDING ON MINIMUM RATIO
------------------------ -------------
<S> <C>
June 30, 1994 1.05
September 30, 1994 1.10
December 31, 1994 1.10
March 31, 1995 1.05
June 30, 1995 1.05
September 30, 1995 1.00
December 31, 1995 1.00
March 31, 1996 1.00
June 30, 1996 1.00
September 30, 1996 1.00
December 31, 1996 1.00
March 31, 1997 1.00
June 30, 1997 and thereafter 1.30
</TABLE>
5.3. MAINTENANCE OF ADJUSTED NET WORTH. The Company shall maintain
at the end of each month set forth below an Adjusted Net Worth of not less than
the minimum amount set forth below for such month (it being understood that
(13,000,000) is less than (11,000,000)):
<TABLE>
<CAPTION>
For Each Month in the Minimum Adjusted
FISCAL QUARTER ENDING ON NET WORTH
- ------------------------ ------------------
<S> <C>
June 30, 1994 $20,000,000
September 30, 1994 20,600,000
</TABLE>
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<PAGE> 70
<TABLE>
<S> <C>
December 31, 1994 21,250,000
March 31, 1995 22,000,000
June 30, 1995 22,800,000
September 30, 1995 23,500,000
December 31, 1995 24,100,000
March 31, 1996 24,700,000
June 30, 1996 25,500,000
September 30, 1996 26,500,000
December 31, 1996 27,350,000
March 31, 1997 28,200,000
June 30, 1997 29,000,000
September 30, 1997 30,000,000
December 31, 1997 31,000,000
March 31, 1998 32,000,000
</TABLE>
5.4. CAPITAL EXPENDITURES. The Borrowers shall not permit any
Capital Expenditures the result of which is that the Capital Expenditures for
the period from December 31, 1993 until such date is in excess of the maximum
amount set forth below for such Fiscal Quarter in which such date falls:
<TABLE>
<CAPTION>
Maximum Amount of
FISCAL QUARTER ENDING ON CAPITAL EXPENDITURES
------------------------ --------------------
<S> <C>
June 30, 1994 $1,750,000
September 30, 1994 2,750,000
December 31, 1994 3,750,000
March 31, 1995 4,750,000
June 30, 1995 5,600,000
September 30, 1995 6,200,000
December 31, 1995 6,600,000
March 31, 1996 7,100,000
June 30, 1996 8,000,000
September 30, 1996 8,700,000
December 31, 1996 9,400,000
March 31, 1997 10,000,000
June 30, 1997 10,600,000
September 30, 1997 11,200,000
</TABLE>
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<TABLE>
<S> <C>
December 31, 1997 11,800,000
March 31, 1998 12,500,000
</TABLE>
5.5. EBITDA TO TOTAL CASH INTEREST RATIO. The Company shall maintain
at the end of each Fiscal Quarter set forth below a ratio of EBITDA to Cash
Interest Expense, in each case determined based on the four Fiscal Quarters
ending on the date of determination (except that (i) in the case of the Fiscal
Quarter ending June 30, 1994, such determination shall be made based on the
three months then ending, (ii) in the case of the Fiscal Quarter ending
September 30, 1994, such determination shall be made based on the six months
then ending, and (iii) in the case of the Fiscal Quarter ending December 31,
1994, such determination shall be based on the nine months then ending) of not
less than the ratio set forth below for such Fiscal Quarter:
<TABLE>
<CAPTION>
For Each Fiscal Quarter
ENDING ON MINIMUM RATIO
------------- -------------
<S> <C>
June 30, 1994 1.25
September 30, 1994 1.30
December 31, 1994 1.30
March 31, 1995 1.35
June 30, 1995 1.35
September 30, 1995 1.40
December 31, 1995 1.40
March 31, 1996 1.40
June 30, 1996 1.40
September 30, 1996 1.45
December 31, 1996 1.45
March 31, 1997 1.50
June 30, 1997 1.50
September 30, 1997 1.75
December 31, 1997 1.75
March 31, 1998 1.75
</TABLE>
ARTICLE VI
AFFIRMATIVE COVENANTS
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<PAGE> 72
As long as any of the Obligations or the Commitments remain
outstanding, unless the Majority Lenders otherwise consent in writing, each of
the Company and each Borrower agrees with the Lenders and the Agent that:
6.1. COMPLIANCE WITH LAWS, ETC. Each Loan Party shall
comply, and shall cause each of its Subsidiaries to comply in all material
respects with all Requirements of Law, Contractual Obligations and Permits;
PROVIDED, HOWEVER, that the Loan Parties shall not be deemed in default of this
Section 6.1 if all such non-compliances in the aggregate could have no
reasonable likelihood of having a Material Adverse Effect.
6.2. CONDUCT OF BUSINESS. Each Loan Party shall (a) conduct,
and shall cause each of its Subsidiaries to conduct, its business in the
ordinary course consistent with past practice; (b) use, and cause each of its
Subsidiaries to use, its reasonable efforts, in the ordinary course and
consistent with past practice, to (i) preserve its business and the goodwill
and business of the customers, advertisers, suppliers and others having
business relations with such Loan Party or any of its Subsidiaries, and (ii)
keep available the services and goodwill of its present employees; (c)
preserve, and cause each of its Subsidiaries to preserve, all registered
patents, trademarks, trade names, copyrights and service marks with respect to
its business; and (d) perform and observe, and cause each of its Subsidiaries
to perform and observe, all the terms, covenants and conditions required to be
performed and observed by it under its Contractual Obligations (including,
without limitation, to pay all rent and other charges payable under any lease
and all debts and other obligations as the same become due), and do, and cause
its Subsidiaries to do, all things necessary to preserve and to keep unimpaired
its rights under such Contractual Obligations; PROVIDED, HOWEVER, that, in the
case of each of clauses (a) through (d), such Loan Party shall not deemed in
default of this Section 6.2 if all such failures in the aggregate could have no
reasonable likelihood of having a Material Adverse Effect.
6.3. PAYMENT OF TAXES, ETC. Each Loan Party shall pay and
discharge, and shall cause each of its Subsidiaries to pay and discharge,
before the same shall become delinquent, all lawful governmental claims, taxes,
assessments, charges and levies, except where contested in good faith, by
proper proceedings, if adequate reserves
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<PAGE> 73
therefor have been established on the books of such Loan Party or the
appropriate Subsidiary in conformity with GAAP; PROVIDED, HOWEVER, that such
Loan Party shall not be deemed in default of this Section 6.3 if all such
non-payments in the aggregate could have no reasonable likelihood of having a
Material Adverse Effect.
6.4. MAINTENANCE OF INSURANCE. Each Loan Party shall
maintain, and shall cause each of its Subsidiaries to maintain, insurance with
responsible and reputable insurance companies or associations in such amounts
and covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which
such Loan Party or such Subsidiary operates and as otherwise satisfactory to
the Agent, in its sole judgment exercised reasonably, and, in any event, all
insurance required by any Collateral Document. All insurance of the Borrowers
shall name the Agent and the Lenders as additional insured or loss payees as
its interest shall appear and shall not be cancelable except upon 30 days'
prior notice to the Secured Party, each as the Agent shall determine. The Loan
Parties will furnish to the Lenders from time to time such information as may
be requested as to such insurance.
6.5. PRESERVATION OF CORPORATE EXISTENCE, ETC. Each Loan
Party shall preserve and maintain, and shall cause each of its Subsidiaries to
preserve and maintain, its corporate existence, rights (charter and statutory)
and franchises (other than those of inactive Subsidiaries).
6.6. ACCESS. Each Borrower shall, at any reasonable time and
from time to time, permit the Agent or any of its designees, agents or
representatives thereof, to (a) during normal business hours examine and make
copies of and abstracts from the records and books of account of such Borrower
and each of its Subsidiaries, (b) during normal business hours visit the
properties of such Borrower and each of its Subsidiaries, (c) during normal
business hours discuss the affairs, finances and accounts of such Borrower and
each of its Subsidiaries with any of their respective officers or directors,
and (d) communicate directly with such Borrower's independent certified public
accountants. Except during the continuance of a Default or Event of
Default, such access shall be on reasonable advance notice. The Borrowers shall
authorize its independent certified public accountants to disclose to the Agent
or any Lender any and all financial statements and other information of
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any kind, including, without limitation, copies of any management letter.
6.7. KEEPING OF BOOKS. Each Loan Party shall keep, and shall
cause each of its Subsidiaries to keep, proper books of record and account, in
which full and correct entries shall be made of all financial transactions and
the assets and business of such Loan Party and each such Subsidiary.
6.8. MAINTENANCE OF PROPERTIES, ETC. Each Loan Party shall
maintain and preserve, and shall cause each of its Subsidiaries to maintain and
preserve, (i) all of its properties which are necessary in the conduct of its
business in satisfactory working order and condition, and (ii) all rights,
permits, licenses, approvals and privileges (including, without limitation, all
Permits) which are necessary in the conduct of its business; PROVIDED, HOWEVER,
that such Loan Party shall not be deemed in default of this Section 6.8 if all
such failures in the aggregate could have no reasonable likelihood of having a
Material Adverse Effect.
6.9. PERFORMANCE AND COMPLIANCE WITH OTHER COVENANTS. The
Company and each Borrower shall perform and comply with, and shall cause each
of its Subsidiaries to perform and comply with, each of the covenants and
agreements set forth in the Related Documents and the Indentures and under each
other Contractual Obligation to which it or any of its Subsidiaries is a party;
PROVIDED, HOWEVER, that none of the Company or any Borrower shall be deemed in
default of this Section 6.9 if all such failures in the aggregate could have no
reasonable likelihood of having a Material Adverse Effect.
6.10. APPLICATION OF PROCEEDS. The Loan Parties shall use
the entire amount of the proceeds of the Loans as provided in Section 4.18.
6.11. FINANCIAL STATEMENTS. The Company and the Borrowers
shall furnish to the Lenders:
(a) as soon as available and in any event within 30 days
after the end of each of month, consolidated and consolidating balance sheets
of the Company and its Subsidiaries as of the end of such month and
consolidated and consolidating statements of income and cash flow of the
Company and its Subsidiaries for the period commencing at
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<PAGE> 75
the end of the previous Fiscal Year and ending with the end of such month, all
prepared in conformity with GAAP and certified by the chief financial officer
of the Company as fairly presenting the financial condition and results of
operations of the Company and its Subsidiaries at such date and for such period
(subject to ordinary year-end audit adjustments), together with (i) a
certificate of said officer stating that no Default or Event of Default has
occurred and is continuing or, if a Default or an Event of Default has occurred
and is continuing, a statement as to the nature thereof and the action which
the Borrowers propose to take with respect thereto, and (ii) a schedule in form
satisfactory to the Agent of the computations used by the Company in
determining compliance with all financial covenants contained herein;
(b) as soon as available and in any event within 45 days
after the end of each of the first three Fiscal Quarters of each Fiscal Year,
consolidated balance sheets of Holdings and its Subsidiaries and consolidated
and consolidating balance sheets of the Company and its Subsidiaries as of the
end of such quarter, and consolidated statements of income and cash flow of
Holdings and its Subsidiaries and consolidated and consolidating statements of
income and cash flow of the Company and its Subsidiaries for the period
commencing at the end of the previous Fiscal Year and ending with the end of
such Fiscal Quarter, all prepared in conformity with GAAP and certified by the
chief financial officer of Holdings or the Company as fairly presenting the
financial condition and results of operations of Holdings, the Company and its
Subsidiaries at such date and for such period (subject to ordinary year-end
audit adjustments), together with (i) a certificate of said officer stating
that no Default or Event of Default has occurred and is continuing or, if a
Default or an Event of Default has occurred and is continuing, a statement as
to the nature thereof and the action which the Borrowers propose to take with
respect thereto, (ii) a schedule in form satisfactory to the Agent of the
computations used by the Borrowers in determining compliance with all financial
covenants contained herein, and (iii) a written discussion and analysis by the
management of Holdings and the Company of the financial statements furnished in
respect of such Fiscal Quarter;
(c) as soon as available and in any event within 90 days after
the end of each Fiscal Year, consolidated and consolidating balance sheets of
the Company and its
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Subsidiaries, and consolidated balance sheets of Holdings and its Subsidiaries
as of the end of such year and consolidated and consolidating statements of
income and cash flow of the Company and its Subsidiaries and consolidated
statements of income consolidated financial statements, without qualification
as to the scope of the audit by Arthur Andersen & Co. or other independent
public accountants of recognized national standing, together with (i) a
certificate of such accounting firm stating that in the course of the regular
audit of the business of the Holdings, the Company and each Borrower and its
Subsidiaries, which audit was conducted by such accounting firm in accordance
with generally accepted auditing standards, such accounting firm has obtained
no knowledge that a Default or Event of Default has occurred and is continuing,
or, if in the opinion of such accounting firm, a Default or Event of Default
has occurred and is continuing, a statement as to the nature thereof, (ii) a
schedule in form satisfactory to the Agent of the computations used by such
accountants in determining, as of the end of such Fiscal Year, the Company's
and the Borrowers' compliance with all financial covenants contained herein,
and (iii) a written discussion and analysis by the management of Holdings and
the Company of the financial statements furnished in respect of such Fiscal
Year;
(d) not later than the date on which the Borrowers shall
deliver to the Lenders the financial statements referred to in Section 6.11(c)
for any Fiscal Year, a letter from the Borrowers' independent public
accountants in substantially the form and substance as the letter delivered on
the Closing Date pursuant to Section 3.1(m); and
(e) promptly after the same are received by Holdings, the
Company and each Borrower, a copy of each management letter provided to
Holdings, the Company and each Borrower (as the case may be) by its independent
certified public accountants which refers in whole or in part to any
inadequacy, defect, problem, qualification or other lack of fully satisfactory
accounting controls utilized by Holdings, the Company and each Borrower (as the
case may be) or any of its Subsidiaries.
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6.12. REPORTING REQUIREMENTS. The Company and the Borrowers
shall furnish to Agent on behalf of the Lenders unless otherwise specified:
(a) to the extent practicable prior to any Asset Sale
anticipated to generate in excess of $500,000 in Asset Sales Proceeds, a notice
(i) describing the assets being sold and (ii) stating the estimated Asset Sales
Proceeds in respect of such Asset Sale;
(b) as soon as available and in any event prior to the end of
June and December of each Fiscal Year, a budget of the Company and its
Subsidiaries and each Borrower and its Subsidiaries for the next succeeding
twelve months, displaying on a monthly basis anticipated balance sheets,
forecasted revenues, net income and cash flow, each on a consolidated basis;
(c) prior to August 15, 1994, balance sheets of each Borrower
and TWI and each of their respective Subsidiaries as of March 31, 1994 (or, if
later, the Closing Date), all prepared in conformity with GAAP and certified by
a Responsible Officer of such Borrower or TWI as fairly presenting the
financial condition of such Borrower or TWI, as the case may be, at such date
(subject to year-end audit adjustments).
(d) (i) promptly and in any event within 30 days after any
Loan Party, any of its Subsidiaries or any ERISA Affiliate knows or has reason
to know that any ERISA Event has occurred, and (ii) promptly and in any event
within 10 days after any Loan Party, any of its Subsidiaries or any ERISA
Affiliate knows or has reason to know that a request for a minimum funding
waiver under Section 412 of the Code has been filed or is reasonably expected
to be filed with respect to any Qualified Plan, a written statement of the
chief financial officer or other appropriate officer of such Loan Party
describing such ERISA Event or waiver request and the action, if any, which
such Loan Party, its Subsidiaries and ERISA Affiliates propose to take with
respect thereto and a copy of any notice filed with the PBGC or the IRS
pertaining thereto;
(e) promptly and in any event within 30 days after the filing
thereof by any Loan Party, any of its Subsidiaries or any ERISA Affiliate, a
copy of each annual report (Form 5500 Series, including Schedule B thereto)
filed with respect to a Qualified Plan, and upon request by
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any Lender through the Agent, with respect to any other Plan or Pension Plan;
(f) promptly and in any event within 20 days after receipt
thereof, a copy of any adverse notice, determination letter, ruling or opinion
any Loan Party, any of its Subsidiaries or any ERISA Affiliate receives from
the PBGC, DOL or IRS with respect to any Qualified Plan and, at the request of
any Lender, a copy of any favorable notice, determination letter, ruling or
opinion with respect thereto from any such Governmental Authority;
(g) promptly and in any event within 20 days after receipt
thereof, a copy of any correspondence any Loan Party, any of its Subsidiaries
or any ERISA Affiliate receives from the plan sponsor (as defined by Section
4001 (a)(10) of ERISA) of any Multiemployer Plan concerning potential
Withdrawal Liability of any Loan Party, any of its Subsidiaries or any ERISA
Affiliate, or notice of any reorganization with respect to any Multiemployer
Plan, together with a written statement of the chief financial officer or other
appropriate officer of such Loan Party of the action which such Loan Party, its
Subsidiaries and ERISA Affiliates propose to take with respect thereto;
(h) promptly and in any event within 30 days after the
adoption thereof, notice of (i) any amendment to a Title IV Plan which could
result or results in an increase in benefits or the adoption of any new Title
IV Plan, and (ii) any amendment to a, or adoption of a new, Retiree Welfare
Plan, which could result or results in new or increased benefits;
(i) promptly and in any event within 30 days after receipt of
written notice of commencement thereof, notice of any action, suit or
proceeding before any Governmental Authority or arbitrator affecting any Loan
Party, any of its Subsidiaries or any ERISA Affiliate with respect to any Plan,
Pension Plan or Qualified Plan except those which in the aggregate, if
adversely determined, could have no reasonable likelihood of having a Material
Adverse Effect;
(j) promptly and in any event within 30 days after notice or
knowledge thereof, notice that any Loan Party or any of its Subsidiaries has
become or is likely to become subject to the tax on prohibited transactions
imposed
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by Section 4975 of the Code, together with a copy of Form 5330;
(k) promptly and in any event within 10 days after receipt
thereof by any Loan Party, any of its Subsidiaries or any ERISA Affiliate, such
Loan Party shall furnish to the Agent a copy of each notice from the PBGC,
received by such Loan Party, any of its Subsidiaries or any ERISA Affiliate of
the PBGC's intention to terminate any Pension Plan or to have a trustee
appointed to administer any Pension Plan;
(l) simultaneously with the date that any Loan Party, any
of its Subsidiaries or any ERISA Affiliate files a notice of intent to
terminate any Title IV Plan under a distress termination within the meaning of
Section 4041(c) of ERISA, such Loan Party shall furnish to the Agent a copy of
each such notice;
(m) simultaneously with the date that any Loan Party, any
of its Subsidiaries or any ERISA Affiliate files a notice of intent to
terminate any Title IV Plan, if such termination would require material
additional contributions in order to be considered a standard termination
within the meaning of Section 4041(b) of ERISA, such Loan Party shall furnish
to the Agent a copy of each notice;
(n) promptly after the commencement thereof, notice of all
actions, suits and proceedings before any domestic or foreign Governmental
Authority or arbitrator, affecting any Loan Party or any of its Subsidiaries,
except those which in the aggregate, if adversely determined, could have no
reasonable likelihood of having a Material Adverse Effect;
(o) promptly and in any event within two Business Days after
any Loan Party becomes aware of the existence of (i) any Default or Event of
Default, (ii) any breach or non-performance of, or any default under, any
Indenture or any Contractual Obligation which could have a reasonable
likelihood of having a Material Adverse Effect, (iii) any Material Adverse
Change or any event, development or other circumstance which has any reasonable
likelihood of causing or resulting in a Material Adverse Change, telephonic or
telegraphic notice in reasonable detail specifying the nature of the Default,
Event of Default, breach, non-performance, default, event, development or
circumstance, including, without limitation, the anticipated effect
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thereof, which notice shall be promptly confirmed in writing within five days;
(p) promptly after the sending or filing thereof, copies of
all notices, certificates or reports delivered pursuant to any Indenture;
(q) promptly after the sending or filing thereof, copies of
all reports which Holdings, the Company or any Borrower sends to its security
holders generally, and copies of all reports and registration statements which
Holdings, the Company, any Borrower or any of its Subsidiaries files with the
Securities and Exchange Commission or any national securities exchange or the
National Association of Securities Dealers, Inc.;
(r) upon the request of the Agent, copies of all federal,
state and local tax returns and reports filed by any Borrower or any of its
Subsidiaries in respect of taxes measured by income (excluding sales, use and
like taxes);
(s) promptly and in any event within 30 days of any Borrower
or any Subsidiary learning of any of the following, written notice to the Agent
of any of the following:
(i) any Borrower or any of its Subsidiaries is or
may be liable to any Person as a result of a Release or threatened
Release which could reasonably be expected to subject any Borrower or
any of its Subsidiaries to Environmental Liabilities and Costs of
$500,000 or more;
(ii) the receipt by any Borrower or any of its
Subsidiaries of notification that any real or personal property of any
Borrower or any of its Subsidiaries is subject to any Environmental
Lien;
(iii) the receipt by any Borrower or any of its
Subsidiaries of any notice of violation of, or knowledge by any
Borrower or any of its Subsidiaries that there exists a condition
which might reasonably result in a violation by any Borrower or any of
its Subsidiaries of, any Requirement of Law involving environmental,
health or safety matters, except for such violations the consequence
of which in the aggregate would have no reasonable likelihood of
subjecting any Borrower and its Subsidiaries
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collectively to Environmental Liabilities and Costs of $500,000 or
more;
(iv) the commencement of any judicial or administrative
proceeding or investigation alleging a violation of any Requirement of
Law involving environmental, health or safety matters, other than
those the consequences of which in the aggregate would have no
reasonable likelihood of subjecting any Borrower and its Subsidiaries
collectively to Environmental Liabilities and Costs of $500,000 or
more;
(v) any proposed acquisition of stock, assets or
real estate, or any proposed leasing of property, or any other action
by any Borrower or any of its Subsidiaries other than those the
consequences of which in the aggregate have no reasonable likelihood
of subjecting any Borrower and its Subsidiaries collectively to
Environmental Liabilities and Costs of $500,000 or more; and
(vi) any proposed action taken by any Borrower or any of
its Subsidiaries to commence, recommence or cease manufacturing,
industrial or other operations other than those the consequences of
which in the aggregate have no reasonable likelihood of requiring any
Borrower and its Subsidiaries to obtain additional environmental,
health or safety Permits that collectively require the expenditure of
$500,000 or more or become subject to additional Environmental
Liabilities and Costs of $500,000 or more;
(t) upon written request by any Lender through the Agent, a
report providing an update of the status of any environmental, health or safety
compliance, hazard or liability issue identified in any notice or report
required pursuant to this Section 6.12 and any other environmental, health or
safety compliance obligation, remedial obligation or liability, other than
those which in the aggregate have no reasonable likelihood of subjecting any
Borrower and its Subsidiaries to Environmental Liabilities and Costs of
$500,000 or more; and
(u) such other information respecting the business,
properties, condition, financial or otherwise, or operations of any Loan Party
or any of its Subsidiaries as any Lender through the Agent may from time to
time reasonably request.
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6.13. NEW REAL ESTATE. If, at any time, any Borrower or any
of its Subsidiaries acquires any Real Estate not covered by a Mortgage, such
Borrower or such Subsidiary shall promptly execute, deliver and record a first
priority mortgage in favor of the Agent on behalf and for the ratable benefit
of the Secured Parties covering such Real Estate (subordinate only to such
Liens as are permitted hereunder and any Liens in favor of the Secured Parties
(as defined in the Revolving Credit Agreement), in form and substance
satisfactory to the Agent, and provide the Agent with a Title Insurance Policy
covering such Real Estate in an amount equal to the purchase price of such Real
Estate, and a current ALTA survey thereof, and a surveyor's certificate in form
and substance satisfactory to the Agent.
6.14. EMPLOYEE PLANS. (a) With respect to other than a
Multiemployer Plan, for each Qualified Plan hereafter adopted or maintained by
any Loan Party, any of its Subsidiaries or any ERISA Affiliate, such Loan Party
shall (i) seek, and cause such of its Subsidiaries and ERISA Affiliates to
seek, and receive determination letters from the IRS to the effect that such
Qualified Plan is qualified within the meaning of Section 401(a) of the Code;
and (ii) from and after the adoption of any such Qualified Plan, cause such
plan to be qualified within the meaning of Section 401(a) of the Code and to be
administered in all material respects in accordance with the requirements of
ERISA and Section 401(a) of the Code.
(b) Each Loan Party shall comply, and cause such of its
Subsidiaries and ERISA Affiliates to comply, with the notice and continuation
coverage requirements of Section 4980B of the Code and the applicable
regulations thereunder.
6.15. FISCAL YEAR. The Company, each Borrower and each of
the Company's other Subsidiaries shall maintain as its Fiscal Year the twelve
month period ending on June 30 of each year provided that any of the Company,
each Borrower and each of the Company's other Subsidiaries may change its
Fiscal Year with the prior written consent of the Majority Lenders which
consent shall not be unreasonably withheld.
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6.16. ENVIRONMENTAL. Each of the Company, each Borrower and
each of the Company's other Subsidiaries shall, at its cost, upon receipt of
any notification or otherwise obtaining knowledge of any Release or other event
that could result in any such Person incurring Environmental Liabilities and
Costs in excess of $500,000, conduct or pay for consultants to conduct, tests
or assessments of environmental conditions at such operations or properties,
including, without limitation, the investigation and testing of subsurface
conditions, and shall take such remedial, investigational or other action as
required by Environmental Laws, as any Governmental Authority requires or as is
appropriate and consistent with good business practice.
ARTICLE VII
NEGATIVE COVENANTS
As long as any of the Obligations or Commitments remain
outstanding, without the written consent of the Majority Lenders, the Company
and each Borrower agrees with the Lenders and the Agent that:
7.1. LIENS, ETC. No Borrower shall create or suffer to
exist, nor shall it permit any of its Subsidiaries to create or suffer to
exist, any Lien upon or with respect to any of its or such Subsidiary's
properties, whether now owned or hereafter acquired, or assign, or permit any
of its Subsidiaries to assign, any right to receive income, except for (each
such exception being given independent effect):
(a) Liens created pursuant to the Loan Documents;
(b) (i) Purchase money Liens or purchase money security
interests upon or in any property (other than Inventory and Accounts
(other than Inventory purchased from General Electric Company of the
type in existence on the date hereof)) acquired or held by any
Borrower or any of its Subsidiaries in the ordinary course of business
to secure the purchase price of such property or to secure
Indebtedness incurred in connection with financing the acquisition of
such property and (ii) Liens to secure Capitalized Lease Obligations;
PROVIDED, HOWEVER, that: (A) any such Lien is created for the purpose
of securing solely Indebtedness representing, or incurred to finance,
refinance or refund, the cost (including, without limitation, the
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cost of construction) of the property subject thereto, (B) the
principal amount of the Indebtedness secured by such Lien does not
exceed 100% of such cost and (C) such Lien does not extend to or cover
any other property other than such item of property and any
improvements on such item; PROVIDED, FURTHER, that the aggregate
principal amount of the Indebtedness secured by the Liens referred to
in this clauses (i) and (ii) above, together with Indebtedness
incurred pursuant to clause (ii) of Section 7.2(e), shall not exceed
the actual amount of Capital Expenditures made by the Borrowers to the
extent permitted hereunder;
(c) Any Lien securing the renewal, extension or refunding of
any Indebtedness or other Obligation secured by any Lien permitted by
subsections (b), (i), or (j) of this Section 7.1 without any increase
in the amount secured thereby or in the assets subject to such Lien;
(d) Liens arising by operation of law in favor of
materialmen, mechanics, warehousemen, carriers, lessors or other
similar Persons incurred by any Borrower or any of its Subsidiaries in
the ordinary course of business which secure its obligations to such
Person; PROVIDED, HOWEVER, that (i) such Borrower or such Subsidiary
is not in default with respect to such payment obligation to such
Person, or (ii) such Borrower or such Subsidiary is in good faith and
by appropriate proceedings diligently contesting such obligation and
adequate provision is made for the payment thereof;
(e) Liens (excluding Environmental Liens) securing taxes,
assessments or governmental charges or levies; PROVIDED, HOWEVER, that
neither the Borrowers nor any of their Subsidiaries is in default in
respect of any payment obligation with respect thereto unless such
Borrower or such Subsidiary is in good faith and by appropriate
proceedings diligently contesting such obligation and adequate
provision is made for the payment thereof;
(f) Liens incurred or pledges and deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance, old-age pensions and other social security
benefits;
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(g) Liens securing the performance of bids, tenders, leases,
contracts (other than for the repayment of borrowed money), statutory
obligations, surety and appeal bonds and other obligations of like
nature, incurred as an incident to and in the ordinary course of
business, and judgment liens; PROVIDED, HOWEVER, that all such Liens
(i) in the aggregate have no reasonable likelihood of having a
Material Adverse Effect and (ii) do not secure directly or indirectly
judgments in excess of $1,000,000;
(h) Zoning restrictions, easements, licenses, reservations,
restrictions on the use of real property or minor irregularities
incident thereto which do not in the aggregate materially detract from
the value or use of the property or assets of the Borrowers or any of
their Subsidiaries or impair, in any material manner, the use of such
property for the purposes for which such property is held by such
Borrower or any such Subsidiary;
(i) Liens in favor of landlords securing operating leases
permitted by Section 7.3;
(j) Liens existing on the date of this Agreement and
disclosed on Schedule 7.1; and
(k) Liens in favor of the Secured Parties (as defined in the
Revolving Credit Agreement).
7.2. INDEBTEDNESS. No Borrower shall create or suffer to
exist, nor permit any of its Subsidiaries to create or suffer to exist, any
Indebtedness except (each such exception being given independent effect):
(a) the Obligations;
(b) Indebtedness with respect to Contingent
Obligations permitted by Section 7.13;
(c) current liabilities in respect of taxes,
assessments and governmental charges or levies incurred, or claims for
labor, materials, inventory, services, supplies and rentals incurred,
or for goods or services purchased, in the ordinary course of business
consistent with the past practice;
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(d) Indebtedness of any Borrower to (i) any other
Borrower or (ii) Holdings or the Company, representing loans or
advances made by such other Borrower, Holdings or the Company (as the
case may be) in each case evidenced by an Intercompany Note;
(e) (i) Indebtedness secured by Liens permitted by
Section 7.1(b) and (ii) additional unsecured Indebtedness of the
Borrower in an aggregate amount outstanding which, when added to
Indebtedness secured by Liens permitted by Section 7.1(b) does not
exceed the actual amount of Capital Expenditures made by the Borrowers
to the extent permitted hereunder (such unsecured Indebtedness to be
on terms and conditions at least as favorable as those obtained by
comparable companies);
(f) Indebtedness existing on the date hereof and
listed on Schedule 7.2 and any Indebtedness used to refinance or
replace such Indebtedness provided such refinancing or replacement
Indebtedness is in an aggregate principal amount and at a rate of
interest not to exceed such Indebtedness being refinanced or replaced
(provided that such Indebtedness used to refinance or replace such
Indebtedness in an aggregate amount up to $2,000,000 may be at an
interest rate in excess of such Indebtedness being refinanced or
replaced as long as such rate of interest is commercially reasonable
at the time such Indebtedness is incurred);
(g) Indebtedness in respect of reverse repurchase
agreements relating to marketable direct obligations issued 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; provided that the terms of such agreements comply with
the guidelines set forth in the Federal Financial Agreements of
Depository Institutions with Securities Dealers and Others, as adopted
by the Comptroller of the Currency;
(h) Indebtedness in respect of interest rate
contracts and foreign exchange agreements to the extent entered into
in the ordinary course of business on such terms and with such
counterparties acceptable to the Agent;
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(i) the Obligations (as defined in the Revolving
Credit Agreement).
7.3. LEASE OBLIGATIONS. (a) No Borrower shall create or
suffer to exist, nor permit any of its Subsidiaries to create or suffer to
exist, any obligations as lessee for the rental or hire of real or personal
property of any kind under other leases or agreements to lease (other than
Capitalized Leases) having an original term of one year or more which would
cause the direct or contingent liabilities of the Borrowers and their
Subsidiaries, on a consolidated basis, in respect of all such obligations to
exceed (i) $5,000,000 for the period from the Closing Date until the second
anniversary of the Closing Date and (ii) thereafter $6,000,000 payable in any
period of 12 consecutive months.
(b) No Borrower shall, nor shall it permit any of its
Subsidiaries to, become or remain liable as lessee or guarantor or other surety
with respect to any lease, whether an operating lease or a Capitalized Lease,
of any property (whether real or personal or mixed), whether now owned or
hereafter acquired, which (i) any Borrower or any of its Subsidiaries has sold
or transferred or is to sell or transfer to any other Person, or (ii) any
Borrower or any of its Subsidiaries intends to use for substantially the same
purposes as any other property which has been or is to be sold or transferred
by that entity to any other Person in connection with such lease provided that
the Borrowers may consummate sale-leaseback transactions in an aggregate amount
not to exceed $3,000,000.
7.4. RESTRICTED PAYMENTS. No Borrower shall, nor shall it
permit any of its Subsidiaries to:
(a) declare or make any dividend payment or other distribution
of assets, properties, cash, rights, obligations or securities
on account or in respect of any of its Stock or Stock
Equivalents other than (i) dividends paid to any Borrower or
any wholly- owned Subsidiary of any Borrower by any
wholly-owned Subsidiary of any Borrower and (ii) so long as no
Default or Event of Default has occurred and is continuing (or
would result therefrom), (A) (I) dividends or distributions to
the Company or Holdings necessary to make mandatory interest
and scheduled principal payments on the Existing 12 1/4%
Senior Secured
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Notes, the Existing Floating Rate Senior Secured Notes and the
Existing Senior Subordinated Notes, (II) dividends or distributions to
the Company or Holdings necessary to make payments for interest,
principal and redemption premiums on the Existing Convertible
Debentures, and (III) dividends or distributions to the Company or
Holdings necessary to pay fees and expenses related to the
Reorganization; provided that if a Trigger Event has occurred and is
continuing (and no Default or Event of Default has occurred and is
continuing) dividends or distributions may be made to the Company or
Holdings pursuant to this clause (A) solely to the extent necessary to
make mandatory interest payments on the Existing 12 1/4% Senior
Secured Notes and the Existing Floating Rate Senior Secured Notes and
(B) dividends or distributions to the Company as set forth in the
Intercorporate Agreement and Tax Sharing Agreement as in effect on the
date hereof; or
(b) purchase, redeem, prepay, defease or otherwise acquire for
value or make any payment (other than required payments) on
account or in respect of any principal amount of Indebtedness
for borrowed money, now or hereafter outstanding, except (i)
the Loans and (ii) payments on account of advances made by
Holdings or the Company to the Borrowers not to exceed the
amount advanced to the Borrowers from the proceeds from the
issuance of the Debentures.
7.5. MERGERS, STOCK ISSUANCES, SALE OF ASSETS, ETC. (a)
Except as set forth in Section 7.6, no Borrower shall nor shall it permit any
of its Subsidiaries to (i) merge with any Person, (ii) consolidate with any
Person, (iii) acquire all or substantially all of the Stock or Stock
Equivalents of any Person, (iv) acquire all or substantially all of the assets
of any Person or all or substantially all of the assets constituting the
business of a division, branch or other unit operation of any Person, (v) enter
into any joint venture or partnership with any Person, or (vi) sell, lease,
transfer or otherwise dispose of, whether in one transaction or in a series of
transactions any substantial part of its assets, including, without limitation,
substantially all assets constituting the business of a division, branch or
other unit operation
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(other than a sale of any division, branch or other unit of WOC Inc. in
compliance with Section 7.5(c)(iv) below).
(b) No Borrower shall issue or transfer, nor permit any of
its Subsidiaries to issue or transfer, any Stock or Stock Equivalents other
than any such issuance or transfer (A) by a Subsidiary of any Borrower to a
wholly-owned Subsidiary of any Borrower or (B) by a wholly-owned Subsidiary of
any Borrower to any Borrower.
(c) No Borrower shall, nor shall it permit any of its
Subsidiaries to, sell, convey, transfer, lease or otherwise dispose of any of
its assets or any interest therein to any Person, or permit or suffer any other
Person to acquire any interest in any of the assets of any Borrower or any such
Subsidiary, except (i) the sale or disposition of assets in the ordinary course
of business or assets which have become obsolete or are replaced in the
ordinary course of business, (ii) leases of personal property by any Borrower
or any wholly-owned Subsidiary of any Borrower to any Borrower or to any
wholly-owned Subsidiary of any Borrower, (iii) the lease or sublease of real
property not constituting a sale and leaseback, to the extent not otherwise
prohibited by this Agreement, (iv) other sales of assets for Fair Market Value
for at least 75% in cash, Cash Equivalents and Indebtedness assumed by the
purchaser thereof and on such other terms as are commercially reasonable
(provided that asset sales after the date hereof in an aggregate amount of not
more than $1,000,000 may be sold for Fair Market Value without regard to the
requirement of a purchase price of at least 75% in cash, Cash Equivalents and
Indebtedness assumed by the purchaser thereof).
(d) No Borrower shall sell or otherwise dispose of, or factor
at maturity or collection, or permit any of its Subsidiaries to sell or
otherwise dispose of, or factor at maturity or collection, any Accounts.
7.6. INVESTMENTS IN OTHER PERSONS. No Borrower shall,
directly or indirectly, make or maintain, nor permit any of its Subsidiaries to
make or maintain, any loan or advance to any Person or own, purchase or
otherwise acquire, or permit any of its Subsidiaries to own, purchase or
otherwise acquire, any Stock, Stock Equivalents, other equity interest,
obligations or other securities of, or any assets constituting the purchase of
a business or line of business, or make or maintain, or permit any of its
Subsidiaries to
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make or maintain, any capital contribution to, or otherwise invest in, any
Person (any such transaction being an "Investment"), except:
(a) Investments in Accounts, contract rights and
chattel paper, notes receivable and similar items arising or acquired
in the ordinary course of business consistent with the past practice;
(b) loans or advances to employees of any Borrower or
any of its Subsidiaries, which loans and advances shall not in the
aggregate exceed $500,000 outstanding at any time;
(c) Investments in Cash Equivalents; or
(d) Investments existing on the date hereof and set
forth on Schedule 7.6;
(e) Investments by any Borrower to any other
Borrower evidenced by an Intercompany Note; or
(f) (i) Investments in joint ventures, newly created
Subsidiaries or Subsidiaries acquired after the Closing Date and (ii)
loans or advances to TWI evidenced by an Intercompany Note, in an
aggregate amount for both clauses (i) and (ii) not to exceed at any
time an amount equal to $250,000 plus an additional $250,000 for each
full year since the Closing Date, provided that, after giving effect
to such Investment, the Available Credit (as defined in the Revolving
Credit Agreement) of all of the Borrowers is at least $5,000,000.
7.7. MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES. The Company
shall not sell or otherwise dispose of any shares of Stock or any Stock
Equivalent of any Subsidiary or permit any Subsidiary to issue, sell or
otherwise dispose of any shares of its Stock or any Stock Equivalent or the
Stock or any Stock Equivalent of any other Subsidiary (other than the options
described in clauses (iv) and (v) of the definition of "Change of Control" and
inactive Subsidiaries of the Borrowers).
7.8. CHANGE IN NATURE OF BUSINESS. No Borrower shall make,
nor shall it permit any of its Subsidiaries to make, any material change in the
nature or conduct of its business as carried on at the date hereof.
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7.9. COMPLIANCE WITH ERISA. (a) No Loan Party shall,
directly or indirectly, nor shall it permit any of its Subsidiaries or any
ERISA Affiliate to, directly or indirectly, by reason of an amendment or
amendments to, or the adoption of, one or more Title IV Plans, permit the
present value of all benefit liabilities, as defined in Title IV of ERISA
(using the actuarial assumptions utilized by the PBGC upon termination of a
plan), (i) to increase by more than $250,000; PROVIDED, HOWEVER, that this
limitation shall not be applicable to the extent that the fair market value of
assets allocable to such benefits, all determined using actuarial assumptions
utilized by the PBGC upon termination of a plan, is in excess of the benefit
liabilities or (ii) to increase such liabilities such that security must be
provided under Section 401(a) of the Code. No Loan Party shall, nor shall any
of its Subsidiaries, establish or become obligated with respect to any new
Welfare Plan, or modify any existing Welfare Plan, which would result in the
present value of future liabilities under all such plans to increase by more
than $250,000. No Loan Party shall, nor shall any of its Subsidiaries,
establish or become obligated to contribute to any new unfunded Pension Plan,
or modify any existing unfunded Pension Plan, which would result in the present
value of future liabilities under all such plans to increase by more than
$250,000.
(b) No Loan Party shall, directly or indirectly, nor
shall it permit any of its Subsidiaries or any ERISA Affiliate, directly or
indirectly, to (i) satisfy any liability under any Qualified Plan with a policy
or other contract from an insurance company or (ii) invest the assets of any
Qualified Plan in or in an obligation of an insurance company, unless in each
case such insurance company is rated AA or better by Standard & Poor's
Corporation and the equivalent or higher rating of each other nationally
recognized rating agency.
7.10. MODIFICATION OF RELATED DOCUMENTS AND INDENTURES. The
Company shall not, nor shall it permit any of its Subsidiaries to, (i) alter,
rescind, terminate, amend, supplement, waive or otherwise modify any provision
of or permit any breach or default to exist under any Related Document or any
Indenture, or take or fail to take any action thereunder if to do so has a
reasonable likelihood of having a Material Adverse Effect; or (ii) amend,
modify or change, or consent or agree to any amendment, modification or change
to, any of the terms relating to the payment or prepayment of principal of, or
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premium or interest on, any Debenture (other than any such amendment,
modification or change which would extend the maturity or reduce the amount of
any payment of principal thereof or which would reduce the rate or extend the
date for payment of interest thereon).
7.11. MODIFICATION OF MATERIAL AGREEMENTS. (a) No Borrower
shall, nor shall it permit any of its Subsidiaries to, alter, amend, modify,
rescind, terminate or waive any of their respective rights under, or fail to
comply in all material respects with, any of its material Contractual
Obligations, except in the ordinary course of business consistent with past
practice; PROVIDED, HOWEVER, that, with respect to any Contractual Obligation,
the Borrowers shall not be deemed in default of this Section 7.11 if all such
failures in the aggregate could have no reasonable likelihood of having a
Material Adverse Effect; and PROVIDED, FURTHER, that in the event of any such
breach or event of default by a Person other than the Borrowers or any of their
Subsidiaries, the Borrowers shall promptly notify the Agent of any such breach
or event of default.
(b) The Borrowers shall not, nor shall they permit, any
amendment, modification or supplement to the Tax Sharing Agreement, the
Intercorporate Agreement or the Trademark License Agreement the effect of which
in whole or in part is adverse to any of the Borrowers or its Subsidiaries.
7.12. ACCOUNTING CHANGES. No Borrower shall make, nor shall
it permit any of its Subsidiaries to make, any change in accounting treatment
and reporting practices or tax reporting treatment, except as permitted by GAAP
and disclosed to the Lenders and the Agent.
7.13. CONTINGENT OBLIGATIONS. No Borrower shall, nor shall
it permit any of its Subsidiaries to, incur, assume, endorse, be or become
liable for, or guarantee, directly or indirectly, or permit or suffer to exist,
any Contingent Obligation, except for:
(i) Contingent Obligations evidenced by a Loan
Document;
(ii) guarantees by any Borrower of Indebtedness of
any of its Subsidiaries, to the extent such underlying Indebtedness is
permitted hereunder; and
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(iii) guarantees by Subsidiaries of Indebtedness of any
Borrower or other Subsidiaries of any Borrower, to the extent such
underlying Indebtedness is permitted by Section 7.2.
7.14. TRANSACTIONS WITH AFFILIATES. No Borrower shall nor
shall it permit any of its Subsidiaries, to enter into any transaction directly
or indirectly with or for the benefit of any Affiliate of any Borrower, except
(each exception to be given independent effect) for (A) transactions in the
ordinary course of business on a basis no less favorable to such Borrower or
such Subsidiary as would be obtained in a comparable arm's length transaction
with a Person not an Affiliate, (B) salaries and other employee compensation to
officers or directors of any Borrower or any of its Subsidiaries commensurate
with current compensation levels or commensurate with companies engaged in
similar businesses or as approved by a majority of the members of the Board of
Directors of such Borrower or such Subsidiary who are not receiving such
compensation, (C) payments made to the Company or Holdings in respect of
corporate overhead, interest payments and other dividends solely to the extent
expressly set forth in Section 7.4(a), (D) lease of certain facilities from
Holdings and its Affiliates to WOC Inc. and Waxman Consumer Products Group Inc.
on terms acceptable to Agent and (E) the transactions contemplated by the Tax
Sharing Agreement, the Intercorporate Agreement and the Trademark License
Agreement.
7.15. CANCELLATION OF INDEBTEDNESS OWED TO IT. No Borrower
shall cancel, nor shall it permit any of its Subsidiaries to cancel, any claim
or Indebtedness owed to it except (a) in the case of a claim or Indebtedness
owed to any Person who is an Affiliate of such Borrower, for adequate
consideration and in the ordinary course of business or (b) in the case of a
claim or Indebtedness owed to any Person who is not an Affiliate of such
Borrower, for adequate consideration or in the ordinary cause of business.
7.16. NO NEW SUBSIDIARIES. No Borrower shall, nor shall it
permit any of the Subsidiaries to, (I) incorporate or otherwise organize any
Subsidiary which was not in existence on the Closing Date or (II) acquire any
Stock of any Person such that such Person becomes a new Subsidiary of such
Borrower or such Subsidiary, except as permitted by Section 7.6; provided that
(a) if such new Subsidiary is not a foreign Subsidiary, such new Subsidiary
shall execute and deliver to the Agent (i) a guaranty in
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form and substance reasonably satisfactory to the Agent, (ii) a security
agreement in substantially the form of Exhibit D, (iii) if appropriate, a
pledge agreement in substantially the form of Exhibit J, pledging 100% (or 65%
of any foreign Subsidiaries of such new Subsidiary) of the Stock owned by such
new Subsidiary, (iv) if appropriate, any mortgages or leasehold mortgages
required pursuant to Section 6.13 and (v) take any and all action necessary or
desirable to pledge and perfect a security interest in all of such Subsidiary's
assets and (b) the Borrower (or its Subsidiary) owning such new Subsidiary
execute and deliver to the Agent a pledge agreement in substantially the form
of Exhibit J, pledging 100% (or 65% of such new Subsidiary if such new
Subsidiary is a foreign Subsidiary) of all Stock owned by such Person of such
new Subsidiary, each with such modifications as are acceptable to the Agent.
7.17. CAPITAL STRUCTURE. No Borrower shall make, nor shall
it permit any of its Subsidiaries to, make, any change in its capital structure
(including, without limitation, in the terms of its outstanding Stock) or amend
its certificate of incorporation or by-laws other than for changes or
amendments which in the aggregate have no Material Adverse Effect.
7.18. NO SPECULATIVE TRANSACTIONS. No Borrower shall, nor
shall permit any of its Subsidiaries to, engage in any speculative transaction
or in any transaction involving commodity options or futures contracts except
for the sole purpose of hedging in the normal course of business and consistent
with industry practices.
7.19. ENVIRONMENTAL. No Borrower shall, nor shall it permit
any of its Subsidiaries, any lessee or any other Person to, dispose of any
Contaminant in violation of any Environmental Law by placing it in or on the
ground or waters of any property owned or leased by any Borrower or any of its
Subsidiaries or any other Person; PROVIDED, HOWEVER, that the Borrowers shall
not be deemed in violation of this Section 7.19 if, as the consequence of all
such disposals, the Borrowers and their Subsidiaries would not incur
Environmental Liabilities and Costs in excess of $1,000,000.
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ARTICLE VIII
EVENTS OF DEFAULT
8.1. EVENTS OF DEFAULT. Each of the following events shall
be an Event of Default:
(a) Any Borrower shall fail to pay any principal (including,
without limitation, mandatory prepayments of principal) of, or
interest on, any Loan, any fee, any other amount due hereunder or
under the other Loan Documents or other of the Obligations when the
same becomes due and payable; or
(b) Any representation or warranty made or deemed made by any
Loan Party in any Loan Document or by any Loan Party (or any of its
officers) in connection with any Loan Document shall prove to have
been incorrect in any material respect when made or deemed made; or
(c) Any Loan Party shall fail to perform or observe (i) any
term, covenant or agreement contained in Articles VI or VII, or (ii)
any other term, covenant or agreement contained in this Agreement or
in any other Loan Document if such failure under this clause (ii)
shall remain unremedied for ten days after the earlier of the date on
which (A) a Responsible Officer of any Borrower becomes aware of such
failure or (B) written notice thereof shall have been given to the
Borrowers by the Agent or any Lender; or
(d) (i) Holdings or any of its Subsidiaries (other than Ideal
Subsidiaries) shall fail to pay any principal of or premium or
interest on any Indebtedness of Holdings or such Subsidiary having a
principal amount of $5,000,000 or more (excluding Indebtedness
evidenced by the Notes), when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise); or (ii) any other event shall occur or condition
shall exist under any agreement or instrument relating to any such
Indebtedness, if the effect of such event or condition is to
accelerate, or to permit the acceleration of (after the expiration of
any applicable period of grace), the maturity of such Indebtedness; or
(iii) any such Indebtedness shall become or be declared to be due and
payable, or required to be prepaid (other than by a regularly
scheduled required prepayment), or Holdings
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or any of its Subsidiaries (other than the Ideal Subsidiaries) shall
be required to repurchase or offer to repurchase such Indebtedness,
prior to the stated maturity thereof; provided that no Event of
Default shall be deemed to occur under clause (i) hereof if such
non-payment occurs because the Borrowers were prohibited from making
distributions or dividends to Holdings or the Company pursuant to
Section 7.4 solely as a result of the occurrence of a Trigger Event;
or
(e) Holdings or any of its Subsidiaries (other than the Ideal
Subsidiaries) shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against
Holdings or any of its Subsidiaries (other than the Ideal
Subsidiaries) seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief
of debtors, or seeking the entry of an order for relief or the
appointment of a custodian, receiver, trustee or other similar
official for it or for any substantial part of its property and, in
the case of any such proceedings instituted against Holdings or any of
its Subsidiaries (other than the Ideal Subsidiaries) (but not
instituted by Holdings or such Subsidiary (other than the Ideal
Subsidiaries)), either such proceedings shall remain undismissed or
unstayed for a period of 60 days or any of the actions sought in such
proceedings shall occur; or Holdings or any of its Subsidiaries (other
than the Ideal Companies) shall take any corporate action to authorize
any of the actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess
of $500,000 to the extent not fully covered by insurance subject to
reasonable deductions shall be rendered against any Loan Party or any
of its Subsidiaries and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order, or (ii)
there shall be any period of 30 consecutive days during which a stay
of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
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(g) (i) With respect to any Plan, a prohibited transaction
within the meaning of Section 4975 of the Code or Section 406 of ERISA
shall occur which in the reasonable determination of the Agent has a
reasonable likelihood of resulting in direct or indirect liability to
any Loan Party or any of its Subsidiaries, (ii) with respect to any
Title IV Plan, the filing of a notice to voluntarily terminate any
such plan in a distress termination, (iii) with respect to any
Multiemployer Plan, any Loan Party, any of it Subsidiaries or any
ERISA Affiliate shall incur any Withdrawal Liability, (iv) with
respect to any Qualified Plan, any Loan Party, any of its Subsidiaries
or any ERISA Affiliate shall incur an accumulated funding deficiency
or request a funding waiver from the IRS, or (v) with respect to any
Title IV Plan or Multiemployer Plan which has an ERISA Event not
described in clauses (i) through (iv) hereof, in the reasonable
determination of the Agent there is a reasonable likelihood for
termination of any such plan by the PBGC; PROVIDED, HOWEVER, that the
events listed in clauses (i) through (v) hereof shall constitute
Events of Default only if the liability, deficiency or waiver request
of any Loan Party, any of its Subsidiaries or any ERISA Affiliate,
whether or not assessed, equals or exceeds $1,000,000 in any case set
forth in (i) through (v) above, equals or exceeds, $1,000,000 in the
aggregate for all such cases;
(h) Any material provision of any Collateral Document after
delivery thereof under Section 3.1 shall for any reason cease to be
valid and binding on any Loan Party party thereto, or any Loan Party
shall so state in writing; or
(i) Any Collateral Document after delivery thereof pursuant
to Section 3.1 shall, for any reason, cease to create a valid Lien on
any of the Collateral purported to be covered thereby, or such Lien
shall cease to be a perfected and first priority Lien, or any Loan
Party shall so state in writing; or
(j) There shall occur any Change of Control; or
(k) There shall occur any Default or Event of Default as such
terms are defined in the Revolving Credit Agreement; or
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(l) There shall occur a Material Adverse Change or an event which
would have a Material Adverse Effect; or
(m) Holdings shall have (i) altered, rescinded, terminated,
amended, supplemented, waived or otherwise modified any provision of
or permitted any breach or default to exist under any Indenture, or
taken or failed to take any action thereunder if to do so has a
reasonable likelihood of having a Material Adverse Effect; or (ii)
amended, modified or changed, or consented or agreed to any amendment,
modification or change to, any of the terms relating to the payment or
prepayment of principal of, or premium or interest on, any Debenture
(other than any such amendment, modification or change which would
extend the maturity or reduce the amount of any payment of principal
thereof or which would reduce the rate or extend the date for payment
of interest thereon); or
(n) Any material provision of the Intercreditor Agreement
after delivery thereof under Section 3.1 shall for any reason cease to
be valid and binding on the parties thereto.
8.2. REMEDIES. If there shall occur and be continuing any
Event of Default, the Agent (i) shall at the request, or may with the consent,
of the Majority Lenders by notice to the Borrowers, declare the obligation of
each Lender to make Loans to be terminated, whereupon the same shall forthwith
terminate, and (ii) shall at the request, or may with the consent, of the
Majority Lenders by notice to the Borrowers, declare the Loans, all interest
thereon and all other amounts and Obligations payable under this Agreement to
be forthwith due and payable, whereupon the Notes, all such interest and all
such amounts and Obligations shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Borrowers; PROVIDED, HOWEVER, that
upon the occurrence of the Event of Default specified in subparagraph (e)
above, (A) the obligation of each Lender to make Loans shall automatically be
terminated and (B) the Loans, all such interest and all such amounts and
Obligations shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrowers. In addition to the remedies set forth
above, the Agent may exercise any remedies provided for by the Collateral
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Documents in accordance with the terms thereof or any other remedies provided
by applicable law.
ARTICLE IX
THE AGENT
9.1. AUTHORIZATION AND ACTION. (a) Each Lender hereby
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement and the other Loan Documents
as are delegated to the Agent by the terms hereof and thereof, together with
such powers as are reasonably incidental thereto. Without limitation of the
foregoing, each Lender hereby authorizes the Agent to execute and deliver, and
to perform its obligations under, each of the Loan Documents to which the Agent
is a party, and to exercise all rights, powers and remedies that the Agent may
have under such Loan Documents. Each Lender authorizes the Agent to execute
and deliver any and all documents and instruments as are reasonably incidental
to any release of Collateral to the extent that the sale of such Collateral is
permitted hereby.
(b) As to any matters not expressly provided for by this
Agreement and the other Loan Documents (including, without limitation,
enforcement or collection of the Notes), the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Majority Lenders, and such
instructions shall be binding upon all Lenders and all holders of Notes;
PROVIDED, HOWEVER, that the Agent shall not be required to take any action
which the Agent in good faith believes exposes it to personal liability or is
contrary to this Agreement or applicable law. The Agent agrees to give to each
Lender prompt notice of each notice given to it by any Loan Party pursuant to
the terms of this Agreement or the other Loan Documents.
9.2. AGENT'S RELIANCE, ETC. Neither the Agent, nor any of
its Affiliates or any of the respective directors, officers, agents or
employees of the Agent or any such Affiliate shall be liable for any action
taken or omitted to be taken by it, him, her or them under or in connection
with this Agreement or the other Loan Documents, except for its, his, her or
their own gross negligence or
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wilful misconduct. Without limitation of the generality of the foregoing, the
Agent (i) may treat the payee of any Note as the holder thereof until such Note
has been assigned in accordance with Section 10.7; (ii) may rely on the
Register to the extent set forth in Section 10.7(c); (iii) may consult with
legal counsel (including, without limitation, counsel to the Borrowers or any
other Loan Party), independent public accountants and other experts selected by
it and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts; (iv) makes no warranty or representation to any Lender and shall not
be responsible to any Lender for any statements, warranties or representations
made in or in connection with this Agreement or any of the other Loan
Documents; (v) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or any of the other Loan Documents on the part of the Borrowers or
any other Loan Party or to inspect the property (including, without limitation,
the books and records) of the Borrowers or any other Loan Party; (vi) shall not
be responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any of
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (vii) shall incur no liability under or in respect of
this Agreement or any of the other Loan Documents by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telegram,
cable, telex or facsimile transmission) believed by it to be genuine and signed
or sent by the proper party or parties.
9.3. CITIBANK AND AFFILIATES. With respect to its
Commitment, the Loans made by it and each Note issued to it, Citibank shall
have the same rights and powers under this Agreement as any other Lender and
may exercise the same as though it were not the Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include Citibank in its
individual capacity. Citibank and its affiliates may accept deposits from,
lend money to, act as trustee under indentures of, and generally engage in any
kind of business with, the Borrowers or any other Loan Party or any of their
respective Subsidiaries and any Person who may do business with or own
securities of the Borrowers or any other Loan Party or any of their respective
Subsidiaries, all as if Citibank were not the Agent and without any duty to
account therefor to the Lenders.
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9.4. LENDER CREDIT DECISION. Each Lender acknowledges that
it has, independently and without reliance upon the Agent or any other Lender
and based on the financial statements referred to in Article IV and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the 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 decisions in taking or
not taking action under this Agreement and other Loan Documents.
9.5. INDEMNIFICATION. The Lenders agree to indemnify the
Agent and its Affiliates, and their respective directors, officers, employees,
agents and advisors (to the extent not reimbursed by the Borrowers or other
Loan Parties), ratably according to the respective unpaid principal amounts of
the Notes then held by each of them owing to them (or if no Notes are at the
time outstanding, ratably according to the respective amounts of the aggregate
of their Commitments), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel) of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against, the Agent (in such capacity) in any way
relating to or arising out of this Agreement or the other Loan Documents or any
action taken or omitted by the Agent under this Agreement or the other Loan
Documents; PROVIDED, HOWEVER, that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's or such
Affiliate's gross negligence or wilful misconduct. Without limitation of the
foregoing, each Lender agrees to reimburse the Agent promptly upon demand for
its ratable share of any out-of-pocket expenses (including, without limitation,
reasonable fees and disbursements of legal counsel) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of its rights or
responsibilities under, this Agreement or the other Loan Documents, to the
extent that the Agent is not reimbursed for such expenses by the Borrowers or
another Loan Party.
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9.6. SUCCESSOR AGENT. The Agent may resign at any time by
giving written notice thereof to the Lenders and the Borrowers. Upon any such
resignation, the Majority Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Majority
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Agent's giving of notice of resignation, then the retiring Agent may,
on behalf of the Lenders, appoint a successor Agent, which shall be (a) a
Lender or (b) if no Lender accepts such appointment, a commercial bank
organized under the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least $50,000,000.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under this Agreement
and the other Loan Documents. After any retiring Agent's resignation hereunder
as Agent, the provisions of this Article IX shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent under this
Agreement and the other Loan Documents.
ARTICLE X
MISCELLANEOUS
10.1. AMENDMENTS, ETC. (a) Subject to the terms of the
Intercreditor Agreement, no amendment or waiver of any provision of this
Agreement or the Intercreditor Agreement nor consent to any departure by the
Company or the Borrowers therefrom shall in any event be effective unless the
same shall be in writing and signed by the Majority Lenders, and then any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; PROVIDED, HOWEVER, that no amendment, waiver
or consent shall, unless in writing and signed by all the Lenders, do any of
the following: (i) amend or waive any of the conditions specified in Sections
3.1 and 3.2; (ii) increase the individual or aggregate Commitments of the
Lenders or subject the Lenders to any additional obligations; (iii) reduce the
principal of, or interest on, the Loans or any fees or other amounts payable
hereunder (other than the waiver of the right to receive default interest or
any waiver, amendment or consent, the
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effect of which is to cure any Default or Event of Default which, in turn,
results in the lower interest rates); (iv) postpone any date fixed for any
payment of principal of, or interest on, the Loans or any fees or other amounts
payable hereunder; (v) change the percentage of the Commitments, the aggregate
unpaid principal amount of the Loans, which shall be required for the Lenders
or any of them to take any action hereunder; (vi) release Collateral in excess
of 10% of the value of all such Collateral on the date hereof, except as shall
otherwise be provided herein or in the Collateral Documents; or (vii) amend
Section 8.1(e) or this Section 10.1; and PROVIDED, FURTHER, that no amendment,
waiver or consent shall, unless in writing and signed by the Agent in addition
to the Lenders required above to take such action, affect the rights or duties
of the Agent under this Agreement or the other Loan Documents.
(b) Each Lender grants to the Agent the right to purchase all
(but not less than all) of such Lender's Commitments, and Loans owing to it
and the Notes held by it and all of its rights and obligations hereunder and
under the other Loan Documents at a price equal to the aggregate amount of
outstanding Loans owed to such Lender (together with all accrued and unpaid
interest and fees owed to such Lender), which right may be exercised by the
Agent if such Lender refuses to execute any amendment, waiver or consent which
requires the written consent of all of the Lenders and to which the Majority
Lenders, the Agent and the Borrowers have agreed. Each Lender agrees that if
the Agent exercises its option hereunder, it shall promptly execute and deliver
all agreements and documentation necessary to effectuate such assignment as set
forth in Section 10.7.
10.2. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including, without limitation,
telegraphic, telex, telecopy or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered by hand, if to any Borrower, at its
address at c/o Waxman Industries, Inc., 24460 Aurora Road, Bedford Heights,
Ohio 44146 (telecopy no.: 216-439-4909) (telephone number: 216-439-1830),
Attention: Neal Restivo; if to any Lender, at its Domestic Lending Office
specified opposite its name on Schedule II; and if to the Agent, at its address
at 399 Park Avenue, 6th Floor, New York, NY 10043 (telecopy number:
212-793-1290) (telephone number: 212-559-3149), Attention: Keith Karako; or, as
to any Borrower or the Agent, at such other address as shall be designated by
such party in a written notice to the other
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parties and, as to each other party, at such other address as shall be
designated by such party in a written notice to such Borrower and the Agent.
All such notices and communications shall, when mailed, telegraphed, telexed,
telecopied, cabled or delivered, be effective three days after deposited in the
mails, or when delivered to the telegraph company, confirmed by telex
answerback, telecopied with confirmation of receipt, delivered to the cable
company or delivered by hand to the addressee or its agent, respectively,
except that notices and communications to the Agent pursuant to Article II or
IX shall not be effective until received by the Agent. Any notice given to any
Borrower shall be deemed to be given to all Borrowers.
10.3. NO WAIVER; REMEDIES. No failure on the part of any
Lender or the Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
10.4. COSTS; EXPENSES; INDEMNITIES. (a) Each Borrower
jointly and severally agree to pay on demand (i) all costs and expenses of the
Agent in connection with the preparation, execution, delivery, administration,
modification and amendment of this Agreement, each of the other Loan Documents
and each of the other documents to be delivered hereunder and thereunder,
including, without limitation, the reasonable fees and out-of-pocket expenses
of counsel, accountants, appraisers, consultants or industry experts retained
by the Agent with respect thereto and, as to the Agent, with respect to
advising it as to its rights and responsibilities under this Agreement and the
other Loan Documents, and (ii) all costs and expenses of the Agent or any of
the Lenders and each Lender (including, without limitation, the reasonable fees
and out-of-pocket expenses of counsel, accountants, appraisers, consultants or
industry experts retained by the Agent or any Lender) in connection with the
restructuring or enforcement (whether through negotiation, legal proceedings or
otherwise) of this Agreement and the other Loan Documents.
(b) Each of the Company, and each Borrower jointly and
severally agrees to indemnify and hold harmless the Agent and each Lender and
their respective Affiliates, and the directors, officers, employees, agents,
attorneys,
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consultants and advisors of or to any of the foregoing (including, without
limitation, those retained in connection with the satisfaction or attempted
satisfaction of any of the conditions set forth in Article III) (each of the
foregoing being an "Indemnitee") from and against any and all claims, damages,
liabilities, obligations, losses, penalties, actions, judgments, suits, costs,
disbursements and expenses of any kind or nature (including, without
limitation, fees and disbursements of counsel to any such Indemnitee) which may
be imposed on, incurred by or asserted against any such Indemnitee in
connection with or arising out of any investigation, litigation or proceeding,
whether or not any such Indemnitee is a party thereto, whether direct,
indirect, or consequential and whether based on any federal, state or local law
or other statutory regulation, securities or commercial law or regulation, or
under common law or in equity, or on contract, tort or otherwise, in any manner
relating to or arising out of this Agreement, any other Loan Document, any
Obligation, any Disclosure Document, any Related Document, any Indenture, or
any act, event or transaction related or attendant to any thereof, including,
without limitation, (i) all Environmental Liabilities and Costs arising from or
connected with the past, present or future operations of any Borrower or any of
its Subsidiaries involving any property subject to a Collateral Document, or
damage to real or personal property or natural resources or harm or injury
alleged to have resulted from any Release of Contaminants on, upon or into such
property or any contiguous real estate; (ii) any costs or liabilities incurred
in connection with any Remedial Action concerning any Borrower or any of its
Subsidiaries; (iii) any costs or liabilities incurred in connection with any
Environmental Lien; (iv) any costs or liabilities incurred in connection with
any other matter under any Environmental Law, including, without limitation,
CERCLA and applicable state property transfer laws, whether, with respect to
any of the foregoing, such Indemnitee is a mortgagee pursuant to any leasehold
mortgage, a mortgagee in possession, the successor in interest to any Borrower
or any of its Subsidiaries, or the owner, lessee or operator of any property of
any Borrower or any of its Subsidiaries by virtue of foreclosure, except, with
respect to any of the foregoing referred to in clauses (i), (ii), (iii) and
(iv), to the extent incurred following (A) foreclosure by the Agent or any
Lender, or the Agent or any Lender having become the successor in interest to
any Borrower or any of its Subsidiaries, and (B) attributable primarily to acts
of the Agent or such Lender or any agent on behalf of the Agent
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or such Lender; or (v) the use or intended use of the proceeds of the Loans or
in connection with any investigation of any potential matter covered hereby
(collectively, the "Indemnified Matters"); PROVIDED, HOWEVER, that any Borrower
shall not have any obligation under this Section 10.4(b) to an Indemnitee with
respect to any Indemnified Matter caused by or resulting from the gross
negligence or willful misconduct of that Indemnitee, as determined by a court
of competent jurisdiction in a final non-appealable judgment or order.
(c) Each Borrower jointly and severally agrees to indemnify
the Agent and the Lenders for, and hold the Agent and the Lenders harmless from
and against, any and all claims for brokerage commissions, fees and other
compensation made against the Agent and the Lenders for any broker, finder or
consultant with respect to any agreement, arrangement or understanding made by
or on behalf of any Loan Party or any of its Subsidiaries in connection with
the transactions contemplated by this Agreement.
(d) Each Borrower agrees that any indemnification or other
protection provided to any Indemnitee pursuant to this Agreement (including,
without limitation, pursuant to this Section 10.4) or any other Loan Document
shall (i) survive payment of the Obligations and (ii) inure to the benefit of
any Person who was at any time an Indemnitee under this Agreement or any other
Loan Document.
10.5. RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default each Lender is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Lender to or for the credit or the account of any Borrower against any and all
of the Obligations now or hereafter existing whether or not such Lender shall
have made any demand under this Agreement or any Note or any other Loan
Document and although such Obligations may be unmatured. Each Lender agrees
promptly to notify the Borrowers after any such set-off and application made by
such Lender; PROVIDED, HOWEVER, that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of each Lender
under this Section are in addition to the other rights and remedies (including,
without limitation, other rights of set-off) which such Lender may have.
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10.6. BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by the Company, each Borrower and the Agent
and when the Agent shall have been notified by each Lender that such Lender has
executed it and thereafter shall be binding upon and inure to the benefit of
each Borrower, the Agent and each Lender and their respective successors and
assigns, except that none of the Company or the Borrowers shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Lenders.
10.7. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Lender may
sell, transfer, negotiate or assign to one or more other Lenders or other
financial institutions acceptable to the Agent all or a portion of its
Commitments, the Loans owing to it and the Notes held by it and a commensurate
portion of its rights and obligations hereunder and under the other Loan
Documents; PROVIDED, HOWEVER, that (i) each such assignment shall be of a
constant, and not a varying, percentage of all of the assigning Lender's rights
and obligations under this Agreement and (ii) each assignee hereunder shall
also be approved by the Agent, which consent shall not be unreasonably
withheld. The parties to each assignment shall execute and deliver to the
Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance, together with a fee of $3,000 and the Notes (or an Affidavit of
Loss and Indemnity with respect to such Notes satisfactory to the Agent)
subject to such assignment. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in such Assignment and
Acceptance, (A) the assignee thereunder shall become a party hereto and, to the
extent that rights and obligations under the Loan Documents have been assigned
to such assignee pursuant to such Assignment and Acceptance, have the rights
and obligations of a Lender, and (B) the assignor thereunder shall, to the
extent that rights and obligations under this Agreement have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights (except
those which survive the payment in full of the Obligations) and be released
from its obligations under the Loan Documents (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under the Loan Documents, such Lender shall
cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the
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other parties hereto as follows: (i) other than as provided in such Assignment
and Acceptance, such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any of the statements, warranties or
representations made in or in connection with this Agreement or any other Loan
Document furnished pursuant thereto or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any
other Loan Document or any other instrument or document furnished pursuant
hereto or thereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Loan Party or the performance or observance by any Loan Party of any of
its obligations under this Agreement or any other Loan Document or of any other
instrument or document furnished pursuant hereto or thereto; (iii) such
assigning Lender confirms that it has delivered to the assignee and the
assignee confirms that it has received a copy of this Agreement and each of the
Loan Documents together with a copy of the most recent financial statements
delivered by the Borrowers to the Lenders pursuant to each of the clauses of
Section 6.11 (or if no such statements have been delivered, the financial
statements referred to in Section 4.5 of this Agreement) and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed
by it as a Lender.
(c) The Agent shall maintain at its address referred to in
Section 10.2 a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the
Lenders and the Commitments of and principal amount of the Loans owing to each
Lender from time to time (the
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"Register"). The entries in the Register shall be conclusive and binding for
all purposes, absent manifest error, and the Loan Parties, the Agent and the
Lenders may treat each Person whose name is recorded in the Register as a
Lender for all purposes of this Agreement. The Register shall be available for
inspection by the Borrowers, the Agent or any Lender at any reasonable time and
from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee, together with the fee set forth in
Section 10.7(a) and the Notes subject to such assignment, the Agent shall, if
such Assignment and Acceptance has been completed, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register
and (iii) give prompt notice thereof to the Borrowers. Within five Business
Days after its receipt of such notice, the Borrowers, at their own expense,
shall execute and deliver to the Agent, in exchange for such surrendered Notes,
new Notes to the order of such assignee in an amount equal to the Commitments
assumed by it pursuant to such Assignment and Acceptance and, if the assigning
Lender has retained Commitments hereunder, new Notes to the order of the
assigning Lender in an amount equal to the Commitments retained by it
hereunder. Such new Notes shall be dated the same date as the Surrendered
Notes and be in substantially the form of Exhibit A hereto, as applicable.
(e) In addition to the other assignment rights provided in
this Section 10.7, each Lender may assign, as collateral or otherwise, any of
its rights under this Agreement (including, without limitation, rights to
payments of principal or interest on the Loans) to any Federal Reserve Bank
without notice to or consent of the Borrowers or the Agent; PROVIDED, HOWEVER,
that no such assignment shall release the assigning Lender from any of its
obligations hereunder. The terms and conditions of any such assignment and the
documentation evidencing such assignment shall be in form and substance
satisfactory to the assigning Lender and the assignee Federal Reserve Bank.
(f) Each Lender may sell participations to one or more banks
or other Persons in or to all or a portion of its rights and obligations under
the Loan Documents (including, without limitation, all or a portion of its
Commitments, the Loans owing to it and the Notes held by it). The terms of
such participation shall not, in any event, require the
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participant's consent to any amendments, waivers or other modifications of any
provision of any Loan Documents, the consent to any departure by any Loan Party
therefrom, or to the exercising or refraining from exercising any powers or
rights which such Lender may have under or in respect of the Loan Documents
(including, without limitation, the right to enforce the obligations of the
Loan Parties), except if any such amendment, waiver or other modification or
consent would (i) reduce the amount, or postpone any date fixed for, any amount
(whether of principal, interest or fees) payable to such participant under the
Loan Documents, to which such participant would otherwise be entitled under
such participation or (ii) result in the release of all or substantially all of
the Collateral other than in accordance with the Collateral Documents.
Notwithstanding the sale of any participation by any Lender, (i) such Lender's
obligations under the Loan Documents (including, without limitation, its
Commitments) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the holder of such Notes and
Obligations for all purposes of this Agreement, (iv) such Lender shall disclose
to the Agent the identity of each bank or other entity purchasing a
participation within a reasonable time after the sale and purchase of such
participation, and (v) the Borrowers, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and may assume all of such
Lender's actions are properly authorized.
10.8. GOVERNING LAW; SEVERABILITY. This Agreement and the
Notes and the rights and obligations of the parties hereto and thereto shall be
governed by, and construed and interpreted in accordance with, the law of the
State of New York.
10.9. SUBMISSION TO JURISDICTION; SERVICE OF PROCESS. (a)
Any legal action or proceeding with respect to this Agreement or the Notes or
any document related thereto may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Agreement, each Borrower hereby accepts
for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably
waive any objection, including, without limitation, any objection to the laying
of venue or based on
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the grounds of FORUM NON CONVENIENS, which any of them may now or hereafter
have to the bringing of any such action or proceeding in such respective
jurisdictions.
(b) Each Borrower irrevocably consents to the service of
process of any of the aforesaid courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
the borrower at its address provided herein.
(c) Nothing contained in this Section 10.9 shall affect the
right of the agent, any Lender or any holder of a Note to serve process in any
other manner permitted by law or commence legal proceedings or otherwise
proceed against any Borrower in any other jurisdiction.
10.10. SECTION TITLES. The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
10.11. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
10.12. ENTIRE AGREEMENT. This Agreement, together with all
of the other Loan Documents and all certificates and documents delivered
hereunder or thereunder, and the fee letter between the Company and Citibank
embody the entire agreement of the parties and supersedes all prior agreements
and understandings relating to the subject matter hereof.
10.13. CONFIDENTIALITY. Each Lender and the Agent agree to
keep information obtained by it pursuant hereto and the other Loan Documents
confidential in accordance with such Lender's or the Agent's, as the case may
be, customary practices and agrees that it will only use such information in
connection with the transactions contemplated by this Agreement and not
disclose any of such information other than (i) to such Lender's or the
Agent's, as the case may be, employees, representatives and agents who are or
are expected to be involved in the evaluation of such information in connection
with the transactions contemplated by this Agreement and who are advised of the
confidential
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nature of such information, (ii) to the extent such information presently is or
hereafter becomes available to such Lender or the Agent, as the case may be, on
a non-confidential basis from a source other than any Borrower, (iii) to the
extent disclosure is required by law, regulation or judicial order or requested
or required by bank regulators or auditors, or (iv) to assignees or
participants or potential assignees or participants who agree to be bound by
the provisions of this sentence.
10.14. WAIVER OF JURY TRIAL. Each of the parties hereto
waives any right it may have to trial by jury in respect of any litigation
based on, or arising out of, under or in connection with this Agreement or any
other Loan Document, or any course of conduct, course of dealing, verbal or
written statement or action of any party hereto.
10.15. JOINT AND SEVERAL OBLIGATIONS. (a) Any term or
provision of this Agreement or any other Loan Document to the contrary
notwithstanding, the maximum aggregate amount of the Obligations for which any
Borrower (which Obligations are not direct borrowings or direct obligations of
such Borrower) (the "Non-Direct Obligations") shall be liable shall not exceed
the maximum amount for which such Borrower can be liable without rendering such
Non-Direct Obligations, as they relate to such Borrower, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer.
(b) To the extent that any Borrower shall be required
hereunder to pay a portion of its Non-Direct Obligations which shall exceed the
greater of (i) the amount of the economic benefit actually received by such
Borrower from the Loans in respect of such Non-Direct Obligations and (ii) the
amount which such Borrower would otherwise have paid if such Borrower had paid
the aggregate amount of the Non-Direct Obligations of such Borrower (excluding
the amount thereof repaid by the other Borrowers) in the same proportion as
such Borrower's net worth at the date enforcement hereunder is sought bears to
the aggregate net worth of all the Borrowers at the date enforcement hereunder
is sought, then such Borrower shall be reimbursed by the other Borrowers for
the amount of such excess, pro rata based on the respective net worths of the
Borrowers at the date enforcement hereunder is sought.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
WAXMAN USA INC.
By:_______________________________
Title:
Borrowers
---------
BARNETT INC.
By:_______________________________
Title:
WOC INC.
By:_______________________________
Title:
WAXMAN CONSUMER PRODUCTS GROUP INC.
By:_______________________________
Title:
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AGENT
CITIBANK, N.A.
as Agent
By:_______________________________
Title: Vice-President
Lenders
-------
CITIBANK, N.A.
By:_______________________________
Title: Vice-President
HELLER FINANCIAL, INC.
By:_______________________________
Title:
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<TABLE>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<S> <C> <C>
1.1. DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. COMPUTATION OF TIME PERIODS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
1.3. ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
1.4. CERTAIN TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
2.1. THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.2. MAKING THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.3. FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.4. [omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.5. REPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.6. PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.7. CONVERSION/CONTINUATION OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.8. INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.9. INTEREST RATE DETERMINATION AND PROTECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.10. INCREASED COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.11. ILLEGALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.12 CAPITAL ADEQUACY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.13. PAYMENTS AND COMPUTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.14. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.15. SHARING OF PAYMENTS, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.16. PAYMENT ON ACCOUNT OF COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.17. INTERCREDITOR AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE III
CONDITIONS OF LENDING
3.1. CONDITIONS PRECEDENT TO THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.2. ADDITIONAL CONDITIONS PRECEDENT TO THE LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.3. CONDITIONS PRECEDENT TO THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.2. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . 50
4.3. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
4.4. FULL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
4.5. FINANCIAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
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<TABLE>
<S> <C> <C>
4.6. LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.7. MARGIN REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.8. OWNERSHIP OF BORROWER; SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . 56
4.9. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
4.10. LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
4.11. RELATED DOCUMENTS; INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
4.12. NO BURDENSOME RESTRICTIONS; NO DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . 59
4.13. NO OTHER VENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
4.14. INVESTMENT COMPANY ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
4.15. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
4.16. LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
4.17. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
4.18. USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
4.19. ENVIRONMENTAL PROTECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
4.20. TRANSACTION COSTS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
4.21. INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
4.22. TITLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE V
FINANCIAL COVENANTS
5.1. MAXIMUM LEVERAGE RATIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
5.2. FIXED CHARGE COVERAGE RATIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
5.3. MAINTENANCE OF ADJUSTED NET WORTH . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
5.4. CAPITAL EXPENDITURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5.5. EBITDA TO TOTAL CASH INTEREST RATIO . . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE VI
AFFIRMATIVE COVENANTS
6.1. COMPLIANCE WITH LAWS, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.2. CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.3. PAYMENT OF TAXES, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.4. MAINTENANCE OF INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.5. PRESERVATION OF CORPORATE EXISTENCE, ETC . . . . . . . . . . . . . . . . . . . . . . . . 72
6.6. ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.7. KEEPING OF BOOKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.8. MAINTENANCE OF PROPERTIES, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.9. PERFORMANCE AND COMPLIANCE WITH OTHER COVENANTS . . . . . . . . . . . . . . . . . . . . 73
6.10. APPLICATION OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.11. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.12. REPORTING REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
6.13. NEW REAL ESTATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6.14. EMPLOYEE PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6.15. FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6.16. ENVIRONMENTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
</TABLE>
ii
<PAGE> 117
<TABLE>
ARTICLE VII
NEGATIVE COVENANTS
<S> <C> <C>
7.1. LIENS, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.2. INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.3. LEASE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.4. RESTRICTED PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.5. MERGERS, STOCK ISSUANCES, SALE OF ASSETS, ETC . . . . . . . . . . . . . . . 87
7.6. INVESTMENTS IN OTHER PERSONS . . . . . . . . . . . . . . . . . . . . . . . . 88
7.7. MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES . . . . . . . . . . . . . . . . . . 89
7.8. CHANGE IN NATURE OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . 89
7.10. MODIFICATION OF RELATED DOCUMENTS AND INDENTURES. . . . . . . . . . . . . . 90
7.11. MODIFICATION OF MATERIAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . 91
7.12. ACCOUNTING CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
7.13. CONTINGENT OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 91
7.14. TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . 92
7.15. CANCELLATION OF INDEBTEDNESS OWED TO IT . . . . . . . . . . . . . . . . . . 92
7.16. NO NEW SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
7.17. CAPITAL STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
7.18. NO SPECULATIVE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 93
7.19. ENVIRONMENTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
ARTICLE VIII
EVENTS OF DEFAULT
8.1. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
8.2. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
ARTICLE IX
THE AGENT
9.1. AUTHORIZATION AND ACTION . . . . . . . . . . . . . . . . . . . . . . . . . . 98
9.2. AGENT'S RELIANCE, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
9.3. CITIBANK AND AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . 99
9.4. LENDER CREDIT DECISION . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
9.5. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
9.6. SUCCESSOR AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
ARTICLE X
MISCELLANEOUS
10.1. AMENDMENTS, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
10.2. NOTICES, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
10.3. NO WAIVER; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
10.4. COSTS; EXPENSES; INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . 103
10.5. RIGHT OF SET-OFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
</TABLE>
iii
<PAGE> 118
<TABLE>
<S> <C> <C>
10.6. BINDING EFFECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
10.7. ASSIGNMENTS AND PARTICIPATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
10.8. GOVERNING LAW; SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
10.9. SUBMISSION TO JURISDICTION; SERVICE OF PROCESS . . . . . . . . . . . . . . . . . . . 109
10.10. SECTION TITLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
10.11. EXECUTION IN COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
10.12. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
10.13. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
10.14. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
10.15. JOINT AND SEVERAL OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
</TABLE>
iv
<PAGE> 119
SCHEDULES
Schedule I - Commitments
Schedule II - Applicable Lending Offices and
Addresses for Notices
Schedule 4.2 - Defaults
Schedule 4.3 - Taxes
Schedule 4.8 - Subsidiaries
Schedule 4.9 - ERISA
Schedule 4.13 - Joint Ventures
Schedule 4.16 - Labor
Schedule 4.19 - Environmental Protection
Schedule 4.22(a) - Borrower's Owned Real Estate
Schedule 4.22(b) - Borrower's Leased Real Estate
Schedule 7.1 - Existing Liens
Schedule 7.2 - Existing Indebtedness
Schedule 7.6 - Existing Investments
v
<PAGE> 120
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Conversion or Continuation
Exhibit D - Form of Security Agreement
Exhibit E - Form of Intellectual Property Security
Agreement
Exhibit F - Form of Opinion of Counsel for the
Loan Parties
Exhibit G - Form of Assignment and Acceptance
Exhibit H - Form of Mortgage
Exhibit I - Form of Intercompany Note
Exhibit J - Form of Stock Pledge Agreement
Exhibit K - Form of Intercreditor Agreement
vi
<PAGE> 1
WAXMAN INDUSTRIES, INC.
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED JUNE 30, MARCH 31,
- --------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1994 1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense $ 20,370 $21,003 $18,797 $14,759 $ 9,028 $15,643 $15,274
Interest element
of rents 1,252 1,133 970 1,058 826 1,143 911
-----------------------------------------------------------------------------------------------------
$ 21,622 $22,136 $19,767 $15,817 $ 9,854 $16,786 $16,185
=====================================================================================================
Earnings:
Income (loss)
before taxes ($15,674) ($5,126) ($2,795) $ 3,090 $ 9,932 ($ 1,339) ($3,049)
Fixed charges 21,622 22,136 19,767 15,817 9,854 16,786 16,185
-----------------------------------------------------------------------------------------------------
$ 5,948 $17,010 $16,972 $18,907 $19,786 $15,447 $13,136
=====================================================================================================
Ratio of
earnings
to fixed
charges(1) -- -- -- 1.2 2.0 -- --
=====================================================================================================
<FN>
(1) As a result of restructuring and nonrecurring charges recorded for the
nine months ended March 31, 1994 and 1993 and in fiscal years 1993,
1992 and 1991, as well as other non-cash charges and expenses incurred
during the fourth quarter of fiscal year 1993, earnings were
insufficient to cover fixed charges by $1,339, $3,049, $15,674, $5,126
and $2,795 for the nine months ended March 31, 1994 and 1993 and in
fiscal years 1993, 1992 and 1991, respectively. See Note 4 to the
Notes to Consolidated Financial Statements as of June 30, 1993.
</TABLE>
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
SUBSIDIARIES OF WAXMAN INDUSTRIES, INC.
Waxman USA Inc., a Delaware corporation
<PAGE> 1
Exhibit 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
Cleveland, Ohio
June 17, 1994
