<PAGE>
Post-Effective Amendment
No. 8/Reg. No. 33-54211
As filed with the Securities and Exchange Commission
on April 15, 1996
Registration No. 33-54211
SECURITIES AND EXCHANGE COMMISSION
__________
POST-EFFECTIVE AMENDMENT No. 8 to
REGISTRATION STATEMENT
ON FORM S-2
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, LLP
919 Third Avenue
New York, New York 10022
(212) 758-9500
-----------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE
PUBLIC: As soon as practicable after this registration statement becomes
effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box: [X]
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>
WAXMAN INDUSTRIES, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM OF FORM S-2 PROSPECTUS CAPTION OR LOCATION
---------------- -------------------------------
<C> <S> <S>
1. Forepart of the Registration Statement Outside Front Cover Page of Prospectus
and Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Available Information; Inside Front Cover and
Page of Prospectus Outside Back Cover Pages of Prospectus
3. Summary Information, Risk Factors and Prospectus Summary; Incorporation of Certain
Ratio of Earnings to Fixed Charges Information by Reference; Risk Factors.
4. Use of Proceeds Inside Front Cover Page of Prospectus; Prospectus
Summary; Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Selling Security Holders; Plan of Distribution
8. Plan of Distribution and Underwriting Outside Front Cover Page of Prospectus; Plan of
Distribution
9. Description of Securities to be Registered Outside Front Cover Page of Prospectus; Prospectus
Summary; Description of Warrants;
Description of Capital Stock
10. Interests of Named Experts and Counsel Legal Matters
11. Information with Respect to the Registrant Outside Front Cover Page of Prospectus; Available
Information; Incorporation of Certain Information
by Reference; Prospectus Summary; Risk Factors
12. Incorporation of Certain Information by Available Information; Incorporation of Certain
Reference Information by Reference
13. Disclosure on Commission Position on Not Applicable
Indemnification of Securities Act Liabilities
</TABLE>
i
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 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.
SUBJECT TO COMPLETION, DATED APRIL 15, 1996
PROSPECTUS
WAXMAN INDUSTRIES, INC.
2,950,000 Warrants to Purchase Shares of Common Stock
2,950,000 Shares of Common Stock, Par Value $.01 Per Share
This Prospectus relates to the offer and sale of 2,950,000 warrants
("Warrants") to purchase shares of common stock, par value $.01 per share (the
"Common Stock"), of Waxman Industries, Inc. (the "Company") and the 2,950,000
shares of Common Stock, subject to adjustment, issuable upon exercise of the
Warrants. The Warrants and shares of Common Stock referenced above offered
hereby are sometimes collectively referred to herein as the "Securities." The
Securities will be sold by the holders thereof (the "Selling Security Holders").
See "Selling Security Holders."
On May 20, 1994, the Company issued Series A 12 3/4% Senior Secured
Deferred Coupon Notes Due 2004 having an initial accredited value of $50,000,000
(the "Notes") together with the Warrants in exchange for $50,000,000 aggregate
principal amount of the Company's then outstanding 13 3/4% Senior Subordinated
Notes due June 1, 1999 (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 Company's 12.25% Fixed Rate
Senior Secured Notes due September 1, 1998 and Floating Rate Senior Secured
Notes due September 1, 1998 to certain waivers of and the adoption of certain
amendments to the indenture governing such Senior Secured Notes (which notes
have recently been defeased by the Company - See "Recent Developments"), (ii)
the establishment of a $55 million revolving credit facility and a $15 million
term loan (each of which were recently refinanced), (iii) 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 and (iv) the repayment of the borrowings under the Company's
then existing domestic revolving credit facilities.
Each Warrant entitles the holder thereof to purchase one share of Common
Stock, subject to adjustment in certain circumstances discussed below, at a cash
exercise price of $2.45 per share, subject to adjustment in certain
circumstances discussed below. The Company would receive all of the proceeds
from the exercise of the Warrants. The Warrants are currently exercisable and
expire on June 1, 2004. The Warrants were originally issued by the Company in a
private placement to certain institutional investors. There is presently no
active trading market for the Warrants and there can be no assurance that one
will develop. The Common Stock is traded on the New York Stock Exchange, Inc.
(the "NYSE") under the symbol "WAX." On April 12, 1996, the last reported sales
price per share of Common Stock, as reported by the NYSE, was $4.00.
The Securities are being offered for the accounts of the Selling
Security Holders. See "Selling Security Holders." The offer and sale of the
Securities is 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 (the "Equity Registration Rights
Agreement"), dated as of May 20, 1994, between the Company and The Huntington
National Bank, as Warrant Agent (the "Warrant Agent") under the Warrant
Agreement dated as of May 20, 1994 between such Warrant Agent and the Company,
on behalf of the original purchasers of the Warrants. The Company has agreed to
pay all expenses of this offering but will not receive any of the proceeds from
the sale of Securities being offered hereby. The aggregate proceeds to the
Selling Security Holders from the sale of the Securities will be the purchase
price of the Securities sold, less the aggregate underwriting fees, discounts
and commissions, if any. See "Plan of Distribution."
The Selling Security Holders directly, through agents designated from
time to time or through dealers or underwriters also to be designated, may sell
the Securities from time to time on terms to be determined at the time of sale.
To the extent required, the specific Securities to be sold, the names of the
Selling Security Holders, the purchase price, the public offering price, the
names of any such agents, dealers or underwriters and any applicable commissions
or discount with respect to a particular offer will be set forth in an
accompanying Prospectus supplement (or, if required, a post-effective amendment
to the Registration Statement of which this Prospectus forms a part). The
distribution of the Securities of the Selling Security Holders may be effected
in one or more transactions that may take place on the NYSE or the over-the-
counter market, including ordinary broker's transactions, privately negotiated
transactions or through sales to one or more dealers for resale of such
securities as principals, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. Usual
and customary or specifically negotiated brokerage fees, commissions or
discounts may be paid by the Selling Security Holders in connection with such
sales.
The Selling Security Holders and any broker-dealers, agents or
underwriters that participate with the Selling Security Holders in the
distribution of the Securities may be deemed to be "Underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"), and
any commissions received by them and any profit on the resale of the Securities
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. See "Plan of Distribution" for indemnification
arrangements."
Prospective purchasers of the Securities offered hereby should carefully
consider the matters set forth under "Risk Factors."
_________________________________________
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 SECURITIES HAVE NOT BEEN AND WILL NOT BE QUALIFIED FOR SALE UNDER
THE SECURITIES LAWS OF CANADA OR ANY PROVINCE OR TERRITORY OF CANADA. THE
SECURITIES 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.
2
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 ___________, 1996
3
AVAILABLE INFORMATION
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 Securities and Exchange Commission (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 10005.
The Company has filed a Registration Statement on Form S-2 (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.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
Company's Annual Report on Form 10-K for its fiscal year ended June 30, 1995
filed with the Commission (File No.0-5888) pursuant to the Exchange Act, as
amended by an amendment on Form 10-K/A filed with the Commission on October 11,
1995 and further amended by an amendment on Form 10-K/A-1 filed with the
Commission on November 2, 1995 (collectively, the "1995 Annual Report"), the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995
filed with the Commission on November 13, 1995 (the "September 1995 10-Q") and
the Company's Quarterly Report on Form 10-Q for the quarter ended December 31,
1995 filed with the Commission on February 12, 1996 (the "December 1995 10-Q,"
and, together with the 1995 Annual Report and the September 1995 10-Q, the
"Periodic Reports").
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain without
charge, upon request, a copy of any of the documents incorporated by reference
herein, except for the exhibits to such documents. Requests should be directed
to Waxman Industries, Inc. 24460 Aurora Road, Bedford Heights, Ohio 44146,
Telephone No: (216) 439-1830.
4
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 or incorporated by reference 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 and include the operations of
Waxman Consumer Products Group Inc. ("Consumer Products"). As a result of the
Company's prior determination to sell its Consumer Products business, Consumer
Products is reported as a discontinued operation and the consolidated financial
statements and financial information incorporated by reference herein have been
reclassified to report separately Consumer Products' net assets and results of
operations. In connection with the recently completed initial public offering
of Barnett Inc. ("Barnett"), formerly a wholly-owned indirect subsidiary of the
Company, the Company currently has ceased its efforts to sell Consumer Products.
Accordingly, unless the context otherwise indicates, the information contained
in this Prospectus (other than the Periodic Reports) reflects Consumer Products
as a continuing operation; provided, however, that the information contained in
the Periodic Reports reflects Consumer Products as a discontinued operation.
See "Recent Developments."
The Company
The Company believes it is one of the leading suppliers of plumbing
products to the repair and remodeling market in the United States. The Company,
through its subsidiaries, together with Barnett, distribute plumbing, electrical
and hardware products to approximately 50,000 customers in the United States,
including, plumbing and electrical repair and remodeling contractors and
independent retailers. The Company's consolidated net sales were $232.3 million
and $116.9 million in fiscal 1995 and the six months ended December 31, 1995,
respectively.
The business of the Company is conducted primarily through its indirect
wholly-owned subsidiary Consumer Products and through Barnett, of which the
Company indirectly owns approximately 45% of the outstanding common stock, and,
through the ownership of certain convertible preferred stock, owns approximately
a 54% economic interest. Consumer Products markets and distributes
approximately 9,400 products to a wide variety of retailers, primarily do-it-
yourself ("D-I-Y") warehouse home centers, home improvement centers, mass
merchandisers, hardware stores and lumberyards. Consumer Products' customers
include large national retailers such as Kmart, Builders Square and Wal-Mart, as
well as large regional D-I-Y retailers such as 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 15 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' 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 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
5
consumer. Consumer Products' net sales for fiscal 1995 and the six months ended
December 31, 1995 were $72.0 million and $32.3 million, respectively.
Barnett is a leading direct marketer and distributor of an extensive
line of plumbing, electrical and hardware products to over 40,000 active
customers throughout the United States. Barnett offers approximately 8,200 name
brand and private label products through its industry-recognized Barnett's
catalogs and telesales operations. Barnett markets its products through three
distinct, comprehensive catalogs that target professional contractors,
independent hardware stores and maintenance managers. Barnett's staff of over
70 knowledgeable telesalespersons, customer service and technical support
personnel work together to serve customers by assisting in product selection and
offering technical advice. To provide rapid delivery and a strong local
presence, Barnett has established a network of 28 distribution centers
strategically located in 28 major metropolitan areas throughout the United
States. Through these local distribution centers, approximately two-thirds of
Barnett's orders are shipped directly to the customer, usually within 24 hours
of an order. The remaining one-third of the orders are picked up by the
customer at one of Barnett's local distribution centers. Barnett's strategy of
being a low-cost, competitively priced supplier is facilitated by its volume of
purchases and offshore sourcing of a significant portion of its private label
products. Products are purchased from over 400 domestic and foreign suppliers.
Barnett believes that its distinctive business model has enabled it to
become a high-volume, cost-efficient direct marketer of competitively priced
plumbing, electrical and hardware products. Barnett's approximately 500-page
catalogs offer an extensive selection of products in an easy to use format
enabling customers to consolidate purchases with a single vendor. Barnett
provides an updated version of its catalogs to its customers on average four
times a year. To attract new customers and offer special promotions to existing
customers, Barnett supplements its catalogs with monthly promotional flyers.
Barnett's experienced and knowledgeable inbound telesales staff, located at
Barnett's centralized headquarters in Jacksonville, Florida, uses Barnett's
proprietary information systems to take customer orders as well as offer
technical advice. Barnett's highly trained outbound telesales staff maintains
frequent customer contact, makes telesales presentations and encourages
additional purchases. Targeted customer accounts are typically assigned an
outbound telesalesperson in order to enhance customer relationships and improve
customer satisfaction. Barnett's high in-stock position and extensive network
of local distribution centers enable it to fulfill approximately 94% of the
items included in each customer order and provide rapid delivery. Barnett's net
sales were $109.1 million and $60.5 million in fiscal 1995 and the six months
ended December 31, 1995, respectively.
The Company has several smaller operations which are conducted through
its other indirect wholly-owned subsidiaries, WOC Inc. ("WOC") and TWI,
International, Inc. ("TWI"). WOC includes four operations, the largest of which
are U.S. Lock ("U.S. Lock") - a distributor of a full line of security hardware
products and LeRan Copper & Brass ("LeRan") - a supplier of copper tubing, brass
fittings and other related products. 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. TWI includes foreign
sourcing operations in Mexico, China and Taiwan which support Consumer Products,
Barnett and WOC. Net sales from these smaller operations were $51.2 million and
$24.1 million in fiscal 1995 and the six months ended December 31, 1995,
respectively.
Recent Developments
On February 1, 1996, Barnett filed a registration statement with the
Commission with respect to an initial public offering (the "Barnett Public
Offering") of its common stock (the "Barnett Common Stock"). On March 28, 1996,
the registration statement with respect to the Barnett Public Offering was
declared effective and on April 3, 1996, the Barnett Public Offering was
consummated. In such offering, 7,207,200 shares, representing approximately
55.1% of the Barnett Common Stock, were sold in the aggregate by Barnett and
Waxman USA Inc. ("Waxman USA"), a direct wholly-owned subsidiary of the Company,
at an initial public offering price per share of $14.00, resulting in aggregate
net proceeds of $93.4 million. As of April 10, 1996, Waxman USA beneficially
owns approximately 49.9% of the
6
Barnett Common Stock and, together with convertible non-voting preferred stock
of Barnett owned by Waxman USA, owns approximately a 54% economic interest of
the capital stock of Barnett.
Of the $48.5 million of net proceeds received by Barnett in the Barnett
Public Offering, Barnett used (i) approximately $23.0 million to repay all of
the outstanding indebtedness borrowed by it under the secured credit facility
(the "Operating Companies Revolving Credit Facility") among Citicorp USA, Inc.,
as agent, Barnett, Consumer Products and WOC, (ii) $22.0 million to pay dividend
evidenced by a note payable to Waxman USA and (iii) $3.5 million for working
capital. The $44.9 million of net proceeds received by Waxman USA from the
Barnett Public Offering, together with payment from Barnett of the $22.0 note
payable described above, were, or will be, applied primarily to repay debt
including (i) all of the $39.2 million principal amount of the Company's 12 1/4%
Senior Secured Notes due 1998 and Floating Rate Senior Secured Notes due 1998
(collectively, the "Senior Secured Notes") plus accrued interest and redemption
premium of approximately $1.2 million, thereby eliminating the mandatory sinking
fund requirements relating to the Senior Secured Notes which were scheduled to
commence in September 1996, (ii) all (approximately $0.2 million) of the
indebtedness under the Company's 9% Convertible Subordinated Debentures due 2007
(the "Waxman Debentures") and (iii) approximately $5.0 million of the $10.0
million outstanding indebtedness and accrued interest under the secured term
loan (the "Term Loan") among Citibank, N.A., as agent, Barnett, Consumer
Products and WOC. The remaining net proceeds received by Waxman USA
(approximately $21.3 million) are intended to be used to (i) reduce additional
outstanding indebtedness borrowed by Consumer Products and WOC under the
Operating Companies Revolving Credit Facility and/or (ii) retire the Notes
and/or Exchange Notes (as defined below) and/or (iii) reinvest in Consumer
Products' and/or WOC's businesses. The Company's business strategy is to reduce
its leverage by the sale of selected assets and to refinance its remaining
indebtedness whenever possible. See "Recent Developments." In addition, the
Company believes that the Barnett Public Offering will be beneficial to the
growth and earnings potential of Barnett.
Also as part of the Company's efforts to decrease its leverage and
increase its financial flexibility, concurrently with the consummation of the
Barnett Public Offering, Waxman USA consummated an exchange offer (the "Exchange
Offer") pursuant to which it exchanged $43,026,000 principal amount of the
Company's outstanding Senior Subordinated Notes for a like principal amount of
Waxman USA 11 1/8% Senior Notes due 2001 (the "Exchange Notes") and in
connection therewith solicited consent to certain amendments to the Indenture
pursuant to which the Senior Subordinated Notes were issued. Generally, the
amendments to the Senior Subordinated Note indenture eliminate virtually all of
the restrictive covenants and events of defaults previously contained in such
indenture. The Exchange Offer decreased the Company's cash interest burden and
extended the maturity of the Senior Subordinated Notes exchanged in the Exchange
Offer by several years. The Exchange Notes were not registered under the
Securities Act and may not be offered or sold in the United States absent
registration or an applicable exemption from such registration requirements.
In August 1995, the Company announced that it had decided to sell its
Consumer Products business and entered into a letter of intent, which
subsequently expired, which contemplated the sale of the Consumer Products
business, together with certain supporting operations and certain home center
accounts now serviced by Barnett, to a group consisting of HIG Capital
Management ("HIG") of Miami, Florida along with certain members of Consumer
Products' existing management team for an aggregate cash purchase price of $50
million plus other consideration which would have given the Company
approximately a 25% economic interest in Consumer Products on a going forward
basis. Since the consummation of the Barnett Public Offering, the Company has
ceased its efforts to sell Consumer Products and instead retains and continues
to operate Consumer Products and will report its results as a continuing
operation. However, as a result of the Company's prior determination to sell
its Consumer Products business, for the fiscal year ended June 30, 1995 and the
six month period ended December 31, 1995, Consumer Products is reported as a
discontinued operation and the consolidated financial statements and financial
information in its Periodic Reports incorporated by reference herein.
7
In connection with the Barnett Public Offering, Waxman USA entered into
an amendment and restatement of the Operating Companies Revolving Credit
Facility and Term Loan (the "Restated Credit Agreement") to provide for, among
other things, an approximately one year secured credit facility providing for
revolving credit advances of up to $25.0 million and term loans of up to $5.0
million ("Restated Term Loans") and a release of Barnett from such lending
arrangements. As a result of the limited duration of the Restated Credit
Agreement, Waxman USA is currently negotiating with respect to a refinancing of
such credit facility. Although the Company believes, based on discussions to
date, that it will be able to refinance the Restated Credit Agreement before its
expiration, there can be no assurance that it will be able to do so or as to the
terms of any such refinancing it is able to obtain.
Revolving credit advances under the Restated Credit Agreement will be
subject to borrowing base formulas and will bear interest at (i) the per annum
rate of 1.5% plus the highest of (a) the prime rate of Citibank, N.A. or (b) the
federal funds rate plus 0.5% and a formula with respect to three month
certificates of deposit of major United States money market banks or (ii) LIBOR
plus 3.0%. The Revolving Credit Facility includes a letter of credit
subfacility of $4.0 million. Restated Term Loans will bear interest at a rate
per annum equal to 2.0% over the interest rate applicable to revolving credit
advances under the Restated Credit Agreement. Borrowings under the Restated
Credit Agreement will be secured by the accounts receivable, inventory, certain
general intangibles and unencumbered fixed assets of Consumer Products and WOC
(the "Borrowers") and 65% of the capital stock of one subsidiary of TWI and 100%
of the capital stock of another such subsidiary. In addition, Restated Term
Loans will also be secured by a pledge of 500,000 shares of Barnett Common
Stock owned by Waxman USA. The Restated Credit Agreement will require the
Borrowers to maintain cash collateral accounts into which all available funds
are deposited and applied to service the facility on a daily basis. The
Restated Credit Agreement will prevent dividends and distributions by the
Borrowers except in certain limited instances including, so long as there is no
Default or Event of Default, and Waxman USA is in compliance with certain
financial covenants, the payment of interest on the Senior Subordinated Notes
and Exchange Notes, and will contain customary negative, affirmative and
financial covenants and conditions.
The Restated Credit Agreement will contain only the events of default
contained in the Operating Companies Revolving Credit Facility, which include
the following: (i) any Borrower shall fail to make any payment of principal or
interest or any other amount due under the agreements related to the Restated
Credit Agreement 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 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 declared 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 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; (iv) there shall occur any Change of Control (as
defined in the Restated Credit Agreement; and (v) there shall occur a Material
Adverse Effect (as defined in the Restated Credit Agreement) or an event which
would have a Material Adverse Effect (as defined in the Restated Credit
Agreement).
8
The current corporate structure of the Company is as follows:
WAXMAN INDUSTRIES, INC.
WAXMAN USA INC.
BARNETT INC.(1)
WAXMAN CONSUMER PRODUCTS GROUP INC.
WOC INC.
TWI, INTERNATIONAL INC. AND SUBSIDIARIES
______________________
(1) Waxman USA beneficially owns approximately 49.9% of the Barnett Common
Stock and, together with non-voting preferred stock of Barnett owned by
Waxman USA, approximately 54% of the capital stock of Barnett.
9
The Warrants were issued pursuant to exemptions from, or transactions
not subject to, the registration requirements of the Securities Act and
applicable state securities laws. The Company structured the offering of the
Warrants and Notes 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 Securities Act. The original purchasers of the
Warrants, as a condition to their purchase of the Warrants and Notes, required
the Company to enter into the Equity 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 Securities Act the Warrants and shares of Common Stock issuable upon
exercise of the Warrants. The Company prepared and filed the Registration
Statement of which this Prospectus forms a part with the Commission pursuant to
the Equity Registration Rights Agreement. The original purchasers of the Notes,
as a condition to their purchase of the Notes and Warrants, also 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 Notes. The Company prepared and filed a
Registration Statement with the Commission pursuant to such registration rights
agreement. See "Plan of Distribution."
See "Selling Security Holders" and "Plan of Distribution" for a
discussion of the offering of the Warrants, the agreements referred to above and
additional related agreements. See "Description of the Warrants" for a
discussion of the terms of the Warrants.
The Offering
Securities Offered. . . . . . . . .
2,950,000 Warrants to purchase shares of Common Stock. In addition, this
Prospectus relates to the 2,950,000 shares of Common Stock issuable upon
exercise of the Warrants, subject to adjustment in the event of any
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, stock issuance below fair market value or other similar transaction.
Underlying Common Stock. .
Each Warrant is exercisable to purchase one share of Common Stock subject to
adjustment under certain circumstances. See "Description of Warrants."
Exercise Price . . . . . .
$2.45 per share, subject to adjustment in certain circumstances. See
"Description of Warrants."
Exercise Period. . . . . .
The Warrants are currently exercisable. See "Description of Warrants."
Expiration Date. . . . . .
The Warrants expire at 5:00 p.m. New York City time on June 1, 2004.
Warrant Agent. . . . . . .
The Huntington National Bank is serving as Warrant Agent under the Warrant
Agreement.
10
Common Stock
Number of Shares . . . . .
2,950,000 shares, subject to adjustment in certain circumstances, of Common
Stock issuable upon the exercise of the Warrants.
Common Stock Outstanding .
11,737,162 shares as of February 7, 1996 (including 9,522,083 shares of Common
Stock and 2,215,079 shares of Class B Common Stock).
NYSE symbol for
the Common Stock . . . . .
WAX
Proceeds of the Offering. . . . . .
All of the proceeds from the sale of Securities offered hereby will be received
by the Selling Security Holders. The Company will not receive any of the
proceeds from this offering.
If all of the 2,950,000 Warrants offered hereby are exercised at the initial
exercise price of $2.45 per share, the Company would receive $7,227,500, which
would be added to the Company's working capital and used for general corporate
purposes.
For more complete information regarding the Warrants, see "Description
of Warrants."
Risk Factors
Prospective purchasers of Securities offered hereby should carefully
consider the matters set forth under "Risk Factors," as well as the other
information and data included in this Prospectus.
11
RISK FACTORS
Prospective purchasers of Securities offered hereby should carefully
read the entire Prospectus and, in particular, should consider, among other
things, the following risks.
LEVERAGE
The Company has a high degree of leverage. At December 31, 1995, the
outstanding consolidated indebtedness (excluding trade payables and accrued
liabilities) of the Company was approximately $204.4 million. At December 31,
1995, after giving effect to the Exchange Offer and the Barnett Public Offering
and the application of the net proceeds therefrom, the outstanding consolidated
indebtedness (excluding trade payables and accrued liabilities) of the Company
was approximately $120.0 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
Restated Credit Agreement, including any refinancing thereof, will be sufficient
to fund working capital, capital expenditures and debt service requirements for
the next 12 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. In addition to the other matters set forth herein under
"Risk Factors," the Company's future performance is subject to prevailing
economic conditions and financial, business and other factors, many of which
factors are beyond the Company's control. The Company currently believes that
it must obtain a significant infusion of funds, either through additional debt
refinancing transactions or the sale of equity and/or assets before any further
significant deleveraging can occur. In addition, the $5.7 million principal
amount of Senior Subordinated Notes not tendered in the Exchange Offer mature in
June 1999. Cash interest on the Notes is payable semi-annually commencing
December 1999. The Company's management's current projections indicate that
there will not be sufficient cash flow from operations to make the June 1999
principal payment on the Senior Subordinated Notes or the December 1999 cash
interest payment on the Notes. Accordingly, the Company's management currently
intends to pursue a sale of assets or other capital raising transaction to
satisfy such cash requirements. However, there can be no assurances that the
Company will be able to consummate any such sale or capital raising transaction.
There can also be no assurance that the Company will be able to refinance the
Senior Subordinated Notes, the Notes or the Exchange Notes, respectively, at or
prior to their respective maturities. In addition, the Company is a holding
company with no operations of its own and, therefore, its ability to pay cash
interest on the Notes commencing in December 1999, and the debt service for the
$5.7 million principal amount of Senior Subordinated Notes not tendered in the
Exchange Offer will require an increase in the Company's cash flow from current
levels or a substantial reduction in the Company's level of indebtedness or the
completion of other capital raising transactions, including asset sales. There
can be no assurance that such increase in cash flow or reduction in indebtedness
or other capital raising transaction will occur.
To the Company's knowledge, its high degree of leverage has not resulted
in the refusal by any of its customers, suppliers or manufacturers to do
business with the Company or in the alteration of material terms which have had
a material impact on the Company's business.
12
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The terms and conditions of the instruments evidencing the Restated
Credit Agreement, as well as other indebtedness of the Company and Waxman USA,
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. 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 18.3% (and 14.0%, assuming the exercise of all of the
Warrants offered hereby) of the outstanding shares of the Company's common
stock, par value $.01 per share, and 83% of the outstanding shares of the
Company's Class B common stock are held by Melvin and Armond Waxman, brothers
and respectively, the Co-Chairmen of the Board and Co-Chief Executive Officers
of the Company (the "Principal Stockholders"). These holdings represent 63.4%
(and 58.1%, assuming the exercise of all of the Warrants offered hereby) 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, certain provisions in the
Company's Certificate of Incorporation, By-laws and debt instruments, including
the Change of Control provisions in the Indenture governing the Notes, 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 1995, 1994, 1993, and for the six months ended December 31,
1995,the Company's earnings were insufficient to cover its fixed charges by
$11.7 million, $3.1 million, $15.7 million and $3.8 million, respectively. The
Company believes that the successful implementation of its business strategy
described herein will enable it to reduce or eliminate the deficiency of
earnings to fixed charges. However, there can be no assurances regarding when
such deficiencies will be reduced or eliminated or that the deficiencies
experienced in the past will not reoccur.
FOREIGN SOURCING
In fiscal 1995, products manufactured outside of the United States
accounted for approximately 27.8% of the total product purchases made by the
Company. 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
13
have a short-term adverse effect on the Company's business until alternative
supply arrangements were secured.
RELIANCE ON KEY CUSTOMERS
During fiscal 1995 and the six months ended December 31, 1995, Kmart and
its subsidiaries, Consumer Products' largest customer, accounted for
approximately 13.5% and 12.5%, respectively, of the Company's total net sales
and 43.6% and 43.6%, respectively, of Consumer Products' total net sales.
During the same periods, the Company's ten largest customers accounted for
approximately 24.1% and 23.9%, respectively, of the Company's total net sales.
The loss of or a substantial decrease in the business of the Company's largest
customers could have a material adverse effect on the Company's operations. In
addition, certain articles in the financial press during the past year have
questioned the financial condition of Kmart, Consumer Products' largest
customer. In addition, Kmart has stated that it intends to sell its Builders
Square business, which accounted for approximately 24.7% and 26.6%,
respectively, of Consumer Products' net sales in fiscal 1995 and the six months
ended December 31, 1995, respectively. There can be no assurance that any
purchaser of Builders Square will continue to do business with the Company or to
the extent it does continue to do business with the Company, as to the amount,
terms or conditions of any sales by such purchaser. As a result of the Barnett
Public Offering, the Company and Waxman USA will rely primarily on Consumer
Products for cash flow. Consumer Products' customers include D-I-Y warehouse
home centers, home improvement centers, mass merchandisers, hardware stores and
lumberyards. Consumer Products may be adversely effected by prolonged economic
downturns or significant declines in consumer spending. There can be no
assurance that any such prolonged economic downturn or significant decline in
consumer spending will not have a material adverse impact on Consumer Products'
business and its ability to generate cash flow.
PROCEEDS OF THE OFFERING
The Company will not receive any of the proceeds of this offering. All
of the proceeds of this offering will be received by the Selling Security
Holders.
ABSENCE OF PUBLIC MARKET; EFFECT OF MARKET PRICE OF BARNETT COMMON STOCK
At present, the Warrants are owned by a small number of investors and
there is no active trading market for the Warrants. If an active trading market
does not develop, purchasers of the Warrants may have difficulty liquidating
their investment and the Warrants may not be readily accepted as collateral for
loans. Accordingly, no assurances can be given as to the price at which holders
of the Warrants will be able to sell the Warrants, if at all.
The liquidity of and the market prices for the Warrants and Common Stock
can be expected to vary with changes in market and economic conditions, the
financial condition and prospects of the Company and other factors that
generally influence the market prices of securities, including fluctuations in
the market for warrants and common stock generally. In addition, the market
price of the Common Stock may be effected by the market price of the Barnett
Common Stock, which may be effected by the factors enumerated in the preceding
sentence.
POSSIBLE FUTURE SALES OF SHARES BY THE SELLING SECURITY HOLDERS
Subject to the restrictions described under "Risk Factors -- Shares
Eligible for Future Sale" and applicable law, upon the effectiveness of the
Registration Statement of which this Prospectus forms a part, the
14
Selling Security Holders could cause the sale of any or all of the Warrants or
underlying shares of Common Stock they own. The Selling Security Holders may
determine to sell Warrants or the underlying shares of Common Stock from time to
time for any reason. Although the Company can make no prediction as to the
effect, if any, that sales of Warrants or shares of Common Stock owned by the
Selling Security Holders would have on the market price of Common Stock
prevailing from time to time, sales of substantial amounts of Warrants or Common
Stock, or the availability of such Warrants or shares of Common Stock for sale
in the public market, could adversely affect prevailing market prices of the
Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
As of February 7, 1996, there were 9,522,083 shares of Common Stock
outstanding and 2,215,079 shares of Class B Common Stock outstanding
(convertible into 2,215,079 shares of Common Stock). To the extent such shares
are not held by "affiliates" or otherwise subject to restrictions on resale,
including those imposed by Section 16(b) of the Exchange Act, the Warrants, and
upon exercise of the Warrants, the shares of Common Stock which are issuable
upon exercise of the Warrants and offered hereby are eligible for sale in the
public market. Although the Company can make no prediction as to the effect, if
any, that sales of the Warrants and shares of Common Stock referred to above
would have on the market price of the Common Stock prevailing from time to time,
sales of a substantial amount of Warrants or Common Stock, or the availability
of such Warrants or shares of Common Stock for sale in the public market could
adversely affect prevailing market prices of the Common Stock.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Securities offered hereby, all of which will be received by the Selling Security
Holders.
If all of the 2,950,000 Warrants offered hereby are exercised at the
initial exercise price of $2.45 per share, the Company would receive $7,227,500,
which would be added to the Company's working capital and used for general
corporate purposes.
15
SELLING SECURITY HOLDERS [confirm]
The following table sets forth certain information with respect to the
Securities beneficially owned and offered hereby by each Selling Security
Holder.
Name Warrants Owned Warrants Offered
- ---- -------------- ----------------
American Enterprise Life Insurance Company 2,950 2,950
Citicorp Securities, Inc. 147,500 147,500
Colonial High Yield Securities Fund 59,000 59,000
Executive Investors High Yield Fund 5,900 5,900
First Investors Fund for Income 103,250 103,250
First Investors High Yield Fund 100,300 100,300
IDS Life Insurance Company 143,075 143,075
IDS Life Insurance Company of New York 10,325 10,325
Internationale Nederlanden (U.S.) Finance
Corporation 354,000 354,000
Kemper Diversified Income Fund 222,607 222,607
Kemper High Income Trust 55,106 55,106
Kemper High Yield Fund 800,453 800,453
Kemper Investors Fund-High Yield Portfolio 52,274 52,274
Kemper Multi-Market Income Trust 12,154 12,154
KML High Yield Investments N.V. 9,853 9,853
KML II High Yield Investments N.V. 9,853 9,853
MetLife-State Street High Income Fund 236,000 236,000
MetLife-State Street Managed Assets 29,500 29,500
Metropolitan Life Insurance Co. 59,000 59,000
Merrill Lynch Pierce Fenner & Smith Inc. 359,900 359,900
Northstar High Yield Fund 118,000 118,000
T.D. Partners 59,000 59,000
--------- ----------
Total 2,950,000 2,950,000
========= =========
_______________
16
The Company is registering, on behalf of each Selling Security Holder,
the offer and sale of the number of Warrants set forth opposite such Selling
Security Holder's name under the column captioned "Warrants Offered" and the
same number of shares of Common Stock, subject to adjustment in certain
circumstances, issuable upon exercise of the Warrants. As of the date hereof,
no Warrants have been exercised to purchase shares of Common Stock.
Because the Selling Security Holders may offer all or some part of the
Securities pursuant to this Prospectus and because this offering is not being
underwritten on a firm commitment basis, no estimate can be given as to the
amount of Securities to be offered for sale by the Selling Security Holders nor
the amount of Securities that will be held by the Selling Security Holders upon
termination of this offering. See "Plan of Distribution." To the extent
required, the specific amount of Securities to be sold by the Selling Security
Holders in connection with a particular offer will be set forth in an
accompanying Prospectus supplement.
DESCRIPTION OF THE WARRANTS
The Warrants were issued pursuant to the terms of a Warrant Agreement,
dated as of May 20, 1994 (the "Warrant Agreement"), by and between the Company
and The Huntington National Bank, as warrant agent (the "Warrant Agent"), on
behalf of the original purchasers of the Warrants. The following summary of the
material provisions of the Warrant Agreement and the Warrant Certificate
attached thereto (the "Warrant Certificate") does not purport to be complete,
and where reference is made to particular provisions of the Warrant Agreement or
the Warrant Certificate, such provisions, including the definitions of certain
terms, are qualified in their entirety by reference to all of the provisions of
the Warrant Agreement and Warrant Certificate, which have been filed or
incorporated by reference as exhibits to the Registration Statement of which
this Prospectus forms a part.
The Warrants are currently exercisable. The Warrants will expire June
1, 2004. Upon exercise, each Warrant entitles the holder to receive one Warrant
Share at a cash exercise price of $2.45, subject to adjustment in certain
circumstances.
Holders of the Warrants do not have any of the rights or privileges of
the stockholders of the Company, including voting rights to receive dividends,
prior to exercise of the Warrants. The Company has reserved out of its
authorized but unissued shares a sufficient number of shares of Common Stock for
issuance upon exercise of the Warrants. The Common Stock issuable on exercise
of the Warrants will be, when issued, fully paid and nonassessable.
ANTI-DILUTION
The Warrants contain customary anti-dilution provisions, including
adjustments in the event of a reclassification, recapitalization, stock
dividend, stock split, reverse stock split, stock issuance below fair market
value or other similar transaction, and including protections in the event of a
transaction in which the Company is not the surviving entity.
METHOD OF EXERCISE
The Warrants may be exercised by surrendering to the Warrant Agent the
Warrant Certificates evidencing such Warrants, with the accompanying form of
election to purchase properly completed and executed. Upon surrender of the
Warrant Certificates and payment in cash of the exercise price, the Warrant
17
Agent will deliver, or cause to be delivered, to or upon the written order of
such holder, certificates representing the Warrant Shares to which such holder
is entitled.
Warrant Certificates will be issued in registered form only and no
service charge shall be made for registration of transfer or exchange upon
surrender of any Warrant Certificate at the office of the Warrant Agent
maintained for that purpose. The Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Warrant
Certificates.
AMENDMENT
From time to time, the Company and the Warrant Agent, without the
consent of the holders of the Warrants, may amend or supplement the Warrant
Agreement for certain purposes, including curing defects or inconsistencies or
making any change that does not adversely affect the rights of any holder. Any
amendment or supplement to the Warrant Agreement that has an adverse effect on
the interests of holders or that affects the anti-dilution provisions contained
therein shall require the written consent of registered holders of a majority of
the then outstanding Warrants. The consent of each holder of an Warrant
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 for the Warrants would be modified in any
manner.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 2,000,000 shares
of Preferred Stock, $.01 par value, 22,000,000 shares of Common Stock, $.01 par
value, and 6,000,000 shares of Class B Common Stock, $.01 par value. As of
February 7, 1996, no shares of Preferred Stock, 9,552,083 shares of Common Stock
and 2,215,079 shares of Class B Common Stock were issued and outstanding.
COMMON STOCK AND CLASS B COMMON STOCK
Each share of Common Stock entitles the holder to one vote on all
matters submitted to the stockholders, including the election of directors, and
each share of Class B Common Stock entitles the holder to ten votes on all such
matters. Except as set forth below, all actions submitted to a vote of
stockholders are voted on by holders of Common Stock and Class B Common Stock
voting together as a single class. The holders of Common Stock and Class B
Common Stock vote separately as classes with respect to any amendments to the
Company's Certificate of Incorporation that alter or change the powers,
preferences or special rights of their respective classes of stock so as to
affect them adversely, and with respect to such other matters as may require
class votes under the Delaware General Corporation Law.
Dividends on the Class B Common Stock may not exceed those on the Common
Stock. Each share of Common Stock and Class B Common Stock is equal in respect
of rights to dividends and other distributions in stock or property of the
Company (including distributions upon liquidation of the Company), except that
in the case of dividends or other distributions payable on the Common Stock and
the Class B Common Stock in shares of such stock, including distributions
pursuant to split-ups or divisions of the Common Stock or the Class B Common
Stock, only Common Stock will be distributed with respect to Common Stock and
only Class B Common Stock will be distributed with respect to Class B Common
Stock. In no event will either the
18
Common Stock or the Class B Common Stock be split, divided or combined unless
the other is split, divided or combined equally.
The Class B Common Stock is not transferable by a holder except to or
among such holder's spouse, certain of such holder's relatives and certain
trusts established for their benefit. The Class B Common Stock is convertible
into Common Stock on a share-for-share basis at any time.
If the number of outstanding shares of Class B Common Stock at any time
falls below 250,000 (as adjusted for any stock splits, combinations, stock
dividends or further issuances of Class B Common Stock), the outstanding shares
of Class B Common Stock will automatically be converted into shares of Common
Stock.
The Class B Common Stock may tend to have an anti-takeover effect.
Since voting control of the Company is vested primarily in the holders of the
Class B Common Stock, the issuance of the Class B Common Stock could render more
difficult, or discourage, a hostile merger proposal, a tender offer or a proxy
contest, even if such actions were favored by a majority of the holders of
Common Stock. As of February 7, 1996, Melvin Waxman and Armond Waxman
beneficially owned an aggregate of approximately 83% of the outstanding Class B
Common Stock and 63.4% of the aggregate outstanding voting power of the Company.
The transfer agent and registrar for the Common Stock and Class B Common
Stock is The Huntington Trust Company, N.A., Columbus, Ohio.
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more
series, and the Board of Directors is authorized to fix the dividend rights and
terms, any conversion rights, any voting rights, any redemption rights and terms
(including sinking fund provisions), the rights in the event of liquidation and
any other rights, preferences, privileges and restrictions of any series of
Preferred Stock, as well as the number of shares constituting such series and
the designation thereof. The Preferred Stock, if issued, will rank senior to
the Company Common Stock as to dividends and as to liquidation preference.
Holders of Preferred Stock will have no preemptive rights. The issuance of
shares of Preferred Stock could have an anti-takeover effect under certain
circumstances. The issuance of shares of Preferred Stock could enable the Board
of Directors to render more difficult or discourage an attempt to obtain control
of the Company by means of a merger, tender offer or other business combination
transaction directed at the Company by, among other things, placing shares of
Preferred Stock with investors who might align themselves with the Board of
Directors, issuing new shares to dilute stock ownership of a person or entity
seeking control of the Company or creating a class or series of Preferred Stock
with voting rights. The issuance of shares of the Preferred Stock as an anti-
takeover device might preclude stockholders from taking advantage of a situation
which they believed could be favorable to their interests. No shares of
Preferred Stock are outstanding, and the Company has no present plans to issue
any shares of Preferred Stock.
PLAN OF DISTRIBUTION
Any or all of the Securities may be sold from time to time to purchasers
directly by the Selling Security Holders. Alternatively, the Selling Security
Holders may from time to time offer the Securities through underwriters, dealers
or agents who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Security Holders and/or the
purchasers of Securities for whom
19
they may act as agents. The Selling Security Holders and any such underwriters,
dealers or agents that participate in the distribution of Securities may be
deemed to be underwriters under the Securities Act, and any profit on the sale
of the Securities by them and any discounts, commissions or concessions received
by them may be deemed to be underwriting discounts and commissions under the
Securities Act. The Securities may be sold from time to time in one or more
transactions at a fixed offering price, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices. The distribution
of Securities by the Selling Security Holders may be effected in one or more
transactions that may take place on the NYSE or the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of such shares as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary
or specifically negotiated brokerage fees, discounts and commissions may be paid
by the Selling Security Holders in connection with such sales of securities.
At the time a particular offer of Securities is made, to the extent
required, a supplement to this Prospectus will be distributed (or, if required,
a post-effective amendment to the Registration Statement of which this
Prospectus is a part will be filed) which will identify the specific Securities
being offered and set forth the aggregate amount of Securities being offered,
the purchase price and the terms of the offering, including the name or names of
the Selling Security Holders and of any underwriters, dealers or agents, the
purchase price paid by any underwriter for Securities purchased from the Selling
Security Holders, any discounts, commissions and other items constituting
compensation from the Selling Security Holders and/or the Company and any
discounts, commissions or concessions allowed or reallowed or paid to dealers,
including the proposed selling price to the public. In addition, an
underwritten offering will require clearance by the National Association of
Securities Dealers, Inc. of the underwriter's compensation arrangements. The
Company will not receive any of the proceeds from the sale by the Selling
Security Holders of the Securities offered hereby. All of the filing fees and
other expenses of this Registration Statement will be borne in full by the
Company, other than any underwriting fees, discounts and commissions relating to
this offering.
Pursuant to the Equity Registration Rights Agreement, the Company will
use its best efforts to keep the Registration Statement of which this Prospectus
forms a part effective under the Act for a period of three years following the
initial effective date of such Registration Statement (or such shorter period as
permitted under the Equity Registration Rights Agreement) and the Company will
pay substantially all of the expenses incident to the offering and sale of the
Securities to the public, other than underwriting fees, discounts and
commissions. The Equity Registration Rights Agreement provides for cross-
indemnification of the Selling Security Holders and the Company, to the extent
permitted by law, for losses, claims, damages, liabilities and expenses arising,
under certain circumstances, out of any registration of the Securities. The
Equity Registration Rights Agreement also provides that in connection with an
underwriting offering, the Company will indemnify the underwriters thereof,
their officers and directors and each person who controls such underwriters
(within the meaning of the Securities Act) to the same extent as provided with
respect to the indemnification of the Selling Security Holders signatory to such
agreement, except with respect to information provided by such underwriters
specifically for inclusion within the appropriate registration statement. 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
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
20
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 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 may
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 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, 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 Securities pursuant to the Equity
Registration Rights Agreement.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Securities may not simultaneously engage
in market making activities with respect to the Securities for a period of two
business days prior to the commencement of such distribution. In addition and
without limiting the foregoing, the Selling Security Holders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation Rules 10b-6 and 10b-7, which provisions
may limit the timing of purchases and sales of the Securities by the Selling
Security Holders.
In order to comply with certain states' securities laws, if applicable,
the Securities will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states the Securities may not be sold
unless the Securities have been registered or qualified for sale in such state,
or unless an exemption from registration or qualification is available and is
obtained.
The Warrants originally issued by the Company in the Private Exchange
Offer contained legends as to their restricted transferability. In addition,
the certificates for Common Stock issuable upon exercise of the Warrants would
contain, legends as to their restricted transferability. Upon the effectiveness
of the Registration Statement of which this Prospectus forms a part and the
transfer of the Securities pursuant thereto, these legends will no longer be
necessary, and accordingly, new certificates representing such Securities will
be issued to the transferee without any such legends unless otherwise required
by law.
In addition to sales pursuant to the Registration Statement of which
this Prospectus forms a part, the Warrants and the shares of Common Stock
issuable upon exercise of the Warrants may be sold in accordance with Rule 144
under the Securities Act.
21
LEGAL MATTERS
The legality of the securities covered by this Prospectus has been
passed upon by Shereff, Friedman, Hoffman & Goodman, LLP, New York, New York,
counsel to the Company.
EXPERTS
The consolidated financial statements of the Company as of June 30, 1994
and June 30, 1995 and for each of the three years in the period ended June 30,
1995 appearing in the Company's Annual Report and incorporated by reference in
this Prospectus and elsewhere in this Registration Statement have been audited
by Arthur Andersen LLP, independent 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 the method of accounting for certain warehousing and catalog costs as
discussed in Note 4 to the consolidated financial statements.
22
No person has been authorized to give any information or to make any
representations, other than those herein, in connection with this offer and, if
given or made, such information or representations must not be relied upon.
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, any of these securities in any jurisdiction to any person to whom
it is unlawful to make such offer or solicitation in such jurisdiction. The
delivery of this Prospectus at any time does not imply that the information
herein is correct as of any time subsequent to its date.
------------------------
TABLE OF CONTENTS
Page
----
Available Information. . . . . 4
Incorporation of Certain Documents
by Reference 4
Prospectus Summary . . . . . . 5
Risk Factors . . . . . . . . . 12
Use of Proceeds. . . . . . . . 15
Selling Security Holders . . . 16
Description of Warrants. . . . 17
Description of Capital Stock . 18
Plan of Distribution . . . . . 19
Legal Matters. . . . . . . . . 22
Experts. . . . . . . . . . . . 22
WAXMAN INDUSTRIES, INC.
2,950,000
Warrants to
Purchase Common Stock
----------------
2,950,000
Shares of
Common Stock
Par Value $.01 Per Share
----------------
PROSPECTUS
----------------
____________, 1996
----------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following expenses incurred in connection with this Registration
Statement will be paid by the Company. The Selling Security Holders will not
bear any of such expenses.
<TABLE>
<CAPTION>
<S> <C>
Filing Fees - Securities and Exchange Commission $ --
Accounting Fees and Expenses 5,000*
Legal Fees and Expenses 15,000*
Printing Fees and Expenses 2,500*
Miscellaneous Expenses 2,500*
Total $25,000*
* Estimated
</TABLE>
ITEM 14. 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 16. EXHIBITS
<TABLE>
<CAPTION>
<C> <S>
4.1(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 (Exhibit 4.1 to Waxman Industries, Inc.'s Form S-4
filed June 20, 1994, incorporated herein by reference).
4.2 First Supplemental Indenture, dated as of January 19, 1996, by and between Waxman Industries,
Inc. and The Huntington National Bank, as Trustee.
4.3(1) Warrant Agreement, dated as of May 20, 1994, by and between Waxman Industries, Inc. and The
Huntington National Bank, as Warrant Agent (Exhibit 4.2 to Waxman Industries, Inc.'s Form S-4
filed June 20, 1994, incorporated herein by reference).
4.4(1) Warrant Certificate (Exhibit 4.3 to Waxman Industries, Inc.'s Form S-4 filed June 20, 1994,
incorporated herein by reference).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
5.1(1) Opinion of Shereff, Friedman, Hoffman & Goodman, LLP regarding legality (filed as Exhibit 5.1
to this Registration Statement).
10.1(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(1) 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).
10.3(1) 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).
10.4(1) 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).
10.5(1) Employment Agreement dated November 1, 1994 between Waxman Consumer Products Group Inc.
and Laurence Waxman. (Exhibit 10.6 to Waxman Industries, Inc.'s Amendment No. 4 on Form S-2
to Form S-1 filed October 10, 1995, Registration No. 33-54211, incorporated herein by reference).
10.6(1) 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. (Exhibit 10.6 to Waxman Industries, Inc.'s Form S-4 filed June 20, 1994, incorporated herein
by reference).
10.7(1) 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. (Exhibit 10.7 to Waxman Industries, Inc.'s Form S-4 filed June 20, 1994,
incorporated herein by reference).
10.8 Intercorporate Agreement dated March 28, 1996 among Barnett Inc., Waxman Industries, Inc.,
Waxman USA Inc., Waxman Consumer Products Group Inc., WOC Inc. and TWI, International Inc.
10.9(1) 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 (Exhibit 10.8 to Waxman Industries, Inc.'s Form
S-4 filed June 20, 1994, incorporated herein by reference).
10.10(1) 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 (Exhibit 10.9 to Waxman Industries, Inc.'s Form S-4 filed June 20, 1994,
incorporated herein by reference).
10.11(1) Amendment No. 2 to the Term Loan Agreement and Amendment No. 1 to the Revolving Credit
Agreement 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. (Exhibit 10.11 to
Waxman Industries, Inc.'s Amendment No. 4 on Form S-2 to Form S-1 filed October 10, 1995,
Registration No. 33-54211, incorporated herein by reference).
II-2
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
<C> <S>
10.12 Amended and Restated Credit Agreement dated as of April 3, 1996 among Waxman USA Inc.,
Waxman Consumer Products Group Inc., WOC Inc., the Lenders and Issuers party thereto and
Citibank, N.A., as agent, and certain exhibits thereto.
10.13 Standstill Agreement dated March 28, 1996 between Waxman Industries, Inc. and Barnett Inc.
10.14 Indenture, dated as of April 3, 1996, by and between Waxman USA Inc. and the United States Trust
Company of New York, as Trustee, with respect to the Senior Notes due 2001, including the form
of Senior Notes.
10.15 Registration Rights Agreement, dated as of April 3, 1996, by and between Waxman USA Inc. and
the United States Trust Company of New York.
12.1(1) Statement re: computation of ratio (Exhibit 12.1 to Waxman Industries Inc.'s Form S-1 filed July
18, 1995, incorporated herein by reference).
13.1(1) Waxman Industries, Inc.'s Annual Report on Form 10-K for its fiscal year ended June 30, 1995
(File No. 33-5888, incorporated herein by reference).
13.2(1) Waxman Industries, Inc.'s Quarterly Report on Form 10-Q for its fiscal quarter-ended September
30, 1995 (File No. 33-5888, incorporated herein by reference).
13.3(1) Waxman Industries, Inc.'s Quarterly Report on Form 10-Q for its fiscal quarter ended December
31, 1995 (File No. 33-5888).
23.1 Consent of Arthur Andersen LLP.
23.2(1) Consent of Shereff, Friedman, Hoffman & Goodman, LLP (contained in its opinion filed as
Exhibit 5.1 to this Registration Statement).
</TABLE>
__________________
(1) Incorporated herein by reference as indicated.
(B) FINANCIAL STATEMENT SCHEDULES
All schedules have been omitted because the required
information is not present or not present
in amounts sufficient to require submission of the schedule, or because the
information required is included
in the consolidated financial statements including notes thereto.
ITEM 17. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;
II-3
<PAGE>
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to section 13(a) or section
15(d) of the securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. The undersigned registrant hereby undertakes to deliver
or cause to be delivered with the prospectus, to each person whom the prospectus
is sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the prospectus is sent
or given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
D. 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
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE>
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-2 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 15th day of
April, 1996.
WAXMAN INDUSTRIES, INC.
By:/s/ Armond Waxman
----------------------
Armond Waxman,
Co-Chairman of the Board and Co-Chief Executive Officer
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>
/s/ * Co-Chairman of the Board, April 15, 1996
Melvin Waxman Co-Chief Executive Officer
and Director
/s/ Armond Waxman Co-Chairman, Co-Chief Executive April 15, 1996
Armond Waxman Officer and Director
* Director April 15, 1996
William R. Pray
/s/ Michael J. Vantusko Vice President-Finance (Principal April 15, 1996
Michael J. Vantusko Accounting Officer) and Assistant
Secretary
* Director April 15, 1996
Samuel J. Krasney
* Director April 15, 1996
Irving Z. Friedman
* Director April 15, 1996
Judy Robins
* By:/s/ Armond Waxman
----------------------
Armond Waxman
As Attorney-in-Fact
</TABLE>
II-5
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the individual whose signature
appears below
constitutes and appoints Armond Waxman, his attorney-in-fact and agent, with the
power of substitution for
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
all documents in connection therewith with the Securities and Exchange
Commission, and hereby ratifying
and confirming all that said attorney-in-fact, or his substitute or substitutes,
may do or cause to be done by
virtue thereof.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Michael J. Vantusko Vice President - Finance April 15, 1996
------------------- (Principal Accounting Officer)
Michael J. Vantusko and Assistant Secretary
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description Sequential Page Number
- ------- ------------------- ----------------------
<S> <C> <C>
4.1(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 (Exhibit 4.1 to Waxman Industries, Inc.'s Form S-4
filed June 20, 1994, incorporated herein by reference).
4.2 First Supplemental Indenture, dated as of January 19, 1996, by and between Waxman Industries,
Inc. and The Huntington National Bank, as Trustee.
4.3(1) Warrant Agreement, dated as of May 20, 1994, by and between Waxman Industries, Inc. and The
Huntington National Bank, as Warrant Agent (Exhibit 4.2 to Waxman Industries, Inc.'s Form S-4
filed June 20, 1994, incorporated herein by reference).
4.4(1) Warrant Certificate (Exhibit 4.3 to Waxman Industries, Inc.'s Form S-4 filed June 20, 1994,
incorporated herein by reference).
5.1(1) Opinion of Shereff, Friedman, Hoffman & Goodman, LLP regarding legality (filed as Exhibit 5.1
to this Registration Statement).
10.1(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(1) 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).
10.3(1) 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).
10.4(1) 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).
10.5(1) Employment Agreement dated November 1, 1994 between Waxman Consumer Products Group Inc.
and Laurence Waxman. (Exhibit 10.6 to Waxman Industries, Inc.'s Amendment No. 4 on Form S-2
to Form S-1 filed October 10, 1995, Registration No. 33-54211, incorporated herein by reference).
10.6(1) 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. (Exhibit 10.6 to Waxman Industries, Inc.'s Form S-4 filed June 20, 1994, incorporated herein
by reference).
10.7(1) 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. (Exhibit 10.7 to Waxman Industries, Inc.'s Form S-4 filed June 20, 1994,
incorporated herein by reference).
10.8 Intercorporate Agreement dated March 28, 1996 among Barnett Inc., Waxman Industries, Inc.,
Waxman USA Inc., Waxman Consumer Products Group Inc., WOC Inc. and TWI, International Inc.
10.9(1) 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 (Exhibit 10.8 to Waxman Industries, Inc.'s Form
S-4 filed June 20, 1994, incorporated herein by reference).
10.10(1) 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 (Exhibit 10.9 to Waxman Industries, Inc.'s Form S-4 filed June 20, 1994,
incorporated herein by reference).
10.11(1) Amendment No. 2 to the Term Loan Agreement and Amendment No. 1 to the Revolving Credit
Agreement 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. (Exhibit 10.11 to
Waxman Industries, Inc.'s Amendment No. 4 on Form S-2 to Form S-1 filed October 10, 1995,
Registration No. 33-54211, incorporated herein by reference).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description Sequential Page Number
- ------- ------------------- ----------------------
<S> <C> <C>
10.12 Amended and Restated Credit Agreement dated as of April 3, 1996 among Waxman USA Inc.,
Waxman Consumer Products Group Inc., WOC Inc., the Lenders and Issuers party thereto and
Citibank, N.A., as agent, and certain exhibits thereto.
10.13 Standstill Agreement dated March 28, 1996 between Waxman Industries, Inc. and Barnett Inc.
10.14 Indenture, dated as of April 3, 1996, by and between Waxman USA Inc. and the United States Trust
Company of New York, as Trustee, with respect to the Senior Notes due 2001, including the form
of Senior Notes.
10.15 Registration Rights Agreement, dated as of April 3, 1996, by and between Waxman USA Inc. and
the United States Trust Company of New York.
12.1(1) Statement re: computation of ratio (Exhibit 12.1 to Waxman Industries Inc.'s Form S-1 filed July
18, 1995, incorporated herein by reference).
13.1(1) Waxman Industries, Inc.'s Annual Report on Form 10-K for its fiscal year ended June 30, 1995
(File No. 33-5888, incorporated herein by reference).
13.2(1) Waxman Industries, Inc.'s Quarterly Report on Form 10-Q for its fiscal quarter-ended September
30, 1995 (File No. 33-5888, incorporated herein by reference).
13.3(1) Waxman Industries, Inc.'s Quarterly Report on Form 10-Q for its fiscal quarter ended December
31, 1995 (File No. 33-5888).
23.1 Consent of Arthur Andersen LLP.
23.2(1) Consent of Shereff, Friedman, Hoffman & Goodman, LLP (contained in its opinion filed as
Exhibit 5.1 to this Registration Statement).
</TABLE>
__________________
(1) Incorporated herein by reference as indicated.
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
First Supplemental Indenture, dated as of January 19, 1996, to
the Indenture dated as of May 20, 1994 (the "Indenture"), between Waxman
Industries, Inc., a Delaware corporation (the "Company"), and the Huntington
National Bank, as Trustee (the "Trustee").
R E C I T A L
The Indenture provides that the Company and the Trustee may,
without notice to or the consent of any Holder of the Company's 12-3/4% Senior
Secured Deferred Coupon Notes due June 1, 2004 (the "Securities"), enter into a
Supplemental Indenture for the purpose of curing any ambiguity, defect or
inconsistency in the Indenture provided that such Supplemental Indenture does
not adversely affect the rights of any Holder.
NOW, THEREFORE, the parties agree as follows for their mutual
benefit and for the equal and ratable benefit of the Holders of the Securities:
1. Capitalized terms not defined herein shall have the
meaning given to them in the Indenture.
2. Section 5.01, Consolidation, Merger, Conveyance,
Transfer or Lease is hereby amended by deleting the first paragraph thereof in
its entirety and inserting the following paragraph in lieu thereof:
"The Company shall not consolidate with or merge with or into any person
or sell, assign, convey, lease, transfer or otherwise dispose of (or cause or
permit any Subsidiary of the Company to sell, assign, convey, lease, transfer or
otherwise dispose of) all or substantially all of the Company's and the
Company's Subsidiaries' properties and assets (determined on a consolidated
basis for the Company and the Company's Subsidiaries taken as a whole) to
another person or persons, in a single transaction or through a series of
related transactions unless:".
<PAGE>
3. This First Supplemental Indenture is an indenture
supplemental to and in implementation of the Indenture, and the Indenture and
this First Supplemental Indenture shall henceforth be read together.
4. The Trustee accepts the trusts created by the Indenture,
as supplemented by this First Supplemental Indenture, and agrees to perform the
same upon the terms and conditions in the Indenture, as supplemented by this
First Supplemental Indenture.
5. The Indenture as amended and supplemented by this First
Supplemental Indenture is in all respects confirmed and preserved.
6. This First Supplemental Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
7. The provisions of this First Supplemental Indenture will
take effect immediately upon its execution and delivery by the Trustee.
8. This First Supplemental Indenture shall be governed by
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the day and year first above
written.
WAXMAN INDUSTRIES, INC.
By: /s/ Michael Vantusko
_________________________
Name:
Title:
THE HUNTINGTON NATIONAL BANK,
as Trustee
By: /s/ Frank Lamb
__________________________
Name:
Title:
<PAGE>
INTERCORPORATE AGREEMENT
This Intercorporate Agreement ("Agreement"), dated as of March 28, 1996,
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"), WOC Inc., a Delaware corporation ("WOC"), TWI,
International, Inc., a Delaware corporation ("TWI"), and Barnett Inc., a
Delaware corporation ("Barnett").
WHEREAS, pursuant to an initial public offering (the "Public Offering"),
Barnett and WUSA are offering for sale to the public an aggregate of up to
approximately 50.1% (55.1% if the underwriters' overallotment option is
exercised in full) of Barnett's common stock, $.01 par value per share (the
"Common Stock");
WHEREAS, Waxman, prior to the Public Offering, owned 100% of the issued
and outstanding shares of Common Stock;
WHEREAS, after the Public Offering, Waxman and Barnett will be separate
publicly held corporations and Waxman will continue to beneficially own
approximately 49.9% (44.9% if the underwriters' over-allotment option is
exercised in full) of the issued and outstanding Common Stock;
WHEREAS, Waxman currently provides, and desires to continue to provide,
certain general, administrative and financial services to Barnett and/or its
future subsidiaries, if any (collectively, the "Barnett Group"), including,
among other things, certain treasury and financial functions, tax services, and
insurance and risk management services under an Intercorporate Agreement, dated
as of May 20, 1994, by and among Waxman, WUSA, CPG, Barnett and WOC (the
"Existing Intercorporate Agreement");
WHEREAS, Barnett currently provides certain services to WUSA, CPG, WOC
and/or their other subsidiaries and their divisions (collectively, the "Waxman
Group") under the Existing Intercorporate Agreement;
WHEREAS, Barnett currently shares certain warehouse space with U.S.
Lock, a division of WOC, and LeRan Copper and Brass, a division of U.S. Lock;
WHEREAS, upon the Effective Date (as hereinafter defined), Barnett will
no longer be an indirect wholly-owned subsidiary of Waxman and, pursuant to this
Agreement, will cease to be a party to the Existing Intercorporate Agreement;
and
<PAGE>
WHEREAS, to facilitate Waxman's and Barnett's separate ongoing
businesses and to reduce unnecessary additional overhead and personnel costs,
Waxman and Barnett desire to enter into this Agreement to set forth the terms
upon which (x) Waxman will continue to provide services to the Barnett Group and
(y) Barnett will continue to provide services to and share facilities with the
Waxman Group.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the adequacy and receipt
of which are hereby acknowledged, the parties agree as follows:
1. Services.
(a) Barnett hereby engages Waxman to provide, and Waxman agrees to
provide, to the Barnett Group, such administrative services as Barnett may
reasonably require with respect to (i) securing and monitoring the insurance
needs of the Barnett Group and securing the appropriate insurance coverage
therefor, (ii) the preparation and filing of federal and certain state and local
tax returns, (iii) accounting, treasury and other financial services, including,
without limitation, assistance with the preparation of all required filings
under federal and state securities laws and any securities exchange or the
National Association of Securities Dealers, Inc. (iv) assistance in financing
matters and (v) relations with lending, banking and underwriting institutions
and organizations and for shareholder, investor and public relations, as well as
such other services as Barnett 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 Barnett may reasonably
request from time to time and will be of the same type and quality that Waxman
has historically provided to itself or Barnett. Notwithstanding the foregoing,
on or prior to May 15th of each fiscal year during the term of this Agreement,
commencing with May 15, 1996, Barnett shall advise Waxman in writing of the
scope and level of Waxman Services it reasonably expects to require to be
provided to the Barnett Group during the ensuing fiscal year. The estimate of
the scope and level of services shall not limit the services required to be
provided hereunder, but is intended to be used for labor and capital planning
purposes. The parties hereto agree that services to be provided by Waxman for
the Barnett Group 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 Barnett or
the other members of the Barnett Group, if any, and that the services rendered
by such persons in such capacity from this date forward
2
<PAGE>
shall be deemed to have been rendered pursuant to the terms of this Agreement,
unless other arrangements have been agreed to among such Waxman Provider,
Waxman and Barnett. 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. In addition, to the extent that
any employee of Barnett or any member of the Barnett Group participates in any
employee benefit programs maintained by Waxman, Barnett shall determine, to the
extent legally permissible, whether and to what extent such employees will
participate in such programs.
(b) Waxman hereby engages Barnett to provide, and Barnett agrees to
provide, to the Waxman Group, such administrative services as Waxman may
reasonably require with respect to (i) the utilization of Barnett's management
information systems, (ii) the utilization of Barnett management's direct
marketing expertise and (iii) the provision of financial accounting, order
processing, billing and collection services, as well as such other services as
Waxman may reasonably request (collectively, the "Barnett Services"). The
Barnett Services will be provided at such times and with respect to such
matters as Waxman may reasonably request from time to time and will be of the
same type and quality that Barnett has historically provided to itself or the
Waxman Group. The Barnett Providers shall devote to the providing of Barnett
Services that amount of time which is reasonably necessary in order for Barnett
to fulfill its obligations hereunder. Notwithstanding the foregoing, on or
prior to May 15th of each fiscal year during the term of this Agreement,
commencing with May 15, 1996, Barnett shall advise Waxman in writing of the
scope and level of Barnett Services it reasonably expects to require to be
provided to the Waxman Group during the ensuing fiscal year. The estimate of
the scope and level of services shall not limit the services required to be
provided hereunder, but is intended to be used for labor and capital planning
purposes. The parties hereto agree that services to be provided by Barnett for
the Waxman Group hereunder are to be performed by such persons as shall be
designated by Barnett from time to time (all of such persons are hereafter
collectively referred to as the "Barnett Providers"). The parties hereto
further acknowledge that it is their mutual expectation that certain of the
Barnett Providers shall continue to serve as, or be elected as, officers of
Waxman or the other members of the Waxman Group, if any, and that the services
rendered by such persons in such capacity from this date forward shall be
deemed to have been rendered pursuant to the terms of this Agreement, unless
other arrangements have been agreed to among such Barnett Provider, Waxman and
Barnett. The Barnett Providers shall devote to the providing of Barnett
Services that amount of time which is reasonably necessary in order for Barnett
to fulfill its obligations hereunder.
3
<PAGE>
(c) Neither Waxman nor Barnett shall take any action or enter into
any agreement which would render it unable to fully perform its obligations
under this Agreement.
(d) In order to coordinate the provisions of the Barnett Services
and the Waxman Services hereunder, the parties agree to aprise the respective
Chief Financial Officer of each of Waxman and Barnett for all requests for and
all fees, costs and expenses incurred with respect to the provision of services
hereunder.
2. Fees.
(a) As compensation for the Waxman Services rendered under this
Agreement, Barnett will pay to Waxman quarterly in arrears, upon the receipt of
an invoice therefor, the allocable cost of the compensation of the Waxman
Providers (including all employee benefits and prerequisites of the Waxman
Providers) while they are rendering the Waxman Services. Waxman shall also be
reimbursed for actual out-of-pocket disbursements to third parties by Waxman
required for the provision of the Waxman Services. Such fee shall be paid by
Barnett to Waxman within 10 days after Waxman has provided an invoice to
Barnett setting forth the total amount of the fee and the data supporting such
calculation. Waxman shall render such invoice to Barnett within 15 days of the
end of each fiscal quarter during the term hereof. To the extent that Barnett
does not agree with Waxman's determination of Barnett's allocable costs of the
compensation of the Waxman Providers, the respective Audit Committees of Waxman
and Barnett shall resolve such dispute, and, if such committees are unable to
resolve such dispute, they shall seek the assistance of Arthur Andersen LLP (or
such other firm(s) of certified independent public accountants that may be
regularly engaged by Waxman and Barnett) to resolve such dispute, and, if such
accounting firm(s) is unable to resolve such dispute, they shall mutually
select an independent arbitrator to resolve such dispute, whose determination
shall be conclusive and binding.
(b) As compensation for the Barnett Services rendered under this
Agreement, Waxman will pay to Barnett, quarterly in arrears, upon the receipt
of an invoice therefor, the allocable costs of the compensation of the Barnett
Providers (including all employee benefits and perquisites of the Barnett
Providers) while they are rendering the Barnett Services. Barnett shall also
be reimbursed for all actual out-of-pocket disbursements to third parties by
Barnett required for the provision of the Barnett Services. Such fee shall be
paid by Waxman to Barnett within 10 days after Barnett has provided an invoice
to Waxman setting forth the total amount of the fee and the data supporting
such calculation. Barnett shall render such invoice to Waxman within 15 days
of the end of each fiscal quarter during the term hereof. To the extent that
Waxman does not agree with Barnett's determination of Waxman's allocable costs
of the compensation of the Barnett
4
<PAGE>
Providers, the respective Audit Committees of Waxman and Barnett shall resolve
such dispute, and, if such committees are unable to resolve such dispute, they
shall seek the assistance of Arthur Andersen LLP (or such other firm(s) of
certified independent public accountants that may be regularly engaged by
Waxman and Barnett) to resolve such dispute, and, if such accounting firm(s) is
unable to resolve such dispute, they shall mutually select an independent
arbitrator to resolve such dispute, whose determination shall be conclusive and
binding.
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 the Barnett Group's businesses, their
properties and assets and their directors and officers that are part of
Waxman's coverage will continue to be maintained by Waxman until Barnett
obtains appropriate replacement coverage. Barnett will reimburse Waxman for
the actual premium costs associated with providing such insurance coverage
within 15 days after Waxman's receipt of invoices for such insurance coverage.
Waxman agrees to consult with Barnett prior to incurring any obligations for
insurance coverage on behalf of any member of the Barnett Group. Barnett
agrees to continue be included in Waxman's insurance coverage to the extent
that it is financially reasonable to do so.
4. Indemnification. (a) Barnett agrees to indemnify the Waxman
Group 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 Barnett or any
member of the Barnett Group, by reason of the provision of services by Waxman
and/or the Waxman Providers to the Barnett Group or any member of the Barnett
Group pursuant to the terms of this Agreement (other than any action by Barnett
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.
(b) Waxman agrees to indemnify the Barnett Group and the
Barnett Providers (individually, a "Barnett Indemnitee," and, collectively, the
"Barnett Indemnitees"), if a Barnett 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 Waxman or any member of the Waxman
Group, by reason of the provision of services by Barnett and/or the Barnett
Providers to the Waxman Group or any member of the Waxman Group pursuant to the
terms of this Agreement (other than any action by
5
<PAGE>
Waxman against Barnett by reason of a breach of this Agreement by Barnett)
against 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 Barnett Indemnitee.
5. Responsibility for Providing Compensation and Fringe Benefits
to Service Providers. Barnett and Waxman, respectively, shall bear 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 Barnett
Providers and the Waxman Providers, respectively, and such persons shall not,
except as approved by Barnett and Waxman, be entitled to any compensation or
benefit from Barnett or Waxman, as the case may be, for services performed for
the Waxman Group or the Barnett Group, respectively, in any capacity,
including, but not limited to, services as an officer of any member of the
Barnett Group and any member of the Waxman Group, as the case may be.
6. Warehouse Facilities; Product Purchases. Certain members of
the Waxman Group may occupy space leased by Barnett. With respect to any such
occupancy, the duration of such occupancy arrangement and portion of the
premises to be occupied shall be mutually agreed between the parties to such
arrangement and the cost of such occupancy shall be equal to the rent paid by
Barnett allocable to the space occupied by such member of the Waxman Group;
provided, however, that if the specific space such member of the Waxman Group
may occupy is not readily subject to physical apportionment, then the charges
shall be based upon an agreed percentage of the net sales of such member of the
Waxman Group allocable to such facility. Each of the Waxman Group and the
Barnett Group may purchase products from each other at prices and upon terms
and conditions as may be agreed among the parties from time to time.
7. Status as Independent Contractor. It is expressly understood
between the parties hereto that Waxman, with respect to services provided by it
to the Barnett Group hereunder, and Barnett, with respect to services provided
by it to the Waxman Group hereunder, shall be independent contractors. It is
also expressly agreed that each of Waxman and Barnett, as the case may be,
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, the other members of the Waxman Group and their employees,
representatives and agents, including without
6
<PAGE>
limitation the Waxman Providers, that all memoranda, notes, records or other
documents made or compiled by Waxman, the other members of the Waxman Group and
their 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 any Barnett
Information (as defined below) shall be Barnett's property and shall be
delivered to Barnett on Barnett's request on the termination of this Agreement
or at any other time. None of Waxman or any member of the Waxman Group, or
their 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 Barnett Group's businesses, any
secret or confidential information, non-public information, knowledge, or data
of the Barnett Group (including, without limitation, names of customers of the
Barnett Group (collectively, "Barnett Information")) obtained by any of them as
a result of Waxman's performance of this Agreement, unless authorized by
Barnett. The provisions of this Section do not extend to any portion of such
Barnett 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 information notice thereof and
agree to cooperate with the furnishing parties' efforts, if any, to contest the
issuance of such order, request or decree.
(b) Barnett agrees, on behalf of itself, the other members of
the Barnett Group and their employees, representatives and agents, including
without limitation the Barnett Providers, that all memoranda, notes, records or
other documents made or compiled by Barnett, the other members of the Barnett
Group, their employees, representatives and agents, including, without
limitation, the Barnett Providers, in the fulfillment of Barnett's obligations
under this Agreement or otherwise, made available to any of them concerning any
Waxman Information (as defined below) shall be Waxman's property and shall be
delivered to Waxman on the termination of this Agreement or at any other time
on Waxman's request. None of Barnett, any other member of the Barnett Group or
their 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 Waxman Group's businesses, any
secret or confidential information, non-public information, knowledge, or data
of the Waxman Group (including, without limitation, names of customers of the
Waxman Group (collectively, "Waxman Information")) obtained by any of them as a
result of Barnett's
7
<PAGE>
performance of this Agreement, unless authorized by Waxman. The provisions of
this Section do not extend to any portion of such Waxman 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
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 information notice thereof and agree to cooperate with the furnishing
parties' efforts, if any, to contest the issuance of such order, request or
decree.
9. Term. Subject to the last sentence of this Section 9, this
Agreement will become effective upon the consummation of the Public Offering
(the "Effective Date") and may be terminated by Waxman upon 360 days prior
written notice given as provided herein to the other parties hereto or by
Barnett upon 360 days prior written notice given as provided herein to the
other parties hereto. Notwithstanding the preceding sentence, the provision of
Section 4 hereof shall survive until the second anniversary of the Effective
Date. At the Effective Date, the Existing Intercorporate Agreement will cease
to be binding upon Barnett and all one of its rights and obligations with
respect to the subject matter thereof shall, on and after the Effective Date,
be governed by this Agreement.
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, Inc.
24460 Aurora Road
Bedford Heights, Ohio 44146
Attention: Chief Executive Officer
8
<PAGE>
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
To TWI: TWI
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, together with the Existing
Intercorporate Agreement, constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede 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.
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 the parties hereto 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.
9
<PAGE>
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.
10
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
WAXMAN INDUSTRIES, INC.
By: /s/ Armond Waxman
------------------------------
Armond Waxman
Co-Chief Executive Officer and
Co-Chairman of the Board
BARNETT INC.
By: /s/ William R. Pray
-------------------------------
William R. Pray
President, Chief Executive Officer
and Director
WAXMAN USA INC.
By: /s/ Michael Vantusko
_______________________________
Michael Vantusko
Vice President-Finance
WAXMAN CONSUMER PRODUCTS GROUP INC.
By: /s/ Michael Vantusko
_______________________________
Michael Vantusko
Treasurer
WOC INC.
By: /s/ Michael Vantusko
_______________________________
Michael Vantusko
Treasurer
TWI, INTERNATIONAL, INC.
By: /s/ Michael Vantusko
_______________________________
Michael Vantusko
Treasurer
11
<PAGE>
U.S. $30,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of May 20, 1994
Amended and Restated
as of April 3, 1996
Among
WAXMAN USA INC.,
as the Company
and
WAXMAN CONSUMER PRODUCTS GROUP INC.
and
WOC INC.
as Borrowers
and
THE LENDERS AND ISSUERS PARTY HERETO
and
CITICORP USA, INC.
as Agent
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
May 20, 1994, as amended and restated as of April 3, 1996,
among WAXMAN USA INC. (the "Company"), 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:
WHEREAS, the Borrowers have requested that the
Lenders make term loans in aggregate principal amount of
$5,000,000 and revolving credit advances of up to
$25,000,000 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.
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<PAGE>
"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
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, for Revolving
Credit Loans, the Applicable Revolver Base Rate Margin, and
for Term Loans, the Applicable Term Base Rate Margin.
"Applicable Eurodollar Margin" means, for
Revolving Credit Loans, the Applicable Revolver Eurodollar
Margin, and for Term Loans, the Applicable Term Eurodollar
Margin.
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<PAGE>
"Applicable Revolver Base Rate Margin" means one
and one-half percent (1.50%).
"Applicable Revolver Eurodollar Rate Margin" means
three percent (3%).
"Applicable Term Base Rate Margin" means three and
one-half percent (3 1/2%).
"Applicable Term 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
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 (includ-
ing 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
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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 bene-
ficial 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
replacement or repair is abandoned or is otherwise discon-
tinued 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 Revolving Credit Commitments of the Lenders minus
the aggregate outstanding principal amount of the Revolving
Credit 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
Revolving Credit Loans advanced to such Borrower at such
time and the Letter of Credit Obligations of such Borrower
at such time.
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"Barnett" means Barnett Inc., a Delaware
corporation.
"Barnett Pledge Agreement" means the Pledge
Agreement, in substantially the form of Exhibit E hereto,
given by the Company to the Agent.
"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 per-
cent 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
Insurance Fund for insuring U.S. dollar deposits in the
United States; and
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(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 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%
(b) 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
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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%
in each case, less such other 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) less, for either or both of the
two Borrowers as the Company may elect on each Borrowing
Base Certificate, the Borrowing Base Reserve.
"Borrowing Base Certificate" means a certificate
of the Borrowers substantially in the form of Exhibit I or
such other form acceptable to the Agent.
"Borrowing Base Reserve" means the sum of (a) for
the period from the Closing Date to the three month
anniversary of the Closing Date, $2.5 million, for the
period from the three month anniversary of the Closing Date
to the six month anniversary of the Closing Date, $3.25
million, for the period from the six month anniversary of
the Closing Date to the nine month anniversary of the
Closing Date, $4.0 million, and $4.75 million thereafter,
and (b) an amount equal to the sum of (i) if the Fair Market
Value of the Term Collateral is less than $7.5 million, 50%
of the difference between $7.5 million and (A) the greater
of (1) $5 million and (2) the Fair Market Value of the Term
Collateral, and (ii) if the Fair Market Value of the Term
Collateral is less than $5 million, 100% of the difference
between $5 million and the Fair Market Value of the Term
Collateral provided, however, that in no event shall the
Borrowing Base Reserve exceed $5,000,000. The Borrowing
Base Reserve shall be calculated as of the date on which the
Borrowing Base is calculated.
"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.
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<PAGE>
"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 addi-
tions 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.
"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
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<PAGE>
repurchase agreements relating to marketable direct obliga-
tions 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 each
Borrower for any period shall include, without duplication,
any payments made by such Borrower pursuant to Section
7.4(a)(ii)(A) hereof.
"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
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
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<PAGE>
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.
"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 Agree-
ments, the Intellectual Property Security Agreements, 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.
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<PAGE>
"Collateral Documents Amendment" means an
amendment, in substantially the form of Exhibit D hereto, to
the Security Agreements, the Pledge Agreements and the
Intellectual Property Security Agreements.
"Commitment" means, as to each Lender, such
Lenders Revolving Credit Commitment or Term Loan Commitment.
"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, hazard-
ous 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 Indebted-
ness 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
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 other-
wise) (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 contribu-
tion 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
11
<PAGE>
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.
"Debentures" means (i) prior to the consummation
of the Proposed Restructuring, the Deferred Coupon 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, the Existing Senior
Subordinated Notes, the Deferred Coupon Notes and, until
defeased pursuant to the Proposed Restructuring, 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.
"Deferred Coupon 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 between
Holdings and Huntington National Bank, as trustee.
"Disclosure Document" means the Offer to Exchange
and Consent Solicitation relating to the Existing Senior
Subordinated Notes, dated February 27, 1996, as it may be
amended, supplemented or modified from time to time.
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<PAGE>
"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
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
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<PAGE>
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 duplica-
tion, (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
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
14
<PAGE>
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
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 of WOC Inc., 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 dis-
puted 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
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(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
(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 accept-
able to the Agent, in its sole judgment exercised reason-
ably; 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 condition, 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
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(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 on such Accounts 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
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 vegeta-
tion).
"Environmental Liabilities and Costs" means, as to
any Person, all liabilities, obligations, responsibilities,
Remedial Actions, losses, damages, punitive damages, conse-
quential damages, treble damages, costs and expenses
(including, without limitation, all fees, disbursements and
17
<PAGE>
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
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 amend-
ment 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
18
<PAGE>
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
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
19
<PAGE>
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 11-1/8% Senior Notes
due 2001 of the Company issued pursuant to the Indenture,
dated as of April 3, 1996, by and between the Company and
United States Trust Company of New York, 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 February 27,
1996, as it may be amended, modified or supplemented
relating to (i) the Company's offer to exchange for
$48,750,000 aggregate principal amount of its Existing
Senior Subordinated Notes its Exchange Notes and (ii)
consents to certain provisions of the indenture relating to
the Existing Senior Subordinated Notes, each as more
particularly described in the Disclosure Document.
"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.
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<PAGE>
"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.
"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.
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<PAGE>
"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 Subsidi-
aries 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
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 prin-
ciples 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 gov-
ernment, 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.
22
<PAGE>
"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 dupli-
cation, (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,
(ii) all obligations of such Person evidenced by notes,
bonds, debentures or similar instruments, (iii) all indebt-
edness of such Person created or arising under any condi-
tional 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 Indebted-
ness 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 liabili-
ties 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
the Intellectual Security Agreement, dated May 20, 1994 made
23
<PAGE>
by each of the Borrowers and Barnett, as amended by the
Collateral Documents Amendment, as such agreement may be
amended, supplemented or otherwise modified from time to
time.
"Intercompany Note" means any intercompany note,
substantially in the form of Exhibit K to the Original
Credit Agreement, made by any Borrower to any other Borrower
or by any Borrower to the Company or Holdings.
"Intercorporate Agreements" mean the Intercorpo-
rate Agreement among Holdings, the Company, the Borrowers
and Barnett dated on or about the Original Closing Date and
the Intercorporate Agreement among Holdings, the Company,
the Borrowers and Barnett dated on or about the Closing
Date.
"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 pre-
ceding 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;
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<PAGE>
(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
(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%).
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<PAGE>
"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 speci-
fied 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 fore-
going, and the filing, under the Uniform Commercial Code or
comparable law of any jurisdiction, of any financing state-
ment naming the owner of the asset to which such Lien
relates as debtor.
"Loan" means a Revolving Credit Loan, a Term 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 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.
26
<PAGE>
"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.
"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
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) inter-
est 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, plus the following for such Person and its
27
<PAGE>
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 and the Term Notes.
"Notice of Borrowing" has the meaning specified in
Section 2.2(a).
"Obligations" means the Loans, the Letter of
Credit Obligations and all other advances, debts, liabili-
ties, 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" in-
cludes, 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.
28
<PAGE>
"Operating Plan" means those financial plans dated
April 1, 1996 covering the Fiscal Years ending in 1996
through 1998, inclusive, delivered to the Lenders by the
Borrowers.
"Original Closing Date" means the Closing Date (as
defined in the Original Credit Agreement).
"Original Credit Agreement" means the Credit
Agreement, dated as of May 20, 1994, among the Company, the
Borrowers, Barnett, the lenders parties thereto and Citicorp
North America Inc., as Agent.
"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.
"Permit" means any permit, approval, authoriza-
tion, license, variance or permission required from a
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, corpor-
ation (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
29
<PAGE>
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 (i) 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, dated the Original Closing Date, and (ii) the
Barnett Pledge Agreement, dated the Closing Date, as each
such pledge agreement may be amended, supplemented or
otherwise modified from time to time.
"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, and (ii) the obligations of
Barnett under the Existing Credit Agreement outstanding, (B)
the consummation of the transactions contemplated by the
Exchange Offer and Consent Solicitation, (C) the public
offering of the Stock of Barnett, and (D) the refinancing of
a portion of the Loans made pursuant to the Term Loan Credit
Agreement with the proceeds of the Term Loans, as 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, 1995, and the quarterly
Reports on Form 10-Q of Holdings for the fiscal quarters
ended September 30, 1995 and December 31, 1995, 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
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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, includ-
ing, 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 In-
debtedness 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 there-
under 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 there-
under 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, and (b) the amendment to the
Indenture relating to the Existing Senior Subordinated
Notes.
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"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 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 organiza-
tional 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.
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"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.
"Revolving Credit Collateral" means any Collateral
other than the Term Collateral.
"Revolving Credit Commitment" means, as to each
Lender, the commitment of such Lender to make Revolving
Credit Loans to the Borrowers pursuant to Section 2.1 (a) in
the aggregate principal amount outstanding not to exceed the
amount set forth opposite such Lender's name on Schedule I
under the caption "Revolving Credit Commitment," as such
amount may be reduced or modified pursuant to this
Agreement.
"Revolving Credit Loan" means a Loan made by a
Lender to any Borrower pursuant to Section 2.1(a) or Section
2.18.
"Revolving Credit Note" means a promissory note of
the Borrowers payable to the order of any Lender in a prin-
cipal amount equal to the amount of such Lender's Revolving
Credit Commitment as originally in effect, in substantially
the form of Exhibit A-1, evidencing the aggregate Indebted-
ness of the Borrowers to such Lender resulting from the
Revolving Credit Loans made by such Lender.
"Secured Parties" means the Lenders, Issuers and
the Agent.
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"Security Agreement" means an agreement, in sub-
stantially the form of Exhibit E to the Original Credit
Agreement, as amended by the Collateral Agreement Amendment,
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 determi-
nation, 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 equiva-
lents (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 converti-
ble 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 Original Closing Date by
and among Holdings and its domestic Subsidiaries.
"Term Borrowing" means a Borrowing consisting of
Term Loans made by the Lenders ratably according to their
respective Term Commitments.
"Term Collateral" means the collateral described
in the Barnett Pledge Agreement.
"Term Loan" means a Loan made by a Lender to any
Borrower pursuant to Section 2.1(b).
"Term Loan Commitment" means, as to each Lender,
the commitment of such Lender to make Term Loans to the
Borrowers pursuant to Section 2.1(b) 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".
"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.
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"Term 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 Term Loan
Commitment, in substantially the form of Exhibit A-2,
evidencing the aggregate Indebtedness of the Borrowers to
such Lender resulting from the Term Loans made by such
Lender.
"Termination Date" means the earliest of (i) April
15, 1996, unless the Closing Date occurs prior thereto,
(ii) the 364th day after the Closing Date and (iii) the date
of termination in whole of the Commitments pursuant to
Section 2.4 or 8.2.
"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 Original Closing Date.
"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
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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
appropriate Exhibit or Schedule to, or Article, Section,
subsection or clause in this Agreement.
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(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 Loans. (a) Revolving Credit Loans. On
the terms and subject to the conditions contained in this
Agreement, each Lender severally agrees to make revolving
credit loans (each a "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 Revolving Credit 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) $25,000,000. Within the limits
of each Lender's Revolving 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.
(b) On the terms and subject to the conditions
contained in this Agreement, each Lender severally agrees to
make a Loan (each a "Term Loan") to the Borrowers on the
Closing Date, in an aggregate amount not to exceed the
amount set opposite such Lender's name on Schedule II hereto
as its Term Loan Commitment (such Lender's "Term Loan
Commitment"). Amounts prepaid pursuant to Section 2.6 may
not be reborrowed under this Section 2.1(b). The Term Loans
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of each Lender shall be evidenced by the Term Note to the
order of such Lender.
2.2. Making the Loans. (a) Each Borrowing shall
be made on notice, given by the Borrower so requesting the
Borrowing to the Agent not later than 12:00 (noon) (New York
City time) on the Business Day of the proposed Borrowing
(or, in the case of a Borrowing consisting of Eurodollar
Rate Loans, three Business Days prior to such proposed
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 Borrowing, (iii) the aggregate amount of such
proposed 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
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
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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 liqui-
dation 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 correspond-
ing 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
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.
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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 Revolving Credit Commitment over such
Lender's Revolving Credit 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 Revolving Credit Commitment, (ii) on the
date of any reduction in whole of the Revolving Credit
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 Revolving
Credit 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 Revolving Credit 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) Subsequent to any prepayments of the Term
Loans pursuant to Section 2.6(c)(iii), the then current
Revolving Credit Commitments shall be reduced on each date
on which any Borrower receives payment from any of the
following (and the Revolving Credit Commitment of each
Lender shall be reduced by its Ratable Portion of such
amount):
(i) upon receipt by such Borrower or its
Subsidiaries of Asset Sale Proceeds in an amount
equal to 75% of such Asset Sale Proceeds, or
(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).
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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 Busi-
ness Days' prior notice to the Agent, stating the proposed
date and aggregate principal amount of the prepayment,
prepay the outstanding principal amount of the Term Loans or
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 Revolving Credit Loans outstanding at such time
exceeds the Revolving Credit Commitments at such time, the
Borrowers jointly and severally agree to forthwith prepay
the Revolving Credit Loans then outstanding in an amount
equal to such excess.
(ii) If at any time the sum of the aggregate
principal amount of Revolving Credit 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 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 Obliga-
tions of such Borrower exceed the Borrowing Base of such
Borrower.
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(iii) If at any time any Borrower receives
proceeds of the types referred to in Section 2.4(b), such
Borrower shall prepay the Term Loan made to it upon receipt
of such proceeds in the amount of such proceeds, together
with interest on the amount prepaid to the date of
prepayment.
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
Loans. Each Notice of Conversion or Continuation shall be
irrevocable.
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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
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
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(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 pur-
poses, absent manifest error. If the Borrowers so notify
the Agent within five Business Days after any Lender noti-
fies 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, addi-
tionally, 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
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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
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
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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
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
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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
political subdivision thereof or any applicable foreign
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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 exer-
cise 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,
has not so received payment in full. If, after giving
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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) 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 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 obliga-
tion to issue any Letter of Credit if:
(i) any order, judgment or decree of any
Governmental Authority or arbitrator shall purport by
its terms to enjoin or restrain such Issuer from issu-
ing 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
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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) $25,000,000.
None of the Lenders (other than the Issuers) shall have any
obligation to issue any Letter of Credit.
(b) In no event shall:
(i) the expiration date of any Letter of
Credit fall after the Termination Date, unless the
Agent shall otherwise consent; or
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(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 Revolving Credit 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
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.
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(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 Revolving Credit Lender,
and each Revolving Credit 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 Revolving Credit
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 Revolving Credit
Lender of such failure, and each Revolving Credit Lender
shall promptly and unconditionally pay to the Agent for the
account of such Issuer the amount of such Revolving Credit
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
Revolving Credit Lender prior to 12:00 noon (New York City
time) on any Business Day, such Revolving Credit 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 Revolving Credit Lender shall not have so
made such Revolving Credit Lender's Ratable Portion of the
amount of such payment available to the Agent for the
account of such Issuer, such Revolving Credit Lender agrees
to pay to the Agent for the account of such Issuer forthwith
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on demand such amount 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 Revolving Credit 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 Revolving Credit 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 Revolving Credit Lender
shall be responsible for the failure of any other Revolving
Credit Lender to make available to the Agent for the account
of any Issuer such other Revolving Credit 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 Revolving
Credit 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 Revolving Credit Lender, in immediately
available funds, an amount equal to such Revolving Credit
Lender's pro rata share of such payment based on the
respective amounts the Revolving Credit Lenders have paid in
respect of such Reimbursement Obligation.
(j) Upon the request of any Revolving Credit
Lender, each Issuer shall furnish to such Revolving Credit
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
Revolving Credit Lender.
(k) The obligations of the Revolving Credit
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;
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(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 Revolving Credit Lender or any
other Person, whether in connection with this
Agreement, any Letter 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 Reimburse-
ment 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 Revolving Credit Lenders
for the account of such Issuer pursuant to Section 2.16(h).
Upon the making of such payment, such Revolving Credit
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
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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 the Applicable Base Rate
Margin 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 thereof pursuant to Section
2.16(i), each Revolving Credit Lender shall, upon notice by
such Issuer, forthwith pay over to such Issuer an amount
equal to such Revolving Credit Lender's Ratable Portion of
the amount which must be so returned by such Issuer based on
the respective amounts paid in respect thereof to the
Revolving Credit 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 Revolving Credit 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.
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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
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
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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
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 Revolving Credit 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.
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(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 Revolving Credit
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 Date") and each Revolving Credit 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 Revolving Credit Lender, such
Revolving Credit 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 Revolving Credit 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 Revolving Credit Lender shall acquire,
without recourse or warranty, an undivided participation in
each Swing Advance otherwise required to be repaid by such
Revolving Credit Lender pursuant to the preceding paragraph,
which participation shall be in a principal amount equal to
such Revolving Credit Lender's Ratable Portion of such Swing
Advance, by paying to the Swing Advance Bank on the date on
which such Revolving Credit 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 Revolving Credit
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
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Swing Advance Bank shall be entitled to recover such amount
on demand from that Revolving Credit 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 Revolving Credit Loans.
From and after the date on which any Revolving Credit Lender
purchases an undivided participation interest in a Swing
Advance pursuant to this paragraph (d), the Swing Advance
Bank shall promptly distribute to such Revolving Credit
Lender such Revolving Credit Lender's Ratable Portion of all
payments of principal and of interest on such Swing Advance,
other than those received from a Revolving Credit 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 Revolving Credit Lender shall, upon notice to the Swing
Advance Bank, forthwith pay over to the Swing Advance Bank
an amount equal to such Revolving Credit Lender's pro rata
share of the payment so rescinded or returned based on the
respective amounts paid in respect thereof to the Revolving
Credit Lenders pursuant to the preceding paragraph (c).
2.19. Payment on Account of Collateral. (a) 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
Revolving Credit 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 ex-
penses 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 there-
with;
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;
Next, to the Revolving Credit 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;
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Next, to the Agent to cash collateralize any
Letter of Credit Obligations in accordance with Section 8.3;
Next, to the Term Lenders, pro rata, for the
payment in full of accrued and unpaid interest on the Term
Loans and then to the principal amount of the Term Loans;
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.
(b) 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 Term Collateral
(after exercise by the Agent of its remedies under the
Barnett Pledge Agreement) shall be applied by the Agent:
First, to the payment of the costs and expenses of
such sale, including, without limitation, reasonable ex-
penses 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 there-
with;
Next, to the Term Lenders, pro rata, for the
payment in full of accrued and unpaid interest on the Term
Loans and then to the principal amount of Term Loans; 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.
ARTICLE III
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
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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 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 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.
(f) The Collateral Documents Amendment, duly
executed by each of the Borrowers and Barnett.
(g) A letter of credit in the amount of
$2,384,923.50, issued by First Union and naming the Agent as
beneficiary, in form and substance satisfactory to the
Agent.
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(h) 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
for such warehouse as agreed to by the Agent and such
landlord.
(i) A favorable opinion of Shereff, Friedman,
Hoffman & Goodman, LLP, 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.
(j) A Borrowing Base Certificate, executed by a
Responsible Officer of each Borrower, satisfactory to the
Agent.
(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,
1996), 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 Sections 3.2(b) and (g), and 3.3(a)
has been satisfied.
(m) [Reserved]
(n) A copy of a letter from the Borrowers' inde-
pendent public accountants regarding (i) the Lenders' reli-
ance 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
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time to time under this Agreement and in connection with the
preparation, review, execution, delivery, amendment, modifi-
cation, 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.
(o) [Reserved]
(p) The Barnett Pledge Agreement, duly executed
by the Company, together with:
(i) certificates representing the Pledged
Shares (as defined in such 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 such Pledge Agreement have
been taken.
(q) 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 December
31, 1995 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;
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(ii) All necessary governmental and third
party approvals required to be obtained by any Loan
Party in connection with the transactions contemplated
hereby and its obtaining the Loans and Letters of
Credit have been obtained;
(iii) There exists no claim, action, suit,
investigation or proceeding (including, without limi-
tation, 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 which, if adversely determined, would
have a Material Adverse Effect;
(iv) The Company shall have exchanged for at
least $32,467,500 of Existing Senior Subordinated Notes
its Exchange Notes, and the consents required under the
Exchange Offer and Consent Solicitation shall have been
obtained;
(v) The Company shall have received not less
than $28,000,000 in proceeds from the issuance of
Common Stock of Barnett, and shall have used such
proceeds to repay all borrowings of Barnett under the
Original Credit Agreement and the Term Loan Credit
Agreement not otherwise refinanced hereunder;
(vi) All of the obligations (as defined in
the Term Loan Credit Agreement) shall have been paid in
full; and
(vii) 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 2.4, 2.16 and 10.4, to the
extent then due and payable, shall have been paid.
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(d) No Lender in its sole judgment exercised
reasonably shall have determined (i) that there has been any
Material Adverse Change since December 31, 1995 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
$5,000,000.
(h) The Intercorporate Agreement, the Tax Sharing
Agreement and the Trademark License Agreement shall be in
form and substance satisfactory to the Lenders.
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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 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 incor-
poration; (ii) is duly qualified as a foreign corporation
and in good standing under the laws of each jurisdiction
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where such qualification is necessary, except for failures
which could not in the aggregate have a reasonable likeli-
hood 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:
(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
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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,
insolvency, fraudulent conveyance, reorganization, mora-
torium 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 adjust-
ment 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 state-
ments 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 enter-
prise have been disclosed to the Lenders. Each Lender
hereby acknowledges that it has received a copy of the
Disclosure Document and the Public Filings.
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(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, 1995, 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 December 31, 1995,
and the related consolidated statements of income, retained
earnings and cash flows of Holdings and its Subsidiaries for
the six 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 December 31, 1995, and said statements
of income, retained earnings and cash flows for the six
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 December 31, 1995, 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, 1995 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.
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(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 December
31, 1995, 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 consists of
9,000 shares of common stock, $0.01 par value per share, of
which 102 shares are issued and outstanding and 1,000 shares
of Preferred Stock, $0.10 par value per share, of which no
shares are 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
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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, the Existing Floating
Rate Senior Secured Notes and the Deferred Coupon Notes (or,
after the Proposed Restructuring, pursuant to the Indenture
relating to the Exchange 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. 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 identi-
fies 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 contribu-
tions 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 satis-
fied 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.
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(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 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
could in the aggregate not be reasonably expected to have a
Material Adverse Effect.
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(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' compen-
sation 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 for general working
capital and corporate purposes and to refinance a portion of
the Indebtedness outstanding under 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-
quences of which could in the aggregate not be reasonably
expected to have a Material Adverse Effect;
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(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 circum-
stances 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. [Reserved]
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.
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
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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 limita-
tion, 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 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 and
renewal options (if any). 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.
(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.
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(d) Except as permitted by Section 6.8, all
water, gas, electrical, steam, compressed air, telecommuni-
cation, 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 termina-
tion 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
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.
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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, each
Borrower agrees with the Lenders and the Agent that:
5.1. Maximum Leverage Ratio. The Borrowers shall
on a combined basis 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,
1996, the product of four and EBITDA for the three months
then ending or in the case of the Fiscal Quarter ending
September 30, 1996, the product of two and EBITDA for the
six months then ending or, in the case of the Fiscal Quarter
ending December 31, 1996, 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:
For the
Fiscal Quarter Ending on Maximum Ratio
------------------------ -------------
June 30, 1996 6.70 to 1
September 30, 1996 6.10 to 1
December 31, 1996 6.00 to 1
March 31, 1997 6.00 to 1
5.2. Fixed Charge Coverage Ratio. The Borrowers
shall on a combined basis 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, 1996, such determination
shall be made based on the three months then ending, (ii) in
the case of the Fiscal Quarter ending September 30, 1996,
such determination shall be made based on the six months
then ending, and (iii) in the case of the Fiscal Quarter
ending December 31, 1996, such determination shall be based on the
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nine months then ending), not less than the ratio set
forth below opposite such Fiscal Quarter:
For the
Fiscal Quarter Ending on Minimum Ratio
------------------------ -------------
June 30, 1996 .667 to 1
September 30, 1996 .80 to 1
December 31, 1996 .80 to 1
March 31, 1997 .85 to 1
5.3. Maintenance of Adjusted Net Worth. The
Borrowers shall on a combined basis 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:
For Each Month in the Minimum Adjusted
Fiscal Quarter Ending On Net Worth
- ------------------------ ----------------
June 30, 1996 $23,000,000
September 30, 1996 $24,000,000
December 31, 1996 $25,000,000
March 31, 1997 $26,000,000
provided, however, that if the Company chooses to
reallocate to the Borrowers certain reserves previously
taken by the Company in connection with a proposed sale of
Waxman Consumer Products, then each of the numbers set forth
below shall be reduced by the amount of the reserves, but
not to exceed $6.5 million.
5.4. Capital Expenditures. The Borrowers shall
not on a combined basis permit any Capital Expenditures the
result of which is that the Capital Expenditures for the
period from July 1, 1995 until such date is in excess of the
maximum amount set forth below for such Fiscal Quarter in
which such date falls:
Maximum Amount of
Fiscal Quarter Ending On Capital Expenditures
------------------------ --------------------
June 30, 1996 $ 650,000
September 30, 1996 $ 900,000
December 31, 1996 $1,100,000
March 31, 1997 $1,300,000
5.5. EBITDA to Total Cash Interest Ratio. The
Borrowers shall on a combined basis 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, 1996, such
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determination shall be made based on the three months then
ending, (ii) in the case of the Fiscal Quarter ending
September 30, 1996, such determination shall be made based
on the six months then ending, and (iii) in the case of
the Fiscal Quarter ending December 31, 1996, such
determination shall be based on the nine months then
ending) of not less than the ratio set forth below for such
Fiscal Quarter:
For Each Fiscal Quarter
Ending On Minimum Ratio
----------- -------------
June 30, 1996 .90 to 1
September 30, 1996 .95 to 1
December 31, 1996 .95 to 1
March 31, 1997 1.0 to 1
ARTICLE VI
AFFIRMATIVE COVENANTS
As long as any of the Obligations or the Commit-
ments remain outstanding, unless the Majority Lenders other-
wise 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 employ-
ees; (c) preserve, and cause each of its Subsidiaries to
preserve, all registered patents, trademarks, trade names,
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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, cove-
nants 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
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 insur-
ance required by any Collateral Document. All insurance of
the Borrowers shall name the Agent and the Lenders as addi-
tional 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 deter-
mine. The Loan Parties will furnish to the Lenders from
time to time such information as may be requested as to such
insurance.
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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.
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.
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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
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 consoli-
dating balance sheets of the Company and its Subsidiaries,
and Barnett, as of the end of such quarter, and consolidated
statements of income and cash flow of Holdings and its
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Subsidiaries and consolidated and consolidating statements
of income and cash flow of the Company and its Subsidiaries,
and Barnett, 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,
and Barnett, 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, and Barnett, 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 Barnett, and consolidated balance sheets
of Holdings and its Subsidiaries, and Barnett, 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 and cash flow of
Holdings and its Subsidiaries, and Barnett, 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
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Company's and the Borrowers' compliance with all financial
covenants contained herein, and (iii) a written discussion
and analysis by the management of Holdings, the Company and
Barnett 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(n); 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:
(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 $100,000 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,
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forecasted revenues, net income and cash flow, each on a
consolidated basis;
(d) [Reserved]
(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;
(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
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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;
(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
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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, 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);
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(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
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
$250,000 or more;
(iv) the commencement of any judicial or
administrative proceeding or investigation alleging a
violation of any Requirement of Law involving environ-
mental, 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 $250,000 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
$250,000 or more; and
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(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 $250,000 or
more or become subject to additional Environmental
Liabilities and Costs of $250,000 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
(v) such other information respecting the busi-
ness, 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
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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.
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 Liabili-
ties and Costs in excess of $250,000, conduct or pay for
consultants to conduct, tests or assessments of environ-
mental conditions at such operations or properties, includ-
ing, 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 appro-
priate 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 deter-
mination 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.
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(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
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):
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(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 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
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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
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 $500,000;
(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; and
(j) Liens existing on the date of this Agreement
and disclosed on Schedule 7.1.
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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
Borrower, Holdings or the Company (as the case may be)
in each case evidenced by an Intercompany Note;
(e) (i) Indebtedness secured by Liens per-
mitted 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 $1,000,000 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);
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(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; and
(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.
7.3. Lease Obligations. (a) No Borrower shall
create or suffer to exist, nor permit any of its Subsidi-
aries 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 liabili-
ties of the Borrowers and their Subsidiaries, on a consoli-
dated basis, in respect of all such obligations to exceed
$2,000,000 for the period from the Closing Date until the
Termination Date.
(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 $1,000,000.
7.4. Restricted Payments. No Borrower shall, nor
shall it permit any of its Subsidiaries to:
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(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) dividends
or distributions to the Company or Holdings necessary to
make mandatory interest payments on the Existing Senior
Subordinated Notes, the Exchange Notes, the Existing
Convertible Debentures and the Deferred Coupon 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 Original Closing Date, and (iii) additional
dividends or distributions to the Company in an aggregate
amount not to exceed at any time an amount equal to the
$1,000,000, 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) the repayment of
up to $6.5 million of loans made by the Company to the
Borrowers on the Closing Date in order for the Company to
repurchase Existing Senior Subordinated Notes, Existing
Convertible Debentures, Deferred Coupon Notes and the
Exchange Notes.
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
(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-
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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 other-
wise 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:
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(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;
(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, 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
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
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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 liabili-
ties 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; provided,
that the Company may make an exchange offer to the holders
of Existing Senior Secured Notes on terms no more favorable
to such holders than the terms of the Exchange Offer and
Consent Solicitation 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
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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 ex-
ception 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) the 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 ade-
quate 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 the
Security Agreement, (iii) if appropriate, a pledge agreement
in substantially the form of the Pledge Agreement, pledging
100% (or 65% of any foreign Subsidiaries of such new
Subsidiary) of the Stock owned by such new Subsidiary, and
(iv) 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 the Pledge
Agreement, 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 the 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 $1,000,000 or more (excluding Indebtedness
evidenced by the Notes), when the same becomes due and
payable (whether by scheduled maturity, required pre-
payment, 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
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 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
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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 any
Loan Party party thereto, or any Loan Party shall so
state in writing; or
(i) Any Collateral Document after delivery
thereof 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) [Reserved]
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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).
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
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.
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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.
(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
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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
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
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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
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.
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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,
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
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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
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.
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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
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.
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(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: Chief
Financial Officer; if to any Lender, at its Domestic Lending
Office specified opposite its name on Schedule II; if to any
Issuer 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
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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
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
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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,
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
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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 compensa-
tion made against the Agent and the Lenders for any broker,
finder or consultant with respect to any agreement, arrange-
ment 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.
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
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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
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
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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, enforceabil-
ity, 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
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
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<PAGE>
(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
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-1 or A-2
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
128
<PAGE>
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 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.
129
<PAGE>
(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 Agree-
ment 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.
(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 sub-
stantive 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 differ-
ent parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all
130
<PAGE>
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 there-
under, 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 accord-
ance 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 informa-
tion 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 informa-
tion presently is or hereafter becomes available to such
Lender or the Agent, as the case may be, on a non-confiden-
tial 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
131
<PAGE>
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; Amend-
ment to Covenants. The parties hereto agree that all
provisions relating to the Proposed Restructuring and the
Exchange Notes shall become effective upon the consummation
of the Proposed Restructuring provided that the terms of the
Indenture or other agreement governing the Exchange Notes
are no less favorable to the Company and the Borrowers than
as set forth on Exhibit _ hereto.
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: /s/ Michael Vantusko
_______________________________
Title: Vice President-Finance
132
<PAGE>
Borrowers
WOC INC.
By: /s/ Michael Vantusko
_______________________________
Title: Treasurer
WAXMAN CONSUMER PRODUCTS GROUP INC.
By: /s/ Michael Vantusko
_______________________________
Title: Treasurer
Agent
CITICORP USA, INC.
as Agent
By: /s/ Thomas Halsch
_______________________________
Title: Vice-President
Lenders
CITICORP USA, INC.
By: /s/ Thomas Halsch
_______________________________
Title: Vice-President
133
<PAGE>
HELLER FINANCIAL, INC.
By: /s/ Tom Bukowski
_______________________________
Title: Vice-President
Issuers
CITIBANK, N.A.
as Issuer
By: /s/ Thomas Halsch
_______________________________
Title: Vice-President
134
<PAGE>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms. . . . . . . . . . . . . . . . . 1
1.2. Computation of Time Periods. . . . . . . . . . 37
1.3. Accounting Terms . . . . . . . . . . . . . . . 37
1.4. Certain Terms. . . . . . . . . . . . . . . . . 37
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
2.1. The Loans. . . . . . . . . . . . . . . . . . . 38
2.2. Making the Loans . . . . . . . . . . . . . . . 39
2.3. Fees . . . . . . . . . . . . . . . . . . . . . 41
2.4. Reduction and Termination of the Revolving
Credit Commitments . . . . . . . . . . . . . . 41
2.5. Repayment. . . . . . . . . . . . . . . . . . . 42
2.6. Prepayments. . . . . . . . . . . . . . . . . . 42
2.7. Conversion/Continuation Option . . . . . . . . 43
2.8. Interest . . . . . . . . . . . . . . . . . . . 44
2.9. Interest Rate Determination and Protection . . 44
2.10. Increased Costs . . . . . . . . . . . . . . . 45
2.11. Illegality . . . . . . . . . . . . . . . . . . 45
2.12 Capital Adequacy. . . . . . . . . . . . . . . 46
2.13. Payments and Computations . . . . . . . . . . 46
2.14. Taxes. . . . . . . . . . . . . . . . . . . . . 49
2.15. Sharing of Payments, Etc. . . . . . . . . . . 50
2.16. Letter of Credit Facility . . . . . . . . . . 51
2.17. Cash Collateral Account . . . . . . . . . . . 58
2.18. Swing Advances . . . . . . . . . . . . . . . . 59
2.19. Payment on Account of Collateral . . . . . . . 61
ARTICLE III
CONDITIONS OF LENDING
3.1 Conditions Precedent to Initial Loans and
Letters of Credit . . . . . . . . . . . . . . . 62
3.2. Additional Conditions Precedent to Initial
Loans and Letters of Credit. . . . . . . . . . 65
3.3. Conditions Precedent to Each Loan and Letter
of Credit . . . . . . . . . . . . . . . . . . . 67
i
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Corporate Existence; Compliance with Law . . . 68
4.2. Corporate Power; Authorization; Enforceable
Obligations . . . . . . . . . . . . . . . . . 69
4.3. Taxes. . . . . . . . . . . . . . . . . . . . . 71
4.4. Full Disclosure. . . . . . . . . . . . . . . . 72
4.5. Financial Matters. . . . . . . . . . . . . . . 73
4.6. Litigation . . . . . . . . . . . . . . . . . . 74
4.7. Margin Regulations . . . . . . . . . . . . . . 74
4.8. Ownership of Borrower; Subsidiaries. . . . . . 74
4.9. ERISA. . . . . . . . . . . . . . . . . . . . . 75
4.10. Liens . . . . . . . . . . . . . . . . . . . . 77
4.11. Related Documents; Indentures . . . . . . . . 78
4.12. No Burdensome Restrictions; No Defaults . . . 78
4.13. No Other Ventures . . . . . . . . . . . . . . 78
4.14. Investment Company Act . . . . . . . . . . . . 79
4.15. Insurance . . . . . . . . . . . . . . . . . . 79
4.16. Labor Matters . . . . . . . . . . . . . . . . 79
4.17. Force Majeure . . . . . . . . . . . . . . . . 80
4.18. Use of Proceeds . . . . . . . . . . . . . . . 81
4.19. Environmental Protection . . . . . . . . . . . 81
4.20. [Reserved] . . . . . . . . . . . . . . . . . . 82
4.21. Intellectual Property . . . . . . . . . . . . 83
4.22. Title . . . . . . . . . . . . . . . . . . . . 83
ARTICLE V
FINANCIAL COVENANTS
5.1. Maximum Leverage Ratio . . . . . . . . . . . . 85
5.2. Fixed Charge Coverage Ratio. . . . . . . . . . 86
5.3. Maintenance of Adjusted Net Worth. . . . . . . 86
5.4. Capital Expenditures . . . . . . . . . . . . . 87
5.5. EBITDA to Total Cash Interest Ratio. . . . . . 87
ARTICLE VI
AFFIRMATIVE COVENANTS
6.1. Compliance with Laws, Etc. . . . . . . . . . . 88
6.2. Conduct of Business. . . . . . . . . . . . . . 88
6.3. Payment of Taxes, Etc. . . . . . . . . . . . . 89
6.4. Maintenance of Insurance . . . . . . . . . . . 89
6.5. Preservation of Corporate Existence, Etc.. . . 89
ii
<PAGE>
6.6. Access . . . . . . . . . . . . . . . . . . . . 89
6.7. Keeping of Books . . . . . . . . . . . . . . . 90
6.8. Maintenance of Properties, Etc. . . . . . . . 90
6.9. Performance and Compliance with Other
Covenants. . . . . . . . . . . . . . . . . . . 90
6.10. Application of Proceeds . . . . . . . . . . . 90
6.11. Financial Statements . . . . . . . . . . . . . 90
6.12. Reporting Requirements . . . . . . . . . . . . 93
6.13. New Real Estate . . . . . . . . . . . . . . . 98
6.14. Employee Plans . . . . . . . . . . . . . . . . 98
6.15. Fiscal Year . . . . . . . . . . . . . . . . . 98
6.16. Environmental . . . . . . . . . . . . . . . . 99
6.17. Borrowing Base Determination . . . . . . . . . 99
6.18. Cash Management System . . . . . . . . . . . . 100
ARTICLE VII
NEGATIVE COVENANTS
7.1. Liens, Etc.. . . . . . . . . . . . . . . . . . 100
7.2. Indebtedness . . . . . . . . . . . . . . . . . 102
7.3. Lease Obligations. . . . . . . . . . . . . . . 103
7.4. Restricted Payments. . . . . . . . . . . . . . 104
7.5. Mergers, Stock Issuances, Sale of Assets,
Etc. . . . . . . . . . . . . . . . . . . . . . 105
7.6. Investments in Other Persons . . . . . . . . . 106
7.7. Maintenance of Ownership of Subsidiaries . . . 107
7.8. Change in Nature of Business . . . . . . . . . 107
7.9. Compliance with ERISA. . . . . . . . . . . . . 107
7.10. Modification of Related Documents and
Indentures. . . . . . . . . . . . . . . . . . 108
7.11. Modification of Material Agreements . . . . . 108
7.12. Accounting Changes. . . . . . . . . . . . . . 109
7.13. Contingent Obligations. . . . . . . . . . . . 109
7.14. Transactions with Affiliates. . . . . . . . . 109
7.15. Cancellation of Indebtedness Owed to It . . . 110
7.16. No New Subsidiaries . . . . . . . . . . . . . 110
7.17. Capital Structure . . . . . . . . . . . . . . 110
7.18. No Speculative Transactions . . . . . . . . . 111
7.19. Environmental . . . . . . . . . . . . . . . . 111
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Events of Default . . . . . . . . . . . . . . 111
8.2. Remedies . . . . . . . . . . . . . . . . . . 114
8.3. Actions in Respect of Letters of Credit . . . 115
iii
<PAGE>
ARTICLE IX
THE AGENT
9.1. Authorization and Action . . . . . . . . . . 117
9.2. Agent's Reliance, Etc. . . . . . . . . . . . 117
9.3. Citicorp and Affiliates . . . . . . . . . . . 118
9.4. Lender Credit Decision . . . . . . . . . . . 119
9.5. Indemnification . . . . . . . . . . . . . . . 119
9.6. Successor Agent . . . . . . . . . . . . . . . 120
ARTICLE X
MISCELLANEOUS
10.1. Amendments, Etc.. . . . . . . . . . . . . . . 120
10.2. Notices, Etc. . . . . . . . . . . . . . . . . 122
10.3. No Waiver; Remedies . . . . . . . . . . . . . 122
10.4. Costs; Expenses; Indemnities. . . . . . . . . 122
10.5. Right of Set-off. . . . . . . . . . . . . . . 125
10.6. Binding Effect. . . . . . . . . . . . . . . . 125
10.7. Assignments and Participations. . . . . . . . 125
10.8. Governing Law; Severability . . . . . . . . . 129
10.9. Submission to Jurisdiction; Service of
Process . . . . . . . . . . . . . . . . . . 129
10.10. Section Titles . . . . . . . . . . . . . . . 130
10.11. Execution in Counterparts . . . . . . . . . . 130
10.12. Entire Agreement . . . . . . . . . . . . . . 130
10.13. Confidentiality . . . . . . . . . . . . . . . 130
10.14. Waiver of Jury Trial . . . . . . . . . . . . 131
10.15. Joint and Several Obligations . . . . . . . . 131
10.16. Consent to Proposed Restructuring;
Amendment to Covenants . . . . . . . . . . . 132
iv
<PAGE>
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>
EXHIBITS
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Term Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Conversion or Continuation
Exhibit D - Form of Collateral Document Amendment
Exhibit E - Form of Barnett Pledge 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
vi
<PAGE>
Waxman Industries, Inc.
24460 Aurora Road
Bedford Heights, Ohio 44146
March 28, 1996
Barnett Inc.
3333 Lenox Avenue
Jacksonville, Florida 32254
Dear Sirs:
Waxman Industries, Inc., a Delaware corporation ("Waxman") and Barnett
Inc., a Delaware corporation, hereby agree as follows:
1. For purposes of this Agreement the term (a) "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 ("Voting
Securities") 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 and
(b) "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 and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock.
2. During the term of this Agreement, Waxman will not, and will
cause each of its Subsidiaries not to, acquire, offer to acquire, or agree to
acquire, directly or indirectly, by purchase or otherwise, any Voting
Securities (including shares of common stock, par value $.01 per share) of
Barnett or direct or indirect rights or options to acquire (through purchase,
exchange, conversion or otherwise) any Voting Securities of Barnett if such
acquisition, at the time it is made, together with the Voting Securities of
Barnett otherwise owned collectively by Waxman and its Subsidiaries, would
result in Waxman's aggregate beneficial (as defined below) or record ownership
of Voting Securities of Barnett during the term of this Agreement equalling or
exceeding a majority of the Voting Securities of Barnett as most recently
publicly reported on or prior to the date of such acquisition, it being
understood that no subsequent reduction in the outstanding Voting Securities of
Barnett shall result in a violation of this paragraph.
<PAGE>
3. During the term of this Agreement, Waxman and any of its
Subsidiaries shall have the right, directly or indirectly, to offer, sell,
transfer, pledge, assign, hypothecate or otherwise dispose of any Voting
Securities of Barnett beneficially owned by Waxman or any of its Subsidiaries.
4. The parties to this Agreement shall take all actions and
execute all instruments, documents, stipulations and agreements reasonably
necessary to implement or carry out the terms hereof.
5. This Agreement shall become effective upon the execution hereof
and shall remain effective for a period of four years.
6. Each of the parties hereto represents and warrants that it is
duly authorized to execute and deliver this Agreement and that this Agreement
is a valid and binding obligation of such party enforceable against such party
in accordance with it terms. This Agreement shall be binding upon, and shall
inure to the benefit of and be enforceable by, the respective successors and,
assigns of the parties hereto.
7. The parties agree that the provisions of this Agreement shall
be severable in the event that any of the provisions hereof are held by a court
of competent jurisdiction to be invalid, void or otherwise unenforceable, and
that the remaining provisions shall remain enforceable to the fullest extent
permitted by law.
8. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware (without giving effect to the principles
of conflict of laws thereof).
9. This Agreement may be executed in two or more counterparts
which together shall constitute a single agreement.
Very truly yours,
Waxman Industries, Inc.
By: /S/ MICHAEL VANTUSKO
----------------------
Accepted and Agreed:
Barnett Inc.
By: /S/ WILLIAM R. PRAY
-------------------------
<PAGE>
===============================================================
WAXMAN USA INC.,
as Issuer
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
--------------------
INDENTURE
Dated as of April 1, 1996
--------------------
$48,750,000
11 1/8% Senior Notes
Due 2001, Series A
and
11 1/8% Senior Notes
Due 2001, Series B
===============================================================
<PAGE>
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; 10.02
(c)........................................... N.A.
311(a)........................................... 7.11
(b)........................................... 7.11
(c)........................................... N.A.
312(a)........................................... 2.05
(b)........................................... 10.03
(c)........................................... 10.03
313(a)........................................... 7.06
(b)(1)........................................ 7.06
(b)(2)........................................ 7.06
(c)........................................... 7.06; 10.02
(d)........................................... 7.06
314(a)........................................... 4.07; 4.08; 10.02
(b)........................................... N.A.
(c)(1)........................................ 7.02; 10.04
(c)(2)........................................ 7.02; 10.04
(c)(3)........................................ N.A.
(d)........................................... N.A.
(e)........................................... 10.05
(f)........................................... N.A
315(a)........................................... 7.01(b)
(b)........................................... 7.05; 10.02
(c)........................................... 7.01(a)
(d)........................................... 6.05; 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)........................................... 10.01
(c)........................................... 10.01
- ----------------------
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>
TABLE OF CONTENTS
Page
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
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............................ 27
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...................................... 29
Section 2.14 Deposit of Monies................................. 30
ARTICLE THREE
REDEMPTION
Section 3.01 Notices to Trustee................................ 30
Section 3.02 Selection of Securities To Be
Redeemed........................................ 30
Section 3.03 Notice of Redemption.............................. 31
Section 3.04 Effect of Notice of Redemption.................... 32
Section 3.05 Deposit of Redemption Price....................... 32
Section 3.06 Securities Redeemed in Part....................... 33
-ii-
<PAGE>
Page
ARTICLE FOUR
COVENANTS
Section 4.01 Payment of Securities............................. 33
Section 4.02 Maintenance of Office or Agency................... 33
Section 4.03 Corporate Existence............................... 34
Section 4.04 Payment of Taxes and Other Claims................. 34
Section 4.05 Maintenance of Properties and
Insurance....................................... 34
Section 4.06 Compliance Certificate; Notice of
Default......................................... 35
Section 4.07 Compliance with Laws.............................. 36
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................. 40
Section 4.12 Limitation on Dividends and Other
Payment Restrictions Affecting
Subsidiaries.................................... 43
Section 4.13 Limitation on Liens............................... 43
Section 4.14 Limitation on Investment, Loans
and Advances.................................... 44
Section 4.15 Limitation on Transactions with
Affiliates...................................... 44
Section 4.16 Change of Control................................. 45
Section 4.17 Disposition of Proceeds of Asset
Sales........................................... 47
Section 4.18 Limitation on Issuances and Sales of
Preferred Stock by Subsidiaries................. 51
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 Consolidation, Merger, Conveyance,
Transfer or Lease............................... 51
Section 5.02 Successor Entity Substituted...................... 53
ARTICLE SIX
DEFAULT AND REMEDIES
Section 6.01 Events of Default................................. 53
Section 6.02 Acceleration...................................... 55
-iii-
<PAGE>
Page
Section 6.03 Other Remedies.................................... 56
Section 6.04 Waiver of Past Defaults........................... 56
Section 6.05 Control by Majority............................... 56
Section 6.06 Limitation on Suits............................... 57
Section 6.07 Rights of Holders To Receive Payment.............. 57
Section 6.08 Collection Suit by Trustee........................ 57
Section 6.09 Trustee May File Proofs of Claim.................. 58
Section 6.10 Priorities........................................ 58
Section 6.11 Undertaking for Costs............................. 59
ARTICLE SEVEN
TRUSTEE
Section 7.01 Duties of Trustee................................. 60
Section 7.02 Rights of Trustee................................. 61
Section 7.03 Individual Rights of Trustee...................... 62
Section 7.04 Trustee's Disclaimer.............................. 62
Section 7.05 Notice of Default................................. 62
Section 7.06 Reports by Trustee to Holders..................... 63
Section 7.07 Compensation and Indemnity........................ 63
Section 7.08 Replacement of Trustee............................ 64
Section 7.09 Successor Trustee by Merger, Etc.................. 65
Section 7.10 Eligibility; Disqualification..................... 66
Section 7.11 Preferential Collection of Claims
Against Company................................. 66
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.01 Discharge of Indenture............................ 66
Section 8.02 Legal Defeasance and Covenant
Defeasance...................................... 68
Section 8.03 Application of Trust Money........................ 72
Section 8.04 Repayment to Company.............................. 72
Section 8.05 Reinstatement..................................... 72
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01 Without Consent of Holders........................ 73
Section 9.02 With Consent of Holders........................... 73
Section 9.03 Compliance with TIA............................... 75
-iv-
<PAGE>
Page
Section 9.04 Revocation and Effect of Consents................. 75
Section 9.05 Notation on or Exchange of Securities............. 76
Section 9.06 Trustee To Sign Amendments, Etc................... 76
ARTICLE TEN
MISCELLANEOUS
Section 10.01 TIA Controls...................................... 76
Section 10.02 Notices........................................... 76
Section 10.03 Communications by Holders with Other
Holders......................................... 78
Section 10.04 Certificate and Opinion as to
Conditions Precedent............................ 78
Section 10.05 Statements Required in Certificate or
Opinion......................................... 78
Section 10.06 Rules by Trustee, Paying Agent,
Registrar....................................... 79
Section 10.07 Legal Holidays.................................... 79
Section 10.08 Governing Law..................................... 79
Section 10.09 No Adverse Interpretation of Other
Agreements...................................... 79
Section 10.10 No Recourse Against Others........................ 80
Section 10.11 Successors........................................ 80
Section 10.12 Duplicate Originals............................... 80
Section 10.13 Severability...................................... 80
Section 10.14 Table of Contents, Headings, Etc.................. 80
Signatures.......................................................... 81
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
Note: This Table of Contents shall not, for any purpose, be
deemed to be part of the Indenture.
-v-
<PAGE>
INDENTURE, dated as of April 1, 1996, between WAXMAN USA INC., a
Delaware corporation (the "Company"), and UNITED STATES TRUST COMPANY OF NEW
YORK, a bank and trust company organized under the New York Banking Law, 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 11
1/8% Senior Notes Due 2001, Series A, and 11 1/8% Senior Notes Due 2001,
Series B, without distinction as to Series:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"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, including, without limitation, Indebtedness
incurred in connection with, or in anticipation of, such other person becoming
a Subsidiary of such 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.
"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
<PAGE>
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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 such person or a Subsidiary of such person, 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 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 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).
<PAGE>
-3-
"Bankruptcy Law" means Title 11 of the U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.
"Barnett" means Barnett Inc., a Delaware corporation.
"Barnett Common Stock" means the common stock, $.01 par value per
share, of Barnett.
"Barnett Intercorporate Agreement" means the Intercorporate
Agreement among Waxman Industries, the Company, Barnett, Waxman Consumer
Products Group Inc. and WOC Inc. as in existence as of the consummation of the
Barnett Public Offering.
"Barnett Public Offering" means the initial public offering of
Barnett Common Stock.
"Barnett Sale Proceeds" means the net proceeds from the sale of
Barnett Common Stock.
"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.
"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
<PAGE>
-4-
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 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 (as such term is used in Section
13(d)(3) of the Exchange Act) (a "Group of Persons") other than Permitted
Holders, (ii) the merger or consolidation of the Company or Waxman Industries,
with or into another corporation with the effect
<PAGE>
-5-
that the then existing shareholders of the Company or Waxman Industries, as
the case may be, together with the Permitted Holders beneficially own (within
the meaning of Rule 13d-3 under the Exchange Act) securities representing 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 or Waxman Industries, from
the directors who constituted such 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 or Waxman Industries
representing 35% or more of the Voting Power of the Company or Waxman
Industries, as the case may be, and, at such time, Permitted Holders are not
the beneficial owners (as so defined) of securities representing 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 or Waxman Industries, as the case may be.
"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.
"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.
<PAGE>
-6-
"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 of such person for such period; (iii) depreciation expense of such
person for such period; (iv) amortization expense of such person for such
period including, without limitation, amortization of capitalized debt
issuance costs; and (v) any other non-cash charges of such person for such
period (excluding any non-cash charge to the extent that it requires an
accrual of or a reserve for cash disbursements for any future period).
"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, "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, other than the
incurrence or retirement of Indebtedness in the ordinary course of business
pursuant to working capital or revolving credit facilities, 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
<PAGE>
-7-
(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 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,
<PAGE>
-8-
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 (including limitations resulting from the ownership of less than
100% of the Capital Stock of such Subsidiary) 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 Stock (other than Disqualified Stock) at such date, as
determined on a consolidated basis in accordance with GAAP.
"Covered Amount" means with respect to any disposition of Capital
Stock of Barnett or any Asset Sale involving WOC Inc. an amount equal to the
excess of (x) the aggregate fair value of the Capital Stock of Barnett owned
by the Company and its Subsidiaries immediately upon consummation of such
disposition or Asset Sale less the aggregate principal amount of any
outstanding Permitted Barnett Secured Indebtedness after taking into account
the application of the proceeds of such disposition or Asset Sale over (y) the
product of (i) the aggregate principal amount of Exchange Notes and other
Indebtedness incurred after the Issue Date that is pari passu or structurally
senior in right of payment (other than Indebtedness under the Credit
Agreement) to the Exchange Notes and is outstanding after taking into account
the application of the proceeds of such disposition or Asset Sale and (ii)
two (2).
"Credit Agreement" means the credit agreement dated as of May 20,
1994, entered into between the Company, certain
<PAGE>
-9-
of the Subsidiaries of the Company, 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.
"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."
"Deferred Coupon Notes" means Waxman Industries' $92,797,000
aggregate principal amount at maturity of 12 3/4% Senior Secured Deferred
Coupon Notes due June 1, 2004.
"Deferred Coupon Note Refinancing Indebtedness" means any
Indebtedness the net proceeds of which are used entirely to refinance, in
whole or in part, the Deferred Coupon Notes provided that (i) such
Indebtedness does not accrue interest prior to June 1, 1999, (ii) after June
1, 1999 such Indebtedness does not accrue interest at a rate per annum in
excess of the rate per annum that the Deferred Coupon Notes, as in existence
on the Issue Date, accrue interest and (iii) such Indebtedness does not
provide for any mandatory redemption, amortization or sinking fund requirement
earlier than six months after the final maturity of the Securities.
"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
<PAGE>
-10-
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.
"Eligible Sale Proceeds" means an amount equal to the excess of
(i) the net cash proceeds received from any disposition of Capital Stock of
Barnett or any Asset Sale involving WOC Inc. over (ii) the Covered Amount.
"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.
<PAGE>
-11-
"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.
"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.
"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.
<PAGE>
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"Independent Director" means any director that (i) is not and has
not been an officer or employee of Waxman Industries 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.
"Intercorporate Agreement" means the Intercorporate Agreement
among Waxman Industries, the Company, Barnett, Waxman Consumer Products Group
Inc. and WOC Inc. dated as of May 20, 1994, as amended to the Issue Date.
"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
securities issued by, any other person.
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"Issue Date" means the date of first issuance of the Securities
under this Indenture.
"Legal Holiday" has the meaning provided in Section 10.07.
"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.
"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 September 1, 2001.
"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
<PAGE>
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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, with respect to any person (a) in the case
of any sale of Capital Stock by such person or common equity contribution to
such person, the aggregate net cash proceeds received by such person 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 such person,
the aggregate net cash proceeds received by such person, 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.
"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 (one of whom shall be the Chief Financial
Officer) or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of such person and otherwise complying with the requirements of
Sections 10.04 and 10.05.
"Opinion of Counsel" means a written opinion from legal counsel
who is acceptable to the Trustee complying with the requirements of Sections
10.04 and 10.05. Unless otherwise required by the TIA, the legal counsel may
be an employee of or counsel to the Company.
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"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Amount" has the meaning provided in Section 4.10.
"Permitted Barnett Secured Indebtedness" means Indebtedness of the
Company or any of its Subsidiaries in an aggregate principal amount not to
exceed $5.0 million that is secured by a Lien described under clause (h) of
the definition of "Permitted Liens," less the principal amount of Permitted
Barnett Secured Indebtedness permanently prepared pursuant to Section 4.17
hereof.
"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 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; and (vi) Investments represented by Interest Rate
Protection Obligations and Currency Hedging Agreements.
"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
<PAGE>
-16-
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; (h) Liens on up to
$10.0 million fair value of Barnett Common Stock provided such Liens secure
not more than $5.0 million of Permitted Barnett Secured Indebtedness; and (i)
Liens arising in the ordinary course of business in favor of custom and
revenue authorities to secure payment of custom duties.
"Permitted Term Loan Indebtedness" means Indebtedness of the
Company or any of its Subsidiaries, the proceeds of which are used to
refinance the term loan portion of the Credit Agreement (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.
"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
<PAGE>
-17-
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.
"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 April 3, 1996, as
the same may be amended, supplemented or otherwise modified from time to time
in accordance with the terms thereof.
"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,
<PAGE>
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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 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),
(iv) or (v) of Section 4.14 hereof.
"Restricted Security" has the meaning set forth in Rule 144(a)(3)
under the Securities Act.
"Sale/Leaseback Transaction" means any arrangement with any person
providing for the leasing to the Company or any Subsidiary of the Company 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.
"SEC" means the Securities and Exchange Commission.
"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.
"Series A Notes" means the Company's 11 1/8% Senior Notes Due
2001, 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 11 1/8% Senior Notes Due
2001, 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
<PAGE>
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(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.
"Tax Sharing Agreement" means the Tax Sharing Agreement among
Waxman Industries and certain of its Subsidiaries, dated as of May 20, 1994,
as in existence on the Issue Date.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (SECTIONS)
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.
"Trademark License Agreement" means, collectively, the Trademark
License Agreement between Barnett Inc. and WOC Inc., dated as of May 20, 1994,
the Trademark License Agreement between Barnett Inc. and Waxman Consumer
Products Group Inc., dated as of May 20, 1994, the Trademark License Agreement
between WOC Inc. and Barnett Inc., dated as of May 20, 1994, and the Trademark
License Agreement between Waxman Consumer Products Group Inc. and WOC Inc.,
dated as of May 20, 1994, in each case as in existence on the Issue Date.
"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.
<PAGE>
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"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 Industries" means Waxman Industries, 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.
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.
<PAGE>
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SECTION 1.03. Rules of Construction.
(a) Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) words in the singular include the plural, and
words in the plural include the singular;
(4) provisions apply to successive events and
transactions; and
(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.
(b) Except as otherwise expressly provided herein, the provisions hereof
shall not apply to the Barnett Public Offering or the application of the net
proceeds therefrom.
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
<PAGE>
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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.
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 of $48,750,000, 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 of Securities outstanding at any time may not
exceed $48,750,000, 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.
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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.
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
<PAGE>
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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 New York office, 114 West
47th Street, New York, New York 10036-1532, Attn: Corporate Trust Department.
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.
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
<PAGE>
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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 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
<PAGE>
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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.
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
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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.
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.
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
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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 of the Company pursuant to
Section 2.02, definitive Securities in exchange for temporary Securities.
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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 or cause
to be fixed 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
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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.
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.
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 Securities are not listed on a national
securities exchange, on a pro rata basis (in amounts equal to $1,000 or any
whole multiple thereof), by lot
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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,
if any;
(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for
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redemption ceases to accrue on 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 Security- holder;
(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,
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except with respect to monies owed as obligations to the Trustee pursuant to
Article Seven.
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 set forth in Section 2.03.
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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 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
<PAGE>
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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 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
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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.
(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 promptly, 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
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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 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
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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 (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 the Company outstanding from
time to time pursuant to the Credit Agreement 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 the Company
outstanding pursuant to clause (h) 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 the Company, in each case
calculated on a consolidated basis in accordance with GAAP minus (B) the
amount of Indebtedness pursuant to the Credit Agreement prepaid
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after the Issue Date with the Net Cash Proceeds from an Asset Sale
pursuant to Section 4.17;
(c) Indebtedness of the Company and Subsidiaries of
the Company outstanding on the Issue Date;
(d) Indebtedness of the Company that is subordinated or pari passu
in right of payment to the Securities 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
2.25:1;
(e) Indebtedness of a Subsidiary of the Company 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;
(f) Indebtedness represented by Interest Rate Protection
Obligations and Currency Hedging Agreements of Subsidiaries of the
Company with respect to Indebtedness of Subsidiaries of the Company
(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;
(g) any replacements, renewals, refinancings and extensions of
Indebtedness incurred under clauses (a), (c) and (d) above, provided
that (i) except with respect to Permitted Term Loan 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 Term Loan
Indebtedness, any such Indebtedness of any person must be replaced,
refinanced or extended with Indebtedness incurred by such person or by
the Company and (iii) the principal amount of Indebtedness incurred
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pursuant to this clause (g) (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
(h) in addition to the items referred to in clauses (a) through
(g) above, (x) Indebtedness and Attributable Indebtedness of the Company
or Subsidiaries of the Company in an aggregate principal amount not to
exceed $5,000,000 at any one time outstanding, provided that
Indebtedness of Subsidiaries of the Company 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 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 (d) of Section 4.10 hereof; 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'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, 1996 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 (x) 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 (y) any common
equity contribution made to the Company during the Base Period 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), (iv) or (v)
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 in each of the foregoing cases,
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, (ii) the retirement of any shares of
Capital Stock of the Company or Indebtedness of the Company which is
subordinated in right of payment to the Securities by
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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 Indebtedness of the Company which is
subordinated in right of payment to the Securities 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 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) dividends to Waxman
Industries to satisfy interest payments on the Deferred Coupon Notes,
including any Deferred Coupon Note Refinancing Indebtedness, provided that any
such dividend is used on the date such dividend is paid to make interest
payments on the Deferred Coupon Notes or Deferred Coupon Note Refinancing
Indebtedness, as the case may be, and provided further that no Default or
Event of Default shall have occurred and be continuing after the payment of
any such dividend (v) the redemption or retirement, or dividends to Waxman
Industries for the redemption or retirement, (by way of open market purchase
or otherwise) within 365 days of the Issue Date of Deferred Coupon Notes or
Deferred Coupon Note Refinancing Indebtedness in an amount not to exceed the
aggregate net cash proceeds received by the Company and/or Barnett from the
sale of shares of Capital Stock of Barnett representing not more than 55.1% of
the Barnett Common Stock pursuant to the Barnett Public Offering that are in
excess of $75.0 million, provided no Default or Event of Default shall have
occurred and be continuing after such redemption or retirement or the payment
of such dividend, as the case may be, (vi) the payment of any dividend or
distribution by the Company to Waxman Industries (A) pursuant to the Tax
Sharing Agreement, which dividend or distribution is used solely to pay income
taxes and may not exceed the lesser of (x) income taxes actually paid by
Waxman Industries (on a consolidated basis with its Subsidiaries) and (y) the
amount of income taxes which would be paid by the Company and its Subsidiaries
if they were a consolidated tax paying group filing a consolidated return and
(B) which dividend or distribution is used solely to pay taxes (other than
income taxes) actually payable by Waxman Industries; and (vii) Restricted
Payments consisting of 50% of Eligible Sale Proceeds (100% in the case of
clause (iv) above), provided no Default or
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Event of Default shall have occurred and be continuing after the making of
such Restricted Payment.
In determining the amount of Restricted Payments permissible under
clause (c) above, amounts expended pursuant to clauses (i), (ii), (iv) and
(vii) 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 Credit Agreement as in effect on the Issue Date, (ii) any
restrictions existing under any agreement that refinances, replaces, amends or
extends an agreement containing a restriction permitted by clause (i) 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 refinanced, replaced, amended or extended or
(iii) customary non-assignment or sublease provisions of any agreement of the
Company or its Subsidiaries.
SECTION 4.13. Limitation on Liens.
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, which (a) secures Indebtedness of the Company subordinated in
right of payment to the Securities, unless the Securities are secured by a
Lien on such property that is senior to such Lien or (b) secured Indebtedness
of the Company which is pari passu in right of payment with the Securities,
unless the Securities are
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secured by a Lien on such property that is equal and ratable with such Lien,
except for Liens existing as of the Issue Date and Permitted Liens.
Notwithstanding the foregoing, Liens shall be permitted by the
previous clauses (a) through (b) 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.
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 (including any such
Investment pursuant to which a person becomes a Wholly-Owned Subsidiary
of the Company) or in the Company by any Subsidiary of the Company;
(ii) 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;
(iii) Investments permitted to be made pursuant to
Section 4.11 hereof;
(iv) 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
(v) 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
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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
Section 4.15 shall not apply to (x) customary directors' fees and consulting
fees or (y) any Affiliate Transaction pursuant to and in accordance with the
provisions of the Tax Sharing Agreement, Intercorporate Agreement, Barnett
Intercorporate Agreement or the Trademark License Agreements.
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 later than 60 days following the Change
of Control Date, all Securities then outstanding at a purchase price equal to
101% of the principal amount thereof plus accrued 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.
(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:
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(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;
(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
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(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 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 net proceeds 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
360 days of receipt of any Net Cash Proceeds from an Asset Sale:
(x) apply such Net Cash Proceeds to permanently prepay
Indebtedness outstanding under the Credit Agreement; or
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(y) apply such Net Cash Proceeds to acquire or construct assets of
the Company or a Subsidiary of the Company in lines of business related
to the Company's and its Subsidiaries' businesses as in existence on the
Issue Date.
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 (c) below; provided,
however, that (i) to the extent that the Net Cash Proceeds applied to
permanently prepay Indebtedness consist in whole or in part of Barnett Sale
Proceeds, then such Barnett Sale Proceeds may be applied to permanently prepay
such Indebtedness to the extent required by the terms of the Credit Agreement
(as in existence on the Issue Date) and, to the extent such prepayment is not
so required, such Barnett Sale Proceeds may be used to prepay such
Indebtedness and to make an offer to purchase Securities as set forth below on
a pro rata basis based on the aggregate principal amount of Indebtedness
outstanding under the Credit Agreement and Securities outstanding, (ii) up to
$10.0 million of Barnett Sale Proceeds may be applied pursuant to clause (x)
above and not subject to the preceding clause (i) provided that any such
Barnett Sale Proceeds so applied must first be applied to permanently prepay
any Permitted Barnett Secured Indebtedness then outstanding.
(c) When the aggregate amount of unutilized Excess Proceeds equals
or exceeds $2.5 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 $2.5 million) at a price in
cash equal to 100% of the outstanding principal amount thereof, plus accrued
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.
The provisions of this Section 4.17 shall not apply to any
Eligible Sale Proceeds used in accordance with clause (iv) of Section 4.11
hereof and shall otherwise only apply to 50% of any Eligible Sale Proceeds.
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(d) 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.
(e) 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 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 (e). 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;
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(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);
(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.
(f) 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
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Company will publicly announce the results of the Asset Sale Offer as promptly
as practicable following the Asset Sale Payment Date.
(g) 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 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.
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 (determined on a consolidated
basis for the Company and its Subsidiaries, taken as a whole) to another
person or persons, in a single transaction or through a series of related
transactions, or cause 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
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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 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 (d) 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
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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:
(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
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Indebtedness are in an aggregate principal amount of $5,000,000 or
more; 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; 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
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) the Company or any Material Subsidiary 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 of the Company in an
involuntary case or proceeding,
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(B) appoints a Custodian of the Company or
any Material Subsidiary of the Company for all
or substantially all of its properties, or
(C) orders the liquidation of the Company
or any Material Subsidiary 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.
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 principal of
and 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 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.
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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, premium, if any, 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 6.02, 6.07 and 9.02, the Holders of at least 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, premium, if
any, 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 at least 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
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caused by its following such direction; provided that the Trustee may 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 indemnity satisfactory to
the Trustee against any loss, liability or expense to be incurred in
compliance with such request;
(4) the Trustee does not comply with the request within 30 days
after receipt of the request and the offer of indemnity; and
(5) during such 30-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, premium, if any, 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.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal, premium or
interest specified in clause (i) or (ii) of
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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, premium, if any,
and accrued interest remaining unpaid, together with interest on overdue
principal, premium 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 securities or property payable or
deliverable upon the conversion or exchange of the Securities or upon 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:
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First: to the Trustee for amounts due under
Section 7.07;
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 and premium, if any,
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 premium, if
any; 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.
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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 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
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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.
(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 10.04 and 10.05
hereof. 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,
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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 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 hereof.
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 hereof, 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
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Default in payment of principal of, premium, if any, 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 hereof, 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.
Within 60 days after each March 15 beginning with the March 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 March 15 that complies with TIA (SECTION) 313(a). The Trustee
also shall comply with TIA (SECTION) 313(b).
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
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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 enforcing this Indenture
against the Company (including Section 7.07 hereof) and of defending
themselves against any claim (whether asserted by any Securityholder or the
Company) 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 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;
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(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 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
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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 (SECTIONS) 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.
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
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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;
(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
hereof 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 hereof 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.
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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, 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 4.18 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
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(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 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
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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 the 91st day following the
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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.
<PAGE>
-72-
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 in accordance with this Indenture to the payment
of principal of, premium, if any, 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, premium, if any, 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
<PAGE>
-73-
Company has made any payment of interest on, premium, if any, 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.
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; or
(5) to comply with any requirements of the SEC in
connection with the qualification of this Indenture under
the TIA;
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.
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
<PAGE>
-74-
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 principal amount outstanding 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; or
(vii) 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.
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 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.
<PAGE>
-75-
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>
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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.
Subject to the next sentence, 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
MISCELLANEOUS
SECTION 10.01. 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 10.02. 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:
<PAGE>
-77-
if to the Company:
Waxman USA Inc.
24460 Aurora Road
Bedford Heights, Ohio 44146
Attention: Chief Financial Officer
with a copy to:
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Attention: Scott M. Zimmerman, Esq.
if to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Department
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 Security- holder,
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
<PAGE>
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communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 10.03. 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 Company, the Trustee, the Registrar and any other person
shall have the protection of TIA (SECTION) 312(c).
SECTION 10.04. Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee
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 10.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture 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;
<PAGE>
-79-
(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
(4) a statement as to whether or not, in the opinion of each such
person, such condition or covenant has been complied with.
SECTION 10.06. 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 10.07. 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 10.08. 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 10.09. 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.
<PAGE>
-80-
SECTION 10.10. 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 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 10.11. 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 10.12. 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 10.13. 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 10.14. 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>
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed as of the date first written above.
WAXMAN USA INC.,
as Issuer
By: /S/ ARMOND WAXMAN
--------------------------
Name: Armond Waxman
Title: Co-Chairman of the Board and
Co-Chief Executive Officer
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Trustee
By: /S/ JAMES E. LOGAN
--------------------------
Name: JAMES E. LOGAN
Title: VICE PRESIDENT
<PAGE>
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 IS, AS OF THE DATE OF SUCH OFFER, SALE OR
TRANSFER, 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 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.
A-1
<PAGE>
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
A-2
<PAGE>
WAXMAN USA INC.
11 1/8% Senior Note
Due 2001, Series A
No. $
WAXMAN USA 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 September
1, 2001.
Interest Payment Dates: March 1 and September 1,
beginning September 1, 1996.
Record Dates: February 15 and August 15, beginning
August 15, 1996.
A-3
<PAGE>
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: , 1996
WAXMAN USA INC.
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
A-4
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 11 1/8% Senior Notes Due 2001, Series A,
described in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Trustee
By:
---------------------------
Authorized Signer
A-5
<PAGE>
WAXMAN USA INC.
11 1/8% Senior Note
Due 2001, Series A
1. Interest.
WAXMAN USA 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 March 1
and September 1 of each year (the "Interest Payment Date"), commencing
September 1, 1996. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
April 3, 1996. 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
11 1/8% 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, premium, if any, 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.
3. Paying Agent and Registrar.
Initially, United States Trust Company of New York (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.
A-6
<PAGE>
4. Indenture.
The Company issued the Securities under an Indenture, dated as of
April 1, 1996 (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 11 1/8% Senior Notes Due 2001, 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 (SECTIONS) 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 unsecured obligations of the Company limited (except
as otherwise provided in the Indenture) in aggregate principal amount to
$48,750,000.
5. Optional Redemption.
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 principal amount thereof, as set forth in the immediately succeeding
paragraph, plus accrued 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 principal amount shall
be as follows, if the Securities are redeemed during the 12-month period
beginning June 1 of the years indicated below:
Year Percentage
1995................................... 103.438%
1996................................... 101.719%
1997 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
A-7
<PAGE>
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.
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 11 1/8% Senior Notes Due 2001, 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. 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
A-8
<PAGE>
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.
10. 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.
11. 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.
A-9
<PAGE>
12. 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 transactions
with Affiliates and mergers. The Company must quarterly report to the Trustee
on compliance with such limitations.
13. 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.
14. 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.
15. 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.
A-10
<PAGE>
16. 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.
17. Authentication.
This Security shall not be valid until the Trustee or
authenticating agent manually signs the certificate of authentication on this
Security.
18. Governing Law.
The Laws of the State of New York shall govern this Security and
the Indenture.
19. 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).
20. 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.
21. 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.
A-11
<PAGE>
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 USA INC., 24460 Aurora Road, Bedford Heights, Ohio 44146, Attn.:
President.
22. 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.
A-12
<PAGE>
[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
(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
A-13
<PAGE>
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>
[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>
EXHIBIT B
[FORM OF SERIES B NOTE]
WAXMAN USA INC.
11 1/8% Senior Note
Due 2001, Series B
No. $
WAXMAN USA 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
September 1, 2001.
Interest Payment Dates: March 1 and September 1
beginning September 1, 1996.
Record Dates: February 15 and August 15 beginning
August 15, 1996.
B-1
<PAGE>
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 USA INC.
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
B-2
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 11 1/8% Senior Notes Due 2001, Series B,
described in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Trustee
By
-----------------------------
Authorized Signer
B-3
<PAGE>
WAXMAN USA INC.
11 1/8% Senior Note
Due 2001, Series B
1. Interest.
WAXMAN USA 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 March 1
and September 1 of each year (the "Interest Payment Date"), commencing
September 1, 1996. Interest on the Securities will accrue from the most recent
date to which interest has been paid, or if no interest has been paid, from
April 3, 1996. 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
11 1/8% 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, United States Trust Company of New York (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
April 1, 1996 (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 11 1/8% Senior Notes Due 2001, Series B (the "Series B
B-4
<PAGE>
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 (SECTIONS) 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 unsecured obligations of the Company limited (except
as otherwise provided in the Indenture) in aggregate principal amount to
$48,750,000.
5. Exchange Offer.
The Series B Securities were issued pursuant to an exchange offer
pursuant to which 11 1/8% Senior Notes Due 2001, 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.
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 principal amount thereof, as set forth in the immediately succeeding
paragraph, plus accrued 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 principal amount shall
be as follows, if the Securities are redeemed during the 12-month period
beginning June 1 of the years indicated below:
Year Percentage
1995................................... 103.438%
1996................................... 101.719%
1997 and thereafter.................... 100.000%
B-5
<PAGE>
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.
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. 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.
B-6
<PAGE>
10. 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.
11. 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.
12. 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 transactions
with Affiliates and mergers. The Company must quarterly report to the Trustee
on compliance with such limitations.
13. Successors.
When a successor assumes all the obligations of its
predecessor under the Securities and the Indenture and the
B-7
<PAGE>
transaction complies with the terms of Article Five of the Indenture, the
predecessor will be released from those obligations.
14. 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.
15. 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.
16. 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.
17. Authentication.
This Security shall not be valid until the Trustee or
authenticating agent manually signs the certificate of authentication on this
Security.
B-8
<PAGE>
18. Governing Law.
The Laws of the State of New York shall govern this Security and
the Indenture.
19. 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).
20. 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.
21. 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 USA INC., 24460
Aurora Road, Bedford Heights, Ohio 44146, Attn.: President.
B-9
<PAGE>
[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-10
<PAGE>
[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-11
<PAGE>
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>
EXHIBIT D
Transferee Letter of Representation
c/o United States Trust Company
of New York
Ladies and Gentlemen:
In connection with our proposed purchase of $ aggregate principal
amount of the 11 1/8% Senior Notes Due 2001 (the "Notes") of Waxman USA 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, at the time of such offer, sale or
transfer, is 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
D-1
<PAGE>
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 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>
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>
WAXMAN USA INC.
$48,750,000
11 1/8% Senior Notes Due 2001
REGISTRATION RIGHTS AGREEMENT
April 3, 1996
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Ladies and Gentlemen:
Waxman USA Inc., a Delaware corporation (the "Company"), proposes,
upon the terms and subject to the conditions set forth in the Offer to
Exchange and Consent Solicitation dated February 27, 1996, as supplemented by
Supplement No. 1 thereto dated March 27, 1996 (the "Exchange Offer Circular")
and the related Consent and Letter of Transmittal to (x) offer to exchange for
$48,750,000 aggregate principal amount of Waxman Industries, Inc.'s 13 3/4%
Senior Subordinated Notes due 1999 (the "Notes"), $48,750,000 aggregate
principal amount of the Company's 11 1/8% Senior Notes Due 2001 (the "Exchange
Notes") and (y) solicit holders of Notes to consent to waivers and amendments
to certain of the provisions in the indenture governing the Notes (the
solicitation of holders of Notes to such exchange and consent being referred
to herein as the "Exchange Offer"). The Exchange Notes will be issued pursuant
to an indenture (the "Indenture") between the Company and The United States
Trust Company of New York, as trustee (the "Trustee"), dated as of April 3,
1996. As an inducement to the holders of the Notes to tender such Notes in the
Exchange Offer, the Company agrees with you, as Trustee, for the benefit of
the holders of the Exchange Notes (the "Holders"), as follows:
1. Exchange Offer. The Company shall prepare and, not later than 60
days after the date of original issuance of the Exchange Notes (the "Closing
Date"), file with the Securities and Exchange Commission (the "Commission") a
registration statement (the "Exchange Offer Registration Statement") on an
appropriate form under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to a proposed offer (the "Registered Exchange Offer") to
the Holders of the Exchange Notes to issue and deliver to such Holders, in
exchange for the
<PAGE>
-2-
Exchange Notes, a like principal amount of debt securities of the Company
identical in all material respects to the Exchange Notes (the "Registered
Exchange Notes"), except for the transfer restrictions relating to the
Exchange Notes. The Company shall use its best efforts to cause such Exchange
Offer Registration Statement to become effective under the Securities Act
within 120 days of the Closing Date and shall use its best efforts to keep the
Exchange Offer Registration Statement effective until the closing of the
Registered Exchange Offer. Following the declaration of the effectiveness of
the Exchange Offer Registration Statement, the Company shall promptly commence
the Registered Exchange Offer, it being the objective of such Registered
Exchange Offer to enable each Holder of the Exchange Notes electing to
exchange the Exchange Notes for Registered Exchange Notes (assuming that such
Holder is not an affiliate of the Company within the meaning of the Securities
Act, acquires the Registered Exchange Notes in the ordinary course of such
Holder's business and has no arrangements with any person to participate in
the distribution of the Registered Exchange Notes) to trade such Registered
Exchange Notes from and after their receipt without any limitations or
restrictions under the Securities Act and the securities laws of the several
states of the United States. In connection with such Registered Exchange
Offer, the Company shall take such further action, including, without
limitation, appropriate filings under state securities laws (subject to the
qualifications contained in Section 3(g)), as may be necessary to realize the
foregoing objective.
The Company shall include within the prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of
Distribution," which shall contain a summary statement of the positions taken
or policies made by the Staff of the Commission with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of Registered Exchange Notes received by such
broker-dealer in the Registered Exchange Offer (a "Participating
Broker-Dealer"). Such "Plan of Distribution" section shall also allow the use
of the prospectus by all persons subject to the prospectus delivery
requirements of the Securities Act, including Participating Broker-Dealers,
and include a statement describing the means by which Participating
Broker-Dealers may resell the Registered Exchange Notes.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the
<PAGE>
-3-
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Registered Exchange Notes; provided that
such period shall not exceed 180 days.
In connection with the Registered Exchange Offer, the Company
shall:
(a) mail, or cause to be mailed, to each Holder a copy of the
prospectus forming part of the Exchange Offer Registration Statement, together
with an appropriate letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30
days after the date notice thereof is mailed to the Holders (or longer if
required by applicable law);
(c) utilize the services of a Depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of New
York;
(d) permit Holders to withdraw tendered Exchange Notes at any time
prior to the close of business, New York time, on the last business day on
which the Registered Exchange Offer shall remain open;
(e) require each Holder of Exchange Notes who wishes to exchange
such Exchange Notes for Registered Exchange Notes to represent that it is not
an affiliate of the Company and that any Registered Exchange Notes to be
received by it will be acquired in the ordinary course of its business and
that at the time of the commencement of the Exchange Offer, and as of the date
of such representation, it has no arrangement with any person to participate
in the distribution (within the meaning of the Act) of the Registered Exchange
Notes; and
(f) otherwise comply in all respects with all applicable laws.
As soon as practicable after the close of the Registered Exchange
Offer the Company shall:
(i) accept for exchange all the Exchange Notes
tendered and not validly withdrawn pursuant to the
Registered Exchange Offer;
(ii) deliver to, or cause to be delivered to, the
Trustee for cancellation all the Exchange Notes so
accepted for exchange; and
<PAGE>
-4-
(iii) cause the Trustee to authenticate and deliver promptly to each
Holder of the Exchange Notes, Registered Exchange Notes equal in
principal amount to the Exchange Notes of such Holder so accepted for
exchange.
The Registered Exchange Notes may be issued under (i) the
Indenture or (ii) an indenture substantially similar to the Indenture, which
in either event will provide that the Registered Exchange Notes will not be
subject to the transfer restrictions set forth in the Indenture and that the
Registered Exchange Notes and the Exchange Notes will vote and consent
together on all matters as one class and that none of the Registered Exchange
Notes or the Exchange Notes will have the right to vote or consent as a
separate class on any matter.
2. Shelf Registration. If, (i) prior to the consummation of the
Registered Exchange Offer, the Company or the Holders of at least 25% of the
aggregate principal amount of Exchange Notes reasonably determine in good
faith that because of any change in law or in then prevailing interpretations
of the Staff of the Commission, the Company is not permitted to effect a
Registered Exchange Offer, as contemplated by Section 1 hereof, (ii) the
Registered Exchange Offer is not consummated within 180 days of the date
hereof or (iii) a Holder of Exchange Notes is not eligible to participate in
the Registered Exchange Offer because of a change in law or in prevailing
interpretations of the Staff of the Commission, the Company shall take the
following actions:
(a) The Company shall as promptly as reasonably practicable file
with the Commission and thereafter shall use its best efforts to cause
to be declared effective a registration statement (the "Shelf
Registration Statement" and, together with the Exchange Offer
Registration Statement, a "Registration Statement") on an appropriate
form under the Securities Act relating to the offer and sale of the
Exchange Notes by the Holders thereof from time to time in accordance
with the methods of distribution set forth in the Shelf Registration
Statement and Rule 415 under the Securities Act (hereafter, the "Shelf
Registration").
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of
the Exchange Notes for a period of three years from the date the Shelf
Registration Statement is declared effective by the Commission or such
shorter period that will terminate when all the Exchange Notes covered
by the Shelf Registration Statement have
<PAGE>
-5-
been sold pursuant thereto; provided that the Company shall be deemed
not to have used its best efforts to keep the Shelf Registration
Statement effective during the requisite period if it voluntarily takes
any action that would result in Holders of the Exchange Notes covered
thereby not being able to offer and sell the Exchange Notes during that
period, unless such action is required by applicable law.
Notwithstanding the foregoing, the Company shall not be required to
amend or supplement the Shelf Registration Statement, any related
prospectus or any document incorporated therein by reference in the
event that, and for a period not to exceed, for so long as this
Agreement is in effect, an aggregate of 60 days if (i) an event occurs
and is continuing as a result of which the Shelf Registration Statement,
any related prospectus or any document incorporated therein by reference
as then amended or supplemented would, in the Company's good faith
judgment, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein
not misleading, and (ii) the Company determines in its good faith
judgment that the disclosure of such event at such time would have a
material adverse effect on the business, operations or prospects of the
Company.
(c) The Company shall cause the Shelf Registration Statement and
the related prospectus and any amendment or supplement thereto, as of
the effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3. Registration Procedures. To the extent
applicable, in connection with any Shelf Registration
contemplated by Section 2 hereof and any Registered Exchange
Offer contemplated by Section 1 hereof, the following
provisions shall apply:
(a) The Company shall give written notice to the Holders of the
Exchange Notes and any Participating Broker-Dealer from whom the Company
has received prior written notice that it will be a Participating
Broker-Dealer in the Registered Exchange Offer:
<PAGE>
-6-
(i) when the Registration Statement or any amendment thereto
has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become
effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus
included therein or for additional information (excluding the
particulars of any such request);
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation or threatening of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of
any notification with respect to the suspension of the
qualification of the Exchange Notes or Registered Exchange Notes
for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose;
(v) of the happening of any event that requires the Company
to make changes in the Registration Statement or the prospectus in
order to make the statements therein not misleading (which notice
shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made); and
(vi) when the prospectus contained in any Registration
Statement shall not contain the current information required by
the Securities Act.
(b) The Company shall use its best efforts to prevent the issuance
or obtain the withdrawal of any order suspending the effectiveness of
the Registration Statement at the earliest possible time.
(c) The Company shall furnish to each Holder of the Exchange Notes
included within the coverage of the Shelf Registration, without charge,
at least one copy of the Registration Statement and any post-effective
amendment which was declared effective by the Commission, including
financial statements and schedules, and, if the Holder so requests in
writing, all exhibits (including those, if any, incorporated by
reference).
<PAGE>
-7-
(d) The Company shall deliver to any Holder of the Exchange Notes
who so requests, without charge, at least one copy of the Exchange Offer
Registration Statement which was declared effective by the Commission
and any post-effective amendment which was declared effective by the
Commission, including financial statements and schedules, and, if any
such Holder requests, all exhibits (including those, if any,
incorporated by reference).
(e) The Company shall deliver to each Holder of the Exchange Notes
included within the coverage of the Shelf Registration which was
declared effective by the Commission, without charge, as many copies of
the prospectus (including each preliminary prospectus) included in such
Shelf Registration Statement and any post-effective amendment which was
declared effective by the Commission or supplement thereto as such
person may reasonably request. The Company consents, subject to the
provisions of this Agreement, to the use of the prospectus or any
amendment or supplement thereto by each of the selling Holders of the
Exchange Notes in connection with the offering and sale of the Exchange
Notes covered by the prospectus, or any amendment or supplement thereto,
included in the Shelf Registration Statement.
(f) The Company shall deliver to any Participating Broker-Dealer
and such other persons required to deliver a prospectus following the
Registered Exchange Offer, without charge, as many copies of the final
prospectus included in the Exchange Offer Registration Statement and any
post-effective amendment declared effective by the Commission or
supplement thereto as such persons may reasonably request. The Company
consents, subject to the provisions of this Agreement, to the use of the
prospectus or any post-effective amendment declared effective by the
Commission or supplement thereto by any Participating Broker-Dealer and
such other persons required to deliver a prospectus following the
Registered Exchange Offer in connection with the offering and sale of
the Registered Exchange Notes covered by the prospectus, or any
post-effective amendment declared effective by the Commission or
supplement thereto, included in such Exchange Offer Registration
Statement.
(g) Prior to any public offering of the Exchange Notes pursuant to
a Registration Statement, the Company shall register or qualify or
cooperate with the Holders of the Exchange Notes included therein and
their counsel in connection with the registration or qualification of
the Exchange Notes for offer and sale under the securities or
<PAGE>
-8-
blue sky laws of such jurisdictions as any Holder of the Exchange Notes
reasonably requests in writing and do any and all other acts or things
necessary or advisable to enable the offer and sale in such
jurisdictions of the Exchange Notes covered by such Registration
Statement; provided that the Company shall not be required to (i)
qualify to do business as a foreign corporation or as a broker-dealer in
any jurisdiction where it is not then so qualified, (ii) take any action
which would subject it to general service of process or to taxation in
any jurisdiction where it is not then so subject or (iii) amend the
terms of the Exchange Notes.
(h) The Company shall cooperate with the Holders of the Exchange
Notes to facilitate the timely preparation and delivery of certificates
representing the Exchange Notes to be sold in the Shelf Registration
free of any restrictive legends and in such denominations and registered
in such names as the Holders may request a reasonable period of time
prior to sales of the Exchange Notes pursuant to the Shelf Registration.
(i) Upon the occurrence of any event contemplated by Section
3(a)(v) or (vi) above, subject to the last sentence of Section 2(b), the
Company shall promptly prepare a post-effective amendment to the
Registration Statement or a supplement to the related prospectus or file
any other required document so that, as thereafter delivered to Holders
of the Exchange Notes or the Registered Exchange Notes, as the case may
be, the prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading and will contain the current information required by the
Securities Act.
(j) Not later than the effective date of the applicable
Registration Statement, the Company will provide a CUSIP number for the
Exchange Notes or the Registered Exchange Notes, as the case may be, and
provide the applicable trustee with certificates for the Exchange Notes
or the Registered Exchange Notes, as the case may be, in a form eligible
for deposit with The Depository Trust Company.
(k) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf Registration and will make
generally available to its securities holders (or otherwise provide in
<PAGE>
-9-
accordance with Section 11(a) of the Securities Act) an earnings
statement satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days (plus any extension permitted by Rule 12b-25
under the Exchange Act) after the end of a 12-month period (or 90 days,
if such period is a fiscal year (plus any extension permitted by Rule
12b-25 under the Exchange Act)) beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of
the Registration Statement, which statement shall cover such 12-month
period.
(l) The Company shall cause the Indenture (or an indenture
substantially identical to the Indenture in the case of a Registered
Exchange Offer) to be qualified under the Trust Indenture Act of 1939,
as amended.
(m) The Company may require each Holder of the Exchange Notes to
be sold pursuant to the Shelf Registration Statement to furnish to the
Company such information regarding the Holder and the distribution of
the Exchange Notes as the Company may from time to time reasonably
require for inclusion in the Shelf Registration Statement. If requested
by the Company, prior to the filing of any Shelf Registration Statement
and the filing of any amendments or supplements thereto, each Holder of
the Exchange Notes to be sold pursuant to such Registration Statement,
shall deliver a written representation to the Company that neither such
Shelf Registration Statement nor the prospectus contained therein
contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading but only insofar as any such untrue
statement or omission was made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of, or
approved in writing by, such Holder specifically for inclusion therein.
(n) The Company shall enter into such customary agreements
(including if requested an underwriting agreement in customary form) and
take all such other action, if any, as Holders of 25% in aggregate
principal amount of Registrable Securities shall reasonably request in
order to facilitate the disposition of the Registrable Securities held
by them pursuant to any Shelf Registration.
(o) In the case of any Shelf Registration, the Company shall (i)
make reasonably available for inspection by the Holders of the Exchange
Notes, any underwriter participating in any disposition pursuant to the
Shelf
<PAGE>
-10-
Registration Statement and any attorney, accountant or other agent
retained by the Holders of the Exchange Notes or any such underwriter
(collectively, the "Inspectors") all relevant financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records") and (ii) cause the Company's officers,
directors and employees to supply all relevant information reasonably
requested by the Holders of the Exchange Notes or any such underwriter,
attorney, accountant or agent in connection with the Shelf Registration
Statement; provided that the Company shall not be required to provide
any such Records if the Company reasonably determines in good faith that
such Records are confidential and so notifies the Inspectors in writing
unless, prior to furnishing any such Records, such Holder requesting
such Records agrees to enter into a confidentiality agreement in
customary form and subject to customary exceptions; and provided further
that each such Holder agrees that it will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of such Records.
(p) In the case of the Registered Exchange Offer, the Company
shall (i) make reasonably available for inspection by any known
Participating Broker-Dealer and any attorney, accountant or other agent
retained by such Participating Broker-Dealer (collectively the "Exchange
Offer Inspectors") all relevant financial and other records, pertinent
corporate documents and properties of the Company (collectively the
"Exchange Offer Records") and (ii) cause the Company's officers,
directors and employees to supply all relevant information reasonably
requested by such Participating Broker-Dealer or any such attorney,
accountant or agent in connection with the Exchange Offer Registration
Statement; provided that the Company shall not be required to provide
any such Exchange Offer Records if the Company reasonably determines in
good faith that such Exchange Offers Records are confidential and so
notifies the Exchange Offer Inspectors in writing unless, prior to
furnishing any such Exchange Offer Records, such Holder requesting such
Exchange Offer Records agrees to enter into a confidentiality agreement
in customary form and subject to customary exceptions; and provided
further that each such Holder agrees that it will, upon learning that
disclosure of such Exchange Offer Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the
Company, at its expense, to undertake appropriate action to prevent
disclosure of such Exchange Offer Records.
<PAGE>
-11-
(q) In the case of any Shelf Registration, the Company, if
requested by Holders of 25% in aggregate principal amount of Registrable
Securities, shall cause its outside legal counsel to deliver an opinion
relating to the Exchange in customary form to such Holders and any
underwriter therefor, cause its officers to execute and deliver all
customary documents and certificates requested by any underwriters of
the Exchange Notes and cause its independent public accountants to
provide to such Holders and any underwriter therefor one or more comfort
letters in customary form.
(r) Each Holder of Exchange Notes in the case of any Shelf
Registration and each Participating Broker Dealer in the case of any
Registered Exchange Offer agrees by acquisition of the Exchange Notes
that, upon receipt of notice from the Company as set forth in Section
3(a)(v) or (vi) hereof, such Holder and Participating Broker Dealer will
forthwith discontinue disposition of the Exchange Notes or the
Registered Exchange Notes, as applicable, until such Holder's or
Participating Broker Dealer's receipt of the copies of a supplemented or
amended prospectus, or until it is advised in writing by the Company
that the use of the prospectus may be resumed, and has received copies
of any additional or supplemental filings which are incorporated by
reference in the prospectus. If so directed by the Company, each such
Holder and Participating Broker Dealer will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then
in its possession, of the prospectus covering such Exchange Notes or
Registered Exchange Notes, as applicable, which are the subject of such
instruction.
4. Registration Expenses. The Company shall bear all expenses
incurred by it in connection with the performance of its obligations under
Sections 1 through 3 hereof and, in the event of a Shelf Registration, shall
bear or reimburse the Holders of the Exchange Notes for the reasonable fees
and disbursements of one firm of counsel designated by the Holders of a
majority in principal amount of the Exchange Notes to act as counsel for the
Holders of the Exchange Notes in connection therewith.
5. Indemnification. (a) The Company agrees to indemnify and hold
harmless each Holder of the Exchange Notes and each person, if any, who
controls such Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act and each director, officer, employee or agent
of such Holder and each director, officer, employee or agent of each such
controlling person (each Holder, such controlling
<PAGE>
-12-
persons and each such director, officer, employee and agent are referred to
collectively as the "Indemnified Parties") from and against any losses,
claims, damages or liabilities, joint or several, or any actions in respect
thereof (including, but not limited to, any losses, claims, damages,
liabilities or actions relating to purchases and sales of the Exchange Notes),
to which each Indemnified Party may become subject under the Securities Act,
the Exchange Act or otherwise, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in a Registration
Statement or prospectus contained therein or in any amendment or supplement
thereto, or arise out of, or are based upon, the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and shall reimburse, as incurred,
the Indemnified Parties for any legal or other expenses reasonably incurred by
them in connection with investigating or defending or preparing to defend
against or appearing as a third-party witness in connection with any such
loss, claim, damage, liability or action in respect thereof; provided,
however, that the Company shall not be liable in any such case to the extent
that such loss, claim, damage or liability arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in a Registration Statement or prospectus contained therein or in any
amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by or on behalf of or approved in
writing by such Holder specifically for inclusion therein and provided further
that the Company will not be liable to any Indemnified Party with respect to
any such untrue statement or omission made in any preliminary prospectus that
is corrected in the final prospectus (or any amendment or supplement thereto)
if the person asserting any such loss, claim, damage or liability purchased
Exchange Notes from such Indemnified Party but was not sent or given a copy of
the prospectus (as amended or supplemented), at or prior to the written
confirmation of the sale of such Exchange Notes to such person in any case
where such delivery of the prospectus (as amended or supplemented) is required
by the Securities Act and the untrue statement or alleged untrue statement of
a material fact, or the omission or alleged omission to state a material fact,
that is found to be or is alleged to be the basis of liability in such
preliminary prospectus was corrected in the prospectus as amended or
supplemented and if such Indemnified Party would not have been liable had a
copy of such prospectus been so sent or given, unless such failure to deliver
the prospectus (as amended or supplemented) was a result of noncompliance by
the Company with Section 3(e) of this Agreement. This indemnity agreement will
be in addition to any liability which the
<PAGE>
-13-
Company may otherwise have to such Indemnified Party. The Company will not
settle or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such Indemnified Party
or any person who controls such Indemnified Party within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act is a party
to such claim, action, suit or proceeding) without the prior written consent
of such Indemnified Party, unless such settlement, compromise or consent
includes an unconditional release of each Indemnified Party. The Company shall
also indemnify any underwriters participating in the distribution (as
described in such Registration Statement), their officers and directors and
each person who controls such persons (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) to the same extent as
provided above with respect to the indemnification of the Holders of the
Exchange Notes if requested by such Holders.
(b) The Company agrees to indemnify and hold harmless any
Participating Broker-Dealer and each person, if any, who controls such
Participating Broker-Dealer within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act and each director, officer, employee or
agent of such Participating Broker-Dealer and each director, officer, employee
or agent of each such controlling person (any Participating Broker-Dealer,
such controlling persons and each such director, officer, employee and agent
of such Participating Broker-Dealer are referred to collectively as the
"Exchange Offer Indemnified Parties") from and against any losses, claims,
damages or liabilities, joint or several, or any actions in respect thereof
(including, but not limited to, any losses, claims, damages, liabilities or
actions relating to purchases and sales of Registered Exchange Notes), to
which each Exchange Offer Indemnified Party may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Exchange Offer Registration Statement or prospectus contained therein or in
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse, as incurred, the Exchange Offer Indemnified Parties for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending or preparing to defend against or appearing as a
third-party witness in connection with any such loss, claim, damage, liability
or action in respect thereof; provided, however, that the Company shall not
<PAGE>
-14-
be liable in any such case to the extent that such loss, claim, damage or
liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in any Exchange Offer
Registration Statement or prospectus contained therein or in any amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by or on behalf of, or approved in writing by, such
Exchange Offer Indemnified Party specifically for inclusion therein. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have to such Exchange Offer Indemnified Party. The Company will not
settle or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such Exchange Offer
Indemnified Party or any person who controls such Exchange Offer Indemnified
Party within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act is a party to such claim, action, suit or proceeding) without
the prior written consent of such Exchange Offer Indemnified Party, unless
such settlement, compromise or consent includes an unconditional release of
such Exchange Offer Indemnified Party and each such controlling person from
all liability arising out of such claim, action, suit or proceeding.
(c) Each Holder of the Exchange Notes severally and not jointly,
will indemnify and hold harmless the Company, each director and officer of the
Company and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any losses, claims, damages or liabilities or any actions in respect
thereof, to which the Company or any such director, officer or controlling
person may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in a Shelf Registration Statement or
prospectus contained therein or in any amendment or supplement thereto or
arise out of or are based upon the omission or alleged omission to state
therein a material fact necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of, or approved in writing by, such Holder specifically for
inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, the Company for any legal
or other expenses reasonably incurred by the Company or any such director,
officer or controlling person in
<PAGE>
-15-
connection with investigating or defending or preparing to defend against or
appearing as a third-party witness in connection with any loss, claim, damage,
liability or action in respect thereof. Each Holder of the Exchange Notes will
not settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not the Company, each
director and officer of the Company or any person who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act is a party to such claim, action, suit or proceeding) without the
prior written consent of the Company, unless such settlement, compromise or
consent includes an unconditional release of the Company and each director,
officer and such controlling person from all liability arising out of such
claim, action, suit or proceeding. This indemnity agreement will be in
addition to any liability which such Holder may otherwise have to the Company
or any of its directors, officers or controlling persons.
(d) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action or proceeding (including
a governmental investigation), such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this
Section 5, notify the indemnifying party of the commencement thereof,
enclosing a copy of all papers served on such indemnified party with respect
to such claim; but the omission so to notify the indemnifying party (i) will
not relieve the indemnifying party from any liability under paragraph (a), (b)
or (c) above unless and to the extent it did not otherwise learn of such
action and such failure results in the forfeiture by the indemnifying party of
substantial rights, whether substantive or procedural, or defenses and (ii)
will not, in any event, relieve the indemnifying party from any obligations to
any indemnified party other than the indemnification obligation provided in
paragraph (a), (b) or (c) above. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it elects by delivery of notice to the
indemnified party promptly after receiving notice of the action from the
indemnified party, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory
to such indemnified party; provided, however, that if the defendants in any
such action include both the indemnified party and the indemnifying party and
the indemnified party shall have reasonably concluded that there may be one or
more legal defenses available to it and/or other indemnified parties which are
different from or additional to those
<PAGE>
-16-
available to the indemnifying party, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be liable to such indemnified party under this Section 5 for
any legal or other expenses, other than reasonable out of pocket costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances), (ii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense
of the indemnifying party or (iii) the indemnifying party has not in fact
employed counsel to assume the defense of such action within a reasonable time
after receiving notice of the action.
(e) In circumstances in which the indemnity agreement provided for
in the preceding paragraphs of this Section 5 is unavailable or insufficient
to hold harmless an indemnified party in respect of any losses, claims,
damages, expenses or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Exchange Notes or (ii)
if the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates
<PAGE>
-17-
to information supplied by the Company on the one hand or such Holder or such
other indemnified person, as the case may be, on the other, the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances. The Company and each indemnified party
agrees that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation or by any other method of
allocation that does not take into account the equitable considerations
referred to in the first sentence of this paragraph (e). Notwithstanding any
other provision of this Section 5(e), the Holders of the Exchange Notes shall
not be required to contribute any amount in excess of the amount by which the
net proceeds received by such Holders from the sale of the Exchange Notes
pursuant to a Shelf Registration Statement exceeds the amount of damages which
such Holders have otherwise been required to pay in respect of the same or a
similar claim, and no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (e), each director, officer,
employee and agent of any indemnified party and each person, if any, who
controls such indemnified party within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such indemnified party and each director and officer of the
Company, and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act shall
have the same rights to contribution as the Company.
(f) The agreements contained in this Section 5 and 7 shall survive
the sale of the Exchange Notes pursuant to a Registration Statement and shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement or any investigation made by or on behalf of any indemnified
party.
6. Liquidated Damages. (a) The Company agrees that the Holders of
Registrable Securities will suffer damages if the Company fails to fulfill its
obligations under Sections 1 and 2 and that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, if (i) the
Exchange Offer Registration Statement has not been filed on or prior to the
60th calendar day following the Closing Date, (ii) the Exchange Offer
Registration Statement is not declared effective on or prior to the 120th
calendar day following the Closing Date, (iii) the Registered Exchange Offer
is not consummated or a Shelf Registration Statement is not
<PAGE>
-18-
declared effective on or prior to the 180th calendar day following the Closing
Date or (iv) the Commission shall have issued a stop order suspending the
effectiveness of the Exchange Offer Registration Statement or Shelf
Registration Statement, at a time when such Exchange Offer Registration
Statement or Shelf Registration Statement, as the case may be, is required to
be kept effective by the Company pursuant to the provisions of this Agreement
or at any such time the prospectus contained in any such Exchange Offer
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 (other than as permitted by the last sentence of Section 2(b)),
then the Company agrees to pay, or cause to be paid, in addition to amounts
otherwise due under the Indenture and the Exchange Notes, as liquidated
damages and not as a penalty, to each Holder of Registrable Securities, an
amount equal to $0.05 per week per $1,000 principal amount of Registrable
Securities held by such Holder for each week during the 90-day period
beginning on such 60th calendar day in the case of clause (i) above, such
120th calendar day in the case of clause (ii) above, such 180th calendar day
in the case of clause (iii) above and 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 in the case of clause (iv) above. Such liquidated
damages shall be increased by $0.05 per week per $1,000 principal amount of
Registrable Securities at the beginning of each subsequent 90-day period up to
a maximum aggregate amount of $0.20 per week per $1,000 principal amount of
Registrable Securities. Upon (w) the filing of the Exchange Offer Registration
Statement in the case of clause (i) above, (x) the effectiveness of the
Exchange Offer Registration Statement in the case of clause (ii) above, (y)
the consummation of the Registered Exchange Offer or the effectiveness of a
Shelf Registration Statement in the case of clause (iii) above and (z) the
Exchange Offer Registration Statement or Shelf Registration Statement, as the
case may be, not being subject to an order suspending the effectiveness
thereof and the prospectus contained in any such Exchange Offer Registration
Statement or Shelf Registration Statement, as amended or supplemented,
containing the current information required by the Securities Act and the
rules and regulations promulgated thereunder and not containing any untrue
statement of a material fact or omitting to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the
<PAGE>
-19-
circumstances under which they were made, not misleading, in the case of
clause (iv) above, such liquidated damages will cease to accrue.
(b) The Company shall notify the Trustee within three business
days after each and every date on which an event occurs in respect of which
liquidated damages are required to be paid (an "Event Date"). The Company
shall pay the liquidated damages due on the Registrable Securities by
depositing with the Trustee, in trust, for the benefit of the Holders thereof,
on or before the applicable liquidated damages payment date specified below,
immediately available funds in sums sufficient to pay the liquidated damages
then due. At such time as the foregoing funds are deposited with the Trustee,
the Company shall also deposit with the Trustee an amount sufficient to pay
any fees and expenses of the Trustee related to the distribution of such
liquidated damages. The liquidated damages amount due shall be payable on each
March 1 and September 1 (the "liquidated damages payment dates") to Holders of
record of Registrable Securities on the February 15 and August 15 next
preceding such liquidated damages payment dates. Each obligation to pay
liquidated damages shall be deemed to accrue on the applicable Event Date. The
Company and the Holders of the Exchange Notes, by their acquisition of the
Exchange Notes, agree that the liquidated damages provided for in this Section
6 constitute a reasonable estimate of the damages that may be incurred by
Holders of Registrable Securities by reason of the failure of the Company to
satisfy its obligations in the Agreement.
(c) If the Company effects the Registered Exchange Offer, the
Company will be entitled to close the Registered Exchange Offer provided that
the Company has accepted all the Exchange Notes theretofore validly tendered
in accordance with the terms of the Registered Exchange Offer. Exchange Notes
not tendered in the Registered Exchange Offer shall accrete interest at the
same rates in effect at the time of issuance of the Exchange Notes.
As used in this Agreement, the following capitalized terms shall
have the meanings indicated below:
"Registrable Securities" means the Exchange Notes; provided,
however, that any Exchange Note shall cease to be a Registrable Security when
it is no longer a Transfer Restricted Security.
"Transfer Restricted Securities" means the Exchange Notes upon
original issuance thereof, and at all times subsequent thereto, until, in the
case of any such Exchange Notes,
<PAGE>
-20-
the occurrence of any of the following events: (i) a Registration Statement
with respect to such Exchange Notes shall have been declared effective under
the Securities Act and such Exchange Notes shall have been disposed of by the
Holder thereof pursuant to such Registration Statement; (ii) such Exchange
Notes are transferred to any person pursuant to Rule 144 (or any successor
provisions) promulgated under the Securities Act; or (iii) such Exchange Notes
shall have ceased to be outstanding.
7. Trustee.
(a) The Trustee shall have no responsibility as to the genuineness
of the signatures on this Agreement, nor as to the legal capacity or identity
of the parties to this Agreement, and the Trustee shall be justified in every
act, omission or forbearance in reliance upon this Agreement so long as and to
the extent that it shall act or have acted in good faith.
(b) All of the terms and conditions in connection with the
Trustee's duties and responsibilities with respect to this Agreement, and the
rights of the undersigned parties, are contained in this Agreement. With
respect to its duties hereunder, the Trustee is not required to be familiar
with the provisions of any other instrument or agreement and shall not be
charged with any responsibility or liability in connection with the observance
or non-observance, by any person, of the provisions of any other such
instrument or agreement.
(c) The Trustee shall not be responsible for the determination of
any facts or conditions on which the parties may give notice, but the Trustee
may rely in good faith on the notice received from the parties as to the
existence of such facts or conditions.
(d) The Trustee may rely and shall be protected in acting upon any
paper or other document which may be submitted to it in connection with its
duties under this Agreement and which is believed in good faith by the Trustee
to be genuine and to have been signed or presented by the proper party or
parties, and the Trustee shall have no liability or responsibility with
respect to the form, execution or validity thereof.
(e) The Trustee may act or refrain from acting in respect of any
matter referred to in this Agreement or in additional instructions received in
the performance of its duties in reliance in good faith upon the advice of
counsel which may be selected by it, and shall be fully protected in so acting
or refraining from acting in good faith upon the advice of such counsel.
<PAGE>
-21-
(f) The Trustee may obey and comply with any order or process of a
court (whether or not such court shall have jurisdiction) commanding it to do
or to refrain from some act in relation to the subject matter of this
Agreement. It may rely and continue to rely conclusively upon such orders or
process, notwithstanding that it may be found subsequently to be void or
voidable, until one of the officers of the Trustee, shall have actual
knowledge that such order or process shall have been modified, annulled, set
aside, vacated or quashed.
(g) The Trustee shall have a lien, which shall be paramount and
prior in right of all other persons, upon all money and other property which
shall have been received by it under this Agreement, to secure the payment to
it of fees and expenses hereunder due to the Trustee. The Trustee shall not be
required without its consent to relinquish, deliver or pay over any
instrument,money or other property deposited with it pursuant to this
Agreement unless and until it shall have paid and reimbursed its fees and
expenses.
(h) The Company agrees to reimburse the Trustee for any and all
reasonable expenses which it may have at any time incurred in connection with
this Agreement, and shall indemnify and hold harmless the Trustee and each
person, if any, who controls the Trustee within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act and each director,
officer, employee or agent of the Trustee and of each such controlling persons
from any losses, damages, claims, liabilities, judgments, attorney's fees,
court costs and all other expenses of every kind and nature which may at any
time be incurred by reason of the Trustee's acceptance of, and its performance
under, this Agreement.
8. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the Company has
obtained the written consent of Holders of a majority in aggregate principal
amount of Registrable Securities.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class
mail, telex, telecopy, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Exchange Notes, at the
address of such Holder maintained by the Trustee.
<PAGE>
-22-
(2) if to the Trustee, at its address as follows:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Department
with a copy to:
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue,
New York, New York 10022
Attention: Aaron R. Cahn, Esq.
(3) if to the Company, at its address as follows:
Waxman USA Inc.
24460 Aurora Road
Bedford Heights, Ohio 44146
Attention: Corporate Secretary
with a copy to:
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022-9998
Attention: Scott M. Zimmerman, Esq.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged by recipient's
telecopy operator, if telecopied; and on the day delivered, if sent by
overnight air courier guaranteeing next day delivery.
(c) Successors and Assigns. This Agreement shall be
binding upon the Company and its respective successors and
assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
so executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
<PAGE>
-23-
(e) Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
(g) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid,
illegal or unenforceable, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(h) Third Party Beneficiaries. Holders of the
Exchange Notes and Registered Exchange Notes are intended third
party beneficiaries of this Agreement and this Agreement may be
enforced by such Holders.
<PAGE>
-24-
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the parties hereto in accordance with its terms.
Very truly yours,
WAXMAN USA INC.
By: /S/ MICHAEL VANTUSKO
-----------------------------
Name: MICHAEL VANTUSKO
Title: VICE PRESIDENT-FINANCE
Confirmed and accepted as of the date first above written:
By: UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By: /S/ JAMES E. LOGAN
------------------------------
Name: JAMES E. LOGAN
Title: VICE PRESIDENT
<PAGE>
EXHIBIT 23.1
CONSENT OF ARTHUR ANDERSEN LLP
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
September 26, 1995 included in Waxman Industries, Inc.'s Form 10-K for the year
ended June 30, 1995 and to all references to our Firm included in this
Registration Statement (File No. 33-54211).
