<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998 COMMISSION FILE NO. 1-3462
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
CARLYLE INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-1574754
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE PALMER TERRACE
CARLSTADT, NJ 07072
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (201) 935-6220
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT: N/A
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
[X] YES [ ] NO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
AS OF AUGUST 10, 1998, 7,382,782 SHARES OF COMMON STOCK WERE OUTSTANDING.
<PAGE> 2
CARLYLE INDUSTRIES, INC.
ONE PALMER TERRACE
CARLSTADT, NJ 07072
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Part I -- Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
as of June 30, 1998 and December 31, 1997....................................................3
Consolidated Statements of Operations
for the Three and Six Months Ended June 30, 1998 and 1997....................................4
Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1998 and 1997..............................................5
Notes to Unaudited Consolidated Financial Statements - June 30, 1998.........................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................................................9
Part II -- Other Information
Item 1. Legal Proceedings...............................................................Not Applicable
Item 2. Changes in Securities...........................................................Not Applicable
Item 3. Defaults upon Senior Securities.............................................................13
Item 4. Submission of Matters to a Vote of Security Holders.........................................13
Item 5. Other Information...............................................................Not Applicable
Item 6. Exhibits and Reports on Form 8-K............................................................14
Signatures...........................................................................................15
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
(UNAUDITED) (NOTE)
--------------- ---------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 663 $ 12,475
Accounts receivable trade, net 3,590 3,040
Inventories 5,781 2,541
Current deferred tax asset 2,028 2,740
Other current assets 345 118
--------------- ---------------
Total current assets 12,407 20,914
--------------- ---------------
Property, plant and equipment, at cost 2,685 2,509
Less: Accumulated depreciation and amortization (819) (739)
--------------- ---------------
Net property, plant and equipment 1,866 1,770
--------------- ---------------
Goodwill, net 2,234 2,152
Other assets 852 226
--------------- ---------------
Total Assets $ 17,359 $ 25,062
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,833 $ 731
Current maturities of long-term debt 54 51
Federal and state income taxes payable 77 6,514
Other current liabilities 1,788 2,972
--------------- ---------------
3,752 10,268
--------------- ---------------
Long-Term debt 10,245 78
Other Liabilities 8,592 9,033
--------------- ---------------
Total Liabilities 22,589 19,379
--------------- ---------------
Redeemable Preferred Stock, par value $0.01 per share
21,305,055 shares authorized;
Shares issued and outstanding:
Series A - None
Series B - 10,687,456 at June 30, 1998
20,805,060 at December 31, 1997 10,687 20,805
Accumulated dividends on preferred stock 2,534 4,184
--------------- ---------------
13,221 24,989
--------------- ---------------
Common Stock, par value $0.01 per share
20,000,000 shares authorized;
Shares issued and outstanding:
June 30, 1998: 7,382,782 74
December 31, 1997: 7,382,782 74
Paid in Capital 19,858 19,858
Retained Earnings (38,383) (39,238)
--------------- ---------------
Total Common Stockholders' Equity (18,451) (19,306)
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 17,359 $ 25,062
=============== ===============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
<PAGE> 4
CARLYLE INDUSTRIES, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $ 3,835 $ 4,470 $ 8,892 $ 9,475
Cost of Sales 1,882 1,939 4,382 4,291
-------- -------- -------- --------
1,953 2,531 4,510 5,184
Selling, general & administrative expenses 1,042 1,162 2,141 2,449
Other income -- net -- -- -- 6
-------- -------- -------- --------
Income from continuing operations before
interest and income taxes 911 1,369 2,369 2,741
Interest income 40 106 138 73
-------- -------- -------- --------
Income from continuing operations before
provision for income taxes 951 1,475 2,507 2,814
Provision for income taxes 351 544 920 1,032
-------- -------- -------- --------
Income from continuing operations 600 931 1,587 1,782
Less dividends on preferred stock 362 356 732 704
-------- -------- -------- --------
Income from continuing operations
applicable to common stock 238 575 855 1,078
Loss from discontinued operations net of
income tax provision -- -- -- (316)
Loss on disposal of discontinued operations, net of
income tax provision -- -- -- (9,801)
-------- -------- -------- --------
-- -- -- (10,117)
-------- -------- -------- --------
Net income (loss) applicable to common stock $ 238 $ 575 $ 855 $ (9,039)
======== ======== ======== ========
Basic earnings (loss) per common share:
Continuing operations $ .03 $ .08 $ .12 $ .15
Discontinued operations -- -- -- (1.37)
-------- -------- -------- --------
Total $ .03 $ .08 $ .12 $ (1.22)
======== ======== ======== ========
Diluted earnings (loss) per common share:
Continuing operations $ .03 $ .08 $ .12 $ .15
Discontinued operations -- -- -- (1.37)
-------- -------- -------- --------
Total $ .03 $ .08 $ .12 $ (1.22)
======== ======== ======== ========
Weighted average common shares
outstanding (in thousands) $ 7,383 7,388 7,383 7,388
======== ======== ======== ========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
<PAGE> 5
CARLYLE INDUSTRIES, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 1,587 $ 1,782
Reconciliation of net income from continuing
operations to net cash provided (used) by operations:
Depreciation and amortization 287 188
Deferred tax provision 712 576
Changes in operating assets and liabilities:
Accounts receivable, trade 976 1,290
Merchandise inventories (534) (1,129)
Other assets (874) --
Income taxes payable (6,437) --
Other current assets -- 279
Accounts payable 297 (674)
Other current liabilities (1,476) (535)
Other liabilities (441) (336)
Cash flow from discontinued operations -- (5,666)
-------- --------
(5,903) (4,225)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of discontinued operation -- 51,924
Investment in net assets of acquired business (3,556) --
Capital expenditures (23) (103)
-------- --------
(3,579) 51,821
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility and capitalized
lease obligations 10,194 20,279
Repayment of long term debt and capital lease obligations (24) (57,250)
Preferred stock payment (12,500) --
-------- --------
(2,330) (36,971)
-------- --------
Increase (decrease) in cash and cash equivalents (11,812) 10,625
-------- --------
Cash and cash equivalents beginning of period 12,475 131
-------- --------
Cash and cash equivalents end of period $ 663 $ 10,756
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 28 $ 783
======== ========
Income taxes $ 7,375 $ 117
======== ========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
<PAGE> 6
CARLYLE INDUSTRIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for fair presentation have
been included. Certain reclassifications have been made to prior year amounts in
order to present them on a basis consistent with the current year. Operating
results for the three-month and six-month periods ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. For further information, refer to the consolidated financial
statements and footnotes included in the Company's annual report on Form 10-K
for the year ended December 31, 1997.
NOTE 2: ACQUISITION
On June 30, 1998, the assets and business of Westwater Enterprises LP were
acquired by Westwater Industries, Inc. ("Westwater"), a newly formed
wholly-owned subsidiary of the Company. Westwater is an importer and distributor
of craft and gift products for sale to retail and specialty chain stores. The
Company paid approximately $3.1 million in cash, assumed $.5 million in bank
debt, and committed to payments totaling $2.0 million over three years
contingent upon achievement of specified earnings levels. The acquisition has
been recorded using the purchase method of accounting. The consolidated balance
sheet at June 30, 1998 includes the accounts of Westwater based on a preliminary
allocation of the purchase price. The allocation is expected to be finalized
after various studies and other work have been completed. The second quarter
consolidated statement of operations does not include any results of operations
related to Westwater and consequently, comparative pro forma operating results
have not been presented.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operation: The Company and its subsidiaries distribute a line of home
sewing and craft products.
Consolidation: The accompanying consolidated financial statements include the
accounts of the Company and all subsidiaries after elimination of intercompany
items and transactions.
Depreciation and Amortization: Depreciation and amortization are computed
principally by the straight-line method for each class of depreciable and
amortizable assets based on their estimated useful lives.
<PAGE> 7
Buildings and improvements, machinery and equipment, and furniture, fixtures and
leasehold improvements are generally depreciated over periods of 20-35, 5-25 and
5-10 years, respectively.
Revenue Recognition: Revenue is recognized upon shipment of merchandise.
Cash Equivalents: The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 4: EARNINGS PER SHARE
Earnings per common share for the Company have been computed on the basis of
weighted average common shares outstanding after providing for quarterly
preferred dividend requirements.
NOTE 5: INVENTORIES:
The components of inventories, net of reserves, are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
Raw materials $ 2,122 $ 1,976
Work in Progress 10 10
Finished goods 3,649 555
--------------- ---------------
$ 5,781 $ 2,541
=============== ===============
</TABLE>
NOTE 6: CREDIT FACILITY
On June 23, 1998, the Company entered into a new $14 million revolving credit
agreement (the "Credit Agreement") with Fleet Bank, N.A. ("Fleet"). The Credit
Agreement has a term of five years and amounts available under the agreement are
reduced in $1 million increments at the end of each six month period, with the
first such reduction occurring December 31, 1998. Advances bear interest equal
to, at the Company's option, (1) the rate at which deposits in U.S. dollars are
offered by the principal office of Fleet in London, England to prime banks in
the London interbank market plus 1.5% or (2) Fleet's prime rate. A performance
price grid provides that interest rates will step down upon the Company's
achievement of specified ratios of funded debt to earnings before interest,
income taxes, depreciation and amortization.
The Credit Agreement is guaranteed by all direct and indirect subsidiaries of
the Company and is secured by a first priority lien or security interest in
substantially all of the assets of the Company. The Credit Agreement contains
representations and warranties, covenants and events of default customary for
credit agreements of this nature. Such customary covenants include restrictions
on the ability to borrow more
<PAGE> 8
debt, acquire other companies, make preferred stock payments and use of proceeds
from the sale of assets. In addition to the semi-annual reduction in
availability, additional payments may be required based on the Company's
proceeds from asset sales and "excess cash flow" as defined in the Credit
Agreement.
NOTE 7: PREFERRED STOCK
Under the terms of the Company's charter, dividends are payable upon the
Preferred Stock when, as and if declared by the Board of Directors out of
legally available funds. In addition, the Preferred Stock is required to be
redeemed by the Company in annual installments of $4.2 million beginning March
15, 1995 through March 15, 1999, subject among other things to the approval of
the Company's senior lenders, if any and the extent of legally available funds
as determined by the Board of Directors. Prior to March 27, 1997, the Company
did not make any payments on account of the Preferred Stock (either dividend or
redemption) as the Company's lenders declined to approve such payments. However,
as of that date, the Company discharged its credit facility. Consequently, the
Company was in default of its obligations to redeem the Preferred Stock to the
extent of its legally available funds.
On June 23, 1998 the Company paid $12.5 million to holders of its Series B
Preferred stock of record as of June 22, 1998. $10.1 million of this amount
represented the original redemption amount and $2.4 million represented the
increase in the required redemption payment resulting from accumulated and
unpaid dividends. The payment was previously authorized by the Company's Board
of Directors at its annual meeting on May 14, 1998, which authorization was
contingent upon obtaining the necessary bank financing and receipt of an opinion
by its investment banker that the payment could be made from legally available
funds. On June 23, 1998 both such conditions were met and the payment was made.
As of June 30, 1998, the Preferred Stock payment arrearages aggregated $6.7
million including accrued but unpaid preferred dividends of $2.5 million.
Accrued but unpaid dividends are added to the redemption value of the Preferred
Stock and they continue to accrue interest at a compound rate of 6% per annum.
The Company is engaged in discussions with Noel Group, Inc. ("Noel"), with a
view to satisfying the balance of its obligations to the holders of the
Preferred Stock in accordance with the terms of its charter and to the extent
consistent with the Company's resources. Discussions have dealt with the amount
and timing of payments and possible modifications of the Preferred Stock terms
and conditions. Any such modifications would require the agreement of the
Company and the holders of the Preferred Stock.
The Company intends to fulfill its obligation to the holders of the Preferred
Stock as required by the Company's charter to the extent the Company has cash
resources in excess of those required to operate its business. As the Company
believes that it does not currently have such excess resources, its ability to
make payments on account of the Preferred Stock in the future will depend on the
Company's future cash flow, the timing of the settlement of the liabilities
recorded in the consolidated financial statements of the Company, the outcome of
the negotiations with Noel described above, the ability of the Company to obtain
additional financing and compliance with the Company's new Credit Facility which
presently permits only specified payment amounts including 25% of "excess cash
flow", as defined in the agreement. In addition, as the Company has agreed to
notify the Pension Benefit Guaranty Corporation ("PBGC") prior to making any
redemption payments; the Company's decision to make any such payments will
depend on the successful resolution of any issues which may arise with the PBGC
relating to the Company's unfunded liability to its defined benefit plan. The
Company is also exploring strategic alternatives to redemption of the Preferred
Stock.
<PAGE> 9
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER
Sales during the second quarter of 1998 totaled $3.8 million as compared to
sales of $4.5 million in the second quarter of 1997 for a decrease of $.6
million. A portion of the decline in sales during the second quarter of 1998 was
the result of customer consolidation and related store closings. In addition,
1997 sales were favorably impacted during the second quarter by initial
placements on several new programs.
Gross margin during the second quarter of 1998 totaled $2.0 million as compared
with $2.5 million in the second quarter of 1997. Gross margin percent during the
second quarter of 1998 was 50.9% as compared to 56.6% during the second quarter
of 1997. The lower gross margin dollars in 1998 as compared to 1997 was
primarily the result of lower sales volume in 1998. The lower gross margin
percent during 1998 was the result of increases in variable and fixed cost of
sales as a percent of net sales. Certain fixed costs during the second quarter
of 1998 remained at comparable levels to second quarter of 1997 and while
variable costs declined on a dollar basis in comparison with 1997, their percent
decline was not as large as the percent decline in sales during the quarter.
Selling, general and administrative expenses in the second quarter of 1998
totaled $1.0 million as compared to $1.2 million in the second quarter of 1997.
The reduction in selling, general and administrative expenses in 1998 as
compared to 1997 was primarily the result of the lower corporate administrative
headcount and expense.
Interest income during the quarter totaled $40 thousand as compared to $106
thousand during the second quarter of 1997. The reduction in interest income was
the result of lower levels of invested cash during 1998 as compared to 1997.
The provision for income taxes during the second quarter of 1998 totaled $.4
million as compared to $.5 million during the same period last year. The
combined effective income tax rate totaled 36.9% in both 1998 and 1997. The
combined effective income tax rates are higher than combined statutory rates
because of nondeductible goodwill.
Preferred dividends accrued during the second quarter of 1998 totaled $362
thousand as compared to $356 thousand during the same period in 1997. Preferred
dividends are accrued and compound at a rate of 6% per annum. A portion of the
dividend arrearage was satisfied in connection with a partial redemption of
Preferred Stock on June 23, 1998. See Note 7 to the unaudited consolidated
financial statements.
Second quarter results may not be indicative of future quarterly results due to
future programs with major customers which may vary as to timing and amount from
quarter to quarter. In addition, consolidation within the Company's customer
base may continue to put further pressure on the Company's revenue and operating
results in subsequent quarters. The Company is currently pursuing a number of
strategies to improve its revenue base.
<PAGE> 10
YEAR TO DATE
Sales during the six months ended June 30, 1998 totaled $8.9 million as compared
to $9.5 million during the year to date period in 1997 for a decrease of $.6
million.
Gross margin during the six months ended June 30, 1998 totaled $4.5 million or
50.7% as compared to $5.2 million or 54.7% during the comparable period in 1997.
The decrease in gross margin dollars during the first half of 1998 was the
result of lower sales volume combined with higher variable costs of goods sold.
The decrease in gross margin percent was mostly attributable to higher variable
costs of goods sold as a percent of net sales.
Selling, general and administrative expenses during the six months ended June
30, 1998 totaled $2.1 million as compared to $2.4 million during the first six
months of 1997. The reduction in selling, general and administrative expense in
1998 as compared to 1997 was primarily the result of the lower corporate
administrative headcount and expense.
Interest income during the first six months of 1998 totaled $138 thousand as
compared to $73 thousand during the same period last year. Interest expense
related to outstanding debt under former credit facilities is classified as
discontinued operations during 1997. Interest expense related to the new credit
facility totaled $8 thousand during the six months ended June 30, 1998.
The provision for income taxes during the first six months of 1998 totaled $920
thousand compared to $1.032 million during the comparable period in 1997. The
effective income tax rate was 36.7% during each of the first six month periods
of 1998 and 1997.
Preferred dividends accrued during the first six months of 1998 totaled $732
thousand as compared to $704 thousand during the first six months of 1997.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company's principal sources of liquidity included cash and
cash equivalents of $.7 million and trade accounts receivable of $3.6 million.
In addition, the Company had $3.8 million available under its revolving credit
facility as of June 30, 1998.
Cash used by operations during the six months ended June 30, 1998 totaled $5.9
million which included income tax payments totaling $7.2 million made during the
first quarter of 1998 attributable to the tax gain from the sale of the Thread
division in 1997.
On June 23, 1998, the Company entered into a new $14 million revolving credit
agreement (the "Credit Agreement") with Fleet Bank, N.A. ("Fleet"). The Credit
Agreement has a term of five years and amounts available under the agreement are
reduced in $1 million increments at the end of each six month period, with the
first such reduction occurring December 31, 1998. Advances bear interest equal
to, at the Company's option, (1) the rate at which deposits in U.S. dollars are
offered by the principal office of Fleet in London, England to prime banks in
the London interbank market plus 1.5% or (2) Fleet's prime rate. A performance
price grid provides that interest rates will step down upon the Company's
achievement of specified ratios of funded debt to earnings before interest,
income taxes, depreciation and amortization.
<PAGE> 11
The Credit Agreement is guaranteed by all direct and indirect subsidiaries of
the Company and is secured by a first priority lien or security interest in
substantially all of the assets of the Company. The Credit Agreement contains
representations and warranties, covenants and events of default customary for
credit agreements of this nature. Such customary covenants include restrictions
on the ability to borrow more debt, acquire other companies, make preferred
stock payments and use of proceeds from the sale of assets. In addition to the
semi-annual reduction in availability, additional payments may be required based
on the Company's proceeds from asset sales and "excess cash flow" as defined in
the Credit Agreement.
Under the terms of the Company's charter, dividends are payable upon the
Preferred Stock when, as and if declared by the Board of Directors out of
legally available funds. In addition, the Preferred Stock is required to be
redeemed by the Company in annual installments of $4.2 million beginning March
15, 1995 through March 15, 1999, subject among other things to the approval of
the Company's senior lenders, if any and the extent of legally available funds
as determined by the Board of Directors. Prior to March 27, 1997, the Company
did not make any payments on account of the Preferred Stock (either dividend or
redemption) as the Company's lenders declined to approve such payments. However,
as of that date, the Company discharged its credit facility. Consequently, the
Company was in default of its obligations to redeem the Preferred Stock to the
extent of its legally available funds.
On June 23, 1998 the Company paid $12.5 million to holders of its Series B
Preferred stock of record as of June 22, 1998. $10.1 million of this amount
represented the original redemption amount and $2.4 million represented
accumulated and unpaid dividends. The payment was previously authorized by the
Company's Board of Directors at its annual meeting on May 14, 1998, which
authorization was contingent upon obtaining the necessary bank financing and
receipt of an opinion by its investment banker that the payment could be made
from legally available funds. On June 23, 1998 both such conditions were met and
the payment was made.
As of June 30, 1998, the Preferred Stock payment arrearages aggregated $6.7
million including accrued but unpaid preferred dividends of $2.5 million.
Accrued but unpaid dividends are added to the redemption value of the Preferred
Stock and the total continues to accrue interest at a compound rate of 6% per
annum.
The Company is engaged in discussions with Noel Group, Inc. ("Noel"), with a
view to satisfying the balance of its obligations to the holders of the
Preferred Stock in accordance with the terms of its charter and to the extent
consistent with the Company's resources. Discussions have dealt with the amount
and timing of payments and possible modifications of the Preferred Stock terms
and conditions. Any such modifications would require the agreement of the
Company and the holders of the Preferred Stock.
The Company intends to fulfill its obligation to the holders of the Preferred
Stock as required by the Company's charter to the extent the Company has cash
resources in excess of those required to operate its business. As the Company
believes that it does not currently have such excess resources, its ability to
make payments on account of the Preferred Stock in the future will depend on the
Company's future cash flow, the timing of the settlement of the liabilities
recorded in the financial statements of the Company, the outcome of the
negotiations with Noel described above, the ability of the Company to obtain
additional financing and compliance with the Company's new Credit Facility which
presently permits only specified payment amounts including 25% of "excess cash
flow", as defined in the agreement. In addition, as the Company has agreed to
notify the Pension Benefit Guaranty Corporation ("PBGC") prior to making any
redemption payments; the Company's decision to make any such payments will
depend on the successful
<PAGE> 12
resolution of any issues which may arise with the PBGC relating to the Company's
unfunded liability to its defined benefit plan. The Company is also exploring
strategic alternatives to such financing.
On June 30, 1998 the Company acquired the business and net assets of Westwater
Enterprises, LP for $3.1 million in cash plus the assumption of $.5 million of
bank debt. In connection with this transaction, additional payments of up to
$2.0 million may become payable contingent upon the attainment of specified
earnings levels over the next three years.
YEAR 2000 ISSUES
Management is currently in the process of working with its software vendors to
obtain year 2000 compliant systems. Based on information currently available,
management does not anticipate that the Company will incur significant operating
expenses or be required to invest heavily in computer system improvements to be
year 2000 compliant, however, the Company is still analyzing its systems and
requirements. To the extent the Company's systems are not fully year 2000
compliant, there can be no assurance that potential systems interruptions or the
cost necessary to update software would not have a material adverse effect on
the Company's business, financial condition, results of operations and business
prospects. The Company does not currently have complete information concerning
the year 2000 compliance status of its suppliers and customers. In the event
that any of the Company's significant suppliers or customers do not successfully
and timely achieve year 2000 compliance, the Company's business or operations
could be adversely affected.
NEW YORK STOCK EXCHANGE LISTING
As of December 31, 1997 and June 30, 1998, the Company failed to meet certain of
the New York Stock Exchange (the "Exchange") continued listing requirements. The
Exchange and the Company have had discussions concerning the Company's
circumstances and the Company has submitted to the Exchange its plans to bring
itself into compliance. Although the Exchange has not informed the Company that
it will be delisted, there can be no assurance that the Company's plans to bring
itself into compliance with the Exchange's listing requirements will succeed.
This Quarterly Report on Form 10-Q (the "Quarterly Report") contains statements
which constitute forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Those
statements appear in a number of places in this Quarterly Report and include
statements regarding the intent, belief or current expectations of the Company,
its Directors or its Officers with respect to, among other things: (i) the
Company's financing plans; (ii) trends affecting the Company's financial
condition or results of operations; (iii) the Company's growth strategy and
operating strategy;(iv) customer concentration and the increasing consolidation
of the Company's customer base (v) the declaration and payment of dividends and
(vi) the Company's plans to bring itself into compliance with the Exchange's
listing requirements. Shareholders are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risk and
uncertainties, and that actual results may differ materially from those
projected in the forward-looking statements as a result of various factors.
<PAGE> 13
IMPACT OF INFLATION
The Company's results are affected by the impact of inflation on operating
costs. Historically, the Company has used selling price adjustments, cost
containment programs and improved operating efficiencies to offset the otherwise
negative impact of inflation on its operations.
PART II - OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
a) None
b) REDEEMABLE SERIES B PREFERRED STOCK
Dividends totaling $1,316,018 in 1995, $1,361,230 in 1996
$1,440,957 in 1997 and $751,225 in 1998 were scheduled to be
paid. No such payments were made until June 23, 1998 at which
time a payment of $2,383,396 was made by redemption of 10.1
million shares of Preferred Stock. The balance of unpaid
dividends continue to accrue at a compounded rate of 6% per
annum. Additionally, the Company has not given effect to
certain previously scheduled redemption payments. See Note 7
to the unaudited consolidated financial statements for a
detailed discussion of the Preferred Stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of Carlyle Industries, Inc. was held
on May 14, 1998 for the following purposes:
1) To elect three directors to serve until the next Annual
Meeting of Stockholders and until their successors are
elected.
2) To ratify the selection of Arthur Andersen LLP as the
independent auditors of the Company for the fiscal year ending
December 31, 1998.
3) To transact such other business as may properly come before
the Meeting or any adjournments thereof.
The holders of the Company's Common Stock and Series B Preferred
Stock voted as a single class. The number of votes cast for,
against or withheld, as well as the number of abstentions is set
forth below:
Shares eligible to Vote: 7,382,782
<TABLE>
<CAPTION>
Proposal No 1 Proposal No 2
- -------------------------------------------------------------------------------------------------------
For Against Abstain For Against Abstain
- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
5,825,070 203,967 4,294 6,015,643 14,031 3,657
78.90% 2.76% 0.06% 81.48% .19% 0.05%
</TABLE>
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
EXHIBIT
NUMBER EXHIBIT
10.34 $14,000,000 Credit Agreeement dated June 23,
1998 among Carlyle Industries, Inc. and Fleet
Bank, N.A.
(b) REPORTS ON FORM 8-K.
During the second quarter of 1998, the Company did not file a Current
Report on Form 8-K.
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARLYLE INDUSTRIES, INC.
(Registrant)
/S/ Robert A. Levinson
Robert A. Levinson, Chairman, President and Chief Executive Officer
/S/ Edward F. Cooke
Edward F. Cooke, Vice President, Secretary and Chief Financial Officer
Date: August 10 , 1998
<PAGE> 16
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER EXHIBIT
10.34 $14,000,000 Credit Agreeement dated June 23,
1998 among Carlyle Industries, Inc. and Fleet
Bank, N.A.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.34
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of June 23, 1998 among CARLYLE
INDUSTRIES, INC., a Delaware corporation (together with its successors and
assigns, the "Borrower"), the banks, financial institutions and other
institutional lenders listed on the signature pages hereof as the Initial
Lenders (the "Initial Lenders") and Fleet Bank, N.A., (together with its
successors and assigns, "Fleet"), as agent (together with any successor
appointed pursuant to Article VII, the "Agent") for the Lender Parties (as
hereinafter defined).
PRELIMINARY STATEMENTS:
The Borrower has requested that the Lender Parties lend to the
Borrower up to $14,000,000 in order to finance the acquisition of substantially
all of the assets of Westwater Enterprises, L.P., to use up to $10,000,000
toward the redemption of $12,500,000 of Preferred Stock of the Borrower, to pay
transaction fees and expenses in connection with the transactions contemplated
hereby and to provide for the short term working capital requirements of the
Borrower. The Lender Parties have indicated their willingness to agree to lend
such amounts on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Advance" means Revolving Credit Advance or a Letter of Credit
Advance.
"Acquisition" means the acquisition by the Borrower of
substantially all of the assets of Westwater.
"Acquisition Documents" means all documents executed and
delivered in connection with the Acquisition, including without
limitation the Asset Purchase Agreement, to be executed on a date not
later than July 31, 1998 between the Borrower or Westwater Inc. and
Westwater in form and substance satisfactory to the Agent.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or
<PAGE> 2
officer of such Person. For purposes of this definition, the term
"control" (including the terms "controlling", "controlled by" and
"under common control with") of a Person means the possession, direct
or indirect, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership
of Voting Stock, by contract or otherwise.
"Agent" has the meaning specified in the recital of parties to
this Agreement.
"Agent's Account" means the account of the Agent maintained by
the Agent at Fleet and designated by the Agent in a written notice to
the Lender Parties and the Borrower.
"Annualized Factor" means the fraction, the numerator of which
is 12 and the denominator of which is the number of months in the
applicable Rolling Period.
"Applicable Lending Office" means, with respect to each Lender
Party, such Lender Party's Domestic Lending Office in the case of a
Base Rate Advance and such Lender Party's Eurodollar Lending Office in
the case of a Eurodollar Rate Advance.
"Applicable Margin" means a percentage per annum determined as
set forth below:
<TABLE>
<CAPTION>
WHEN TOTAL FUNDED EURODOLLAR RATE BASE RATE REVOLVING
DEBT/EBITDA IS REVOLVING CREDIT CREDIT ADVANCES
ADVANCES
<S> <C> <C>
Greater than 2.00:1 2.00 1.25
Equal to or less than 2.00:1 1.50 0.00
but greater than 1.50:1
1.00 0.00
Equal to or less than 1.50:1
</TABLE>
"Appropriate Lender" means, at any time, with respect to (a)
the Revolving Credit Facility, a Lender that has a Commitment with
respect to the Revolving Credit Facility at such time and (b) the
Letter of Credit Facility, the Issuing Bank.
"Assigned Agreements" means all Assigned Agreements referred
to in Section 1(e) of the Security Agreement.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender Party and an Eligible Assignee, and accepted
by the Agent, in accordance with Section 8.07 and in substantially the
form of Exhibit C hereto.
"Available Amount" of any Letter of Credit means, at any time,
the maximum
-2-
<PAGE> 3
amount available to be drawn under such Letter of Credit at such time
(assuming compliance at such time with all conditions of drawing).
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be
equal to the higher of:
(a) the rate of interest announced publicly by Fleet
in New York, New York, from time to time, as its prime rate
(and such term shall not be construed to be its best or most
favorable rate); and
(b) 1/2 of one percent per annum above the Federal
Funds Rate.
"Base Rate Advance" means an Advance that bears interest as
provided in Section 2.07(a)(i)(x).
"Blumenthal" means Blumenthal/Lansing Company, a Delaware
corporation and a wholly-owned Subsidiary of the Borrower.
"Borrower" has the meaning specified in the recital of parties
to this Agreement.
"Borrower's Account" means the account of the Borrower
maintained by the Borrower with Fleet at its office at 1185 Avenue of
the Americas, New York, New York 10036, Account No. ___________, or
such other account as the Borrower and the Agent may from time to time
designate as the "Borrower's Account".
"Borrowing" means a Revolving Credit Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the
applicable Business Day relates to any Eurodollar Rate Advances, on
which dealings are carried on in the London interbank market.
"Capital Expenditures" means, for any Person for any period,
the sum of, without duplication, (a) all expenditures made, directly or
indirectly, by such Person or any of its Subsidiaries during such
period for equipment (including computer hardware and software), fixed
assets (including fixtures), real property or improvements, or for
replacements or substitutions therefor or additions thereto, that have
been or should be, in accordance with GAAP, reflected as additions to
property, plant or equipment on a Consolidated balance sheet of such
Person plus (b) the aggregate principal amount of all Debt (including
Obligations under Capitalized Leases) assumed or incurred in connection
with any such expenditures.
"Capitalized Leases" means all leases that have been or should
be, in accordance with GAAP, recorded as capitalized leases.
"Cash Equivalents" means any of the following, to the extent
owned by the Borrower or any Subsidiary free and clear of all Liens
other than Liens created under the
-3-
<PAGE> 4
Collateral Documents and having a maturity of not greater than one (1)
year from the date of acquisition thereof: (a) readily marketable
direct obligations of the Government of the United States or any agency
or instrumentality thereof or obligations unconditionally guaranteed by
the full faith and credit of the Government of the United States, (b)
insured certificates of deposit of or time deposits with any commercial
bank that is a Lender Party or a member of the Federal Reserve System,
issues (or the parent of which issues) commercial paper rated as
described in clause (c), is organized under the laws of the United
States or any State thereof and has combined capital and surplus of at
least $250,000,000, (c) commercial paper in an aggregate amount of no
more than $250,000 per issuer outstanding at any time, issued by any
corporation organized under the laws of any State of the United States
and rated at least "Prime-1" (or the then equivalent grade) by Moody's
or "A-1" (or the then equivalent grade) by S&P, or (d) Investments in
money market or mutual funds that invest in Cash Equivalents of the
types described in clauses (a), (b) and (c) above.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time,
42 U.S.C. Section 9601 et seq.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System maintained by the U.S.
Environmental Protection Agency.
"Closing Date" means the Business Day on or after the
Effective Date when all of the conditions precedent set forth in
Section 3.01 are satisfied in full or waived in accordance with the
terms of this Agreement.
"CM" means Carlyle Manufacturing Company, Inc., a Connecticut
corporation and a wholly-owned Subsidiary of the Borrower.
"Collateral" means all "Collateral", "Mortgaged Property" and
all "Intellectual Property Collateral" referred to in the Collateral
Documents, all cash and Cash Equivalents delivered as collateral
pursuant to Section 5.02(f) and all other property (whether real or
personal) that is or is intended to be subject to any Lien in favor of
the Agent for the benefit of the Secured Parties.
"Collateral Documents" means the Security Agreement, the
Intellectual Property Security Agreement, the Guaranty, the Blocked
Account Letter[s], the Lock-Box Agreement[s], the Mortgage and any
other agreement that creates or purports to create a Lien in favor of
the Agent for the benefit of the Secured Parties.
"Commitment" means a Revolving Credit Commitment or a Letter
of Credit Commitment.
"Confidential Information" means information that the Borrower
or any of its Subsidiaries furnishes to the Agent or any Lender Party
on a confidential basis, but does not include any such information that
is or becomes generally available to the public other than as a result
of disclosure by the Agent or such Lender or that is or becomes
-4-
<PAGE> 5
available to the Agent or such Lender from a source other than the
Borrower or that is otherwise permitted to be disclosed pursuant to the
terms of the Loan Documents.
"Connecticut Real Property" means the properties owned by CM
located at 30 Echo Lake Road, Watertown, Connecticut and at 630
Riverside Drive, Grosvenordale, Connecticut 06246.
"Consolidated" refers, with respect to any Person, to the
consolidation of accounts of such Person and its Subsidiaries in
accordance with GAAP.
"Contingent Payments" has the meaning specified in the
Acquisition Documents.
"Conversion", "Convert" and "Converted" each refer to a
conversion of Advances of one Type into Advances of the other Type
pursuant to Section 2.09 or 2.10.
"Current Assets" of any Person means all assets of such Person
that would, in accordance with GAAP, be classified as current assets of
a company conducting a business the same as or similar to that of such
Person, after deducting adequate reserves in each case in which a
reserve is proper in accordance with GAAP.
"Current Liabilities" of any Person means (a) all Debt of such
Person that by its terms is payable on demand or matures within one
year after the date of determination excluding Funded Debt and (b) all
other items (including, without limitation, taxes accrued as estimated)
that in accordance with GAAP would be classified as current liabilities
of such Person.
"Current Ratio" means, with respect to any Person for any
Rolling Period, the ratio of Current Assets to Current Liabilities.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all Obligations of
such Person for the deferred purchase price of property or services
(other than Contingent Payments until such time as such payments are
reflected as debt on the financial statements of the Borrower and trade
payables not overdue by more than 120 days incurred in the ordinary
course of such Person's business), (c) all Obligations of such Person
evidenced by notes, bonds, debentures or other similar instruments, (d)
all Obligations of such Person created or arising under any conditional
sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all Obligations
of such Person as lessee under Capitalized Leases, (f) all Obligations,
contingent or otherwise, of such Person under acceptance, letter of
credit or similar facilities, (g) all Obligations of such Person to
purchase, redeem, retire, defease or otherwise make any payment in
respect of any capital stock of or other ownership or profit interest
in such Person or any other Person or any warrants, rights or options
to acquire such capital stock (other than Obligations of such Person in
respect of management profit sharing plans), valued, in the case of
Redeemable Preferred Stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and
-5-
<PAGE> 6
unpaid dividends, other than Obligations of the Borrower in respect of
its Preferred Stock, including all current and future redemption and
dividend arrearages, (h) all Debt of others referred to in clauses (a)
through (g) above or clause (i) below guaranteed directly or indirectly
in any manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (1) to pay or purchase
such Debt or to advance or supply funds for the payment or purchase of
such Debt, (2) to purchase, sell or lease (as lessee or lessor)
property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Debt or to assure the
holder of such Debt against loss, (3) to supply funds to or in any
other manner invest in the debtor (including any agreement to pay for
property or services irrespective of whether such property is received
or such services are rendered) or (4) otherwise to assure a creditor
against loss, and (i) all Debt referred to in clauses (a) through (h)
above of another Person secured by (or for which the holder of such
Debt has an existing right, contingent or otherwise, to be secured by)
any Lien on property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Debt.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Domestic Lending Office" means, with respect to any Lender
Party, the office of such Lender Party specified as its "Domestic
Lending Office" opposite its name on Schedule I hereto or in the
Assignment and Acceptance pursuant to which it became a Lender Party,
as the case may be, or such other office of such Lender Party as such
Lender Party may from time to time specify to the Borrower and the
Agent.
"EBITDA" means, with respect to any Person for any period, the
sum, determined on a Consolidated basis, of (a) net income (or net
loss), excluding the cumulative effect, if any, of required changes in
GAAP, (b) Interest Expense, (c) income tax expense, (d) depreciation
expense, (e) amortization expense, (f) noncash charges resulting from
the accretion in value of stock options granted to management of the
Borrower, and (g) extraordinary losses deducted in calculating net
income less extraordinary gains added in calculating net income (in
each case including, without limitation, results of discontinued
operations) in each case of such Person and its Subsidiaries,
determined in accordance with GAAP for such period.
"Effective Date" has the meaning specified in Section 8.06.
"Eligible Assignee" means with respect to any Facility: (i) a
Lender; (ii) an Affiliate of a Lender; (iii) a commercial bank
organized under the laws of the United States, or any State thereof,
and having a combined capital and surplus of at least $50,000,000; (iv)
a savings and loan association or savings bank organized under the laws
of the United States, or any State thereof, and having a combined
capital and surplus of at least $50,000,000; (v) a commercial bank
organized under the laws of any other country that is a member of the
OECD or has concluded special lending arrangements with the
International Monetary Fund associated with its General Arrangements to
Borrow or a political subdivision of any such country, and having a
combined capital
-6-
<PAGE> 7
and surplus of at least $50,000,000, so long as such bank is acting
through a branch or agency located in the United States; (vi) a finance
company, insurance company or other financial institution or fund
(whether a corporation, partnership, trust or other entity) that is
engaged in making, purchasing or otherwise investing in commercial
loans or term debt securities in the ordinary course of its business
and having a combined capital and surplus of at least $50,000,000; and
(vii) any other Person approved by the Agent and the Borrower, such
approval not to be unreasonably withheld or delayed; provided, however,
that neither the Borrower nor any Affiliate of the Borrower shall
qualify as an Eligible Assignee under this definition.
"Environmental Action" means with respect to any Environmental
Law, any Environmental Permit or Hazardous Material (a) any action,
suit, written demand, written claim, written notice of non-compliance
or violation, written notice of liability or potential liability,
investigation, proceeding, consent order or consent agreement
including, without limitation, (i) by any Governmental Authority for
enforcement, cleanup, removal, response, remedial or other actions or
damages and (ii) by any Governmental Authority or third party for
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief and (b) any investigation, monitoring, removal or
remediation activities undertaken by or on behalf of the Borrower or
any Subsidiary whether or not such activities are carried out
voluntarily.
"Environmental Costs and Liabilities" means any and all
damages, liabilities, obligations, charges, fines, penalties,
judgments, actions, claims, costs and expenses (including, without
limitation, fees, disbursements and expenses of legal counsel, experts,
engineers and consultants and the costs of investigation, feasibility
studies and removal and remedial actions) arising from or under any
Environmental Law or relating to any Environmental Action.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, writ, judgment,
injunction, decree or judicial or written agency interpretation, policy
or guidance that has the force or effect of law relating to pollution
or protection of the environment, public or employee health or safety
or natural resources, including, without limitation, those relating to
the use, handling, transportation, treatment, storage, disposal,
release or discharge of Hazardous Materials, including, without
limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33
U.S.C. Section 1251 et seq.; the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401
et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 3803 et seq.;
the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; the
Emergency Planning and the Community Right-to-Know Act of 1986, 42
U.S.C. Section 11001 et seq., the Hazardous Material Transportation
Act, 49 U.S.C. Section 1801 et seq. and the Occupational Safety and
Health Act, 29 U.S.C. Section 651 et seq.; the Connecticut Transfer
Act., Con. Gen. Stat. Section 22a-134 et seq., as amended by Pub. Act
95-183; and any state and local or foreign counterparts or equivalents,
in each case as amended or superseded by official legislation,
regulation or interpretation from time to time.
"Environmental Permit" means any permit, approval,
identification number,
-7-
<PAGE> 8
license or other authorization required under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means any entity (whether or not
incorporated), other than the Borrower that, together with the Borrower
is or was a member of (i) a controlled group of corporations within the
meaning of Section 414(b) of the Internal Revenue Code; (ii) a group of
trades or businesses under common control within the meaning of Section
414(c) of the Internal Revenue Code; or (iii) an affiliated service
group within the meaning of Section 414(m) of the Internal Revenue Code
determined as if the Acquisition were completed.
"ERISA Event" means (a) (i) the occurrence of a reportable
event, within the meaning of Section 4043(c) of ERISA, with respect to
any Plan unless the 30-day notice requirement with respect to such
event has been waived by the PBGC; or (ii) the requirements of
subsection (1) of Section 4043(b) of ERISA (without regard to
subsection (2) of such Section) are met with respect to a contributing
sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an
event described in paragraph (9), (10), (11), (12) or (13) of Section
4043(c) of ERISA is reasonably expected to occur with respect to such
Plan within the following 30 days; (b) failure by the Borrower or an
ERISA Affiliate to meet minimum funding requirements or to make a
payment required under Section 302(e) of ERISA with respect to a Plan;
(c) the provision by the administrator of any Plan of a notice of
intent to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA
(including any such notice with respect to a plan amendment referred to
in Section 4041(e) of ERISA); (d) the cessation of operations at a
facility of the Borrower or any ERISA Affiliate in the circumstances
described in Section 4062(e) of ERISA; (e) the complete or partial
withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer
Plan or a multiple employer plan (as described in Sections 4063 and
4064 of ERISA); (f) the conditions for imposition of a lien under
Section 302(f) or Section 4068 of ERISA shall have been met with
respect to any Plan; (g) the adoption of an amendment to a Plan
requiring the provision of security to such Plan, pursuant to Section
307 of ERISA or Section 401(a)(29) of the Internal Revenue Code; or (h)
the institution by the PBGC of proceedings to terminate a Plan pursuant
to Section 4042 of ERISA, or the occurrence of any event or condition
described in Section 4042 of ERISA that could constitute grounds for
the termination of, or the appointment of a trustee to administer, such
Plan.
"Eurocurrency Liabilities" has the meaning specified 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
Party, the office of such Lender Party specified as its "Eurodollar
Lending Office" opposite its name on Schedule I hereto or in the
Assignment and Acceptance pursuant to which it became a Lender Party
(or, if no such office is specified, its Domestic Lending Office), or
such other office of such Lender Party as such Lender Party may from
time to time specify to
-8-
<PAGE> 9
the Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period for all
Eurodollar Rate Advances comprising part of the same Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a) the rate per annum at which deposits in U.S. dollars are
offered by the principal office of Fleet in London, England to prime
banks in the London interbank market at 11:00 A.M. (London time), and
if the principal office of Fleet in London, England shall not be able
to furnish such rate in a timely manner, the rate equal to the
arithmetic mean of the offered rates for deposits in U.S. dollars which
appears as of 11:00 A.M. (London time) on the display designated as
page "LIBO" on the Reuters Monitor Money Rates Service or such other
page as may replace the LIBO page on that service for the purpose of
displaying London interbank offered rates of major banks, in each case
two Business Days before the first day of such Interest Period in an
amount substantially equal to the higher of Fleet's Eurodollar Rate
Advance comprising part of such Borrowing to be outstanding during such
Interest Period and $1,000,000 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 Advance" means an Advance that bears interest
as provided in Sections 2.07(a)(i)(y) and 2.07(a)(iii).
"Eurodollar Rate Reserve Percentage" for any Interest Period
for all Eurodollar Rate Advances comprising part of the same Borrowing
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 (or any
successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal
reserve requirement) for a member bank of the Federal Reserve System in
New York City with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other
category of liabilities that includes deposits by reference to which
the interest rate on Eurodollar Rate Advances is determined) having a
term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Excess Cash Flow" means, for any period, the sum of (a)
Consolidated net income (or loss) before Preferred Stock dividends of
the Borrower and its Subsidiaries for such period plus (b) an amount
equal to the aggregate amount of all noncash charges deducted in
arriving at Consolidated net income (or loss) for each such period plus
(c) an amount (whether positive or negative) equal to the change in
Consolidated Current Liabilities of the Borrower and its Subsidiaries
during such period less (d) an amount equal to the aggregate amount of
all noncash credits included in arriving at such Consolidated net
income (or net loss) less (e) an amount (whether positive or negative)
equal to the change in Consolidated Current Assets (excluding cash and
Cash Equivalents) of the Borrower and its Subsidiaries during such
period less (f) an amount equal to the amount of all Capital
Expenditures of the Borrower and its Subsidiaries paid in cash during
such period to the extent permitted by this Agreement less (g) an
amount
-9-
<PAGE> 10
equal to the aggregate amount of all regularly scheduled principal
payments of Funded Debt made during such period, together with any
optional prepayments of Revolving Credit Advances made during such
period in accordance with Section 2.06(a), less (h) the amount of any
gain from the sale, lease, transfer or other disposition of any asset
(other than the sale of Inventory in the ordinary course of business
and consistent with past practices) included in Consolidated net income
(or loss) of the Borrower for such period to the extent the net
proceeds therefrom are utilized to prepay Advances pursuant to Section
2.06(b)(ii) less (i) so long as no Default or Event of Default is
continuing on the date such funds are paid, the Contingent Payments to
the extent such payments are not taken into account in clauses (d)
through (h), above; less (j) so long as no Default or Event of Default
is continuing on the date such funds are paid, Thread Escrow Funds
received by the Borrower; less (k) to the extent that such payments are
not taken into account in clauses (d) through (h) above, and to the
extent that the reserve (existing on the date of the Initial Extension
of Credit of $1,800,000) for Environmental Costs and Liabilities is
reduced by any cash payment, the amount of such cash payment.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended (or any similar successor federal statute), and the rules and
regulations thereunder, as the same are in effect from time to time.
"Existing Debt" means the Debt of the Borrower and its
Subsidiaries outstanding immediately before the Effective Date or with
respect to the Acquisition immediately preceding the release of funds
by the Agent as described on Schedule 4.01(rr).
"Extraordinary Receipt" means any cash received by or paid to
or for the account of any Person not in the ordinary course of
business, including, without limitation, pension plan reversions,
proceeds of insurance (other than proceeds of business interruption
insurance to the extent such proceeds constitute compensation for lost
earnings and other than insurance proceeds received by any Person for
the loss of Inventory and other than proceeds of life insurance
covering the life of Ivan Cohen which are used to pay the Contingent
Payments, provided no Default or Event of Default exists at the time of
receipt of such proceeds and payment of such Contingent Payments),
condemnation awards (and payments in lieu thereof) and indemnity
payments; provided, however, that an Extraordinary Receipt shall not
include cash receipts received from proceeds of insurance to the extent
that such proceeds in respect of loss or damage to equipment, fixed
assets or real property are applied (or in respect of which
expenditures were previously incurred) to replace or repair the
equipment, fixed assets or real property in respect of which such
proceeds were received in accordance with the terms of the Loan
Documents, so long as (i) no Default or Event of Default exists at the
time of receipt of such proceeds (other than a Default or Event of
Default consisting of a Material Adverse Change existing solely as a
direct result of such loss or damage) and such proceeds do not exceed
$250,000, (ii) such application is made within twelve months after the
occurrence of such damage or loss and (iii) the Borrower has delivered
a certificate to the Agent on behalf of the Lender Parties within ten
(10) days of receipt of such proceeds certifying compliance with the
foregoing clause (i) and that the foregoing clause (ii) has been or
will be complied with; and provided further, that an Extraordinary
Receipt shall not include cash payments received by the Borrower as
Thread Escrow Funds, provided that
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no Default or Event of Default shall exist at the time of receipt of
such funds.
"Facility" means Revolving Credit Facility or the Letter of
Credit Facility.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period (i) to
the rate published by the Telerate service on page five of its daily
report as the "New York Offered Rate" as of 10:00 A.M. (New York City
time) for such day (or, if such day is not a Business Day, for the
immediately preceding Business Day) or (ii) if the Telerate service
shall cease to publish or otherwise shall not publish such rate for any
day that is a Business Day, 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 that is a Business Day, the average of
the quotations for such day for such transactions received by the Agent
from three Federal funds brokers of recognized standing selected by it.
"Final Maturity Date" means the earlier of (i) June 23, 2003
and (ii) the date of termination in whole of the Revolving Credit
Commitments and the Letter of Credit Commitments pursuant to Section
2.05 or 6.01.
"Fiscal Year" means a fiscal year of the Borrower or any
Subsidiary ending on December 31 in any calendar year.
"Fixed Charge Coverage Ratio" means, with respect to any
Person for any Rolling Period, the ratio of (a) EBITDA for such Person
and its Subsidiaries for the most recent Rolling Period less the sum of
(i) Capital Expenditures of such Person and its Subsidiaries that have
been paid in cash during such Rolling Period and (ii) income taxes of
such Person and its Subsidiaries paid in cash during such Rolling
Period, except for income taxes paid in March 1998 in connection with
the sale of the Borrower's thread division, to (b) the sum of (i)
Interest Expense of such Person and its Subsidiaries that has been paid
in cash during such Rolling Period and (ii) regularly scheduled
principal payments of Funded Debt of such Person and its Subsidiaries
made during such Rolling Period.
"Fleet" has the meaning specified in the recital of parties to
this Agreement.
"Funded Debt" of any Person means Debt of such Person that by
its terms matures more than one year after the date of creation or
matures within one year from such date but is renewable or extendible,
at the option of such Person, to a date more than one year after such
date or arises under a revolving credit or similar agreement that
obligates the lender or lenders to extend credit during a period of
more than one year after such date, including, without limitation, all
amounts of Funded Debt of such Person required to be paid or prepaid
within one year after the date of determination.
"GAAP" has the meaning specified in Section 1.03.
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<PAGE> 12
"General Partner" means Wychwood Trading Company, a Delaware
corporation and the general partner of Westwater.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranties" has the meaning specified in Section 3.01(g)(x).
"Guarantor" means Blumenthal, CM, Westwater Inc. and each
other party to a Guaranty.
"Hazardous Materials" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, dielectric fluid
containing levels of polychlorinated biphenyls, pesticides, lead-based
paints and radon gas, as regulated under any Environmental Law; and (b)
any chemicals, materials or substances defined as or included in the
definition of "Hazardous Substances" in Section 101(14) of CERCLA.
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts, interest rate
insurance agreements and other similar agreements.
"Indemnified Party" has the meaning specified in Section
8.04(b).
"Initial Extension of Credit" means the initial Borrowing
hereunder.
"Initial Lenders" has the meaning specified in the recital of
parties to this Agreement.
"Insufficiency" means, with respect to any Plan, the amount,
if any, of its unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA.
"Intellectual Property Collateral" means all Intellectual
Property Collateral referred to in Section 1 of the Intellectual
Property Security Agreement.
"Intellectual Property Security Agreement" has the meaning
specified in Section 3.01(g)(xvii).
"Interest Coverage Ratio" means, with respect to any Person
for any Rolling Period, the ratio of (a) Consolidated EBITDA of such
Person and its Subsidiaries for the most recent twelve month period to
(b) Interest Expense of such Person and its Subsidiaries during such
Rolling Period.
"Interest Expense" means, with respect to any Person for any
period, the amount by which (i) interest expense (including the
interest component on obligations under Capitalized Leases but
excluding any amortization of deferred financing costs), whether
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paid or accrued, on all Debt of such Person and its Subsidiaries for
such period, including, without limitation and without duplication, (a)
interest expense in respect of Debt resulting from Advances and (b)
commissions, discounts and other fees and charges payable in connection
with letters of credit (including, without limitation, any Letters of
Credit) exceeds (ii) interest income, whether paid or accrued, of such
Person for such period.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, the period commencing on the
date of such Eurodollar Rate Advance or the date of the Conversion of
any Base Rate Advance into such Eurodollar Rate Advance, and ending on
the last day of the period selected by the Borrower pursuant to the
provisions below and, thereafter, each subsequent period commencing on
the last day of the immediately preceding Interest Period and ending on
the last day of the period selected by the Borrower pursuant to the
provisions below. The duration of each such Interest Period shall be
one, two, three or six months, as the Borrower may, upon notice
received by the Agent not later than 11:00 A.M. (New York City time) on
the third Business Day prior to the first day of such Interest Period,
select; provided, however, that:
(a) the Borrower may not select any Interest Period
with respect to any Eurodollar Rate Advance that ends after
the Final Maturity Date;
(b) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Borrowing
shall be of the same duration;
(c) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, provided, however, that, if
such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the immediately
preceding Business Day; and
(d) whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there
is no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Inventory" means all Inventory referred to in Section 1(b) of
the Security Agreement.
"Investment" in any Person means any loan or advance to such
Person, any purchase or other acquisition of any capital stock or other
ownership or profit interest, warrants, rights, options, obligations or
other securities of such Person, any capital
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<PAGE> 14
contribution to such Person or any other investment in such Person,
including, without limitation, any arrangement pursuant to which the
investor incurs Debt of the types referred to in clause (i) or (j) of
the definition of "Debt" in respect of such Person.
"Investment Agreements" has the meaning specified in Section
3.01(g)(xx)(G).
"Issuing Bank" means Fleet and each Eligible Assignee to which
a Letter of Credit Commitment has been assigned pursuant to Section
8.07.
"Lender Party" means any Lender.
"Lenders" means the Initial Lenders and each Person that shall
become a Lender hereunder pursuant to Section 8.07 (but excludes any
participant of any Lender).
"Letter of Credit" has the meaning specified in Section
2.01(b).
"Letter of Credit Advance" means an advance made by the
Issuing Bank.
"Letter of Credit Agreement" has the meaning specified in
Section 2.03(a).
"Letter of Credit Commitment" means the commitment of the
Issuing Bank in an amount, not to exceed the lesser of (a) available
amounts under the Revolving Credit Facility or (b) $500,000 at any time
outstanding.
"Letter of Credit Facility" means, at any time, an amount
equal to the amount of the Issuing Bank's Letter of Credit Commitment
at such time and not to exceed $500,000.
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance
on title to real property.
"Loan Documents" means (i) this Agreement, (ii) the Notes,
(iii) the Collateral Documents, (iv) each Letter of Credit Agreement,
in each case as amended or otherwise modified from time to time and (v)
each other document required to be delivered by the Borrower or any
Subsidiary under any of the documents referred to in (i) through (iv)
of this definition.
"Lock-Box Account" has the meaning specified in Section 7 of
the Security Agreement.
"Lock-Box Agreement" has the meaning specified in Section 7 of
the Security Agreement.
"Management Agreements" has the meaning specified in Section
3.01(g)(xx)(E).
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<PAGE> 15
"Margin Stock" has the meaning specified in Regulation U.
"Material Adverse Change" means any material adverse change in
the assets, business, condition (financial or otherwise), operations,
properties or prospects of the Borrower and its Subsidiaries (on a
Consolidated basis).
"Material Adverse Effect" means a material adverse effect on
(a) the assets, business, condition (financial or otherwise),
operations, properties or prospects of the Borrower and its
Subsidiaries (on a Consolidated basis), (b) the rights and remedies of
the Agent or any Lender Party under any Loan Document or (c) the
ability of the Borrower or any Subsidiary to perform its Obligations
under any Loan Document to which it is or is to be a party.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means the mortgage by Borrower, as Mortgagor to
Agent, as Mortgagee with respect to the Mortgaged Property in form and
substance satisfactory to Agent.
"Mortgaged Property" means all land and improvements thereon
and other real property interests and fixtures owned by the Borrower on
the date of the Initial Extension of Credit at and about 1929 Main
Street, Lansing, Iowa.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA
Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"Net Cash Proceeds" means, with respect to (i) any sale,
lease, transfer or other disposition of any asset or the sale or
issuance of any Debt or capital stock or other ownership or profit
interest, any securities convertible into or exchangeable for capital
stock or other ownership or profit interest or any warrants, rights,
options or other securities to acquire capital stock or other ownership
or profit interest by any Person (but excluding cash received in
respect of the disbursement of the Thread Escrow Funds, so long as no
Default or Event of Default is continuing on the date such payment is
received), or (ii) any Extraordinary Receipt received by or paid to or
for the account of any Person, the aggregate amount of cash received
from time to time (whether as initial consideration or through payment
or disposition of deferred consideration) by or on behalf of such
Person in connection with such transaction after deducting therefrom
only (without duplication) (a) brokerage commissions, underwriting fees
and discounts, legal fees, finder's fees and other similar fees and
commissions, (b) the amount of taxes payable in connection with or as a
result of such transaction and (c) the amount of any Debt secured by a
Lien on such asset that, by the terms of such transaction, is required
to be repaid upon such disposition, in each case to the extent, but
only to the extent, that the amounts so deducted are properly
attributable to such transaction or to the asset that is the subject
thereof and are, in the case of clauses (a) and (c), at the time of
receipt of such cash, actually paid to a Person that is not an
Affiliate of such Person or any Affiliate of
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<PAGE> 16
the Borrower and, in the case of clause (b), on the earlier of the
dates on which the tax return covering such taxes is filed or required
to be filed, actually paid to a Person that is not an Affiliate of such
Person or the Borrower or any Affiliate of the Borrower, provided that
if the amount deducted pursuant to clause (b) above is greater than the
amount actually so paid, the amount of such excess shall constitute
"Net Cash Proceeds."
"Nonratable Assignment" means an assignment by a Lender Party
pursuant to Section 8.07(a) of a portion of its rights and obligations
under this Agreement, other than an assignment of a uniform, and not a
varying, percentage of all of the rights and obligations of such Lender
Party under and in respect of the Revolving Credit Facility.
"Note" means a Revolving Credit Note.
"Notice of Borrowing" has the meaning specified in Section
2.02(a).
"Notice of Issuance" has the meaning specified in Section
2.03(a).
"NPL" means the National Priorities List under CERCLA.
"Obligation" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind, including,
without limitation, any liability of such Person on any claim, whether
or not the right of any creditor to payment in respect of such claim is
reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, disputed, undisputed, legal, equitable, secured or unsecured,
and whether or not such claim is discharged, stayed or otherwise
affected by any proceeding referred to in Section 6.01(f). Without
limiting the generality of the foregoing, the Obligations of the
Borrower under the Loan Documents includes (a) the obligation to pay
principal, interest, charges, expenses, fees, reasonable attorneys'
fees and disbursements, indemnities and other amounts payable by the
Borrower under any Loan Document and (b) the obligation of the Borrower
to reimburse any amount in respect of any of the foregoing that any
Lender Party, in its sole discretion, may elect to pay or advance on
behalf of the Borrower.
"OECD" means the Organization for Economic Cooperation and
Development.
"Open Year" has the meaning specified in Section 4.01(mm).
"Other Taxes" has the meaning specified in Section 2.12(b).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) Liens for taxes, assessments and
governmental charges or levies to the extent not required to be paid
under Section 5.01(b) hereof; (b) Liens imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's Liens
and other similar Liens arising in the ordinary course of business
securing obligations that (i) are not
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<PAGE> 17
overdue for a period of more than 30 days and (ii) either individually
or when aggregated with all other Permitted Liens outstanding on any
date of determination, do not materially adversely affect the use or
value of the property to which they relate or are not required to be
paid under Section 5.01(b) hereof; (c) pledges or deposits to secure
obligations under workers' compensation laws or similar legislation or
to secure the performance of bids, tenders, government contracts (other
than contracts for the payment of money), leases, surety and appeal
bonds, public or statutory obligations and other obligations of like
nature arising in the ordinary course of business (exclusive of
obligations in respect of the payment for borrowed money); and (d)
easements, rights of way and other encumbrances on title to real
property that do not render title to the property encumbered thereby
unmarketable or materially adversely affect the use of such property
for its present purposes.
"Person" means an individual, partnership, limited
partnership, corporation (including a business trust), limited
liability company, joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any
political subdivision or agency thereof.
"Plan" means any "employee benefit plan" as defined in Section
3(3) of ERISA and any other plan, policy, program, practice, agreement,
understanding or arrangement (whether written or oral), other than a
Multiemployer Plan, providing compensation or other benefits to any
current or former director, officer, employee or consultant (or to any
dependent or beneficiary thereof), of the Borrower or any ERISA
Affiliate, which are now, or were within the past 6 years, maintained
by the Borrower or any ERISA Affiliate, or under which the Borrower or
any ERISA Affiliate has any obligation or liability, whether actual or
contingent, including, without limitation, all incentive, bonus,
deferred compensation, vacation, holiday, cafeteria, medical,
disability, stock purchase, stock option, stock appreciation, phantom
stock, restricted stock or other stock-based compensation plans,
policies, programs, practices or arrangements.
"Plan Asset Regulations" has the meaning specified in Section
2.14.
"Plant and Equipment" means all Plant and Equipment referred
to in Section 1(a) of the Security Agreement.
"Pledged Shares" means all Pledged Shares referred to in the
Preliminary Statement to the Security Agreement.
"Preferred Stock" means, with respect to any corporation,
capital stock issued by such corporation that is entitled to a
preference or priority over any other capital stock issued by such
corporation upon any distribution of such corporation's assets, whether
by dividend or upon liquidation.
"Pro Rata Share" of any amount means, with respect to any
Revolving Credit Lender at any time, the product of such amount times a
fraction the numerator of which is the amount of such Lender's
Revolving Credit Commitment at such time and the denominator of which
is the Revolving Credit Facility at such time.
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<PAGE> 18
"PTCE 90-1" has the meaning specified in Section 2.14.
"PTCE 91-38" has the meaning specified in Section 2.14.
"PTCE 95-60" has the meaning specified in Section 2.14.
"PTCE 96-23" has the meaning specified in Section 2.14.
"QPAM" has the meaning specified in Section 2.14.
"QPAM Exemption" has the meaning specified in Section 2.14.
"RCRA" means the Resource Conservation and Recovery Act, as
the same may be amended from time to time, 42 U.S.C. Section 6901 et
seq.
"Receivables" means all Receivables referred to in Section
1(c) of the Security Agreement.
"Redeemable" means, with respect to any capital stock or other
ownership or profit interest, Debt or other right or Obligation, any
such right or Obligation that (a) the issuer has undertaken to redeem
at a fixed or determinable date or dates, whether by operation of a
sinking fund or otherwise, or upon the occurrence of a condition not
solely within the control of the issuer or (b) is redeemable at the
option of the holder.
"Register" has the meaning specified in Section 8.07(e).
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Required Lenders" means at any time Lenders owed or holding
more than 50% of the sum of (a) the aggregate principal amount of the
Advances outstanding at such time and (b) the aggregate Available
amount of all Letters of Credit outstanding at such time and (c) the
aggregate Unused Revolving Credit Commitment at such time.
"Responsible Officer" means any executive officer of the
Borrower.
"Retailer Agreements" has the meaning specified in Section
3.01(g)(xx)(A).
"Revolving Credit Advance" has the meaning specified in
Section 2.01(c).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by the
Revolving Credit Lenders.
"Revolving Credit Commitment" means, with respect to any
Revolving Credit Lender at any time, the amount set forth opposite such
Lender's name on Schedule I hereto under the caption "Revolving Credit
Commitment" or, if a Lender has entered into
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one or more Assignments and Acceptances, the aggregate amount set forth
for such Lender in the Register maintained by the Agent pursuant to
Section 8.07(e) as such Lender's "Revolving Credit Commitment", as such
amount may be reduced at or prior to such time pursuant to Section
2.05.
"Revolving Credit Facility" means, at any time, the aggregate
amount of the Revolving Credit Lenders' Revolving Credit Commitments at
such time.
"Revolving Credit Lender" means any Lender that has a
Revolving Credit Commitment.
"Revolving Credit Note" means a promissory note of the
Borrower payable to the order of any Revolving Credit Lender, in
substantially the form of Exhibit A hereto, evidencing the aggregate
indebtedness of the Borrower to such Lender resulting from the
Revolving Credit Advances made by such Lender.
"Rolling Period" means (i) with respect to any quarter ending
on or prior to December 31, 1998, the period commencing on January 1,
1998 and ending on the last day of such quarter multiplied by the
Annualized Factor and (ii) with respect to any month ending thereafter,
the consecutive four quarter period ending on the last day of such
quarter.
"S&P" means Standard & Poors Ratings Group.
"Secured Obligations" has the meaning specified in the
Security Agreement.
"Secured Parties" means the Agent, the Lender Parties and the
other Persons the Obligations owing to which are or are purported to be
secured by the Collateral under the terms of the Collateral Documents.
"Securities Act" has the meaning assigned to it in Section
4.01(aaa).
"Security Agreement" has the meaning specified in Section
3.01(g)(vii).
"Shareholders' Agreements" has the meaning specified in
Section 3.01(g)(xx)(B).
"Solvent" and "Solvency" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property
of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person,
(b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that
it will, incur debts or liabilities beyond such Person's ability to pay
such debts and liabilities as they mature and (d) such Person is not
engaged in business or a transaction, and is not about to engage in
business or a transaction, for which such Person's property would
constitute an unreasonably small capital. The amount of contingent
liabilities at any time shall be computed as the amount that, in the
light of all the facts and
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circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Source" has the meaning specified in Section 2.14.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such limited liability
company, partnership or joint venture or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries.
"Tax Sharing Agreements" has the meaning specified in Section
3.01(g)(xx)(F).
"Taxes" has the meaning specified in Section 2.12(a).
"Thread Escrow Funds" means the funds held in escrow pursuant
to that certain Escrow Agreement dated March 26, 1997 (the "Thread
Escrow Agreement"), among the Borrower (together with certain
Affiliates of the Borrower which have heretofore been dissolved or
merged with and into the Borrower), HP Belt Acquisition Corporation,
Hicking Pentecost Plc and Bankers Trust Company.
"Total Leverage Ratio" means, with respect to any Person at
any date of determination, the ratio of (a) Funded Debt (other than
contingent obligations of the type described in clause (f) in the
definition of "Debt") of such Person at such date to (b) EBITDA of such
Person and its Subsidiaries for the most recent Rolling Period ending
on such date.
"Type" refers to the distinction between Advances bearing
interest at the Base Rate and Advances bearing interest at the
Eurodollar Rate.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the relevant jurisdiction.
"Unapplied Proceeds" has the meaning specified in Section
2.06(b)(ii).
"Unused Revolving Credit Commitment" means, with respect to
any Revolving Credit Lender at any time, (a) such Lender's Revolving
Credit Commitment at such time minus (b) the sum of the aggregate
principal amount of all Revolving Credit Advances and Letter of Credit
Advances made by such Lender (in its capacity as a Lender) and
outstanding at such time.
"Voting Stock" means capital stock issued by a corporation, or
equivalent
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interests in any other Person, the holders of which are ordinarily, in
the absence of contingencies, entitled to vote for the election of
directors (or persons performing similar functions) of such Person,
even if the right so to vote has been suspended by the happening of
such a contingency.
"Westwater" means Westwater Enterprises, L.P., a Delaware
limited partnership.
"Westwater Inc." means Westwater Industries, Inc., a Delaware
corporation and a wholly-owned Subsidiary of the Borrower.
"Withdrawal Liability" has the meaning specified in Part 1 of
Subtitle E of Title IV of ERISA.
SECTION 1.02. 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".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(f) ("GAAP").
SECTION 1.04. Construction. References to a Section,
subsection, Schedule or Exhibit mean a Section or subsection of or a Schedule or
Exhibit to this Agreement, unless otherwise specified, and the word "including"
means "including, without limitation," whether so stated or not.
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ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
SECTION 2.01. The Advances. (a) The Revolving Credit Advances.
Each Revolving Credit Lender severally agrees, on the terms and conditions
hereinafter set forth, to make advances (each a "Revolving Credit Advance") to
the Borrower from time to time on any Business Day during the period from the
Effective Date until the Final Maturity Date in an amount for each such Advance
not to exceed such Lender's Unused Revolving Credit Commitment at such time
after giving effect to any repayment of Letter of Credit Advances from proceeds
of such Revolving Credit Advances, which Revolving Credit Advances shall, at the
option of the Borrower, be Base Rate Advances or Eurodollar Advances. Each
Revolving Credit Borrowing shall be in an aggregate amount of $50,000 or an
integral multiple of $10,000 in excess thereof (other than a Borrowing, the
proceeds of which shall be used solely to repay or prepay in full outstanding
Letter of Credit Advances) and shall consist of Revolving Credit Advances made
simultaneously by the Revolving Credit Lenders ratably according to their
Revolving Credit Commitments. Within the limits of each Revolving Credit
Lender's Unused Revolving Credit Commitment in effect from time to time, the
Borrower may borrow under this Section 2.01(a), prepay pursuant to Section
2.06(a) and reborrow under this Section 2.01(a), except as provided in Section
2.04. The Revolving Credit Advances and Letter of Credit Advances shall not
exceed $14,000,000 in the aggregate at any one time outstanding, provided,
however, that until such time as the Acquisition shall have occurred and in the
event that the Acquisition shall not have occurred by July 31, 1998, the
Revolving Credit Advances and Letter of Credit Advances shall not exceed
$11,000,000 in the aggregate at any time outstanding, it being understood that
this Section 2.01(a) shall not be deemed to require the consent to the
Acquisition by any Lender, except to the extent provided in Section 3.03.
(b) Letters of Credit. The Issuing Bank agrees, on the terms
and conditions hereinafter set forth, to issue letters of credit (the "Letters
of Credit") for the account of the Borrower from time to time on any Business
Day during the period from the Effective Date until 60 days before the Final
Maturity Date (i) in an aggregate Available Amount for all Letters of Credit
issued by the Issuing Bank not to exceed at any time the Letter of Credit
Commitment at such time and (ii) in an Available Amount for each such Letter of
Credit not to exceed the lesser of (x) the Letter of Credit Facility at such
time and (y) the aggregate Unused Revolving Credit Commitments of the Revolving
Credit Lenders at such time. No Letter of Credit shall have an expiration date
(including all rights of the Borrower or the beneficiary to require renewal)
later than the earlier of 60 days before the Final Maturity Date and no later
than 180 days after the date of issuance thereof, and shall be solely for the
purpose of benefitting foreign suppliers of Inventory to the Borrower,
Blumenthal and, after the Acquisition has occurred, Westwater, Inc. Within the
limits of the Letter of Credit Facility, and subject to the limits referred to
above, the Borrower may request the issuance of Letters of Credit under this
Section 2.01(b), repay any Letter of Credit Advances resulting from drawings
thereunder pursuant to Section 2.03(c) and request the issuance of additional
Letters of Credit under this Section 2.01(b). The Letter of Credit Advances
shall not exceed $500,000 in the aggregate at any one time outstanding.
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SECTION 2.02. Making the Advances. (a) Except as otherwise
provided in Section 2.03, each Borrowing shall be made on notice, given not
later than 11:00 A.M. (New York City time) on the third Business Day prior to
the date of the proposed Borrowing in the case of a Borrowing consisting of
Eurodollar Rate Advances or on the first Business Day prior to the date of the
proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances
by the Borrower to the Agent, which shall give to each Appropriate Lender prompt
notice thereof by telex or telecopier. Each such notice by the Borrower of a
Borrowing (a "Notice of Borrowing") shall be in writing, or telex or telecopier,
in substantially the form of Exhibit B hereto, specifying therein the requested
(i) date of such Borrowing, (ii) Type of Advances comprising such Borrowing,
(iii) aggregate amount of such Borrowing and (iv) in the case of a Borrowing
consisting of Eurodollar Rate Advances, initial Interest Period for each such
Advance. Each Appropriate Lender shall, before 11:00 A.M. (New York City time)
on the date of such Borrowing, make available for the account of its Applicable
Lending Office to the Agent at the Agent's Account, in same day funds, such
Lender's ratable portion of such Borrowing in accordance with the respective
Commitments under the Facility. 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 the Borrower by crediting the Borrower's
Account, provided, however, that the Agent shall first make a portion of such
funds equal to the amount of any Letter of Credit Advances outstanding, on the
date of such Borrowing plus accrued and unpaid interest thereon available to the
Issuing Bank for repayment of such Letter of Credit Advances.
(b) Anything in subsection (a) of this Section 2.02 to the
contrary notwithstanding, (i) the Borrower may not select Eurodollar Rate
Advances for the initial Borrowing or for any Borrowing if the aggregate amount
of such Borrowing is less than $100,000 or if the obligation of the Appropriate
Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to
Section 2.09 or Section 2.10 and (ii) with respect to Borrowings consisting of
Eurodollar Rate Advances, such Eurodollar Rate Advances may not be outstanding
as part of more than four separate Borrowings in the aggregate.
(c) Each Notice of Borrowing shall be irrevocable and binding
on the Borrower. In the case of any Borrowing that the related Notice of
Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower
shall indemnify each Appropriate Lender against any loss, cost or expense
incurred by such Lender as a result of any failure to fulfill on or before the
date specified in such Notice of Borrowing for such Borrowing the applicable
conditions set forth in Article III, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Advance to be made
by such Lender as part of such Borrowing when such Advance, as a result of such
failure, is not made on such date.
(d) Unless the Agent shall have received notice from an
Appropriate Lender prior to the date of any Borrowing under the Facility 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 portion
available to the Agent on the date of such Borrowing in accordance with
subsection (a) or (b) of this Section 2.02 and the Agent may, in reliance upon
such assumption, make available to the Borrower on such date a corresponding
amount. If and to the extent that such Lender shall not have so made such
ratable portion available to the Agent, such Lender and the Borrower severally
agree to repay or pay to the Agent forthwith on demand
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such corresponding amount and to pay interest thereon, for each day from the
date such amount is made available to the Borrower until the date such amount is
repaid or paid to the Agent, at (i) in the case of the Borrower, the interest
rate applicable at such time under Section 2.07 to Advances comprising such
Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such
Lender shall pay to the Agent such corresponding amount, such amount so paid
shall constitute such Lender's Advance as part of such Borrowing for all
purposes.
(e) The failure of any Lender to make the Advance 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 Advance on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Issuance of and Drawings and Reimbursement Under
Letters of Credit. (a) Request for Issuance. Each Letter of Credit shall be
issued upon notice, given not later than 11:00 A.M. (New York City time) on the
third Business Day prior to the date of the proposed issuance of such Letter of
Credit, by the Borrower to the Issuing Bank. Each such notice of issuance of a
Letter of Credit (a "Notice of Issuance") shall be by telephone, confirmed
immediately in writing, or telex or telecopier, specifying therein the requested
(A) date of such issuance (which shall be a Business Day), (B) Available Amount
of such Letter of Credit, (C) expiration date of such Letter of Credit, (D) name
and address of the beneficiary of such Letter of Credit and (E) form of such
Letter of Credit, and shall be accompanied by such application and agreement for
letter of credit as the Issuing Bank may specify to the Borrower for use in
connection with such requested Letter of Credit (a "Letter of Credit
Agreement"). If the requested form of such Letter of Credit is acceptable to the
Issuing Bank in its sole discretion, the Issuing Bank will, upon fulfillment of
the applicable conditions set forth in Article III, make such Letter of Credit
available to the Borrower at its office referred to in Section 8.02 or as
otherwise agreed with the Borrower in connection with such issuance. In the
event and to the extent that the provisions of any Letter of Credit Agreement
shall conflict with this Agreement, the provisions of this Agreement shall
govern.
(b) Letter of Credit Reports. The Issuing Bank shall furnish
(A) to the Agent on the first Business Day of each week a written report
summarizing issuance and expiration dates of Letters of Credit issued by the
Issuing Bank during the previous week and drawings during such week under all
Letters of Credit issued by the Issuing Bank, (B) to each Revolving Credit
Lender on the first Business Day of the first two months of each quarterly
period a written report summarizing issuance and expiration dates of Letters of
Credit issued by the Issuing Bank during the preceding month and drawings during
such month under all Letters of Credit issued by the Issuing Bank and (C) to the
Agent and each Revolving Credit Lender on the first Business Day of each
calendar quarter a written report setting forth the average daily aggregate
Available Amount during the preceding calendar quarter of all Letters of Credit
issued by the Issuing Bank.
(c) Drawing and Reimbursement. The payment by the Issuing Bank
of a draft drawn under any Letter of Credit shall constitute for all purposes of
this Agreement the making by the Issuing Bank of a Letter of Credit Advance,
which shall be a Base Rate Advance, in the amount of such draft. In the event of
any drawing under a Letter of Credit, the Agent shall promptly notify each
Revolving Credit Lender and each Revolving Credit Lender shall purchase
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from the Issuing Bank, and the Issuing Bank shall sell and assign to each such
Revolving Credit Lender, such Lender's Pro Rata Share of such outstanding Letter
of Credit Advance as of the date of such purchase, by making available for the
account of its Applicable Lending Office to the Agent for the account of the
Issuing Bank, by deposit to the Agent's Account, in same day funds, an amount
equal to the portion of the outstanding principal amount of such Letter of
Credit Advance to be purchased by such Lender. Promptly after receipt thereof,
the Agent shall transfer such funds to the Issuing Bank. The Borrower hereby
agrees to each such sale and assignment. Each Revolving Credit Lender agrees to
purchase its Pro Rata Share of an outstanding Letter of Credit Advance on (i)
the Business Day on which notice of the drawing under the related Letter of
Credit is given by the Issuing Bank, provided such notice is given not later
than 11:00 A.M. (New York City time) on such Business Day or (ii) the first
Business Day next succeeding such demand if such notice is given after such
time. Upon any such assignment by the Issuing Bank to any other Revolving Credit
Lender of a portion of a Letter of Credit Advance, the Issuing Bank represents
and warrants to such other Lender that the Issuing Bank is the legal and
beneficial owner of such interest being assigned by it, free and clear of any
liens, but makes no other representation or warranty and assumes no
responsibility with respect to such Letter of Credit Advance, the Loan Documents
or the Borrower. If and to the extent that any Revolving Credit Lender shall not
have so made the amount of such Letter of Credit Advance available to the Agent,
such Revolving Credit Lender agrees to pay to the Agent forthwith on demand such
amount together with interest thereon, for each day from the date of demand by
the Issuing Bank until the date such amount is paid to the Agent, at the Federal
Funds Rate for its account or the account of the Issuing Bank, as applicable. If
such Lender shall pay to the Agent such amount for the account of the Issuing
Bank on any Business Day, such amount so paid in respect of principal shall
constitute a Letter of Credit Advance made by such Lender on such Business Day
for purposes of this Agreement, and the outstanding principal amount of the
Letter of Credit Advance made by the Issuing Bank shall be reduced by such
amount on such Business Day.
(d) Failure to Make Letter of Credit Advances. The failure of
any Lender to make the Letter of Credit Advance to be made by it on the date
specified in Section 2.03(c) shall not relieve any other Lender of its
obligation hereunder to make its Letter of Credit Advance on such date, but no
Lender shall be responsible for the failure of any other Lender to make the
Letter of Credit Advance to be made by such other Lender on such date.
SECTION 2.04. Repayment of Advances. (a) Revolving Credit
Advances. The Borrower shall repay to the Agent for the ratable account of the
Revolving Credit Lenders (i) one million dollars ($1,000,000) on each June 30
and December 31, commencing December 31, 1998 and the Commitment shall be
permanently reduced by such amount on each such date and such amounts may not be
reborrowed and (ii) on the Final Maturity Date the aggregate outstanding
principal of the Revolving Credit Advances then outstanding. On each such
payment date including without limitation the date of any prepayment, the Agent
shall be entitled to automatically debit the Borrower's Account in an amount
equal to all sums due on such date.
(b) Letter of Credit Advances. The Borrower shall repay to the
Agent for the account of the Issuing Bank and each other Revolving Credit Lender
that has made a Letter of Credit Advance on the earlier of demand and the Final
Maturity Date the outstanding principal amount of each Letter of Credit Advance
made by each of them. On each such payment date the
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Agent shall be entitled to automatically debit the Borrower's Account in an
amount equal to all sums due on such date.
SECTION 2.05. Termination or Reduction of the Commitments. (a)
Optional. The Borrower may, upon at least five Business Days' notice to the
Agent on behalf of the Lender Parties, terminate in whole or reduce in part the
Letter of Credit Facility and the Unused Revolving Credit Commitments; provided,
however, that each partial reduction of the Revolving Credit Facility or the
Letter of Credit Facility (i) shall be in an aggregate amount of $100,000 or an
integral multiple of $10,000 in excess thereof and (ii) shall be made ratably
among the Appropriate Lenders in accordance with their Commitments with respect
to such Facility.
(b) Mandatory. (i) The Revolving Credit Facility shall be
automatically and permanently reduced on the date on which any prepayment is
required to be made pursuant to Section 2.04 or 2.06(b)(ii) by an amount equal
to the aggregate amount of Net Cash Proceeds required to be used to prepay the
Revolving Credit Facility under Section 2.06(b)(ii)(2).
(ii) The Letter of Credit Facility shall be
automatically and permanently reduced from time to time on the date of each
reduction in the Revolving Credit Facility by the amount, if any, by which the
amount of the Letter of Credit Facility exceeds the Revolving Credit Facility
after giving effect to such reduction of the Revolving Credit Facility.
SECTION 2.06. Prepayments. (a) Optional. The Borrower shall
have the right to prepay the outstanding aggregate principal amount of the
Advances comprising part of the same Borrowing, in whole or ratably in part,
together with accrued interest and fees to the date of such prepayment on the
aggregate principal amount prepaid on the following terms and conditions:
(i) the Borrower shall have the right to prepay the
outstanding aggregate principal amount of the Revolving Credit Advances
and Letter of Credit Advances together with accrued interest and fees
to the date of such prepayment, without premium or penalty;
(ii) the Borrower shall give at least one Business Day's
notice in the case of Base Rate Advances and three Business Days'
notice in the case of Eurodollar Rate Advances, in each case to the
Agent (received not later than 11:00 A.M. (New York City time)) stating
the proposed date and aggregate principal amount of the prepayment;
(iii) each partial prepayment shall be in an aggregate
principal amount of $25,000 or an integral multiple of $5,000 in excess
thereof, provided that if any partial prepayment of Eurodollar Rate
Advances made pursuant to any Revolving Credit Borrowing shall reduce
the outstanding Eurodollar Rate Advances made pursuant to such
Borrowing to an amount less than the minimum borrowing amount
applicable pursuant to Section 2.02(b), then such Borrowing shall be
Converted at the end of the then current Interest Period into a Base
Rate Advance and any election of an Interest Period with respect
thereto given by the Borrower shall have no force or effect; and
(iv) if any prepayment of a Eurodollar Rate Advance is made on
a date other than the last day of an Interest Period for such Advance
the Borrower shall also pay any
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amounts owing pursuant to Section 8.04(c);
(v) amounts prepaid pursuant to this Section 2.06(a) may be
reborrowed by the Borrower upon compliance with Sections 2.01, 2.02 and
3.02 hereof.
(b) Mandatory. (i) The Borrower shall, no later than the 30th
day following the date on which the financial statements referred to in Section
5.03(d) have been delivered to the Lender Parties for the Fiscal Year ended 1998
and for each Fiscal Year thereafter (but in any event within 120 days after the
end of each such Fiscal Year), prepay an aggregate principal amount of the
Revolving Credit Advances comprising part of the same Borrowings equal to 50% of
the amount of Excess Cash Flow for such Fiscal Year. Each such prepayment of any
Advances shall be applied to prepay and to permanently reduce the Revolving
Credit Facility.
(ii) The Borrower shall, within ten days after receipt of the
Net Cash Proceeds by the Borrower or any Subsidiary from (A) the sale, lease,
transfer or other disposition of any assets (other than obsolete or worn out
property or Inventory in the ordinary course of business and consistent with
past practices) of the Borrower or such Subsidiary, (B) the incurrence or
issuance by the Borrower or such Subsidiary of any Debt (other than Debt
incurred or issued pursuant to Section 5.02(b)), or (C) any Extraordinary
Receipt received by or paid to or for the account of the Borrower or such
Subsidiary and not otherwise included in clause (A) or (B) above, prepay an
aggregate principal amount of the Advances comprising part of the same
Borrowings equal to the amount of such Net Cash Proceeds. Notwithstanding the
foregoing, with respect to any insurance proceeds received pursuant to Section
2.06(b)(ii)(C) to the extent that any such insurance proceeds are not so applied
("Unapplied Proceeds") within twelve months after the occurrence of any damage
or loss, the Borrower shall within 10 days of such twelve month period prepay an
aggregate principal amount of the Advances comprising part of the same
Borrowings equal to the aggregate amount of the Unapplied Proceeds. Each such
prepayment of any Advances shall be applied to prepay the Revolving Credit
Facility and to permanently reduce the Revolving Credit Facility as set forth in
Section 2.05(b)(i).
(iii) The Borrower shall, on the date of receipt of the Net
Cash Proceeds by any Subsidiary from the sale or issuance by the Borrower or any
Subsidiary of any capital stock or other ownerships or profit interest, any
securities convertible into or exchangeable for capital stock or other ownership
or profit interest or any warrants, rights or options to acquire capital stock
or other ownership or profit interest received by or paid to or for the account
of the Borrower or such Subsidiary and not otherwise applied under this Section
2.06(b), apply such Net Cash Proceeds to prepay and to permanently reduce the
Revolving Credit Facility.
(iv) The Borrower shall, on each Business Day, prepay an
aggregate principal amount of the Revolving Credit Advances comprising part of
the same Borrowings and the Letter of Credit Advances equal to the amount by
which (A) the sum of aggregate principal amount of (x) of the Revolving Credit
Advances and (y) the Letter of Credit Advances then outstanding plus the
Available Amount of Letters of Credit then outstanding exceeds the Revolving
Credit Facility. Each such prepayment shall be applied as set forth in Section
2.06(c).
(v) All prepayments under this Section 2.06(b) shall be made
together with accrued interest to the date of such prepayment on the principal
amount prepaid.
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(c) Prepayment of Revolving Credit Facility. Each prepayment
of the Revolving Credit Facility made pursuant to Section 2.06(a) or Section
2.06(b) shall be applied at Borrower's option, to prepay Letter of Credit
Advances then outstanding until such Advances are paid in full or to prepay
Revolving Credit Advances then outstanding comprising part of the same
Borrowings in accordance with the respective Pro Rata Share of the Revolving
Credit Lenders until such Advances are paid in full and, in the case of
prepayments of the Revolving Credit Facility required pursuant to clause (i),
(ii) or (iii) of Section 2.06(b), the Revolving Credit Facility shall be
permanently reduced.
SECTION 2.07. Interest. (a) Scheduled Interest. The Borrower
shall pay interest on the unpaid principal amount of each Revolving Credit
Advance and each Letter of Credit Advance owing to each Revolving Credit Lender
from the date of such Revolving Credit Advance or Letter of Credit Advance, as
the case may be, until such principal amount shall be paid in full, at the
following rates per annum:
(x) Base Rate Advances. For each Letter of Credit Advance and
during such periods as each Revolving Credit Advance is a Base Rate
Advance, a rate per annum equal at all times to the sum of (A) the Base
Rate in effect from time to time plus (B) the Applicable Margin for the
Revolving Credit Facility, payable in arrears quarterly on the last
Business Day of each March, June, September and December during such
periods commencing September 30, 1998, on the date of any prepayment
thereof to the extent required under Section 2.06 and on the Final
Maturity Date.
(y) Eurodollar Rate Advances. During such periods as each such
Revolving Credit Advance is a Eurodollar Rate Advance, a rate per annum
equal at all times during each Interest Period for each such Revolving
Credit Advance to the sum of (A) the Eurodollar Rate for such Interest
Period for such Advance plus (B) the Applicable Margin for the
Revolving Credit Facility, payable in arrears on the last day of such
Interest Period and, if such Interest Period has a duration of more
than three months, subject to clause (d) of the definition of Interest
Period, on each day that occurs during such Interest Period every three
months from the first day of such Interest Period until the date such
Eurodollar Rate Advance shall be Converted or paid in full.
On each interest payment date, including without limitation a date for payment
of defaulted interest in accordance with paragraph (b) below, the Agent shall be
entitled to automatically debit the Borrower's Account in an amount equal to all
sums due and owing on such date.
(b) Default Interest. Upon the occurrence and during the
continuance of a Default under Section 6.01(c) with respect to any covenant
contained in Section 5.04 or under Section 6.01(a), the Agent may, and upon the
request of the Required Lenders shall, require that the Borrower shall pay
interest on (i) the unpaid principal amount of each Advance owing to each
Lender, payable in arrears on the dates referred to in clause (a) of this
Section 2.07 and on demand, at a rate per annum equal at all times to 2% per
annum above the rate per annum required to be paid on such Advance pursuant to
clause (a) of this Section 2.07 and (ii) to the fullest extent permitted by law,
the amount of any interest, fee or other amount payable hereunder that is not
paid when due, from the date such amount shall be due until such amount
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shall be paid in full, payable in arrears on the date such amount shall be paid
in full and on demand, at a rate per annum equal at all times to 2% per annum
above the rate per annum required to be paid, in the case of interest, on the
Type of Advance on which such interest has accrued pursuant to clause (a) of
this Section 2.07, and, in the case of Revolving Credit Advances, on Base Rate
Advances pursuant to clause (a)(x) of this Section 2.07.
(c) Notice of Interest Rate. Promptly after receipt of a
Notice of Borrowing pursuant to Section 2.02(a) or other notice by the Borrower
selecting an Interest Period, the Agent shall give notice to the Borrower and
each Appropriate Lender of the applicable interest rate determined by the Agent
for purposes of clause (a) of this Section 2.07.
SECTION 2.08. Fees. (a) Commitment Fee. Subject to the proviso
of this Section 2.08(a), the Borrower shall pay to the Agent a commitment fee,
from the date hereof in the case of each Initial Lender with a Revolving Credit
Commitment and from the effective date specified in the Assignment and
Acceptance pursuant to which it became a Revolving Credit Lender in the case of
each other Revolving Credit Lender until the Final Maturity Date, payable in
arrears quarterly on the last Business Day of each March, June, September and
December, commencing September 30, 1998, and on the Final Maturity Date, at the
rate of (i) so long as the ratio of total funded Debt to EBITDA is greater than
2.00:1, 37.5 basis points per annum on the aggregate average Unused Revolving
Credit commitments; (ii) so long as the ratio of Total Funded Debt to EBITDA is
equal to or less than 2.00:1 but greater than 1.50:1, 25 basis points per annum
on the aggregate average Unused Revolving Credit Commitments, and (iii) so long
as the ratio of Total Funded Debt to EBITDA is equal to or less than 1.50:1, 15
basis points per annum on the aggregate average Unused Revolving Credit
Commitments.
(b) Underwriting Fees. (i) The Borrower shall pay to the Agent
for the account of each Initial Lender a fee payable on the closing date equal
to 75 basis points on each such Lender's Commitment.
(c) Agent's Fees. The Borrower shall pay to the Agent for its
own account such fees as may from time to time be agreed between the Borrower
and the Agent.
(d) Letter of Credit Fees. The Borrower shall pay to the
Issuing Bank an amount equal to 1/8 of 1% of any Letter of Credit issued by the
Issuing Bank upon issuance of any Letter of Credit.
SECTION 2.09. Conversion of Revolving Credit Advances. (a)
Optional. The Borrower may on any Business Day, upon notice given to the Agent
not later than 11:00 A.M. (New York City time) on the third Business Day prior
to the date of the proposed Conversion and subject to the provisions of Sections
2.07 and 2.10, Convert all or any portion of the Revolving Credit Advances of
one Type comprising the same Borrowing into Revolving Credit Advances of the
other Type; provided, however, that if any Conversion of Eurodollar Rate
Advances into Base Rate Advances is made other than on the last day of an
Interest Period for such Eurodollar Rate Advances the Borrower shall also pay
any amounts owing pursuant to Section 8.04(c), any Conversion of Base Rate
Advances into Eurodollar Rate Advances shall be in an amount not less than the
minimum amount specified in Section 2.02(b), no Conversion of any Advances shall
result in more separate Borrowings than permitted under Section 2.02(b) and
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each Conversion of Revolving Credit Advances comprising part of the same
Revolving Credit Borrowing shall be made ratably among the Revolving Credit
Lenders in accordance with their Revolving Credit Commitments. Each such notice
of Conversion shall, within the restrictions specified above, specify (i) the
date of such Conversion, (ii) the Revolving Credit Advances to be Converted and
(iii) if such Conversion is into Eurodollar Rate Advances, the duration of the
initial Interest Period for such Advances. Each notice of Conversion shall be
irrevocable and binding on the Borrower.
(b) Mandatory. (i) On the date on which the aggregate unpaid
principal amount of Eurodollar Rate Advances comprising any Revolving Credit
Borrowing shall be reduced, by payment or prepayment or otherwise, to less than
$100,000, such Advances shall automatically Convert into Base Rate Advances.
(ii) If the Borrower shall fail to select the duration of any
Interest Period for any Revolving Credit Advances that have been Converted into
Eurodollar Rate Advances in accordance with the provisions contained in the
definition of "Interest Period" in Section 1.01, the Agent will forthwith so
notify the Borrower and the Revolving Credit Lenders, whereupon each such
Eurodollar Rate Advance will automatically, on the last day of the then existing
Interest Period therefor, Convert into a Base Rate Advance.
(iii) Upon the occurrence and during the continuance of any
Event of Default, (x) each Revolving Credit Advance that has been Converted into
a Eurodollar Rate Advance will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Base Rate Advance and (y) the
obligation of the Revolving Credit Lenders to make, or to Convert Revolving
Credit Advances into, Eurodollar Rate Advances shall be suspended.
SECTION 2.10. Increased Costs, Etc. (a) If, due to either (i)
the introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law) in
either case made subsequent to the date hereof, there shall be any increase in
the cost to any Lender Party of agreeing to make or of making, funding or
maintaining Eurodollar Rate Advances or of agreeing to issue or of issuing or
maintaining Letters of Credit or of agreeing to make or of making or maintaining
Letter of Credit Advances, then the Borrower shall from time to time, upon
demand by such Lender Party (with a copy of such demand to the Agent), pay to
the Agent for the account of such Lender Party additional amounts sufficient to
compensate such Lender Party for such increased cost. A certificate as to the
amount of such increased cost and calculating such amount in reasonable detail,
submitted to the Borrower by such Lender Party, shall be conclusive and binding
for all purposes, absent manifest error.
(b) If any Lender Party determines that compliance with any
law or regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) made subsequent
to the date hereof affects or would affect the amount of capital required or
expected to be maintained by such Lender Party or any corporation controlling
such Lender Party and that the amount of such capital is increased by or based
upon the existence of such Lender Party's commitment to lend and other
commitments of such type, then, upon demand by such Lender Party (with a copy of
such demand to the Agent), the
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Borrower shall pay to the Agent for the account of such Lender Party, from time
to time as specified by such Lender Party, additional amounts sufficient to
compensate such Lender Party in the light of such circumstances, to the extent
that such Lender Party reasonably determines such increase in capital to be
allocable to the existence of such Lender Party's commitment to lend or to issue
Letters of Credit hereunder or to the issuance or maintenance of any Letters of
Credit. A certificate as to such amounts and calculating such amount in
reasonable detail submitted to the Borrower by such Lender Party shall be
conclusive and binding for all purposes, absent manifest error.
(c) If, with respect to any Eurodollar Rate Advances under the
Revolving Facility, Lenders owed at least 50% of the then aggregate unpaid
principal amount thereof notify the Agent that the Eurodollar Rate for any
Interest Period for such Advances will not adequately reflect the cost to such
Lenders of making, funding or maintaining their Eurodollar Rate Advances for
such Interest Period, the Agent shall forthwith so notify the Borrower and the
Appropriate Lenders, whereupon (i) each such Eurodollar Rate Advance under the
Revolving Credit Facility will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the
obligation of the Appropriate Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended until the Agent shall notify the
Borrower that such Lenders have determined that the circumstances causing such
suspension no longer exist.
(d) 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 perform its obligations hereunder to make Eurodollar Rate
Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder,
then, on notice thereof and demand therefor by such Lender to the Borrower
through the Agent, (i) each Eurodollar Rate Advance will automatically, upon
such demand, Convert into a Base Rate Advance and (ii) the obligation of the
Appropriate Lenders, or to Convert Advances into, Eurodollar Rate Advances shall
be suspended until the Agent shall notify the Borrower that such Lender has
determined that the circumstances causing such suspension no longer exist.
SECTION 2.11. Payments and Computations. (a) The Borrower
shall make each payment hereunder and under the Notes, irrespective of any right
of counterclaim or set-off, not later than 11:00 A.M. (New York City time) on
the day when due in U.S. dollars to the Agent at the Agent's Account in same day
funds. The Agent will promptly thereafter cause like funds to be distributed (i)
if such payment by the Borrower is in respect of principal, interest, commitment
fees or any other Obligation then payable hereunder and under the Notes to more
than one Lender Party, to such Lender Parties for the account of their
respective Applicable Lending Offices ratably in accordance with the amounts of
such respective Obligations then payable to such Lender Parties and (ii) if such
payment by the Borrower is in respect of any Obligation then payable hereunder
to one Lender Party, to such Lender Party for the account of its Applicable
Lending Office, in each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of an Assignment and Acceptance and recording of
the information contained therein in the Register pursuant to Section 8.07(e),
from and after the effective date of such Assignment and Acceptance, the Agent
shall make all payments hereunder and under the Notes in respect of the interest
assigned thereby to the Lender Party assignee
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thereunder, and the parties to such Assignment and Acceptance shall make all
appropriate adjustments in such payments for periods prior to such effective
date directly between themselves.
(b) If the Agent receives funds for application to the
Obligations under the Loan Documents under circumstances for which the Loan
Documents do not specify the manner in which such funds are to be applied, the
Agent may, but shall not be obligated to, elect to distribute such funds to each
Lender Party ratably in accordance with such Lender Party's proportionate share
of the principal amount of all outstanding Advances and the Available Amount of
all Letters of Credit then outstanding, in repayment or prepayment of such of
the outstanding Advances or other Obligations owed to such Lender Party as the
Agent shall direct.
(c) The Borrower hereby authorizes each Lender Party, if and
to the extent payment owed to such Lender Party is not made when due hereunder
or, in the case of a Lender, under the Note held by such Lender, to charge from
time to time against any or all of the Borrower's accounts with such Lender
Party any amount so due. Such Lender Party shall promptly notify the Borrower of
any such charge provided that the failure to give any such notice shall in no
way affect, impair or diminish the Borrower's obligations or the rights or
remedies of the Lender Parties hereunder.
(d) All computations of interest and fees and Letter of Credit
commissions shall be made by the Agent on the basis of a year of 360 days, in
each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest, fees or
commissions are payable. Each determination by the Agent of an interest rate,
fee or commission hereunder shall be conclusive and binding for all purposes,
absent manifest error.
(e) 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 commitment fee, as
the case may be; provided, however, that, if such extension would cause payment
of interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(f) Unless the Agent shall have received notice from the
Borrower prior to the date on which any payment is due to any Lender Party
hereunder that the Borrower will not make such payment in full, the Agent may
assume that the Borrower has 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 such Lender Party on such due date an amount equal to the amount then due
such Lender Party. If and to the extent the Borrower shall not have so made such
payment in full to the Agent, each such Lender Party shall repay to the Agent
forthwith on demand such amount distributed to such Lender Party together with
interest thereon, for each day from the date such amount is distributed to such
Lender Party until the date such Lender Party repays such amount to the Agent,
at the Federal Funds Rate.
SECTION 2.12. Taxes. (a) Any and all payments by the Borrower
hereunder
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or under the Notes shall be made, in accordance with Section 2.11, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings imposed by a Governmental
Authority, and all liabilities with respect thereto, excluding net income taxes
and franchise taxes imposed on the Agent or any Lender Party as a result of a
present or former connection between the Agent or such Lender Party and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from the Agent or such Lender Party having executed,
delivered or performed its obligations or received a payment under, or enforced,
this Agreement) (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Note to any Lender Party or the Agent,
(i) the sum payable shall be increased as may be necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 2.12) such Lender Party 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) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law; provided, however, that,
to the extent provided in paragraph (f) of this Section 2.12, the Borrower shall
not be required to increase such amounts payable to any Lender Party organized
under the laws of a jurisdiction outside the United States and shall not be
required to indemnify such Lender Party pursuant to this Section 2.12(a) if the
Borrower's obligation to deduct Taxes results from such Lender Party's failure
to comply with the requirements of subsection (e) of this Section 2.12 (without
regard to the last sentence thereof).
(b) In addition, the Borrower shall pay any present or future
stamp, documentary, excise, property or similar taxes, charges or levies that
arise from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or the
Notes; excluding any present or future stamp, documentary, excise, property or
similar taxes, charges or levies (including without limitation, mortgage
recording taxes and similar fees) that arise as a result of sales, assignments
or other transfers of rights hereunder by any Lender Party (all such
non-excluded taxes, charges and levies being hereinafter referred to as "Other
Taxes").
(c) The Borrower shall indemnify each Lender Party and the
Agent for the full amount of Taxes and Other Taxes, and for the full amount of
taxes imposed by any jurisdiction on amounts payable under this Section 2.12,
paid by such Lender Party or the Agent (as the case may be) and any liability
(including penalties, additions to Tax, interest and expenses) arising therefrom
or with respect thereto. This indemnification shall be made within 30 days from
the date such Lender Party or the Agent (as the case may be) makes written
demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower shall furnish to the Agent, at its address referred to in Section 8.02,
the original receipt of payment thereof or a certified copy of such receipt or,
if none is available, other documentary evidence showing such payment. In the
case of any payment hereunder or under the Notes by or on behalf of the Borrower
through an account or branch outside the United States or on behalf of the
Borrower by a payor that is not a United States person, if the Borrower
determines that no Taxes
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are payable in respect thereof, the Borrower shall furnish, or shall cause such
payor to furnish, to the Agent, at such address, an opinion of counsel
acceptable to the Agent stating that such payment is exempt from Taxes. For
purposes of this subsection (d) and subsection (e), the terms "United States"
and "United States person" shall have the meanings specified in Section 7701 of
the Internal Revenue Code.
(e) Each Lender Party organized under the laws of a
jurisdiction outside the United States shall, (1) on or prior to the date of its
execution and delivery of this Agreement in the case of each Initial Lender or
the Issuing Bank, as the case may be, and on the date of the Assignment and
Acceptance pursuant to which it became a Lender Party in the case of each other
Lender Party, provide the Agent and the Borrower with two duly completed copies
of Internal Revenue Service form 1001 or 4224, as appropriate, or any successor
form prescribed by the Internal Revenue Service, and an Internal Revenue Service
form W-8 or W-9, or successor applicable form, as the case may be, certifying
that such Lender Party is exempt from United States withholding tax on payments
under this Agreement or the Notes, (2) deliver to the Borrower and the Agent two
further copies of any such form or certification on or before the date that any
such form or certification expires or becomes obsolete and after the occurrence
of any event requiring a change in the most recent form previously delivered to
the Borrower certifying that such Lender Party is exempt from United States
withholding tax on payments under this Agreement or the Notes, and (3) obtain
such extensions of time for filing and completing such forms or certifications
as may reasonably be requested by the Borrower or the Agent. If the form
provided by a Lender Party at the time such Lender Party first becomes a party
to this Agreement indicates a United States interest withholding tax rate in
excess of zero, withholding tax at such rate shall be considered excluded from
Taxes unless and until such Lender Party provides the appropriate form
certifying that a lesser rate applies, whereupon withholding tax at such lesser
rate only shall be considered excluded from Taxes for periods governed by such
form; provided, however, that, if at the date of the Assignment and Acceptance
pursuant to which a Lender Party becomes a party to this Agreement, the Lender
Party assignor was entitled to payments under subsection (a) of this Section
2.12 in respect of United States withholding tax with respect to interest paid
at such date, then, to such extent, the term Taxes shall include (in addition to
withholding taxes that may be imposed in the future or other amounts otherwise
includable in Taxes) United States withholding tax, if any, applicable with
respect to the Lender Party assignee on such date. If any form or document
referred to in this subsection (e) of this Section 2.12 requires the disclosure
of information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001 or
4224, that the Lender Party reasonably considers to be confidential, the Lender
Party shall give notice thereof to the Borrower and shall not be obligated to
include in such form or document such confidential information.
(f) For any period with respect to which a Lender Party has
failed to provide the Borrower with the appropriate form or document described
in subsection (e) of this Section 2.12 (other than if such failure is due to a
change in law occurring after the date on which a form originally was required
to be provided or if such form otherwise is not required to obtain an exemption
from Taxes), such Lender Party shall not be entitled to indemnification under
subsection (a) or (c) of this Section 2.12 with respect to Taxes imposed by the
United States; provided, however, that should a Lender Party become subject to
Taxes because of its failure to deliver a form required hereunder, the Borrower
shall take such steps as such Lender Party shall
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reasonably request to assist such Lender Party to recover such Taxes.
(g) If requested by the Borrower, and at the Borrower's
expense, any Lender Party and the Agent shall take such steps as may be
appropriate in the sole discretion of such Lender Party or the Agent, as the
case may be, to seek a refund of any Taxes or Other Taxes paid by the Borrower.
If any Lender Party or the Agent receives a refund in respect of any Taxes or
Other Taxes for which the Lender Party has received payment from the Borrower
hereunder, such Lender Party and the Agent, within 15 days of such receipt,
shall deliver to the Borrower the amount of such refund. In addition, within 15
days of a written request of the Borrower, any Lender Party and the Agent shall
execute and deliver to the Borrower such certificates, forms or other documents
which can be reasonably furnished consistent with the facts and which are
reasonably necessary in the opinion of such Lender Party and the Agent to assist
the Borrower in applying for refunds of Taxes or Other Taxes remitted hereunder.
(h) If the Borrower is required to pay any amounts pursuant to
the provisions of this Section 2.12, and if thereafter any Lender Party or the
Agent shall receive or be granted a credit against or remission or other relief
for any Taxes solely in respect of the amounts so paid by the Borrower, such
Lender Party shall, to the extent that it can do so without prejudice to the
retention of the amount of such credit, remission or other relief, pay to the
Borrower as soon as reasonably practicable after the date on which such Lender
Party or the Agent effectively obtains the benefit of such credit, remission or
other relief an amount which such Lender Party reasonably determines to be equal
to such credit, remission or other relief less any sum which the Lender Party is
required by law to deduct therefrom. The Lender Party may, in its sole
discretion, determine the order of utilization of all charges, deductions,
credits and expenses.
(i) In the event that any Lender Party or the Agent receives
written communication from any Governmental Authority with respect to an
assessment or proposed assessment of any Taxes or Other Taxes which the Borrower
is liable to indemnify pursuant to the provisions of this Section 2.12, such
Lender Party or the Agent shall notify the Borrower in writing as soon as
reasonably practicable after receipt of such written communication.
SECTION 2.13. Sharing of Payments, Etc. If any Lender Party
shall obtain at any time any payment (whether voluntary, involuntary, through
the exercise of any right of set-off, or otherwise) (a) on account of
Obligations due and payable to such Lender Party hereunder and under the Notes
at such time in excess of its ratable share (according to the proportion of (i)
the amount of such Obligations due and payable to such Lender Party at such time
to (ii) the aggregate amount of the Obligations due and payable to all Lender
Parties hereunder and under the Notes at such time) of payments on account of
the Obligations due and payable to all Lender Parties hereunder and under the
Notes at such time obtained by all the Lender Parties at such time or (b) on
account of Obligations owing (but not due and payable) to such Lender Party
hereunder and under the Notes at such time in excess of its ratable share
(according to the proportion of (i) the amount of such Obligations owing to such
Lender Party at such time to (ii) the aggregate amount of the Obligations owing
(but not due and payable) to all Lender Parties hereunder and under the Notes at
such time) of payments on account of the Obligations owing (but not due and
payable) to all Lender Parties hereunder and under the Notes at such time
obtained by all of the Lender Parties at such time, such Lender Party shall
forthwith purchase from the other Lender Parties such participations in the
Obligations due and payable or
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owing to them, as the case may be, as shall be necessary to cause such
purchasing Lender Party to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender Party, such purchase from each
other Lender Party shall be rescinded and such other Lender Party shall repay to
the purchasing Lender Party the purchase price to the extent of such Lender
Party's ratable share (according to the proportion of (i) the purchase price
paid to such Lender Party to (ii) the aggregate purchase price paid to all
Lender Parties) of such recovery together with an amount equal to such Lender
Party's ratable share (according to the proportion of (i) the amount of such
other Lender Party's required repayment to (ii) the total amount so recovered
from the purchasing Lender Party) of any interest or other amount paid or
payable by the purchasing Lender Party in respect of the total amount so
recovered. The Borrower agrees that any Lender Party so purchasing a
participation from another Lender Party pursuant to this Section 2.13 may, to
the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender Party were the direct creditor of the Borrower in the amount of
such participation.
SECTION 2.14. Source of Funds. To the extent any Advance
hereunder is made by or on behalf of an insurance company, bank, or an entity
deemed to hold assets of any employee benefit plan subject to ERISA or other
plan as defined in and subject to the prohibited transaction provisions of
Section 4975 of the Internal Revenue Code pursuant to applicable Department of
Labor regulations (the "Plan Asset Regulations"), or any such plan acting on its
own behalf, such insurance company, bank, entity or plan warrants and represents
that at least one of the following statements is an accurate representation as
to each source of funds (a "Source") to be used by such insurance company, bank,
entity or plan to make any Advances hereunder:
(i) the Source consists of plan assets subject to the
discretionary authority or control of an in-house asset manager
("INHAM") as such term is defined in Section IV(a) of Prohibited
Transaction Class Exemption 96-23 (issued April 10, 1996)("PTCE
96-23"), and the payment of the Advances hereunder is exempt under the
provisions of PTCE 96-23; or
(ii) the Source is an "insurance company general account" as
such term is defined in section V(e) of Prohibited Transaction Class
Exemption 95-60 (issued July 12, 1995) ("PTCE 95-60"), and the making
of such Advances is exempt under the provisions of PTCE 95-60; or
(iii) the Source is either (x) an insurance company pooled
separate account, within the meaning of Prohibited Transaction Class
Exemption 90-1 (issued January 29, 1990) ("PTCE 90-1") or (y) a bank
collective investment fund, within the meaning of Prohibited
Transaction Class Exemption 91-38 (issued July 12, 1991) ("PTCE 91-38")
and, except as such insurance company or bank has disclosed to the
Borrower in writing pursuant to this paragraph (iii), no plan or group
of plans maintained by the same employer or employee organization,
beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; and, in either such
case, all records necessary to establish the availability of each
exemption by reason thereof will be maintained and made available as
required by the terms of such
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exemption; or
(iv) the Source is an "investment fund" within the meaning of
Part V of Prohibited Transaction Class Exemption 84-14 (issued March
13, 1984) (the "QPAM Exemption") managed by a "qualified professional
asset manager" ("QPAM") within the meaning of Part V of the QPAM
exemption) which has been identified pursuant to this paragraph (iv),
such that the Advances by or on behalf of such investment fund are
eligible for the exemptive relief provided by the QPAM exemption,
provided that (a) no party to the transactions described in this
Agreement and no affiliate (within the meaning of Section V(c)(1) of
the QPAM Exemption) of such party has, or at any time during the
immediately preceding year exercised, the authority to appoint or
terminate the identified QPAM as manager of the assets of any employee
benefit plan that has an interest in such investment fund (which plans
have been identified pursuant to this paragraph (iii)) or to negotiate
the terms of said QPAM's management agreement on behalf of any such
identified plan and (b) no party to the transactions described in this
agreement is the QPAM or a person related to the QPAM (within the
meaning of Section V(h) of the QPAM exemption; or
(v) the Source is a "governmental plan" as defined in Title I,
Section 3(32) of ERISA; or
(vi) the Source is one or more "employee benefit plans" (or
other plan as defined in and subject to Section 4975 of the Internal
Revenue Code) or a separate account, trust fund, or other entity
comprised of one or more such plans (determined after giving effect to
the Plan Asset Regulations) each of which has been identified to the
Borrower in writing pursuant to this paragraph (v) and for each of
which the Borrower has indicated that it is not a party in interest or
a disqualified person; or
(vii) the Source does not include assets of any employee
benefit plan or other plan, other than a plan exempt from coverage
under ERISA and from the prohibited transaction provisions of Section
4975 of the Internal Revenue Code.
SECTION 2.15. Use of Proceeds. The proceeds of the Advances
shall be available (and the Borrower agrees that it shall use such proceeds)
solely (i) an amount not to exceed $3,000,000, to partially fund the
Acquisition, including the satisfaction of certain Debt of Westwater; (ii) to
use up to $10,000,000 toward the redemption of $12,500,000 of Preferred Stock of
the Borrower, it being understood that as of the Closing Date Borrower will
redeem shares of Preferred Stock of the Borrower having an aggregate value of
$12,500,000; (iii) to pay transaction fees and expenses in connection with the
transactions contemplated hereby; and (iv) to provide for the short term working
capital requirements of the Borrower, Westwater, Inc. (after the occurrence of
the Acquisition) and Blumenthal. Issuances of Letters of Credit shall be
available (and the Borrower agrees that it shall use such Letters of Credit)
solely for the benefit of foreign suppliers of Inventory to the Borrower,
Westwater Inc. (after the occurrence of the Acquisition) and Blumenthal.
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ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Initial Extension of
Credit. The obligation of each Lender to make an Advance or the Issuing Bank to
issue a Letter of Credit on the occasion of the Initial Extension of Credit
hereunder is subject to the satisfaction of the following conditions precedent
before or concurrently with the Initial Extension of Credit:
(a) The Lender Parties shall be satisfied with the corporate
and legal structure and capitalization of the Borrower and its
Subsidiaries including the terms and conditions of the charter, bylaws
and each class of capital stock of the Borrower and its Subsidiaries
and of each agreement or instrument relating to such structure or
capitalization.
(b) There shall not have occurred (and the Lender Parties
shall not have become aware of any facts, conditions or other
information not previously known) which the Lender Parties shall
reasonably determine has, or could reasonably be expected to have, a
Material Adverse Effect.
(c) All necessary governmental (domestic and foreign) and
third party approvals and/or consents in connection with the
consummation of the transactions contemplated hereby shall have been
(or will, within the time frame required, be) obtained and remain in
full effect, and all applicable waiting periods shall have expired
without any action being taken by any competent authority which
restrains, prevents or imposes materially adverse conditions upon the
consummation of the transactions contemplated by this Agreement and the
other Loan Documents or otherwise referred to herein or therein.
Additionally, there shall not exist any judgment, order, injunction or
other restraint issued or filed or a hearing seeking injunctive relief
or other restraint pending or notified prohibiting or imposing
materially adverse conditions upon the consummation of the transactions
contemplated by this Agreement, any Note or any other Loan Documents.
(d) There shall exist no action, suit, investigation,
litigation or proceeding affecting the Borrower or any of its
properties or any Subsidiary or any of their respective properties
pending or threatened before any court, governmental agency or
arbitrator that (i) could reasonably be expected to have a Material
Adverse Effect or (ii) purports to adversely affect the legality,
validity or enforceability of this Agreement, any Note, any other Loan
Document or the consummation of the transactions contemplated hereby or
thereby.
(e) The Lender Parties shall have completed a due diligence
investigation of the Borrower and each of its Subsidiaries (including,
without limitation, a field examination of the quality of the
Borrower's current assets and of the Borrower's management information
systems) in scope, and with results, reasonably satisfactory to the
Lender Parties, and nothing shall have come to the attention of the
Lender Parties during the course of such due diligence investigation to
lead them to believe (i) that any written information, exhibit or
report (including, without limitation, any financial
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information) furnished by or on behalf of the Borrower to the Agent or
any Lender Party was or has become misleading, incorrect or incomplete
in any material respect and (ii) that the Borrower and each of its
Subsidiaries would not have good and marketable title to all of its
current assets; without limiting the generality of the foregoing, the
Lender Parties shall have been given such access to the management,
records, books of account, contracts and properties of the Borrower and
each of its Subsidiaries as they shall have requested.
(f) Intentionally Omitted.
(g) The Agent, on behalf of the Lender Parties, shall have
received on or before the day of the Initial Extension of Credit the
following, each dated such day (unless otherwise specified), in form
and substance satisfactory to the Agent (unless otherwise specified)
and (except for the Notes) in sufficient copies for each Lender Party:
(i) The Notes payable to the order of the Lenders.
(ii) Certified copies of the resolutions of the Board
of Directors of the Borrower and each of the Guarantors
approving this Agreement, the Notes and each other Loan
Document to which it is or is to be a party, and of all
documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this
Agreement, the Notes and each other Loan Document.
(iii) A copy of a certificate of the Secretary of
State (or comparable governmental official) of the
jurisdiction of its incorporation, dated on or reasonably near
the date of the Initial Extension of Credit, in each case
listing the charter of the Borrower and each Subsidiary and
each amendment thereto on file in his office and certifying
that (A) such charter is a true and correct copy thereof, (B)
such amendments are the only amendments to such charter on
file in his office, (C) such Person has paid all franchise
taxes to the date of such certificate and (D) such Person is
duly incorporated and in good standing under the laws of the
State of the jurisdiction of its incorporation.
(iv) A copy of a certificate of the Secretary of
State of the States of New Jersey, New York, California and
Iowa dated on or reasonably near the date of the Initial
Extension of Credit, stating that the Borrower or a
Subsidiary, as the case may be, is duly qualified and in good
standing as a foreign corporation in such state and has filed
all annual reports required to be filed to the date of such
certificate.
(v) A certificate of each of the Borrower and each
Guarantor, signed on behalf of such Person by its President
and its Secretary, dated the date of the Initial Extension of
Credit (the statements made in which certificate shall be true
on and as of the date of the Initial Extension of Credit),
certifying as to (A) the absence of any amendments to the
charter of such Person since the date of the Secretary of
State's certificate referred to in Section 3.01(g)(iii), (B) a
true and correct copy of the bylaws of such Person as in
effect on the date of the Initial
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Extension of Credit, (C) the due incorporation and good
standing of such Person as a corporation organized under the
laws of the jurisdiction of its incorporation and the absence
of any proceeding for the dissolution or liquidation of such
Person, (D) the completeness and accuracy of the
representations and warranties contained in the Loan Documents
as though made on and as of the date of the Initial Extension
of Credit and (E) the absence of any event occurring and
continuing, or resulting from the Initial Extension of Credit,
that constitutes a Default.
(vi) A certificate of the Secretary of each of the
Borrower and each Guarantor certifying the names and true
signatures of the officers of such Persons authorized to sign
this Agreement, the Notes and each other Loan Document to
which they are or are to be parties and the other documents to
be delivered hereunder and thereunder.
(vii) A pledge and security agreement in
substantially the form of Exhibit D (together with each other
pledge and security agreement delivered pursuant to Section
5.01(l) or 5.01(m), in each case as amended, supplemented or
otherwise modified from time to time in accordance with its
terms, the "Security Agreement"), duly executed by the
Borrower and each Guarantor, together with:
(A) certificates representing the Pledged
Shares and the Pledged Debt referred to therein
accompanied, in the case of the Pledged Shares, by
undated stock powers executed in blank,
(B) acknowledgment copies or stamped receipt
copies of proper financing statements, duly filed on
or before the day of the Initial Extension of Credit
under the UCC of the States of New Jersey,
Connecticut, Iowa and Mississippi, New York,
California, Missouri and Virginia and of all other
jurisdictions that the Agent may deem necessary or
desirable in order to perfect and protect the Liens
created under the Collateral Documents, covering the
Collateral described in the Security Agreement,
(C) completed requests for information,
dated on or before the date of the Initial Extension
of Credit, listing the financing statements referred
to in clause (B) next above and all other effective
financing statements filed in the jurisdictions
referred to in clause (B) next above that name the
Borrower, any predecessor thereto or any Guarantor,
as the case may be, as debtor, together with copies
of such other financing statements,
(D) evidence of the completion of all other
recordings and filings of or with respect to the
Security Agreement that the Agent may deem necessary
or desirable in order to perfect and protect the
Liens created thereby,
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(E) Intentionally Omitted.
(F) copies of the Assigned Agreements
referred to in the Security Agreement, together with
a consent to such assignment, in substantially the
form of Exhibit C to the Security Agreement, duly
executed by each party to such Assigned Agreements
other than the Borrower,
(G) unless already provided pursuant to
Section 3.01(f), executed termination statements
(Form UCC-3 or a comparable form), in proper form to
be duly filed on the date of the Initial Extension of
Credit under the UCC of all jurisdictions that the
Agent may deem desirable in order to terminate or
amend existing Liens on the Collateral described in
the Security Agreement,
(H) evidence that all other action that the
Agent may deem necessary or desirable in order to
perfect and protect the Liens and security interests
created under the Security Agreement has been taken,
and
(I) the Blocked Account Letters and Lock-Box
Agreements referred to in the Security Agreement,
duly executed by each Blocked Account Bank and
Lock-Box Bank referred to in the Security Agreement.
(viii) Landlord consents in form and substance
reasonably satisfactory to the Agent, duly executed by the fee
owners or ground lessors of any property which is a leasehold.
(ix) Intentionally Omitted.
(x) A guaranty in substantially the form of Exhibit F
(as amended, supplemented or otherwise modified from time to
time in accordance with its terms, the "Guaranty" and with
each other guaranty delivered pursuant to Section 5.01(m), in
each case as amended, supplemented or otherwise modified from
time to time in accordance with its terms, the "Guaranties"),
duly executed by Blumenthal, CM and Westwater Inc.
(xi) Such financial, business and other information
regarding the Borrower and its Subsidiaries as the Lender
Parties shall have reasonably requested, including, without
limitation, information as to possible contingent liabilities,
tax matters, environmental matters, obligations under Plans,
collective bargaining agreements and other arrangements with
employees, audited annual financial statements for the years
ended December 31, 1995, December 31, 1996 and December 31,
1997, interim financial statements for the 5 month period
ended May 31, 1997 and May 31, 1998, the pro forma balance
sheet as to the Borrower dated as of May 31, 1998 and
forecasts prepared by management, in form and substance
satisfactory to the Lender Parties, of balance sheets, income
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statements and cash flow statements on a monthly basis for the
first year following the day of the Initial Extension of
Credit and on an annual basis for each year thereafter until
the Final Maturity Date.
(xii) A certificate, signed by the chief financial
officer of the Borrower, substantially in the form of Exhibit
I, attesting to the Solvency of the Borrower and its
Consolidated Subsidiaries taken as a whole.
(xiii) To the extent that any information that the
Borrower has or is aware of, or may become available to the
Lender Parties, shall disclose any hazards or any
Environmental Costs and Liabilities under Environmental Laws
that the Lender Parties deem, in their reasonable judgment,
material, the Lender Parties shall be satisfied that such
hazards or such Environmental Costs and Liabilities are
adequately reflected in the Borrower's financial reserves
shown on the financial statements.
(xiv) A letter, in form and substance satisfactory to
the Agent on behalf of the Lender Parties, from the Borrower
to Arthur Andersen LLP, its independent certified public
accountants, advising such accountants that the Agent and the
Lender Parties have been authorized to exercise all rights of
the Borrower and each of its Subsidiaries to require such
accountants to disclose any and all financial statements and
any other information of any kind that they may have with
respect to the Borrower or any of its Subsidiaries and
directing such accountants to comply with any reasonable
request of the Agent or any Lender Party for such information.
(xv) Evidence of insurance (including, without
limitation, business interruption insurance) naming the Agent
as additional insured and loss payee with such responsible and
reputable insurance companies or associations, and in such
amounts and covering such risks as are currently maintained by
the Borrower and each Subsidiary, which insurance shall be
reasonably satisfactory to the Agent.
(xvii) An intellectual property security agreement in
substantially the form of Exhibit E (together with each other
intellectual property security agreement delivered pursuant to
Section 5.01(l) or Section 5.01(m), in each case as amended,
supplemented or otherwise modified from time to time in
accordance with its terms, the "Intellectual Property Security
Agreement"), duly executed by the Borrower and the Guarantors,
together with evidence that all action that the Agent may deem
necessary or desirable in order to perfect and protect the
liens and security interests created under the Intellectual
Property Security Agreement has been taken.
(xviii) A favorable opinion of Bryan Cave LLP,
counsel for the Borrower, in substantially the form of Exhibit
H hereto and, in each case, as to such other matters as any
Lender Party through the Agent may reasonably request.
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(xix) Intentionally Omitted.
(xx) Copies of (A) all existing supply and
distribution agreements with mass merchant or specialty
retailers or other such entities to which the Borrower is a
party (collectively, the "Retailer Agreements");
(B) all existing agreements entered into by
the Borrower governing the terms and relative rights
of its capital stock and any agreements entered into
by shareholders relating to any such entity with
respect to its capital stock (collectively, the
"Shareholders' Agreements");
(C) all existing Plans and Multiemployer
Plans;
(D) all agreements evidencing or relating to
Existing Debt (other than in respect of Obligations
under Capitalized Leases) of the Borrower and its
Subsidiaries (collectively, the "Debt Agreements");
(E) all existing management, consulting and
similar agreements (other than employment agreements)
entered into by the Borrower with any of its
Affiliates (collectively, the "Management
Agreements");
(F) all existing tax sharing, all allocation
and other similar agreements entered into by the
Borrower (collectively, the "Tax Sharing
Agreements"); and
(G) all existing agreements evidencing or
relating to any Investments if the amount theretofore
invested exceeded (or if any requirement to make
additional investments would exceed) $100,000 (other
than Cash Equivalents) (collectively, the "Investment
Agreements");
all of which Retailer Agreements, Shareholders' Agreements, Plans,
Multiemployer Plans, Debt Agreements, Management Agreements, Tax
Sharing Agreements and Investment Agreements shall be in form and
substance reasonably satisfactory to the Agent on behalf of the Lender
Parties and shall be in full force and effect on the date of the
Initial Extension of Credit.
SECTION 3.02. Conditions Precedent to Each Borrowing and
Issuance. The obligation of each Appropriate Lender to make an Advance on the
occasion of each Borrowing (including the Initial Extension of Credit), and the
obligation of the Issuing Bank to issue a Letter of Credit (including the
initial issuance) shall be subject to the further conditions precedent that on
the date of such Borrowing or issuance (a) the following statements shall be
true (and each of the giving of the applicable Notice of Borrowing, Notice or
Issuance and the acceptance by the Borrower of the proceeds of such Borrowing or
Letter of Credit shall constitute a representation and warranty by the Borrower
that both on the date of such notice and on the date of such Borrowing such
statements are true):
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(i) the representations and warranties contained in each Loan
Document are correct on and as of such date, before and after giving
effect to such Borrowing or issuance and to the application of the
proceeds therefrom, as though made on and as of such date other than
any such representations or warranties that, by their terms, refer to a
specific date other than the date of such Borrowing, in which case as
of such specific date;
(ii) no event has occurred and is continuing, or would result
from such Borrowing or issuance or from the application of the proceeds
therefrom, that constitutes a Default;
and (b) the Agent shall have received such other approvals, opinions or
documents as any Appropriate Lender through the Agent or the Issuing Bank may
reasonably request.
SECTION 3.03. Conditions Precedent to Borrowing In Connection
With the Acquisition. The obligation of each Appropriate Lender to make Advances
on the occasion of a Borrowing of up to $3,000,000 to partially fund the
Acquisition shall be subject to the further conditions precedent on the date of
such Borrowing:
(a) The Lenders shall be satisfied with all legal, tax and
accounting matters, and shall be satisfied as to the Solvency of the
Borrower after giving effect to the Acquisition, including without
limitation the procedures performed with respect to Westwater by Arthur
Andersen LLP.
(b) The Lenders shall be satisfied with the corporate and
legal structure of the Borrower, both before and after giving effect to
the Acquisition.
(c) The Lenders shall be satisfied that the assets and
earnings of the Borrower immediately following the Acquisition
contemplated hereby will be sufficient to support the Obligations of
the Borrower under this Agreement and the Notes, the Loan Documents and
the Acquisition Documents and the timely amortization of all
Indebtedness and other Obligations of the Borrower.
(d) The Acquisition shall have been consummated strictly in
accordance with the terms of the Acquisition Documents, without any
waiver or amendment of any term, provision or condition set forth
therein not consented to by the Lenders and in compliance with all
applicable laws.
(e) The Agent shall have received on or before the date of the
Borrowing, each of even date therewith (unless otherwise specified), in
form and substance satisfactory to the Lenders (unless otherwise
specified) and (except for the Notes) in sufficient copies for each
Lender and Agent and Lender's counsel and in the case of (i) through
(vi) below to the extent reasonably necessary to evidence the
additional $3,000,000 Borrowing, the addition of any Guarantor and to
perfect the first priority security interest of the Lender Parties and
Agent in the assets of the Borrower and its Subsidiaries:
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(i) the Notes made payable to the order of the
Lenders;
(ii) the Security Collateral, together with stock or
bond powers duly executed in blank pursuant to the Security
Agreement;
(iii) the Collateral Documents (including without
limitation any additional UCC-1 financing statements and
amendments to existing UCC-1 financing statements);
(iv) the Credit Agreement (including revised
schedules);
(v) the Guarantees;
(vi) the Blocked Account Letters and Lockbox
Agreements;
(vii) Certified copies of the resolutions of the
Board of Directors of the Borrower and the General Partner
approving the Acquisition, all other transactions contemplated
thereby, and of all documents evidencing other necessary
corporate action and governmental approvals, if any, with
respect to the Acquisition and the Acquisition Documents.
(viii) A copy of the charter of the General Partner
and the organizational documents of Westwater and each
amendment thereto certified (as of a date reasonably near the
date hereof) by the Secretary of State of the state of
incorporation or organization of each such Person as being a
complete and correct copy thereof.
(ix) A copy of a certificate of the Secretary of
State of the state of incorporation of the General Partner and
organization of Westwater dated reasonably near the date of
the Borrowing in connection with the Acquisition, listing the
charter or organization documents of such Person and each
amendment thereto on file in his office and certifying that
(A) such amendments are the only amendments to such Person's
charter on file in his office, (B) such Person has paid all
franchise taxes to the date of such certificate and (C) such
Person is duly incorporated or organized and in good standing
under the laws of such state.
(x) Original counterparts of the Acquisition
Documents, each duly and validly executed by each party
thereto.
(xi) Such financial, business and other information
regarding Westwater and the General Partner as the Lenders
shall have reasonably requested.
(xii) A certificate, in substantially the form of
Exhibit I hereto, attesting to the Solvency of the Borrower
and its Subsidiaries, taken as a whole, immediately after
giving effect to the Acquisition from its president or vice
president and chief financial officer.
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(f) The Acquisition shall occur by no later than July 31,
1998.
(g) An opinion of counsel to the Borrower and Westwater, Inc.
and counsel to Westwater in form and substance satisfactory to the Agent as to
such matters as the Agent or its counsel may reasonably request, including
without limitation the due authorization, execution and delivery of the
Acquisition Documents and the enforceability thereof.
(h) Compliance with the requirements of Section 3.01(c), (d),
(g)(vii), (g)(viii) (g)(xvii) and (g)(xx) shall have been demonstrated to
Agent's satisfaction
(i) The Agent shall have received five Business Days' prior
written notice of the closing date for the Acquisition.
(j) The Lender Parties shall be satisfied that all Existing
Debt of Westwater has been prepaid, redeemed or defeased in full or otherwise
satisfied and extinguished. In addition, the creditors under the Existing Debt
of Westwater shall have terminated and released all security interests and Liens
(if any) on the assets owned by the Borrower and the Agent shall have received
such releases of security interests in and Liens on the assets owned by the
Borrower as may have been reasonably requested by the Agent, which releases
shall be in form and substance satisfactory to the Agent. Without limiting the
foregoing, there shall have been delivered (i) proper termination statements
(Form UCC-3 or the appropriate equivalent) for filing under the UCC of each
jurisdiction where a financing statement (Form UCC-1 or the appropriate
equivalent) was filed with respect to the Borrower in connection with the
security interests created with respect to such Existing Debt and the
documentation related thereto, (ii) terminations or assignments of any security
interest in, or Lien on, any patents, trademarks, copyrights, or similar
interests of the Borrower on which filings have been made and (iii) terminations
of all mortgages, leasehold mortgages and deeds of trust created with respect to
property of the Borrower, all of which shall be in form and substance
satisfactory to the Agent. All accrued fees and expenses of the Agent and the
Lender Parties (including the accrued fees and expenses of counsel to the Agent
and of local counsel to the Lender Parties) shall have been paid.
SECTION 3.04. Determinations Under Section 3.01 and 3.03. For
purposes of determining compliance with the conditions specified in Sections
3.01 and 3.03, each Lender Party shall be deemed to have consented to, approved
or accepted or to be satisfied with each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to
the Lender Parties unless an officer of the Agent responsible for the
transactions contemplated by the Loan Documents shall have received notice from
such Lender Party prior to the Initial Extension of Credit specifying its
objection thereto and if the Initial Extension of Credit consists of a
Borrowing, such Lender Party shall not have made available to the Agent such
Lender Party's ratable portion of such Borrowing.
SECTION 3.05. Post Closing Conditions and Covenants. (a) By no
later than July 31, 1998, Borrower shall have moved all accounts listed on
Schedule V to the Security Agreement to Fleet and shall have executed and
delivered Blocked Account Letter[s] and or Lock-Box Agreements, in the forms
attached to the Security Agreement as Exhibit A and Exhibit
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B, respectively, to the Agent. Failure to comply with this covenant shall be
deemed to be an Event of Default pursuant to Section 6.01(c) hereof.
(b) Within fifteen days after request therefor from the Agent,
Borrower shall have executed and delivered the Mortgage in form suitable for
recordation to the Agent, together with an opinion of local Iowa counsel to the
Borrower as to such matters as the Agent may reasonably request. Failure to
comply with this covenant shall be deemed to be an Event of Default under
Section 6.01(d) hereof.
(c) By no later than July 31, 1998, the Borrower shall have
delivered all documents required to be delivered pursuant to Section
3.01(g)(viii). Failure to comply with this covenant shall be deemed to be an
Event of Default under Section 6.01(d) hereof.
(d) The Borrower shall use its best efforts to reinstate the
qualification of Blumenthal as a foreign corporation and shall discharge its
State of California tax liability by no later than October 31, 1998. In the
event that Blumenthal fails to be so qualified by December 31, 1998, such
failure shall be an Event of Default under Section 6.01(c) hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties. The Borrower
represents and warrants as follows on the date hereof and on the date of any
Borrowing:
(a) The Borrower (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases
property or assets or in which the conduct of its business requires it
to so qualify or be licensed except, in the case of this clause (ii),
for such failures to be qualified or licensed which, in the aggregate,
would not have a Material Adverse Effect and (iii) has all requisite
corporate power and authority (including, without limitation, all
governmental licenses, permits and other approvals) to own or lease and
operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted. All of the outstanding
capital stock of the Borrower and each of its Subsidiaries has been
validly issued, is fully paid and non-assessable.
(b) Set forth on Schedule 4.01(b) hereto is a complete and
accurate list of all Subsidiaries of the Borrower showing as of the
date hereof (as to each such Subsidiary) the jurisdiction of its
incorporation, the number of shares of each class of capital stock
authorized, and the number outstanding, on the date hereof and the
percentage of the outstanding shares of each such class owned (directly
or indirectly) by the Borrower and each such Subsidiary and the number
of shares covered by all outstanding options, warrants, rights of
conversion or purchase and similar rights at the date hereof. All of
the outstanding capital stock of all of such Subsidiaries has been
validly issued, is fully paid and non-assessable and is owned by the
Borrower or one or more of its Subsidiaries free and clear of all
Liens, except those created under the Loan Documents, and has been
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issued free of pre-emptive rights. Each such Subsidiary (i) is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (ii) is duly
qualified and in good standing as a foreign corporation in each other
jurisdiction in which it owns or leases property or assets or in which
the conduct of its business requires it to so qualify or be licensed
except, in the case of this clause (ii), for such failures to be
qualified or licensed which, in the aggregate, would not have a
Material Adverse Effect and (iii) has all requisite corporate power and
authority (including, without limitation, all governmental licenses,
permits and other approvals) to own or lease and operate its properties
and assets and to carry on its business as now conducted and as
proposed to be conducted.
(c) The execution, delivery and performance by the Borrower
and each Subsidiary of this Agreement, the Notes and each other Loan
Document to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, are within such Person's
corporate powers, have been duly authorized by all necessary corporate
action, and do not (i) contravene such Person's charter or bylaws (or
equivalent documentation), (ii) violate any law (including, without
limitation, the Securities Exchange Act of 1934 and the Racketeer
Influenced and Corrupt Organizations Chapter of the Organized Crime
Control Act of 1970), rule, regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System),
order, writ, judgment, injunction, decree, determination or award, the
violation of which could reasonably be expected to have a Material
Adverse Effect, (iii) conflict with or result in the breach of, or
constitute a default under, any contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument binding on or
affecting such Person, any of its Subsidiaries or any of their
respective properties or assets or (iv) except for the Liens created
under the Loan Documents, result in or require the creation or
imposition of any Lien upon or with respect to any of the properties or
assets of the Borrower or any of its Subsidiaries. Except as set forth
on Schedule 4.01(c), neither the Borrower nor any of its Subsidiaries
is in violation of any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or in breach of
any such contract, loan agreement, indenture, mortgage, deed of trust,
lease or other instrument, the violation or breach of which could have
a Material Adverse Effect.
(d) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or, with respect to material contracts, any other third party is
required for (i) the due execution, delivery, recordation, filing or
performance by the Borrower of this Agreement, the Notes or any other
Loan Document to which it is or is to be a party, or for the
consummation of the transactions contemplated hereby or thereby, (ii)
the grant by the Borrower or any Subsidiary of the Liens granted by it
pursuant to the Collateral Documents, (iii) the perfection or
maintenance of the Liens created by the Collateral Documents (including
the first priority nature thereof) or (iv) the exercise by the Agent or
any Lender Party of its rights under the Loan Documents or the remedies
in respect of the Collateral pursuant to the Collateral Documents,
except for the authorizations, approvals, actions, notices and filings
listed on Schedule 4.01(d). All applicable waiting periods in
connection with the transactions contemplated hereby have expired
without any action having been taken by any competent authority
restraining, preventing or imposing materially adverse conditions
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upon the rights of the Borrower or its Subsidiaries freely to transfer
or otherwise dispose of, or to create any Lien on, any properties or
assets now owned or hereafter acquired by any of them.
(e) This Agreement has been, and each of the Notes and each
other Loan Document when delivered hereunder will have been, duly
executed and delivered by the Borrower and each Subsidiary, as the case
may be, party thereto. This Agreement is, and each of the Notes and
each other Loan Document is the legal, valid and binding obligation of
the Borrower and each Subsidiary, as the case may be, party thereto,
enforceable against such Person in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or limiting
creditors' rights or by equitable principles generally (regardless of
whether enforcement is sought in equity or at law).
(f) The Consolidated balance sheet of the Borrower and its
Subsidiaries as at December 31, 1997, and the related Consolidated
statements of income and cash flows of the Borrower and its
Subsidiaries for the Fiscal Year then ended, accompanied by an opinion
of Arthur Andersen LLP, independent public accountants, and the
Consolidated balance sheet of the Borrower and its Subsidiaries as at
May 31, 1998, and the related Consolidated statements of income and
cash flows of the Borrower and its Subsidiaries for the five month
period then ended, duly certified by the chief financial officer of the
Borrower, copies of which have been furnished to each Lender Party
prior to the Effective Date, fairly present the Consolidated financial
condition of the Borrower and its Subsidiaries as at such dates and the
results of the operations and cash flow of the Borrower and its
Subsidiaries for the periods ended on such dates, all in accordance
with GAAP applied on a consistent basis, and since December 31, 1997
there has been no Material Adverse Change. Except as fully disclosed in
such financial statements, there were as of the date of such balance
sheets referred to in this Section 4.01(f) no liabilities or
obligations with respect to the Borrower or any of its Subsidiaries of
any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due) which, either individually or in the
aggregate, could reasonably be expected to be material to the Borrower
or any of its Subsidiaries (other than any such liabilities or
obligations which arise in the ordinary course of business in
connection with contracts entered into by any such Person). As of such
balance sheet date, the Borrower knows of no basis for the assertion
against it or any of its Subsidiaries of any liability or obligation of
any nature whatsoever that is not fully disclosed in such financial
statements which, either individually or in the aggregate, could
reasonably be expected to be material to the Borrower or any of its
Subsidiaries.
(g) The pro forma balance sheet of the Borrower, in each case
as at May 31, 1998, certified by the chief financial officer of the
Borrower, copies of which have been furnished to each Lender Party,
fairly present the pro forma financial condition (taking into account
all assumptions contained therein) of the Borrower as at such date
after giving effect to the transactions contemplated hereby, all in
accordance with GAAP.
(h) The Consolidated forecasted balance sheets, income
statements and cash flows statements of the Borrower and its
Subsidiaries delivered to the Lender Parties
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pursuant to Section 3.01(g)(xi) or 5.03 were prepared in good faith on
the basis of the assumptions stated therein, which assumptions were
fair in the light of conditions existing at the time of delivery of
such forecasts, and represented, at the time of delivery, the
Borrower's best estimate determined in good faith of its future
financial performance.
(i) No information, exhibit or report furnished by the
Borrower or any Subsidiary to the Agent or any Lender Party in
connection with the negotiation of the Loan Documents or pursuant to
the terms of the Loan Documents contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements made therein not misleading on the date on which such
information, exhibit or report was so furnished.
(j) Except as disclosed on Schedule 4.01(j) or Schedule
4.01(gg), there is no action, suit, investigation, litigation or
proceeding affecting the Borrower or any of its Subsidiaries, including
any Environmental Action, pending or to Borrower's knowledge threatened
before any court, governmental agency or arbitrator that (i) could
reasonably be expected to have a Material Adverse Effect or (ii)
purports to affect the legality, validity or enforceability of this
Agreement, any Note, any other Loan Document or the Acquisition
Documents or the consummation of the transactions contemplated hereby
or thereby.
(k) No proceeds of any Advance will be used to acquire any
equity security of a class that is registered pursuant to Section 12 of
the Securities Exchange Act of 1934.
(l) Neither the Borrower nor any Subsidiary is engaged in the
business of extending credit for the purpose of purchasing or carrying
Margin Stock, and no proceeds of any Advance 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.
(m) Set forth on Schedule 4.01(m) hereto is a complete and
accurate list of all Plans and Multiemployer Plans.
(n) Except as set forth on Schedule 4.01(n), no ERISA Event
has occurred or is reasonably expected to occur with respect to any
Plan or Multiemployer Plan. Each Plan and each Multiemployer Plan is
and has been, in all material respects, maintained in form and
operation in compliance with its terms and all applicable laws,
including, without limitation, ERISA and the Internal Revenue Code. In
reliance upon the representations and warranties set forth in Section
2.14 hereof, no Advance made hereunder will result in a prohibited
transaction under Section 406 of ERISA or Section 4975 of the Internal
Revenue Code.
(o) Except as set forth on Schedule 4.01(n), as of the last
annual actuarial valuation date, the funded current liability
percentage, as defined in Section 302(d)(8) of ERISA, of each Plan is
100% and there has been no material adverse change in the funding
status of any such Plan since such date.
(p) Schedule B (Actuarial Information) to the most recent
annual report
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(Form 5500 Series) for each Plan, copies of which have been filed with
the Internal Revenue Service and furnished to the Lender Parties, is
complete and accurate and fairly presents the funding status of such
Plan, and since the date of such Schedule B there has been no material
adverse change in such funding status.
(q) Except as set forth on Schedule 4.01(n), neither the
Borrower nor any ERISA Affiliate has incurred or is reasonably expected
to incur any Withdrawal Liability to any Multiemployer Plan.
(r) Neither the Borrower nor any ERISA Affiliate has been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or has been terminated, within the meaning of
Title IV of ERISA, and no such Multiemployer Plan is reasonably
expected by Borrower or any of its ERISA Affiliates to be in
reorganization or to be terminated, within the meaning of Title IV of
ERISA.
(s) Schedule 4.01(n) lists any Plan or Multiemployer Plan
subject to Title IV of ERISA.
(t) Neither the Borrower, nor any Plan, nor any trust created
thereunder, nor any trustee or administrator thereof, has engaged in a
transaction in connection with which the Borrower, any Plan, or such
trust, could be subject to either a material civil penalty assessed
pursuant to section 409 or 502(i) of ERISA or a material tax imposed
pursuant to section 4975 or 4976 of the Internal Revenue Code.
(u) No Plan which is subject to Section 302 of ERISA or
Section 412 of the Internal Revenue Code has incurred an "accumulated
funding deficiency" as defined in either of such Sections, whether or
not waived, nor has requested or obtained any extension of any
applicable amortization period.
(v) No Plan is a multiple employer plan as described in
section 4063(a) of ERISA.
(w) Except as disclosed on Schedule 4.01(n), the Borrower has
no liability under any employee benefit plan, within the meaning of
Section 3(3) of ERISA, other than plans maintained by the Borrower.
(x) Each Plan that is intended to be "qualified" within the
meaning of Section 401(a) of the Internal Revenue Code has been
determined by the Internal Revenue Service to be so qualified, the
trusts maintained thereunder have been determined by the Internal
Revenue Service to be exempt from taxation under Section 501(a) of the
Internal Revenue Code, and all required submissions have been made to
the Internal Revenue Service with respect to maintaining the
"qualified" status of each such Plan under Section 401(a) of the
Internal Revenue Code, including those required by TRA '86 and prior
legislation.
(y) Except as set forth on Schedule 4.01(n), no Plan provides
benefits, including without limitation death or medical benefits
(whether or not insured), with
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respect to current or former employees or dependents thereof of the
Borrower beyond their retirement or other termination of service (other
than (i) coverage mandated by applicable law, (ii) death benefits or
retirement benefits under any "employee pension benefit plan," as that
term is defined in section 3(2) of ERISA, (iii) deferred compensation
benefits accrued as liabilities on the books of the Borrower or (iv)
benefits the full cost of which is borne by the current or former
employee (or his or her dependents or beneficiaries)).
(z) All reports, notices and other disclosure relating to
Plans required to be filed with, or furnished to, government entities,
plan participants or plan beneficiaries have been timely filed and
furnished in accordance with applicable law.
(aa) With respect to each applicable Plan, the Borrower and
any ERISA Affiliates have complied with the provisions of Section
4980B(f) of the Internal Revenue Code.
(bb) The Borrower has not received nor is aware of any
material actions, claims (other than routine claims for benefits),
lawsuits or arbitrations pending or, threatened with respect to any
Plan or Multiemployer Plan or against any fiduciary of any Plan or
Multiemployer Plan, and the Borrower has no knowledge of any facts that
could give rise to any such actions, claims, lawsuits or arbitrations.
(cc) Except as set forth on Schedule 4.01(n), neither the
Borrower nor any ERISA Affiliate has ever contributed to, or withdrawn
in a partial or complete withdrawal (within the meaning of Sections
4205 or 4203 of ERISA, respectively) from, any Multiemployer Plan or
has any fixed or contingent liability under Section 4204 of ERISA.
(dd) Except as set forth in the financial statements referred
to in this Section 4.01 and in Section 5.03, the Borrower and its
Subsidiaries have no material liability with respect to "expected post
retirement benefit obligations" within the meaning of Statement of
Financial Accounting Standards No. 106.
(ee) No Plan provides benefits which are contingent upon or
directly affected by the closing or shutdown of any facility or plant.
(ff) Neither the business nor the properties of the Borrower
or any of its Subsidiaries is affected by 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) that could have a
Material Adverse Effect.
(gg) Except as disclosed in Schedule 4.01(gg), the operations
and properties of the Borrower and each of its Subsidiaries comply in
all material respects with all applicable Environmental Laws, and the
Borrower and each of its Subsidiaries have obtained, maintain and
comply in all material respects with all Environmental Permits
necessary for their respective businesses, operations and properties,
all past
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Environmental Actions as to Borrower and each of its Subsidiaries have
been resolved without ongoing obligations or costs that could
reasonably be expected to have a Material Adverse Effect, and no
circumstances exist to Borrower's knowledge that could (i) form the
basis of an Environmental Action against the Borrower or any of its
Subsidiaries or any of its properties or (ii) cause any such property
to be subject to any restrictions on ownership, occupancy, use or
transferability under any Environmental Law, except, in each case, as
would not be reasonably expected to result in Environmental Costs and
Liabilities that could reasonably be expected to have a Material
Adverse Effect.
(hh) Except as disclosed in Schedule 4.01(gg), none of the
properties currently or, to the knowledge of the Borrower and its
Subsidiaries, formerly owned or operated or used for the disposal,
storage or treatment of Hazardous Materials by the Borrower or any of
its Subsidiaries is listed or proposed for listing on the NPL or on the
CERCLIS or any analogous state list or to Borrower's knowledge is
adjacent to any such property listed or proposed for listing on the
NPL; there are no and, to the knowledge of the Borrower and its
Subsidiaries, never have been any underground or aboveground storage
tanks or any surface impoundments, septic tanks, waste pits, sumps or
lagoons in which Hazardous Materials are being or have been treated,
stored or disposed on any property currently owned or operated by the
Borrower or any of its Subsidiaries or, to the knowledge of the
Borrower, on any property formerly owned or operated by the Borrower or
any of its Subsidiaries; there is no asbestos or asbestos-containing
material on any property currently owned or operated by the Borrower or
any of its Subsidiaries; and Hazardous Materials have not been
released, discharged or disposed of on any property currently or, to
the knowledge of the Borrower or its Subsidiaries, formerly owned or
operated by the Borrower or any of its Subsidiaries, except, in each
case, as would not be reasonably expected to result in Environmental
Costs and Liabilities to the Borrower and its Subsidiaries that could
reasonably be expected to have a Material Adverse Effect.
(ii) Except as disclosed in Schedule 4.01(gg), all Hazardous
Materials transported to or from any property currently or, to the
knowledge of the Borrower and its Subsidiaries, formerly owned or
operated by the Borrower or any of its Subsidiaries have been disposed
of in a manner not expected to result in any liability to the Borrower
or any of its Subsidiaries, except, in each case, as would not be
reasonably expected to result in Environmental Costs and Liabilities to
the Borrower and its Subsidiaries that could reasonably be expected to
have a Material Adverse Effect.
(jj) Neither the Borrower nor any of its Subsidiaries is a
party to any indenture, loan or credit agreement or any lease or other
agreement or instrument or subject to any charter or corporate
restriction that could reasonably be expected to have a Material
Adverse Effect.
(kk) The Collateral Documents create a valid and perfected
first priority security interest in the Collateral securing the payment
of the Secured Obligations, and all filings and other actions necessary
or desirable to perfect and protect such security interest have been
duly taken. The Borrower or a Subsidiary is the legal and beneficial
owner of the Collateral free and clear of any Lien, except for the
liens and security
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interests created or permitted under the Loan Documents.
(ll) The Borrower and each of its Subsidiaries has filed, has
caused to be filed or has been included in all tax returns or
extensions (Federal, state, local and foreign) required to be filed and
has paid all taxes shown thereon to be due, together with applicable
interest and penalties.
(mm) Set forth on Schedule 4.01(mm) hereto is a complete and
accurate list, as of the date hereof, of each taxable year of the
Borrower and each of its Subsidiaries for which Federal income tax
returns have been filed and for which the expiration of the applicable
statute of limitations for assessment or collection has not occurred by
reason of extension or otherwise (an "Open Year").
(nn) There is no unpaid amount, as of the date hereof, of
adjustments to the Federal income tax liability of the Borrower and
each of its Subsidiaries proposed by the Internal Revenue Service with
respect to Open Years. No issues have been raised by the Internal
Revenue Service in respect of Open Years that, in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(oo) There is no unpaid amount, as of the date hereof, of
adjustments to the state, local and foreign tax liability of the
Borrower and its Subsidiaries and Affiliates proposed by all state,
local and foreign taxing authorities (other than amounts arising from
adjustments to Federal income tax returns, if any) that, individually
and in the aggregate, could reasonably be expected to have a Material
Adverse Effect. No issues have been raised by such taxing authorities
that, individually and in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
(pp) Neither the Borrower nor any of its Subsidiaries 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. Neither the
making of any Advances, nor the issuance of any Letters of Credit nor
the application of the proceeds or repayment thereof by the Borrower,
nor the consummation of the other transactions contemplated hereby,
will violate any provision of such Act or any rule, regulation or order
of the Securities and Exchange Commission thereunder.
(qq) The Borrower and its Consolidated Subsidiaries, taken as
a whole, are, and after the consummation of the transactions
contemplated by the Loan Documents and receipt and application by the
Borrower of the proceeds of the Borrowings in accordance with the terms
of this Agreement will be, Solvent.
(rr) Set forth on Schedule 4.01(rr) hereto is a complete and
accurate list of all Existing Debt, showing as of the date hereof the
principal amount outstanding thereunder.
(ss) Set forth on Schedule 4.01(ss) hereto is a complete and
accurate list of all leases of real property under which the Borrower
or any of its Subsidiaries is the lessee,
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showing as of the date hereof the street address, county or other
relevant jurisdiction, state, lessor, lessee, expiration date and
annual rental cost thereof. Each such lease is the legal, valid and
binding obligation of the lessor thereof, enforceable in accordance
with its terms. CM has no assets other than the Connecticut Real
Property.
(tt) Set forth on Schedule 4.01(tt) hereto is a complete and
accurate list of all Investments held by the Borrower or any of its
Subsidiaries, showing as of the date hereof the amount, obligor or
issuer and maturity, if any, thereof. The Borrower has no Subsidiaries
other than those Subsidiaries listed on Schedule 4.01(b) hereto.
(uu) Set forth on Schedule 4.01(uu) hereto is a complete and
accurate list of all patents, registered trademarks, trade names,
service marks and registered copyrights, and all applications therefor
and licenses thereof, of the Borrower or any of its Subsidiaries,
showing as of the date hereof the jurisdiction in which registered, the
registration number, the date of registration and the expiration date.
(vv) Neither the Borrower nor any Subsidiary is (A) engaged in
any unfair labor practice that could reasonably be expected to have a
Material Adverse Effect or (B) a party to a collective bargaining
agreement. The Borrower is in compliance in all material respects with
all applicable laws, agreements and contracts relating to employment,
employment practices, wages, hours and terms and conditions of
employment, including, but not limited to, employee compensation
matters. There is (i) no unfair labor practice complaint or unlawful
employment practice charge pending against the Borrower or any
Subsidiary or threatened against any of them, and no grievance or
arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against the Borrower or any
Subsidiary or threatened against any of them, (ii) no strike, labor
dispute, slowdown or stoppage pending against the Borrower or any
Subsidiary or threatened against any of them, (iii) no union
representation proceeding pending with respect to the employees of the
Borrower or any Subsidiary and (iv) neither the Borrower nor any
Subsidiary has received notice of the intent of any federal, state,
local or foreign agency responsible for the enforcement of labor or
employment laws to conduct an investigation with respect to or relating
to the Borrower or any Subsidiary and no such investigation is in
progress except (with respect to any matter specified in clause (i),
(ii), (iii) or (iv) above, either individually or in the aggregate)
such as could not reasonably be expected to have a Material Adverse
Effect.
(xx) The Borrower and each of its Subsidiaries has good,
marketable and valid title to all assets owned by it, including,
without limitation, all property reflected as owned by it in the
balance sheets of the Borrower referred to in Section 4.01(f) (except
as sold or otherwise disposed of since the date of such balance sheets
pursuant to any transactions not prohibited under this Agreement), free
and clear of all Liens, other than (i) as referred to in the balance
sheets or in the notes thereto, (ii) Permitted Liens or (iii) Liens
permitted under Section 5.02(a).
(yy) The Borrower and each of its Subsidiaries is in
compliance with all applicable statues, laws, ordinances, codes, rules,
regulations and orders of, and all applicable restrictions imposed by,
all governmental bodies, domestic or foreign, in
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respect of the conduct of its business and the ownership of its
property and assets (including applicable statues, regulations, orders
and restrictions relating to environmental standards and controls) to
the extent required as of the date of the Initial Extension of Credit,
except such instances of noncompliance as could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse
Effect.
(zz) Neither the Borrower nor any of its Subsidiaries is in
default under any contract, document or agreement to which it is a
party, and no event, condition or occurrence currently exists, or will
result from the execution, delivery and performance by the Borrower of
the Loan Documents to which it is a party and the transactions
contemplated hereby and thereby, which, after notice or lapse of time,
or both, will constitute such a default by the Borrower under any
contract, document or agreement to which it is a party, in each case
except as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(aaa) Neither the Borrower nor any of its Subsidiaries has
directly or indirectly offered any Note or any part thereof or interest
therein for sale to, or solicited any offer to buy any of the same
from, or otherwise approached or negotiated in respect thereof with,
anyone other than an "accredited investor" as defined in Rule 501(a)
promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). Neither the Borrower nor any of its Subsidiaries nor
anyone acting on its behalf has taken or will take any action which
would subject the issuance and sale of any Note to the provisions of
Section 5 of the Securities Act or to the registration or qualification
requirements of any securities or "blue sky" law of any applicable
jurisdiction.
ARTICLE V
COVENANTS
SECTION 5.01. Affirmative Covenants. So long as any Advance,
any fees or any other Obligations owing hereunder shall remain unpaid, any
Letter of Credit shall be outstanding, or any Lender Party shall have any
Commitment hereunder, the Borrower will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply with all applicable laws, rules, regulations and
orders, such compliance to include, without limitation, compliance with
ERISA and the Racketeer Influenced and Corrupt Organizations Chapter of
the Organized Crime Control Act of 1970, except such instances of
noncompliance as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each
of its Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all Taxes, assessments and governmental charges or
levies imposed upon it or upon its property and (ii) all lawful claims
that, if unpaid, might by law become a Lien upon its property;
provided, however, that each Loan Party shall not be required to pay or
discharge any such Tax, assessment, charge or claim that is being
contested in good faith and by proper
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proceedings and as to which appropriate reserves are being maintained,
unless and until any Lien resulting therefrom attaches to its property
and becomes enforceable against its other creditors.
(c) Compliance with Environmental Laws. Comply, and cause each
of its Subsidiaries to comply, and use its best efforts to cause all
lessees and other Persons operating or occupying its properties to
comply, in all material respects, with all applicable Environmental
Laws and Environmental Permits, including conducting, and causing each
of its Subsidiaries to conduct, any investigation, study, sampling and
testing and undertaking any cleanup, removal, remedial or other action
to remove and clean up Hazardous Materials from any of its properties,
but only, in each case, as and to the extent required by any
Environmental Law.
(d) Maintenance of Properties and Assets; Insurance. The
Borrower will, and cause each of its Subsidiaries to, (i) keep all
property and assets necessary in its business in good working order and
condition (ordinary wear and tear excepted), (ii) maintain insurance
with financially sound and reputable insurance companies on all its
property and assets for the lower of replacement cost or market value
against such risks as applicable per location, (iii) maintain public
liability insurance with financially sound and reputable insurance
companies in such amounts and coverage as determined in good faith by
senior management of the Borrower to be appropriate for the Borrower
and its Subsidiaries and (iv) maintain workers' compensation insurance
with financially sound and reputable insurance companies as statutorily
required by each applicable locale. In addition to the requirements of
the immediately preceding sentence, the Borrower will, and will cause
each of its Subsidiaries to, at all times cause insurance against loss
or damage of the kinds customarily insured against by corporations
similarly situated and owning properties and engaged in like
businesses, with reputable insurers or with the government of the
United States of America or any agency or instrumentality thereof, in
such amounts (giving effect to self insurance) with such deductibles
and by such methods as shall be customary for corporations similarly
situated in the industry and as confirmed to the Agent on behalf of the
Lender Parties in writing by Arkwright Mutual Insurance Company prior
to the Effective Date.
(e) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each of its Subsidiaries to preserve and maintain,
its corporate existence and its rights (charter and statutory) and,
except where any failure to so maintain could not reasonably be
expected either singly or in the aggregate to have a Material Adverse
Effect, its permits, licenses, approvals, privileges and franchises.
(f) Visitation Rights. At any reasonable time and from time to
time upon prior notice permit the Agent or any of the Lender Parties or
any agents or representatives thereof, to examine, audit and make
copies of and abstracts from the records and books of account of, and
visit the properties of, the Borrower or any of its Subsidiaries, and
to discuss the affairs, finances and accounts of the Borrower or any of
its Subsidiaries with any of their officers or directors and with their
independent certified public accountants.
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(g) Preparation of Environmental Reports. At the reasonable
request of the Agent or the Required Lenders at the following times:
(i) upon the occurrence or continuance of an Event of Default, (ii)
upon the acquisition or sale of real property other than the
disposition of the Connecticut Real Property by the Borrower or any of
its Subsidiaries (in which case the request described herein shall be
limited to the real property being acquired or sold) and (iii) two
other times (determined in the reasonable discretion of the Required
Lenders, but in no event shall such two times be during the period when
any lawsuit, notice of violation or liability, claim or proceeding with
respect to any Environmental Law has been asserted in writing against
the Borrower or any of its Subsidiaries) during the term of this
Agreement, provide to the Lender Parties within 60 days after such
request, at the expense of the Borrower, a Phase 1 Environmental Site
Assessment Report for any of its properties described in such request,
prepared by an environmental consulting firm acceptable to the Agent on
behalf of the Lender Parties (and, if thereafter based upon the
recommendation of an environmental consulting firm applying standards
generally accepted in the profession, a Phase II environmental site
assessment report acceptable to the Agent on behalf of the Lender
Parties) conducted according to ASTM Standards then in effect and the
estimated cost of any compliance, removal or remedial action in
connection with any Hazardous Materials on such properties but only, in
each case, as and to the extent required by Environmental Law or a
Governmental Authority; without limiting the generality of the
foregoing, if the Agent on behalf of the Lender Parties determines at
any time that good cause exists that any such report will not be
provided within the time referred to above, the Agent on behalf of the
Lender Parties may retain an environmental consulting firm to prepare
such report at the expense of the Borrower, and the Borrower and each
of its Subsidiaries hereby agrees that it shall grant at the time of
such request, to the Agent, the Lender Parties, such firm and any
agents or representatives thereof permission, subject to the rights of
the Borrower, its Subsidiaries and any tenants, to enter onto their
respective properties to undertake such an assessment. With respect to
the disposition of the Connecticut Real Property, Borrower agrees to
provide to Lender any reports, forms or other information developed on
such properties and in its possession.
(h) Keeping of Books. Keep, and cause each of its Subsidiaries
to keep, proper books of record and account, in which true, full and
correct entries shall be made of all financial dealings and
transactions and the assets and business of the Borrower and each of
its Subsidiaries in accordance with generally accepted accounting
principles.
(i) Compliance with Terms of Leaseholds. Make all payments and
otherwise perform all obligations in respect of all leases of real
property to which the Borrower or any of its Subsidiaries is a party,
keep such leases in full force and effect and not allow such leases to
lapse or be terminated or any rights to renew such leases to be
forfeited or cancelled, notify the Agent of any material default by any
party with respect to such leases and cooperate with the Agent in all
respects to cure any such default.
(j) Performance of Obligations. Perform, and cause each of its
Subsidiaries to perform, all of its obligations under the terms of each
mortgage, indenture, security agreement, loan agreement, credit
agreement or any other agreement, contract or instrument by which it is
bound (except such non-performance as could not reasonably be
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expected to have a Material Adverse Effect).
(k) Transactions with Affiliates. Conduct, and cause each of
its Subsidiaries to conduct, all transactions otherwise permitted under
the Loan Documents with any of their Affiliates (other than, so long as
no Default or Event of Default is continuing, the Borrower and
Blumenthal and, after the Acquisition, Westwater Inc.) on terms that
are fair and reasonable and no less favorable to the Borrower or such
Subsidiary than it would obtain in a comparable arm's-length
transaction with a Person not an Affiliate; provided that the foregoing
restriction shall not apply so long as (in each case) no Default or
Event of Default shall have occurred and be continuing, to the payment
by the Borrower of an amount not to exceed 25% of Excess Cash Flow to
pay Preferred Stock dividends and/or redeem Preferred Stock, to the
payment of $12,500,000 on the Closing Date in connection with the
redemption of Preferred Stock and to the use of the Thread Escrow Funds
to redeem Preferred Stock.
(l) Covenant to Give Security. In addition to the requirements
of Section 5.01(m), upon the request of the Agent following the
occurrence and during the continuance of an Event of Default, and at
the expense of the Borrower, (i) within 20 days after such request,
furnish to the Agent a description of the real and personal properties
of the Borrower and each of its Subsidiaries in detail satisfactory to
the Agent, (ii) within 45 days after such request, duly execute and
deliver to the Agent for the benefit of the Secured Parties mortgages,
pledges, assignments and other security agreements, as specified by and
in form and substance satisfactory to the Agent, securing payment of
all the Obligations of the Borrower under the Loan Documents and
constituting Liens on all such properties, (iii) within 45 days after
such request, take whatever action (including, without limitation, the
recording of mortgages, the filing of UCC financing statements, the
giving of notices and the endorsement of notices on title documents)
may be necessary or advisable in the opinion of the Agent to vest in
the Agent (or in any representative of the Agent designated by it)
valid and subsisting Liens on the properties purported to be subject to
the security agreements delivered pursuant to this Section 5.01(l),
enforceable against all third parties in accordance with their terms,
(iv) within 60 days after such request, deliver to the Agent a signed
copy of a favorable opinion, addressed to the Agent, of counsel for the
Borrower acceptable to the Agent as to the matters contained in clauses
(i), (ii) and (iii) of this Section 5.01(l), as to such security
agreements being legal, valid and binding obligations of the Borrower
enforceable in accordance with their terms and as to such other matters
as the Agent may reasonably request and (v) at any time and from time
to time that an Event of Default is not continuing, promptly execute
and deliver any and all further instruments and documents and take all
such other action as the Agent may reasonably deem desirable in
obtaining the full benefits of, or in preserving the Liens of, such
security agreements.
(m) Additional Loan Parties. To the extent otherwise permitted
to organize or acquire any Subsidiary, cause any such organized or
acquired Subsidiary of the Borrower to execute and deliver to the
Agent, on behalf of the Secured Parties, as promptly as practicable and
in any event within 30 days after the organization or acquisition of
such Subsidiary (A) a security agreement supplement in the form of
Exhibit C to the Security Agreement, (B) a guaranty in the form of
Exhibit F hereto and (C) such other documents,
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agreements, certificates or instruments as the Agent may reasonably
request, in each case in form and substance reasonably satisfactory to
the Agent, and to take all such other actions that may be necessary or
that the Agent may deem reasonably desirable in order to perfect and
protect any pledge, assignment or security interest granted by such
security agreement (granting a security interest in the receivables,
inventory, deposit accounts, equipment, intellectual property and other
assets of such Subsidiary) of such Subsidiary to the Agent for the
benefit of the Secured Parties or to enable the Agent to exercise and
enforce its rights and remedies thereunder.
(n) Hedge Agreements. Borrower shall enter into Hedge
Agreements within 60 days after the Initial Extension of Credit in form
and substance satisfactory to the Agent with a Lender Party covering
twenty percent of the Advances.
SECTION 5.02. Negative Covenants. So long as any Advance,
together with interest, fees and all other Obligations incurred hereunder and
under the Notes shall remain unpaid, any Letter of Credit shall be outstanding
or any Lender Party shall have any Commitment hereunder, the Borrower covenants
and agrees that it will not, at any time:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any Lien on or with respect to any of its properties of any
character (including, without limitation, accounts) whether now owned
or hereafter acquired, or sign or file or suffer to exist under the UCC
of any jurisdiction, a financing statement that names the Borrower or
any of its Subsidiaries as debtor, or sign or suffer to exist any
security agreement authorizing any secured party thereunder to file
such financing statement, or assign any accounts or other right to
receive income, excluding, however, from the operation of the foregoing
restrictions the following:
(i) Liens created under the Loan Documents;
(ii) Permitted Liens;
(iii) Liens existing on the Effective Date and
described on Schedule 5.02(a)(iii) hereto;
(iv) Liens arising in connection with Capitalized
Leases permitted under Section 5.02(b)(i); provided that no
such Lien shall extend to or cover any Collateral or assets
other than the assets subject to such Capitalized Leases;
(v) purchase money Liens upon or in real property or
equipment acquired or held by the Borrower in the ordinary
course of business to secure the purchase price of such real
property or equipment or to secure Debt incurred solely for
the purpose of financing the acquisition of any such real
property or equipment to be subject to such Liens, or Liens
existing on any such real property or equipment at the time of
acquisition (other than any such Liens created in
contemplation of such acquisition that do not secure the
purchase price), or extensions, renewals or replacements of
any of the foregoing for the same or a
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lesser amount; provided, however, that no such Lien shall
extend to or cover any property other than the property or
equipment being acquired, and no such extension, renewal or
replacement shall extend to or cover any property not
theretofore subject to the Lien being extended, renewed or
replaced; and provided further that the aggregate principal
amount of the Debt secured by Liens permitted by this clause
(v) shall not exceed the amount permitted under Section
5.02(b)(i) at any time outstanding and that any such Debt
shall not otherwise be prohibited by the terms of the Loan
Documents;
(vi) the filing of financing statements solely as a
precautionary measure in connection with operating leases
permitted under Section 5.02(c); and
(vii) the replacement, extension or renewal of any
Lien permitted by clause (iii) of this Section 5.02(a) upon or
in the same property theretofore subject thereto or the
replacement, extension or renewal (without increase in the
amount or change in any direct or contingent obligor) of the
Debt secured thereby.
(b) Debt. Create, incur, assume or suffer to exist, or permit
any of its Subsidiaries to create, incur, assume or suffer to exist,
any Debt other than:
(i) Capitalized Leases and Capital Expenditures of
the Borrower and Debt of the Borrower secured by Liens
permitted by Section 5.02(a)(v) so long as the aggregate
principal amount of Obligations under such Capitalized Leases
and all Capital Expenditures and such Debt outstanding at any
time pursuant to this Section 5.02(b)(i) does not exceed in
the aggregate $250,000 in any Fiscal Year, except as otherwise
provided in Section 5.04(e);
(ii) Debt under the Loan Documents;
(iii) indorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business;
(iv) Debt of the Borrower consisting of trade
payables incurred in the ordinary course of business;
(v) intercompany Debt existing on the Effective Date
and described on Schedule 5.02(b)(v) hereto and such
additional intercompany Debt that is incurred in the ordinary
course of business between the Borrower and its Subsidiaries
and which is subordinate to the Debt under the Loan Documents;
and
(vi) Contingent Payments provided, however, that
Contingent Payments may only be made so long as no Default or
Event of Default under the Loan Documents shall be continuing
at the time of such payment.
(c) Lease Obligations. Create, incur, assume or suffer to
exist, or permit any of its Subsidiaries to create, incur, assume or
suffer to exist, any obligations as lessee (i) for the rental or hire
of real or personal property in connection with any sale and
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<PAGE> 62
leaseback transaction, or (ii) for the rental or hire of other real or
personal property of any kind under leases or agreements to lease other
than Capitalized Leases permitted by Section 5.02(b) having an original
term of one year or more.
(d) Mergers, Etc. Merge into or consolidate with any Person or
permit any Person to merge into it, or permit any of its Subsidiaries
to do so.
(e) Sales, Etc. of Assets. Sell, lease, transfer or otherwise
dispose of, or permit any of its Subsidiaries to sell, lease, transfer
or otherwise dispose of, any assets, or grant any option or other right
to purchase, lease or otherwise acquire any assets other than Inventory
to be sold in the ordinary course of its business, except:
(i) sales of Inventory (including, without
limitation, sales of obsolete Inventory) in the ordinary
course of its business consistent with past practices; and
(ii) sales or other dispositions of obsolete or worn
out or non-operating property sold or otherwise disposed of in
the ordinary course of business; provided however, that CM
shall be permitted to dispose of the Connecticut Real
Property.
(f) Investments in Other Persons. Make or hold, or permit any
of its Subsidiaries to make or hold, any Investment in any Person,
other than:
(i) loans and advances by the Borrower to its
employees in the ordinary course of its business as presently
conducted in an aggregate principal amount (determined without
regard to any write-downs or write-offs of such loans and
advances) not to exceed $25,000 at any one time outstanding;
(ii) Investments by the Borrower in cash and Cash
Equivalents, provided that the aggregate amount of all cash
and Cash Equivalents shall not exceed $200,000 at any one time
and provided further that all cash (other than petty cash not
exceeding $5,000) shall be deposited only in "Blocked
Accounts" pursuant to the Security Agreement;
(iii) Investments existing on the Effective Date and
described on Schedule 4.01(tt) hereto (provided that any
additional Investments made with respect thereto shall be
permitted only if independently permitted under the other
provisions of this Section 5.02(f));
(iv) extensions of trade credit in the ordinary
course of business and payable or dischargeable in accordance
with customary terms;
(v) in addition to the Investments permitted by the
preceding clauses of this Section 5.02(f), the Borrower may
make Investments in an aggregate amount not to exceed $100,000
at any one time outstanding; and
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<PAGE> 63
(vi) Investments in respect of securities of trade
creditors or customers provided for by a plan of
reorganization or similar arrangement upon the bankruptcy or
insolvency of such trade creditors or customers.
(g) Dividends, Etc. Declare or pay any dividends, purchase,
redeem, retire, defease or otherwise acquire for value any of its
capital stock or any warrants, rights or options to acquire such
capital stock, now or hereafter outstanding, return any capital to its
stockholders as such, make any distribution of assets, capital stock,
warrants, rights, options, obligations or securities to its
stockholders as such or issue or sell any capital stock or any
warrants, rights or options to acquire such capital stock, or permit
its Subsidiaries to do any of the foregoing, except so long as no
Default or Event of Default shall have occurred and be continuing:
(i) dividends payable solely in common stock;
(ii) cash dividends payable to or by the Borrower so
long as in the case of such dividend payments to the Borrower,
such proceeds shall be immediately applied by the Borrower to
the outstanding Revolving Credit Advances without any
reduction of the Revolving Credit Facility; and
(iii) the payment by the Borrower of cash dividends
on or the redemption of Preferred Stock of Borrower, provided
that, except for the redemption of $12,500,000 of Preferred
Stock required by Section 2.15, amounts so paid shall not in
the aggregate exceed 25% of Borrower's Excess Cash Flow in any
Fiscal Year, plus, so long as no Default or Event of Default
is continuing on the date such funds are received by Borrower,
an amount equal to the funds received by the Borrower in
respect of the Thread Escrow Agreement.
(h) Change in Nature of Business. Make, or permit any of its
Subsidiaries to make, any change in the nature of its business as
carried on at the Effective Date. Notwithstanding anything to the
contrary contained in this Agreement, the Borrower will not engage in
any business other than (i) the business in which the Borrower is
engaged on the Effective Date or (ii) any business which is determined
in good faith by the Board of Directors of the Borrower to be similar,
ancillary, complementary or related to, or an extension of, any
business described in clause (i) of this Section 5.02(h).
(i) Amendments to Charter and Certain Other Agreements. Amend,
or permit any of its Subsidiaries to amend (i) its charter, certificate
of incorporation (including, without limitation, by the filing or
modification of any certificate of designation) or bylaws (or
equivalent organizational documentation) or (ii) any agreement entered
into by it with respect to its capital stock, or enter into any new
agreement with respect to its capital stock (including, but not limited
to, the Stockholders Agreement), other than amendments, modifications
or changes thereto or to such new agreements which are not materially
adverse in any respect to the interests of the Lender Parties and are
not otherwise prohibited by the terms of this Agreement (in the case of
each of clauses (i) and (ii) other than in connection with any issuance
of any capital stock not prohibited by the terms of this Agreement) in
a manner that the Agent reasonably deems
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<PAGE> 64
material.
(j) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in (i) accounting policies
or reporting practices, except as permitted by GAAP or (ii) Fiscal
Year.
(k) Prepayments, Etc. of Debt. Prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof in
any manner, or make any payment in violation of any subordination terms
of, any Debt, other than the prepayment on the date of the closing of
the Acquisition of the Westwater Debt listed on Schedule 5.02(k) hereof
in accordance with the Acquisition Documents and the prepayment of
Advances in accordance with the terms of this Agreement.
(l) Creation of Subsidiaries. Establish, create or acquire, or
permit any of its Subsidiaries to establish, create or acquire, any
Subsidiaries after the Effective Date without the prior written consent
of the Agent in its sole discretion.
(m) Issuance of Capital Stock. Issue after the date hereof, or
permit any of its Subsidiaries to issue after the date hereof, (i) any
class of Preferred Stock, (ii) any class of common stock with mandatory
redemption rights or (iii) options or warrants to purchase or
securities convertible into any of the foregoing securities.
(n) Negative Pledge. Enter into or suffer to exist, or permit
any of its Subsidiaries to enter into or suffer to exist, any agreement
prohibiting or conditioning the creation or assumption of any Lien upon
any of its property or assets other than (i) in favor of the Secured
Parties and (ii) in connection with (A) any Debt permitted by Section
5.02(b)(vi) or (B) any Debt secured by purchase money Liens and
Capitalized Leases, in each case, to the extent permitted under Section
5.02(a).
(o) Partnerships. Become a general partner in any general or
limited partnership or joint venture, or permit any of its Subsidiaries
to do so.
(p) Other Transactions. Engage, or permit any of its
Subsidiaries to engage, in any transaction involving commodity options
or futures contracts or any similar speculative transactions
(including, without limitation, take-or-pay contracts).
(q) Hazardous Material. Permit or allow, or permit any of its
Subsidiaries to permit or allow, any Person operating or occupying any
of its properties to store, manage or dispose of any Hazardous Material
at, on, in or under any such property in material violation of any
Environmental Law or to otherwise materially violate any Environmental
Law.
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<PAGE> 65
(r) ERISA. (i) Engage in any transaction, or permit any of its
ERISA Affiliates to engage in any transaction, in connection with which
the Borrower could be subject to either a tax imposed by Section
4975(a) of the Code or the corresponding civil penalty assessed
pursuant to Section 502(i) or 5.02(l) of ERISA, which penalties and
taxes for all such transactions could be expected to have, in the
aggregate, a Material Adverse Effect.
(ii) Permit to exist, or permit any of its ERISA Affiliates to
permit to exist, any accumulated funding deficiency, for which a waiver
has not been obtained from the Internal Revenue Service, with respect
to any Plan.
(iii) Permit to exist, or permit any of its ERISA Affiliates
to permit to exist, any failure to make contributions or any unfunded
benefits liability which creates, or with the passage of time would
create, a statutory lien or requirement to provide security under ERISA
or the Code in favor of the PBGC or any Plan, Multiemployer Plan or
other entity.
(iv) Permit, or permit any of its ERISA Affiliates to permit,
the sum of the amount of unfunded benefit liabilities (determined in
accordance with Statement of Financial Accounting Standards No. 87)
under all Plans subject to Title IV of ERISA (excluding each such Plan
with an amount of unfunded benefit liabilities of zero or less) to
exceed $250,000 (for purposes of this Section 5.02(r)(iv), "unfunded
benefit liabilities" means the projected benefit obligations less the
fair value of plan assets).
(v) Fail to make any payment, or permit any of its ERISA
Affiliates to fail to make any payment, to any Multiemployer Plan that
it or any if its ERISA Affiliates may be required to make under such
Multiemployer Plan, any agreement relating to such Multiemployer Plan,
or any law pertaining thereto that could reasonably be expected to
have, in the aggregate, a Material Adverse Effect.
(vi) Withdraw, or permit any of its ERISA Affiliates to
withdraw, from any Multiemployer Plan where such withdrawal is likely
to result in any liability which could be expected to have, in the
aggregate, a Material Adverse Effect.
(vii) Take any action which could enable the PBGC to establish
liability which could have a Material Adverse Effect under any
agreement between Borrower and the PBGC including, without limitation,
the February, 1997 agreement referenced in Note 12 to the Borrower's
consolidated financial statements for the fiscal year ended December
31, 1997.
(viii) Except as required by law, increase benefits, create
new benefits, or change any employee coverage under any Plan subject to
Title IV of ERISA where such increase, creation, or change will cause
an increase in the expense of maintaining any such Plan, or adopt any
Plan subject to Title IV of ERISA.
SECTION 5.03. Reporting Requirements. So long as any Advance,
together
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<PAGE> 66
with interest, fees and all other Obligations hereunder and under the
Notes, shall remain unpaid, any Letter of Credit shall be outstanding or any
Lender Party shall have any Commitment hereunder, each Loan Party will furnish
to the Lender Parties, to the extent the following provisions are applicable:
(a) Default Notice. As soon as possible and in any event
within two days after the occurrence of each Default or any event,
development or occurrence reasonably likely to have a Material Adverse
Effect continuing on the date of such statement, a statement of the
chief financial officer of the Borrower setting forth details of such
Default, event, development or occurrence and the action that the
Borrower has taken and proposes to take with respect thereto.
(b) Quarterly Financials. As soon as available and in any
event within 60 days after the end of each quarter, a Consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of
such quarter and Consolidated statements of income and Consolidated
statements of cash flows of the Borrower and its Subsidiaries for the
period commencing at the end of the previous quarter and ending with
the end of such quarter and Consolidated statements of income and
Consolidated statements of cash flows of the Borrower and its
Subsidiaries for the period commencing at the end of the previous
Fiscal Year and ending with the end of such quarter, setting forth in
each case in comparative form the corresponding figures for the
corresponding quarter of the preceding Fiscal Year, all in reasonable
detail and duly certified by the chief financial officer of the
Borrower, together with (i) a certificate of said officer stating that
no Default has occurred and is continuing or, if a Default has occurred
and is continuing, a statement as to the nature thereof and the action
that the Borrower has taken and proposes to take with respect thereto
and (ii) in the event of any change from GAAP used in the preparation
of such financial statements, a statement of reconciliation conforming
such financial statements to GAAP.
(c) Quarterly Certificate. As soon as available and in any
event within 60 days after the end of each of the first three quarters
of each Fiscal Year, a schedule in form satisfactory to the Agent of
the computations used by the Borrower in determining compliance with
the covenants contained in Sections 5.04(a) through (d).
(d) Annual Financials. As soon as available and in any event
within 90 days after the end of each Fiscal Year, a copy of the annual
audit report for such year for the Borrower and its Subsidiaries,
including therein Consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such Fiscal Year and Consolidated
statements of income and a Consolidated statement of cash flows of the
Borrower and its Subsidiaries for such Fiscal Year, in each case
accompanied by an unqualified opinion of Arthur Andersen LLP or other
independent public accountants of recognized standing acceptable to the
Required Lenders, together with (i) a certificate of such accounting
firm to the Lender Parties stating that in the course of the regular
audit of the Consolidated financial statements of the 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 has occurred and is
continuing, or if, in the opinion of such accounting firm, a Default
has occurred and is continuing, a
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<PAGE> 67
statement as to the nature thereof, (ii) a schedule in form
satisfactory to the Agent of the computations used in determining, as
of the end of such Fiscal Year, compliance with the covenants contained
in Sections 5.04(a) through (d), (iii) a schedule of in form
satisfactory to the Agent setting forth the computations used in
determining, as of the end of such Fiscal Year, Excess Cash Flow for
such Fiscal Year, (iv) a certificate of the chief financial officer of
the Borrower stating that no Default has occurred and is continuing or,
if a default has occurred and is continuing, a statement as to the
nature thereof and the action that the Borrower has taken and proposes
to take with respect thereto and (v) in the event of any change from
GAAP in the generally accepted accounting principles used in the
preparation of such financial statements, a statement of reconciliation
conforming such financial statements to GAAP.
(e) Forecasts. As soon as available and in any event no later
than 30 days after the end of each Fiscal Year, forecasts prepared by
management of the Borrower and each Subsidiary of the Borrower, in form
and detail consistent with the past practice of the Borrower, of
balance sheets, income statements and cash flow statements on a monthly
basis for the Fiscal Year following such Fiscal Year then ended and on
an annual basis for each Fiscal Year thereafter until the Final
Maturity Date.
(f) Management Letters. Within two Business Days after the
receipt by the Borrower or any Subsidiary of any "management letter"
from its certified public accountants, notice of any issues raised in
such management letter which could reasonably be considered material
and promptly provide copies of any management discussions distributed
to any shareholders of the Borrower or any of its Subsidiaries.
(g) ERISA Events and ERISA Reports. (i) Promptly and in any
event within five Business Days after the Borrower or any ERISA
Affiliate knows or has reason to know that any ERISA Event has
occurred, a statement of the chief financial officer of the Borrower
describing such ERISA Event and the action, if any, that the Borrower
or such ERISA Affiliate has taken and proposes to take with respect
thereto and (ii) on the date any records, documents or other
information must be furnished to the PBGC with respect to any Plan
pursuant to Section 4010 of ERISA, a copy of such records, documents
and information.
(h) Plan Terminations. Promptly and in any event within two
Business Days after receipt thereof by the Borrower or any ERISA
Affiliate, copies of each notice from the PBGC stating its intention to
terminate any Plan or to have a trustee appointed to administer any
Plan.
(i) Actuarial Reports. Promptly and in any event within five
Business Days after receipt thereof by the Borrower or any ERISA
Affiliate, a copy of the annual actuarial valuation report of each Plan
the funded current liability percentage (as defined in Section
302(d)(8) of ERISA) of which is less than 100%.
(j) Plan Annual Reports. Promptly and in any event within 30
days after the filing thereof with the Internal Revenue Service, copies
of each Schedule B (Actuarial Information) to the annual report (Form
5500 Series) with respect to each Plan.
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<PAGE> 68
(k) Multiemployer Plan Notices. Promptly and in any event
within five Business Days after receipt thereof by the Borrower or any
ERISA Affiliate from the sponsor of a Multiemployer Plan, copies of
each notice concerning (i) the imposition of Withdrawal Liability by
any such Multiemployer Plan, (ii) the reorganization or termination,
within the meaning of Title IV of ERISA, of any such Multiemployer Plan
or (iii) the amount of liability incurred, or that may be incurred, by
the Borrower or any ERISA Affiliate in connection with any event
described in clause (i) or (ii) above.
(l) Plan Adoptions, Etc. Promptly after (i) the adoption or
commitment to the adoption thereof, a copy of any new Plan or
Multiemployer Plan of the Borrower or any of its Subsidiaries and (ii)
any amendment or commitment to any amendment thereof, a copy of such
amendment to any Plan or Multiemployer Plan of the Borrower or any of
its Subsidiaries.
(m) Litigation. Promptly after the commencement thereof,
notice of all actions, suits, investigations, litigation and
proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign,
affecting the Borrower or any of its Subsidiaries, other than any such
proceeding which is de minimis in nature.
(n) Securities Reports. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements and
reports that the Borrower or any of its Subsidiaries sends to its
stockholders, and copies of all regular, periodic and special reports,
and all registration statements, that the Borrower or any of its
Subsidiaries files with the Securities and Exchange Commission or any
governmental authority that may be substituted therefor, or with any
national securities exchange.
(o) Creditor Reports. Promptly after the furnishing thereof,
copies of any statement or report furnished to any other holder of the
securities of the Borrower or of any of its Subsidiaries pursuant to
the terms of any indenture, loan, credit or similar agreement and not
otherwise required to be furnished to the Lender Parties pursuant to
any other clause of this Section 5.03.
(p) Agreement Notices. Promptly upon receipt thereof, copies
of all notices, requests and other documents received by the Borrower
or any of its Subsidiaries under or pursuant to any indenture, loan,
credit or similar agreement regarding or related to any breach or
default by any party thereto or any other event that could materially
impair the value of the interests or the rights of the Borrower or any
of its Subsidiaries or otherwise have a Material Adverse Effect and
copies of any amendment, modification or waiver of any provision of any
indenture, loan, credit or similar agreement as the Agent may
reasonably request.
(q) Revenue Agent Reports. Within 10 days after receipt,
copies of all material Revenue Agent Reports (Internal Revenue Service
Form 886), or other written proposals of the Internal Revenue Service,
that propose, determine or otherwise set forth positive adjustments to
the Federal income tax liability of the affiliated group (within the
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<PAGE> 69
meaning of Section 1504(a)(1) of the Internal Revenue Code) of which
the Borrower is a member aggregating $500,000 or more.
(r) Environmental Conditions. Promptly after the receipt of a
written assertion or occurrence thereof, notice of any Environmental
Action against or of any condition or occurrence on any property of the
Borrower or any of its Subsidiaries that (i) results in noncompliance
by the Borrower or any of its Subsidiaries with any Environmental Law
or Environmental Permit that could be reasonably expected to result in
Environmental Costs and Liabilities that could reasonably be expected
to have a Material Adverse Effect and (ii) causes such property to be
subject to any restrictions on the ownership, occupancy, use or
transferability by the Borrower that could reasonably be expected to
result in Environmental Costs and Liabilities that could reasonably be
expected to have a Material Adverse Effect. All such notices shall
describe in reasonable detail the nature of the claim, investigation,
condition, occurrence or removal or remedial action and the Borrower's
response thereto. In addition, the Borrower will provide the Lender
Parties with copies of all significant communications with any
Governmental Authority relating to Environmental Laws, including,
without limitation, all notices issued under or pursuant to CERCLA, and
all significant communications, including, without limitation, reports,
with any third party relating to any Environmental Action of which
notice is required to be given pursuant to this Section 5.03(r).
(s) Insurance. As soon as available, and in any event within
30 days after the end of each Fiscal Year, a report summarizing the
insurance coverage (specifying type, amount and carrier) in effect for
the Borrower and its Subsidiaries and containing such additional
information as any Lender Party (through the Agent) may reasonably
specify.
(t) Other Information. Such other information respecting the
assets, business, condition (financial or otherwise), operations,
performance, properties or prospects of the Borrower or any of its
Subsidiaries as any Lender Party (through the Agent) may from time to
time reasonably request.
(u) Collateral Report. As soon as available and in any event
within 30 days after the end of each month, a report prepared by the
chief financial officer of the Borrower, in form and substance
reasonably satisfactory to the Agent (and, if the Agent so requests, in
a form capable of being processed by the Agent's computers), setting
forth (i) all Inventory amounts by general category and (ii) a summary
of aging of all Receivables.
SECTION 5.04. Financial Covenants. So long as any Advance
together with interest, fees or any other Obligations hereunder or under any
Note shall remain unpaid, any Letter of Credit shall be outstanding or any
Lender Party shall have any Commitment hereunder, the Borrower and its
Subsidiaries, on a Consolidated basis, will:
(a) Total Leverage Ratio. Maintain a Total Leverage Ratio for
each period set forth below of not more than the amount set
forth below for such period:
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<PAGE> 70
<TABLE>
<CAPTION>
Quarter Ending Ratio
-------------- -----
<S> <C>
September 30, 1998 2.25:1
December 31, 1998 2.25:1
March 31, 1999 2.25:1
June 30, 1999 2.25:1
September 30, 1999 2.00:1
December 31, 1999 2.00:1
March 31, 2000 2.00:1
June 30, 2000 2.00:1
September 30, 2000 1.75:1
December 31, 2000 1.75:1
March 31, 2001 1.75:1
June 30, 2001 1.75:1
September 30, 2001 1.50:1
December 31, 2001 1.50:1
March 31, 2002 1.50:1
June 30, 2002 1.50:1
September 30, 2002 1.50:1
December 31, 2002 1.50:1
March 31, 2003 1.50:1
June 30, 2003 1.50:1
</TABLE>
(b) Fixed Charge Coverage Ratio. Maintain a Fixed Charge Coverage Ratio
for each Rolling Period set forth below of not less than the amount set forth
below for such Rolling Period:
<TABLE>
<CAPTION>
Rolling Period Ending In Ratio
------------------------ -----
Quarter Ending
--------------
<S> <C>
September 30, 1998 1.25:1
December 31, 1998 1.25:1
March 31, 1999 1.25:1
June 30, 1999 1.25:1
September 30, 1999 1.25:1
December 31, 1999 1.25:1
March 31, 2000 1.25:1
June 30, 2000 1.25:1
September 30, 2000 1.25:1
December 31, 2000 1.25:1
March 31, 2001 1.25:1
</TABLE>
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<PAGE> 71
<TABLE>
<S> <C>
June 30, 2001 1.25:1
September 30, 2001 1.25:1
December 31, 2001 1.25:1
March 31, 2002 1.25:1
June 30, 2002 1.25:1
September 30, 2002 1.25:1
December 31, 2002 1.25:1
March 31, 2003 1.25:1
June 30, 2003 1.25:1
</TABLE>
(c) Interest Coverage Ratio. Maintain an Interest Coverage
Ratio for each Rolling Period set forth below of not less than the
amount set forth below for such Rolling Period:
<TABLE>
<CAPTION>
Rolling Period Ending In Ratio
------------------------ -----
Quarter Ending
--------------
<S> <C>
September 30, 1998 2.00:1
December 31, 1998 2.00:1
March 31, 1999 2.00:1
June 30, 1999 2.00:1
September 30, 1999 2.00:1
December 31, 1999 2.00:1
March 31, 2000 2.00:1
June 30, 2000 2.00:1
September 30, 2000 2.00:1
December 31, 2000 2.00:1
March 31, 2001 2.00:1
June 30, 2001 2.00:1
September 30, 2001 2.00:1
December 31, 2001 2.00:1
March 31, 2002 2.00:1
June 30, 2002 2.00:1
September 30, 2002 2.00:1
December 31, 2002 2.00:1
March 31, 2003 2.00:1
June 30, 2003 2.00:1
</TABLE>
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<PAGE> 72
(d) Current Ratio. Maintain at all times a Current Ratio for
each Rolling Period set forth below of not less than the amount set
forth below for such Rolling Period:
<TABLE>
<CAPTION>
Rolling Period Ending In Ratio
------------------------ -----
Quarter Ending
--------------
<S> <C>
September 30, 1998 1.50:1
December 31, 1998 1.50:1
March 31, 1999 1.50:1
June 30, 1999 1.50:1
September 30, 1999 1.50:1
December 31, 1999 1.50:1
March 31, 2000 1.50:1
June 30, 2000 1.50:1
September 30, 2000 1.50:1
December 31, 2000 1.50:1
March 31, 2001 1.50:1
June 30, 2001 1.50:1
September 30, 2001 1.50:1
December 31, 2001 1.50:1
March 31, 2002 1.50:1
June 30, 2002 1.50:1
September 30, 2002 1.50:1
December 31, 2002 1.50:1
March 31, 2003 1.50:1
June 30, 2003 1.50:1
</TABLE>
(e) Capital Expenditures. Not make any Capital Expenditures
(including Capital Leases) that would cause the aggregate of all such
Capital Expenditures made by the Borrower in any Fiscal Year to exceed
$250,000 in the aggregate in any Fiscal Year; provided, however, that
in Fiscal Year 1999 or Fiscal Year 2000, the Borrower shall be
permitted to make an additional $400,000 of Capital Expenditures if and
to the extent such Capital Expenditure is necessary in connection with
the repair or replacement of the roof of the Borrower's facility in
Lansing, Iowa.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("Events of Default")
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shall occur and be continuing:
(a) (i) the Borrower shall fail to pay any scheduled principal of any
Advance or Note or Letter of Credit or (ii) the Borrower shall fail to
pay any interest on or unscheduled principal payment of any Advance or
Note or to make any other payment under any Loan Document, in each case
when the same becomes due and payable, and such failure in the case of
clause (ii) only shall continue unremedied for three (3) days after
such amount was due and payable; or
(b) any representation or warranty made by the Borrower or any of its
Subsidiary (or any of its officers) under or in connection with any
Loan Document shall prove to have been incorrect in any material
respect when made; or
(c) the Borrower or any of its Subsidiaries shall fail to perform or
observe any term, covenant or agreement contained in Sections 2.15,
5.01(e), (g), (l) or (m), 5.02 (except, in the case of negative
covenants contained in Section 5.02, those Defaults which may occur or
arise other than on account of or by affirmative or intentional act or
inaction of the Borrower or any of its Subsidiaries or by reason of an
event or condition which the Borrower or any of its Subsidiaries shall
with knowledge permit to exist, all of which shall be subject to the
provisions of clause (d) below, provided, however, that in the Agent's
judgment, such Default is capable of being cured within such 30 day
period), 5.03 or 5.04; or
(d) the Borrower or any of its Subsidiaries shall fail to perform any
other term, covenant or agreement contained in any Loan Document on its
part to be performed or observed if such failure shall remain
unremedied for 30 days after the earlier of the date on which (A) a
Responsible Officer of the Borrower becomes aware of such failure or
(B) written notice thereof shall have been given to the Borrower by the
Agent or any Lender Party; or
(e) the Borrower or any of its Subsidiaries shall fail to pay any
principal of, premium or interest on or any other amount payable in
respect of any Debt that is outstanding in a principal or notional
amount of at least $250,000 either individually or in the aggregate
(but excluding Debt outstanding hereunder) of the Borrower or such
Subsidiary (as the case may be), when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other event shall occur or
condition shall exist under any agreement or instrument relating to any
such Debt and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event
or condition is to accelerate, or to permit the acceleration of, the
maturity of such Debt or otherwise to cause, or to permit the holder
thereof (or a trustee with respect thereto) to cause, such Debt to
mature; or any such Debt shall be declared to be due and payable or
required to be prepaid or redeemed (other than by a regularly scheduled
required prepayment or redemption), purchased or defeased, or an offer
to prepay, redeem, purchase or defease such Debt shall be required to
be made, in each case prior to the stated maturity thereof; or
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(f) the Borrower or any of its 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 the Borrower or any of its 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 receiver, trustee, or
other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it
(but not instituted by it) that is being diligently contested by it in
good faith, either such proceeding shall remain undismissed or unstayed
for a period of 45 days or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other
similar official for, it or any substantial part of its property) shall
occur; or the Borrower or any of its Subsidiaries shall take any
corporate action to authorize any of the actions set forth above in
this subsection (f); or
(g) any judgment or order for the payment of money (to the extent not
fully paid or discharged or not fully covered by a reputable and
solvent insurance company) shall be rendered against the Borrower 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 60 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect and the aggregate amount of all such
judgments exceeds $250,000; or
(h) any non-monetary judgment or order that could reasonably be
expected to have a Material Adverse Effect shall be rendered against
the Borrower or any of its Subsidiaries, and there shall be any period
of 60 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect; or
(i) any provision of any Loan Document after delivery thereof pursuant
to Section 3.01 or 5.01(l) shall for any reason cease to be in full
force and effect or shall cease to be valid and binding on or
enforceable against the Borrower, or the Borrower shall so state in
writing; or
(j) any Collateral Document after delivery thereof pursuant to Section
3.01 or 5.01(l) shall for any reason (other than pursuant to the terms
thereof) cease to create a valid and perfected first priority lien on
and security interest in any portion of Collateral purported to be
covered thereby; or
(k) Intentionally Omitted.
(l) any ERISA Event shall have occurred on or after June 22, 1998 with
respect to a Plan and the sum (determined as of the date of occurrence
of such ERISA Event) of the Insufficiency of such Plan and the
Insufficiency of any and all other Plans with respect to
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which an ERISA Event shall have occurred and then exist (or the
liability of the Borrower and the ERISA Affiliates related to such
ERISA Event) exceeds $250,000; or
(m) the Borrower or any ERISA Affiliate shall have been notified on or
after June 22, 1998 by the sponsor of a Multiemployer Plan that it has
incurred Withdrawal Liability to such Multiemployer Plan in an amount
that, when aggregated with all other amounts required to be paid to
Multiemployer Plans by the Borrower and the ERISA Affiliates as
Withdrawal Liability (determined as of the date of such notification),
exceeds $250,000 in excess of the unpaid portion of the Withdrawal
Liability with respect to the Schiffli Embroidery Workers Pension Fund
and the District 65 Pension Plan; or
(n) the Borrower or any ERISA Affiliate shall have been notified on or
after June 22, 1998 by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within
the meaning of Title IV of ERISA, and as a result of such
reorganization or termination the aggregate annual contributions of the
Borrower and the ERISA Affiliates to all Multiemployer Plans that are
then in reorganization or being terminated have been or will be
increased over the amounts contributed to such Multiemployer Plans for
the plan years of such Multiemployer Plans immediately preceding the
plan year in which such reorganization or termination occurs by an
amount exceeding $250,000; or
(o) Any Environmental Action or any Environmental Costs and Liabilities
that have a Material Adverse Effect and that shall remain unremedied by
30 days after the earlier of the date on which (A) a Responsible
Officer of the Borrower acquires knowledge that such Environmental
Action or Environmental Costs and Liabilities has a Material Adverse
Effect or (B) written notice thereof shall have been given to the
Borrower by the Agent or any Lender Party;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the
obligation of each Appropriate Lender to make Advances and of the Issuing Bank
to issue Letters of Credit to be terminated, whereupon the same shall forthwith
terminate, and (ii) shall at the request, or may with the consent, of the
Required Lenders, by notice to the Borrower, declare the Notes, all interest
thereon and all other amounts payable under this Agreement and the other Loan
Documents to be forthwith due and payable, whereupon the Notes, all such
interest and all such amounts 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 Borrower; provided, however, that in the
event of any circumstance described in Section 6.01(f) with respect to the
Borrower or any of its Subsidiaries under the Federal Bankruptcy Code, (x) the
obligation of each Lender to make Advances and of the Issuing Bank to issue
Letters of Credit shall automatically be terminated and (y) the Notes, all such
interest and all such amounts 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 Borrower.
SECTION 6.02. Application of Proceeds. Any moneys collected by the
Agent upon a declaration under Section 6.01 that the Notes, all interest thereon
and all other amounts payable under this Agreement or the other Loan Documents
are forthwith due and payable shall be
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applied in the following order:
First: to the payment of all costs, expenses and disbursements of the
Agent for which it is entitled to be reimbursed under Sections 7.05 and 8.04(a);
Second: ratably to the payment then due and unpaid on the Notes for
interest;
Third: ratably to the payment then due and unpaid on the Notes for
principal or any other Obligations to the Agent and Lender Parties; and
Fourth: to the payment of the remainder, if any, to the Borrower or
whomsoever may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may determine.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender Party (in its
capacities as a Lender) and the Issuing Bank (if applicable) hereby appoints and
authorizes the Agent (for purposes of this Article VII, the term "Agent" shall
include Fleet (and/or any of its affiliates) in its capacity as Agent pursuant
to any of the Collateral Documents where it at any time acts as such) to take
such action as agent on its behalf and to exercise such powers and discretion
under this Agreement and the other Loan Documents as are delegated to the Agent
by the terms hereof and thereof, together with such powers and discretion as are
reasonably incidental thereto. As to any matters not expressly provided for by
the 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 Required Lenders, and such instructions shall be binding upon all Lender
Parties and all holders of Notes; provided, however, that the Agent shall not be
required to take any action that exposes the Agent to personal liability or that
is contrary to this Agreement or applicable law. The Agent agrees to give to
each Lender Party prompt notice of each notice given to it by the Borrower
pursuant to the terms of this Agreement.
SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with the Loan
Documents, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent: (a) may treat
the payee of any Note as the holder thereof until the Agent receives and accepts
an Assignment and Acceptance entered into by the Lender that is the payee of
such Note, as assignor, and an Eligible Assignee, as assignee, as provided in
Section 8.07; (b) may consult with legal counsel (including counsel for the
Borrower), 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; (c)
makes no warranty or representation to any Lender Party and shall not be
responsible to any Lender Party for any statements, warranties or
representations (whether written or oral) made in or in
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connection with the Loan Documents; (d) 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 any Loan Document on the part of the Borrower or to inspect the
property (including the books and records) of the Borrower; (e) shall not be
responsible to any Lender Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any Lien or security interest created or purported to be created
under or in connection with, any Loan Document or any other instrument or
document furnished pursuant thereto; and (f) shall incur no liability under or
in respect of any Loan Document by acting upon any notice, consent, certificate
or other instrument or writing (which may be by telegram, telecopy or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03. Fleet and Affiliates. With respect to its Commitments,
the Advances made by it and the Notes issued to it, Fleet (and any successor
Agent) shall have the same rights and powers under the Loan Documents as any
other Lender Party and may exercise the same as though it were not the Agent;
and the term "Lender Party" or "Lenders Parties" shall, unless otherwise
expressly indicated, include Fleet in its individual capacity. Fleet and its
Affiliates may accept deposits from, lend money to, act as trustee under
indentures of, accept investment banking engagements from and generally engage
in any kind of business with, the Borrower, any of its Subsidiaries, any of
their respective Affiliates and any Person who may do business with or own
securities of the Borrower or any such Subsidiary, all as if Fleet were not the
Agent and without any duty to account therefor to the Lender Parties.
SECTION 7.04. Lender Party Credit Decision. Each Lender Party
acknowledges that it has, independently and without reliance upon the Agent or
any other Lender Party and based on the financial statements referred to in
Section 4.01 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 Party also acknowledges that it has and will,
independently and without reliance upon the Agent or any other Lender Party and
based on such documents and information as it shall deem appropriate at the
time, has made and will continue to make its own credit decisions in entering
into this Agreement and the other Loan Documents and in taking or not taking
action under this Agreement or under the other Loan Documents.
SECTION 7.05. Indemnification. Each Lender Party severally agrees to
indemnify the Agent (to the extent not promptly reimbursed by the Borrower) from
and against such Lender Party's ratable share (determined as provided below) of
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including, without limitation, fees and expenses of counsel) that
may be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of the Loan Documents or any action taken or omitted
by the Agent under the Loan Documents; provided, however, that no Lender Party
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 gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender Party agrees to reimburse the Agent
promptly upon demand for its ratable share of any costs and expenses (including,
without limitation, fees and expenses of counsel) payable by the Borrower under
Section 8.04, to the extent that the Agent is not promptly reimbursed for such
costs and expenses by the Borrower. For purposes of this Section 7.05, the
Lender Parties' respective ratable shares of any amount shall be determined, at
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any time, according to the sum of (a) the aggregate principal amount of the
Advances outstanding at such time and owing to the respective Lender Parties and
(b) their respective Unused Revolving Credit Commitments at such time. The
failure of any Lender Party to reimburse the Agent promptly upon demand for its
ratable share of any amount required to be paid by the Lender Party to the Agent
as provided herein shall not relieve any other Lender Party of its obligation
hereunder to reimburse the Agent for its ratable share of such amount, but no
Lender Party shall be responsible for the failure of any other Lender Party to
reimburse the Agent for such other Lender Party's ratable share of such amount.
Without prejudice to the survival of any other agreement of any Lender Party
hereunder, the agreement and obligations of each Lender Party contained in this
Section 7.05 shall survive the payment in full of principal, interest, fees and
all other amounts payable hereunder and under the other Loan Documents.
SECTION 7.06. Successor Agents. The Agent may resign at any time by
giving written notice thereof to the Lender Parties and the Borrower and may be
removed at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent with the consent of the Borrower (such consent shall not be
unreasonably withheld or delayed). If no successor Agent shall have been so
appointed by the Required Lenders, and shall have accepted such appointment,
within 30 days after the retiring Agent's giving of notice of resignation or the
Required Lenders' removal of the retiring Agent, then the retiring Agent may, on
behalf of the Lender Parties, appoint a successor Agent, which shall be a
commercial bank organized under the laws of the United States or of any State
thereof and having a combined capital and surplus of at least $250,000,000. Upon
the acceptance of any appointment as Agent hereunder by a successor Agent and
upon the execution and filing or recording of such financing statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as the Required Lenders may request, in order to continue the
perfection of the Liens granted or purported to be granted by the Collateral
Documents, such successor Agent shall succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under the
Loan Documents. After any retiring Agent's resignation or removal hereunder as
Agent, the provisions of this Article VII shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement; provided, however, that the provisions of Section 7.05 shall continue
to enure for the benefit of the retiring Agent with respect to any matter
arising out of facts or circumstances prior to such resignation or removal.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment, forbearance or waiver of
any provision of this Agreement or the Notes or any other Loan Document, nor
consent to any departure by the Borrower therefrom, shall in any event be
effective unless the same shall be in writing and signed (or, in the case of the
Collateral Documents, consented to) by the Required Lenders, provided that (a)
no amendment, forbearance, waiver or consent shall, unless in writing and signed
by all of the Lenders, do any of the following at any time: (i) waive any of the
conditions specified in Section 3.01 or 3.02 or, in the case of the Borrowing in
connection with the Acquisition, Section 3.03, (ii) change the number of Lenders
or the percentage of (x) the Commitments, (y) the aggregate unpaid principal
amount of the Advances or (z) the aggregate Available Amount of Outstanding
Letters of Credit that, in each case, shall be required for the Lenders or any
of them to take any action hereunder, (iii) release all or substantially all of
the Collateral in any transaction or series of related transactions or permit
the creation, incurrence, assumption or existence of any Lien on all or
substantially all of the Collateral in any transaction or series of related
transactions to secure any Obligations other than Obligations owing to the
Secured Parties under the Loan Documents or (iv) amend this Section 8.01 and (b)
no amendment, forbearance, waiver or consent shall, unless in writing and signed
by the Required Lenders and each Lender that has a Commitment under the
Revolving Credit Facility if affected by such amendment, forbearance, waiver or
consent, (i) increase the Commitments of such Lender or subject such Lender to
any additional obligations, (ii) reduce the principal of, or interest on, the
Notes held by such Lender or any fees or other amounts payable hereunder to such
Lender, (iii) postpone any date fixed for any payment of principal of, or
interest on, the Notes held by such Lender or any fees or other amounts payable
hereunder to such Lender or (iv) change the order of application of any
prepayment set forth in Section 2.06 in any manner that materially affects such
Lender; provided further no amendment, forbearance, waiver or consent shall,
unless in writing and signed by the Issuing Bank, in addition to the Lenders
required above to take such action, effect the rights or obligations of the
Issuing Bank under this Agreement; and provided further, that no amendment,
forbearance, 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.
SECTION 8.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered,
if to the Borrower, at its address at 1 Palmer Terrace, 3rd Floor, Carlstadt,
New Jersey 07072, Attention: Edward F. Cooke, Vice President and Chief Financial
Officer, telecopier number (201) 507-9060, with copies to Bryan Cave LLP, 245
Park Avenue, New York, New York 10167, Attention: Peter A. Eisenberg, Esq.,
telecopier number (212) 692-1900; if to any Initial Lender, at its Domestic
Lending Office specified opposite its name on Schedule I hereto; if to any other
Lender Party, at its Domestic Lending Office specified in the Assignment and
Acceptance pursuant to which it became a Lender Party; and if to the Agent or
Issuing Bank, at its address at 1185 Avenue of the Americas, New York, New York
10036, Attention: John M. Tuohy, telecopier number (212) 819-4120; with a copy
to Kramer, Levin, Naftalis & Frankel, 919 Third Avenue, New York,
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New York 10022, Attention: Allan E. Reznick, Esq., telecopier number (212)
715-8000 or, as to each party, at such other address as shall be designated by
such party in a written notice to the other parties. All such notices and
communications shall, when mailed, telegraphed, telecopied or telexed, be
effective upon receipt. Delivery by telecopier of an executed counterpart of any
amendment or waiver of any provision of this Agreement or the Notes or of any
Exhibit hereto to be executed and delivered hereunder shall be effective as
delivery of a manually executed counterpart thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender
Party or the Agent to exercise, and no delay in exercising, any right hereunder
or under any Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on
demand (i) all reasonable costs and expenses of the Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
the Loan Documents (including, without limitation, (A) all reasonable due
diligence, collateral review, syndication (up to a maximum of $5,000),
transportation, computer, duplication, appraisal, audit, insurance, consultant,
search, filing and recording fees and out-of-pocket expenses and (B) the
reasonable fees and expenses of counsel and local counsel for the Agent with
respect thereto, with respect to advising the Agent as to its rights and
responsibilities, or the perfection, protection or preservation of rights or
interests, under the Loan Documents, with respect to negotiations with the
Borrower or its subsidiaries or with other creditors of the Borrower or any of
its Subsidiaries arising out of any Default or any events or circumstances that
may give rise to a Default and with respect to presenting claims in or otherwise
participating in or monitoring any bankruptcy, insolvency or other similar
proceeding involving creditors' rights generally and any proceeding ancillary
thereto) and (ii) all reasonable costs and expenses of the Agent and the Lender
Parties in connection with the enforcement of the Loan Documents, whether in any
action, suit or litigation, any bankruptcy, insolvency or other similar
proceeding affecting creditors' rights generally (including, without limitation,
the fees and expenses of counsel for the Agent and each Lender Party with
respect thereto).
(b) The Borrower agrees to indemnify and hold harmless the Agent, each
Lender Party and each of their Affiliates and their respective officers,
directors, employees, agents and advisors (each, an "Indemnified Party") from
and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, fees and expenses of counsel) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of, or in connection with the
preparation for a defense of, any investigation, litigation or proceeding
arising out of, related to or in connection with (i) the Facilities, the actual
or proposed use of the proceeds of the Advances, the Loan Documents or any of
the transactions contemplated thereby or (ii) the actual or alleged presence of
Hazardous Materials on any property of the Borrower or any of its Subsidiaries
or any Environmental Action relating in any way to the Borrower or any of its
Subsidiaries, in each case whether or not such investigation, litigation or
proceeding is brought by the Borrower, its directors, shareholders or creditors
or an Indemnified Party or any Indemnified Party is otherwise a party thereto
and whether or not the transactions contemplated hereby are consummated, except
to the
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extent such claim, damage, loss, liability or expense is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted solely from such Indemnified Party's gross negligence or willful
misconduct. The Borrower also agrees not to assert any claim against the Agent,
any Lender Party or any of their Affiliates, or any of their respective
officers, directors, employees, attorneys and agents, on any theory of
liability, for special, indirect, consequential or punitive damages arising out
of or otherwise relating to the Facilities, the actual or proposed use of the
proceeds of the Advances, the Letters of Credit, the Loan Documents or any of
the transactions contemplated thereby.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made (i) by the Borrower to or for the account of a Lender Party
other than on the last day of the Interest Period for such Advance, as a result
of a payment or Conversion pursuant to Section 2.09(b)(i) or 2.10(d),
acceleration of the maturity of the Notes pursuant to Section 6.01 or for any
other reason or (ii) by an Eligible Assignee to a Lender Party upon an
assignment of rights and obligations under this Agreement pursuant to Section
8.07 as a result of a demand by the Borrower pursuant to Section 8.07(a), in
each case other than on the last day of the Interest Period for such Advance,
the Borrower shall, upon demand by such Lender Party (with a copy of such demand
to the Agent), pay to the Agent for the account of such Lender Party any amounts
required to compensate such Lender Party for any additional losses, costs or
expenses that it may reasonably incur as a result of such payment, including,
without limitation, any loss (other than any loss of anticipated profits), cost
or expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by any Lender Party to fund or maintain such Advance or to
repay any amount required to be paid under Section 2.11(f).
(d) If the Borrower fails to pay when due any costs, expenses or other
amounts payable by it under any Loan Document, including, without limitation,
reasonable fees and expenses of counsel and indemnities, such amount may be paid
on behalf of the Borrower by the Agent or any Lender Party, in its sole
discretion.
(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder or under any other Loan Document, the agreements and
obligations of the Borrower contained in Sections 2.10 and 2.12 and this Section
8.04 shall survive the indefeasible and irrevocable payment in full of
principal, interest, fees and all other amounts payable hereunder and under any
of the other Loan Documents.
SECTION 8.05. Right of Set-off. Upon (i) (a) the occurrence and during
the continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of Section 6.01 or
(ii) the occurrence of any Event of Default specified in Section 6.01(f), each
Lender Party and each of its respective Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and otherwise 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 Party or such Affiliate to or for the credit or the account of
the Borrower against any and all of the Obligations of the Borrower now or
hereafter existing under this Agreement and the Note or Notes (if any) held by
such Lender Party, irrespective of whether such Lender Party shall have made any
demand under this Agreement or such Note or Notes and although such obligations
may be unmatured. Each
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Lender Party agrees promptly to notify the Borrower after any such set-off and
application; 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
Party and its respective Affiliates under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
that such Lender Party and its respective Affiliates may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective on
the date (the "Effective Date") on which, the Borrower and the Agent have signed
a counterpart hereof (whether the same or different counterparts) and the
Borrower shall have delivered the same to the Agent and when the Agent shall
have been notified by each Initial Lender that such Initial Lender has executed
this Agreement and thereafter shall be binding upon and inure to the benefit of
the Borrower, the Agent and each Lender Party and their respective successors
and assigns, except that the Borrower shall not have the right to assign its
rights hereunder or any interest herein without the prior written consent of the
Lender Parties.
SECTION 8.07. Assignments and Participations. (a) Each Initial Lender
may and, if demanded by the Borrower (following a demand by such Lender pursuant
to Section 2.10 or 2.12) upon at least 5 Business Days' notice to such Lender
and the Agent, shall assign to no more than two (so long as no Default or Event
of Default shall have occurred, in which case each Initial Lender may assign to
as many Eligible Assignees as it may determine) Eligible Assignees all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment or Commitments, the Advances
owing to it and the Note or Notes held by it); provided, however, that (i) each
such assignment shall be of a uniform, and not a varying, percentage of such
Lender's rights and obligations under and in respect of one or more Facilities,
(ii) except in the case of an assignment to a Person that, immediately prior to
such assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than the lesser of (x) $1,000,000 in the aggregate or (y) the
total amount of such assigning Lender's Commitment hereunder, (iii) each such
assignment shall be to an Eligible Assignee, (iv) each such assignment made as a
result of a demand by the Borrower pursuant to this Section 8.07(a) shall be
arranged by the Borrower after consultation with the Agent and shall be either
an assignment of all of the rights and obligations of the assigning Lender under
this Agreement or an assignment of a portion of such rights and obligations made
concurrently with another such assignment or other such assignments that
together cover all of the rights and obligations of the assigning Lender under
this Agreement, (v) no Lender shall be obligated to make any such assignment as
a result of a demand by the Borrower pursuant to this Section 8.07(a) unless and
until such Lender shall have received one or more payments from either the
Borrower or one or more Eligible Assignees in an aggregate amount at least equal
to the aggregate outstanding principal amount of the Advances owing to such
Lender, together with accrued interest thereon to the date of payment of such
principal amount and all other amounts payable to such Lender under this
Agreement, (vi) no such assignments shall be permitted without the consent of
the Agent until the Agent shall have notified the Lender Parties that
syndication of the Commitments hereunder has been completed and (vii) the
parties to each such assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance, together
with any Note or Notes subject to such assignment and a processing and
recordation fee of $2,000.
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<PAGE> 83
(b) The Issuing Bank may assign to an Eligible Assignee all of its
rights and obligations under the undrawn portion of its Letter of Credit
Commitment at any time; provided, however, that (i) each such assignment shall
be to an Eligible Assignee that is considered by the Agent in its reasonable
discretion to be suitable with respect to the Borrower's requirements at such
time and (ii) the parties to each such assignment shall execute and deliver to
the Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance, together with a processing and recordation fee of $2,000.
(c) Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in such Assignment and Acceptance, (x) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender or the Issuing Bank assignor thereunder shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such Assignment
and Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's or the Issuing Bank's rights and
obligations under this Agreement, such Lender or the Issuing Bank shall cease to
be a party hereto).
(d) By executing and delivering an Assignment and Acceptance, the
Lender Party 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 Party makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, this Agreement or any other Loan Document or any
other instrument or document furnished pursuant hereto or thereto; (ii) such
assigning Lender Party makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under any
Loan Document or any other instrument or document furnished pursuant thereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Section 4.01,
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 Party or any other Lender Party and based on such
documents and information as it shall deem appropriate at the time, make and
continue to make its own credit decisions in entering into such Assignment and
Acceptance and thereafter 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 and discretion under the Loan Documents as are delegated
to the Agent by the terms hereof, together with such powers and discretion as
are reasonably incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement and the other Loan Documents are required to be performed by
it as a Lender or Issuing Bank, as the case may be.
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<PAGE> 84
(e) The Agent shall maintain at its address referred to in Section 8.02
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 Lender Parties
and the Commitment under the Facility of, and principal amount of the Advances
owing under the Facility to, each Lender Party from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrower, the Agent and the Lender
Parties may treat each Person whose name is recorded in the Register as a Lender
Party hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender Party at any reasonable
time and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender Party and an assignee, together with any Note or Notes subject
to such assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit C hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrower. In the case of
any assignment by a Lender, within five Business Days after its receipt of such
notice, the Borrower, at its own expense, shall execute and deliver to the Agent
in exchange for the surrendered Note or Notes a new Note to the order of such
Eligible Assignee in an amount equal to the Commitment assumed by it under a
Facility pursuant to such Assignment and Acceptance and, if the assigning Lender
has retained a Commitment hereunder under such Facility, a new Note to the order
of the assigning Lender in an amount equal to the Commitment retained by it
hereunder. Such new Note or Notes shall be in an aggregate principal amount
equal to the aggregate principal amount of such surrendered Note or Notes, shall
be dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of Exhibit A hereto.
(g) Each Lender Party may sell participations in or to all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Advances owing to it and
the Note or Notes (if any) held by it) to any Person other than the Borrower or
any Subsidiary or Affiliate of the Borrower; provided, however, that (i) such
Lender Party's obligations under this Agreement (including, without limitation,
its Commitments) shall remain unchanged, (ii) such Lender Party shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender Party shall remain the holder of any such Note
for all purposes of this Agreement, (iv) the Borrower, the Agent and the other
Lender Parties shall continue to deal solely and directly with such Lender Party
in connection with such Lender Party's rights and obligations under this
Agreement and (v) no participant under any such participation shall have any
right to approve any amendment or waiver of any provision of any Loan Document,
or any consent to any departure by the Borrower therefrom, except to the extent
that such amendment, waiver or consent would reduce the principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation, postpone any date fixed for
any payment of principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, or release all or substantially all of the Collateral.
(h) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or
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<PAGE> 85
participant or proposed assignee or participant any information relating to the
Borrower furnished to such Lender Party by or on behalf of the Borrower;
provided, however, that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any Confidential Information received by it from such Lender
Party on the terms set forth herein.
(i) Notwithstanding any other provision contained in this Agreement,
any Lender Party may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
SECTION 8.08. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.
SECTION 8.09. No Liability of the Issuing Bank. The Borrower assumes
all risks of the acts or omissions of any beneficiary or transferee of any
Letter of Credit with respect to its use of such Letter of Credit. Neither the
Issuing Bank nor any of its officers or directors shall be liable or responsible
for: (a) the use that may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by the Issuing Bank
against presentation of documents that do not comply with the terms of a Letter
of Credit, including failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or (d) any other circumstances whatsoever in
making or failing to make payment under any Letter of Credit, except that the
Borrower shall have a claim against the Issuing Bank, and the Issuing Bank shall
be liable to the Borrower, to the extent of any direct, but not consequential,
damages suffered by the Borrower that the Borrower proves were caused by (i) the
Issuing Bank's willful misconduct or gross negligence in determining whether
documents presented under any Letter of Credit comply with the terms of the
Letter of Credit or (ii) the Issuing Bank's willful or grossly negligent failure
to make lawful payment under a Letter of Credit after the presentation to it of
a draft and certificates strictly complying with the terms and conditions of the
Letter of Credit. In furtherance and not in limitation of the foregoing, the
Issuing Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary.
SECTION 8.10. Confidentiality. Neither the Agent nor any Lender Party
shall disclose any Confidential Information to any Person without the consent of
the Borrower, other than (a) to the Agent's or such Lender Party's Affiliates
and their respective officers, directors, employees, agent and advisors and to
actual or prospective Eligible Assignees and participants, and then only on a
confidential basis, (b) as required by any law, rule or regulation or judicial
process and (c) as requested or required by any state, federal or foreign
authority or examiner regulating banks or banking or insurance companies.
-85-
<PAGE> 86
SECTION 8.11. Jurisdiction, Etc. (a) THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN SUCH
STATE. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF
NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY TO THIS
AGREEMENT HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH
SUCH PARTY HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK
PERSONAL JURISDICTION OVER SUCH PARTY, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT BROUGHT IN ANY OF THE AFORESAID COURTS, THAT SUCH COURT LACKS PERSONAL
JURISDICTION OVER SUCH PARTY. EACH SUCH PARTY FURTHER IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 8.02 OR
ON SCHEDULE I, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH
SUCH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS
AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR
PROCEEDING COMMENCED HEREUNDER OR UNDER ANY LOAN DOCUMENT THAT SERVICE OF
PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE AGENT, THE COLLATERAL AGENT, ANY LENDER OR THE HOLDER OF ANY NOTE
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY PARTY IN ANY OTHER JURISDICTION.
THE BORROWER HEREBY IRREVOCABLY AND FOR THE TERM OF THE FACILITY OR UNTIL ALL OF
THE OBLIGATIONS HAVE BEEN PAID APPOINTS BRYAN CAVE LLP AT 245 PARK AVENUE, NEW
YORK, NEW YORK 10167 AS ITS AGENT FOR SERVICE OF PROCESS IN THE STATE OF NEW
YORK.
(b) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID
ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE
AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY
SUCH COURT THAT ANY SUCH
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<PAGE> 87
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
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<PAGE> 88
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.
CARLYLE INDUSTRIES, INC.
By
--------------------------------------
Name:
Title:
FLEET BANK, N.A., as Agent and as
Issuing Bank
By
--------------------------------------
Name:
Title:
INITIAL LENDERS
FLEET BANK, N.A.
By
--------------------------------------
Name:
Title:
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<PAGE> 89
$14,000,000
CREDIT AGREEMENT
Dated as of June 23, 1998
Among
CARLYLE INDUSTRIES, INC.,
as Borrower,
and
THE INITIAL LENDERS NAMED HEREIN
and
FLEET BANK, N.A.,
as Agent and Issuing Bank
<PAGE> 90
T A B L E O F C O N T E N T S
<TABLE>
<CAPTION>
SECTION PAGE
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<S> <C>
1.01. Certain Defined Terms.................................................................. 1
1.02. Computation of Time Periods............................................................ 21
1.03. Accounting Terms....................................................................... 21
1.04. Construction........................................................................... 21
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
2.01. The Advances........................................................................... 21
2.02. Making the Advances.................................................................... 22
2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit..................... 24
2.04. Repayment of Advances.................................................................. 25
2.05. Termination or Reduction of the Commitments............................................ 25
2.06. Prepayments............................................................................ 26
2.07. Interest............................................................................... 28
2.08. Fees................................................................................... 28
2.09. Conversion of Revolving Credit Advances................................................ 29
2.10. Increased Costs, Etc................................................................... 30
2.11. Payments and Computations.............................................................. 31
2.12. Taxes.................................................................................. 32
2.13. Sharing of Payments, Etc............................................................... 35
2.14 Source of Funds ........................................................................36
2.15. Use of Proceeds........................................................................ 37
ARTICLE III
CONDITIONS OF LENDING
3.01. Conditions Precedent to Initial Extension of Credit.................................... 37
3.02. Conditions Precedent to Each Borrowing and Issuance.................................... 44
3.03. Conditions Precedent to Borrowing In Connection With the Acquisition................... 44
3.04. Determinations Under Section 3.01 and 3.03............................................. 46
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties......................................................... 47
</TABLE>
i
<PAGE> 91
<TABLE>
<CAPTION>
SECTION PAGE
ARTICLE V
COVENANTS
<S> <C>
5.01. Affirmative Covenants............................................................. 56
5.02. Negative Covenants................................................................ 60
5.03. Reporting Requirements............................................................ 66
5.04. Financial Covenants............................................................... 69
ARTICLE VI
EVENTS OF DEFAULT
6.01. Events of Default................................................................. 74
6.02. Application of Proceeds .......................................................... 76
ARTICLE VII
THE AGENT
7.01. Authorization and Action.......................................................... 77
7.02. Agent's Reliance, Etc............................................................. 77
7.03. Fleet and Affiliates.............................................................. 78
7.04. Lender Party Credit Decision...................................................... 78
7.05. Indemnification................................................................... 78
7.06. Successor Agents.................................................................. 79
ARTICLE VIII
MISCELLANEOUS
8.01. Amendments, Etc................................................................... 79
8.02. Notices, Etc...................................................................... 80
8.03. No Waiver; Remedies............................................................... 80
8.04. Costs and Expenses................................................................ 81
8.05. Right of Set-off.................................................................. 82
8.06. Binding Effect.................................................................... 82
8.07. Assignments and Participations.................................................... 83
8.08. Execution in Counterparts......................................................... 86
8.09. No Liability of the Issuing Bank.................................................. 86
8.10. Confidentiality................................................................... 86
8.11. Jurisdiction, Etc................................................................. 86
</TABLE>
ii
<PAGE> 92
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule I - Commitments and Applicable Lending Offices
Schedule 4.01(b) - Subsidiaries
Schedule 4.01(c) - Violations
Schedule 4.01(d) - Authorizations, Approvals, Actions, Notices and Filings
Schedule 4.01(j) - Legal Proceedings
Schedule 4.01(m) - Plans and Multiemployer Plans
Schedule 4.01(n) - ERISA Disclosure
Schedule 4.01(gg) - Environmental Disclosure
Schedule 4.01(mm) - Open Years
Schedule 4.01(rr) - Existing Debt
Schedule 4.01(ss) - Leased Property
Schedule 4.01(tt) - Investments
Schedule 4.01(uu) - Intellectual Property
Schedule 5.02(a)(iii) - Existing Liens
Schedule 5.02(b)(v) - Intercompany Debt
Schedule 5.02(k) - Westwater Debt
</TABLE>
iii
<PAGE> 93
<TABLE>
EXHIBITS
<S> <C>
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Pledge and Security Agreement
Exhibit E - Form of Intellectual Property Security Agreement
Exhibit F - Form of Guaranty
Exhibit G - Intentionally Deleted
Exhibit H - Form of Opinion of General Counsel of Borrower
Exhibit I - Form of Solvency Certificate
</TABLE>
iv
<PAGE> 94
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
==========================================================================================================================
DOMESTIC EURODOLLAR
REVOLVING LENDING LENDING
NAME OF INITIAL CREDIT OFFICE OFFICE
LENDER COMMITMENT
==========================================================================================================================
<S> <C> <C> <C>
Fleet Bank, N.A. up to Credit Matters Credit Matters
$14,000,000 -------------- --------------
1185 Avenue of the Americas 1185 Avenue of the Americas
New York, NY 10036 New York, NY 10036
Tel: (212) 819-5735 Tel: (212) 819-5735
Fax: (212) 819-4120 Fax: (212) 819-4120
Attn: John M. Tuohy Attn: John M. Tuohy
Operations Operations
---------- ----------
1185 Avenue of the Americas 1185 Avenue of the Americas
New York, NY 10036 New York, NY 10036
Tel: (212) 819-5735 Tel: (212) 819-5735
Fax: (212) 819-4120 Fax: (212) 819-4120
Attn: John M. Tuohy Attn: John M. Tuohy
Payments Payments
-------- --------
1185 Avenue of the Americas 1185 Avenue of the Americas
New York, NY 10036 New York, NY 10036
ABA No.: ABA No.:
Acct. No.: Acct. No.:
Reference: Reference:
</TABLE>
i
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 663
<SECURITIES> 0
<RECEIVABLES> 3,590
<ALLOWANCES> 0
<INVENTORY> 5,781
<CURRENT-ASSETS> 12,407
<PP&E> 2,685
<DEPRECIATION> 819
<TOTAL-ASSETS> 17,359
<CURRENT-LIABILITIES> 3,752
<BONDS> 0
0
13,221
<COMMON> (18,451)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,359
<SALES> 8,892
<TOTAL-REVENUES> 8,892
<CGS> 4,382
<TOTAL-COSTS> 4,382
<OTHER-EXPENSES> 2,369
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (138)
<INCOME-PRETAX> 2,507
<INCOME-TAX> (920)
<INCOME-CONTINUING> 1,587
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 855
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
