<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR QUARTER ENDED JUNE 30, 1996 COMMISSION FILE NO. 33-78922
--------
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
------------------------
AXIA INCORPORATED
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3205251
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 WEST 22ND STREET, SUITE 134, LOMBARD, ILLINOIS 60148 (630) 629-3360
--------------------------------------------------------------------------
(Address and telephone number of principal executive offices)
------------------------
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.
Yes X No
------- -------
------------------------
Title of each class of Registered Securities
11% SERIES B SENIOR SUBORDINATED NOTES DUE 2001
GUARANTEE OF 11% SERIES B SENIOR SUBORDINATED NOTES DUE 2001
<PAGE>
PART I
Item 1. Financial Statements
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
- - ------
CURRENT ASSETS:
Cash and cash equivalents $ 962 $ 45
Accounts receivable, net 11,870 12,357
Inventories 9,172 9,314
Prepaid income taxes and other current assets 2,412 1,971
Deferred income tax benefits 2,938 3,325
-------- --------
Total Current Assets $ 27,354 $ 27,012
-------- --------
PLANT AND EQUIPMENT, AT COST:
Land $ 521 $ 521
Buildings and improvements 6,557 6,617
Machinery and equipment 22,865 22,218
Equipment leased to others 5,388 4,174
-------- --------
$ 35,331 $ 33,530
Less: Accumulated depreciation 9,570 7,491
-------- --------
Net Plant and Equipment $ 25,761 $ 26,039
-------- --------
OTHER ASSETS:
Goodwill, net $ 35,157 $ 35,631
Intangible assets, net 525 721
Deferred charges, net 12,072 12,893
Investment in affiliate 900 900
Other assets 82 92
-------- --------
Total Other Assets $ 48,736 $ 50,237
-------- --------
TOTAL ASSETS $101,851 $103,288
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
- - ------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 5,678 $ 6,650
Accounts payable 4,273 4,137
Accrued liabilities 8,629 9,316
Accrued income taxes 157 159
-------- --------
Total Current Liabilities $ 18,737 $ 20,262
-------- --------
NON-CURRENT LIABILITIES:
Long-term debt, less current maturities $ 40,867 $ 43,507
Other non-current liabilities 11,073 11,025
Deferred income taxes 2,620 2,666
-------- --------
Total Non-Current Liabilities $ 54,560 $ 57,198
-------- --------
STOCKHOLDER'S EQUITY:
Common stock ($.01 par value; 100 shares
authorized, issued and outstanding) $ - $ -
Additional paid-in capital 16,723 16,723
Retained earnings 11,488 8,533
Additional minimum pension liability (54) (54)
Cumulative translation adjustment 397 626
-------- --------
Total Stockholder's Equity $ 28,554 $ 25,828
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $101,851 $103,288
======== ========
</TABLE>
The accompanying Notes to the Unaudited Interim Consolidated Financial
Statements are an integral part of these balance sheets.
1
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
April, 1, 1996 April 1, 1995
to to
June 30, 1996 June 30, 1995
-------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales $19,852 $20,588
Net Rentals 6,016 5,453
------- -------
NET REVENUES $25,868 $26,041
Cost of sales 12,819 14,199
Cost of rentals 2,327 2,313
Selling, general and administrative expenses 5,990 6,207
------- -------
INCOME FROM OPERATIONS $ 4,732 $ 3,322
Interest expense 1,427 1,725
Other expense, net 49 7
------- -------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM $ 3,256 $ 1,590
Provision for income taxes 1,396 733
------- -------
INCOME BEFORE EXTRAORDINARY ITEM $ 1,860 $ 857
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt,
net of income taxes of $410 (See Note 2) $ 614 $ -
------- -------
NET INCOME $ 1,246 $ 857
======= =======
The accompanying Notes to the Unaudited Interim Consolidated Financial Statements
are an integral part of these statements.
2
</TABLE>
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
January 1, 1996 January 1, 1995
to to
June 30, 1996 June 30, 1995
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales $42,609 $40,600
Net rentals 11,880 10,849
------- -------
NET REVENUES $54,489 $51,449
Cost of sales 27,929 27,296
Cost of rentals 4,670 4,436
Selling, general and administrative expenses 12,695 12,368
------- -------
INCOME FROM OPERATIONS $ 9,195 $ 7,349
Interest expense 2,870 3,461
Other expense, net 59 92
------- -------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM $ 6,266 $ 3,796
Provision for income taxes 2,697 1,753
------- -------
INCOME BEFORE EXTRAORDINARY ITEM: 3,569 2,043
EXTRAORDINARY ITEM
Loss on early extinguishment of debt,
net of income taxes of $410 (See Note 2) 614 -
------- -------
NET INCOME $ 2,955 $ 2,043
======= =======
The accompanying Notes to the Unaudited Interim Consolidated Financial Statements
are an integral part of these statements.
3
</TABLE>
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE PERIODS ENDED JUNE 30, 1996 AND JUNE 30, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Additional Minimum Cumulative
Common Stock Paid-in Retained Pension Translation
Par Value Capital Earnings Liability Adjustments
------------ ----------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 $ - $16,848 $ 3,644 $ - $ 304
Net income - - 2,043 - -
Cumulative translation adjustment - - - - 516
Other - (124) - - -
----- ------- ------- ----- -----
BALANCE, JUNE 30, 1995 (unaudited) $ - $16,724 $ 5,687 $ - $ 820
===== ======= ======= ===== =====
BALANCE, DECEMBER 31, 1995 $ - $16,723 $ 8,533 $ (54) $ 626
Net income - - 2,955 -
Cumulative translation adjustment - - - - (229)
----- ------- ------- ----- -----
BALANCE, JUNE 30, 1996 (unaudited) $ - $16,723 $11,488 $ (54) $ 397
===== ======= ======= ===== =====
The accompanying Notes to the Unaudited Interim Consolidated Financial Statements
are an integral part of these statements.
4
</TABLE>
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
January 1, 1996 January 1, 1995
to to
June 30, 1996 June 30, 1995
--------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C>
$ 2,955 $ 2,043
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization 3,392 3,214
Extraordinary item - writeoff of capitalized financing costs 1,024 -
Deferred income tax provision (benefit) 341 536
Loss (gain) on disposal of fixed assets (15) (6)
Provision for losses on accounts receivable 541 372
Provision for obsolescence of inventories 59 (56)
Credit to pension expense (137) -
Changes in assets and liabilities:
Accounts receivable (219) (435)
Inventories (30) (107)
Accounts payable 183 (249)
Accrued liabilities (630) (1,211)
Other current assets 294 295
Income taxes payable (734) (893)
Other non-current assets 86 (253)
Other non-current liabilities 48 (107)
-------- -------
Net Cash Provided by Operating Activities $ 7,158 $ 3,143
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used for capital expenditures $ (2,029) $(2,137)
Proceeds from sale of fixed assets 13 53
-------- -------
Net Cash (Used in) Investing Activities (2,016) $(2,084)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in Revolving Credit Loan $ 2,900 $ 3,000
Payments of other long-term debt (31,612) (4,583)
Proceeds from other long-term debt 25,000 -
Payments of deferred financing costs (478) -
Other equity transactions 4 (112)
-------- -------
Net Cash (Used in) Financing Activities $ (4,186) $(1,695)
EFFECT OF EXCHANGE RATE CHANGES ON CASH $ (39) $ 42
-------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 917 $ (594)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 45 872
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 962 $ 278
======== =======
The accompanying Notes to the Unaudited Interim Consolidated Financial Statements
are an integral part of these statements.
5
</TABLE>
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1 ORGANIZATION AND PRESENTATION
On March 15, 1994, AXIA Incorporated (the "Predecessor Company") was acquired
as part of a merger with a newly-formed company (the "Transaction"), Axia
Acquisition Corp. ("Acquisition"), a Delaware corporation, with the surviving
corporation continuing under the name AXIA Incorporated (the "Company",
including reference to the Predecessor Company where appropriate). Acquisition
was formed solely for the purpose of merging into the Company. Acquisition was
incorporated on January 13, 1994, and issued 100 shares of its $.01 par value
common stock to AXIA Holdings Corp. ("Holdings") on March 1, 1994. Other than
the stock issuance, Acquisition had no activity until its concurrent
contribution from Holdings and its merger with Predecessor Company on March 15,
1994. Due to the substantial change in controlling interest in the Company, the
Company reflected a complete change in its accounting basis of its assets and
liabilities from Predecessor Company historical cost to estimated fair value as
of March 15, 1994, which resulted in the recognition of $37.4 million in
goodwill at the acquisition date.
Accounting policies used in the preparation of the unaudited interim
consolidated financial statements are consistent with the accounting polices
described in the Notes to the Consolidated Financial Statements for the year
ended December 31, 1995. In the opinion of management, the interim financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) which are necessary for a fair presentation of the Company's
financial position, results of operations, and cash flows for the interim
periods presented. The results for such interim periods are not necessarily
indicative of results for the full year. These financial statements should be
read in conjunction with the consolidated financial statements for the year
ended December 31, 1995 and the accompanying notes thereto in the Company's
Annual Report on Form 10-K filed under the Securities Exchange Act of 1934.
NOTE 2 REFINANCING
On June 27, 1996, the Company and its domestic subsidiaries, Ames Taping Tool
Systems, Inc., ("ATTS"), and TapeTech Tool Co., Inc., ("TapeTech"), entered into
a new bank credit agreement (the "Bank Credit Agreement") which replaced its
then existing bank financing. The Company borrowed $25,000,000 on a new term
loan and $3,500,000 of $15,000,000 available on the revolving credit loan. The
proceeds of this borrowing plus cash on hand paid off the outstanding amounts of
the previous bank financing. The Company recorded a pre-tax charge of
$1,024,000 representing the writeoff of unamortized deferred loan costs. This
charge, net of tax, is reflected as an extraordinary item in the accompanying
Consolidated Statements of Income for the three and six month periods ended June
30, 1996.
The Bank Credit Agreement effectively reduced the interest rate of the
Company's bank debt by 1.25% to 1.50% and provided the ability to repurchase and
extinguish Subordinated Notes equal to $4.0 million plus additional amounts
based on free cash flow as defined. Term loan maturities were extended to
December 31, 2000. (See Note 4.)
6
<PAGE>
NOTE 3 INVENTORIES
Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market. The cost elements included in inventories are material, labor and
factory overhead.
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Raw materials $4,784 $5,108
Work in process 1,069 935
Finished goods 3,319 3,271
------ ------
Total inventories $9,172 $9,314
====== ======
</TABLE>
NOTE 4 LONG-TERM DEBT
Long-term debt, inclusive of capital lease obligations which are not material,
consists of the following (in thousands):
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
-------------- ------------------
<S> <C> <C>
11.00% Senior Subordinated Notes $18,250 $18,150
Bank Term Loan 25,000 31,620
Revolving Credit Loan 2,900 -
Other 395 387
------- -------
Total Debt $46,545 $50,157
Less Current Maturities (5,678) (6,650)
------- -------
Total Long-Term Debt $40,867 $43,507
======= =======
</TABLE>
The Senior Subordinated Notes above are stated net of unamortized discounts of
$1,250,000 and $1,350,000 at June 30, 1996, and December 31, 1995, respectively.
Current maturities of long-term debt as of June 30, 1996 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
Scheduled Payment
Date Amount
------------------ ------
<S> <C> <C>
Term Loan September 30, 1996 1,389
Term Loan December 31, 1996 1,389
Term Loan March 31, 1997 1,389
Term Loan June 30, 1997 1,389
Other Various 122
-----
Total Current Maturities $5,678
======
</TABLE>
7
<PAGE>
BANK CREDIT AGREEMENT
On June 27, 1996, as part of a refinancing (see Note 2) of its bank debt, the
Company, ATTS, and TapeTech entered into the Bank Credit Agreement which
included a term loan ("Term Loan") with an original principal amount of
$25,000,000 and a non-amortizing revolving credit loan ("Revolving Credit Loan")
of up to $15,000,000, including up to $1,000,000 of letters of credit.
The proceeds from the Bank Credit Agreement of an initial borrowing of $3.5
million under the Revolving Credit Loan and $25.0 million in the Term Loan, and
$1.4 million in cash on hand, were used to prepay the then existent term loan,
revolving credit loan, interest and other fees outstanding at the refinancing
date. An additional $.5 million in deferred transaction costs were incurred and
will be amortized over the life of the Bank Credit Agreement, which terminates
December 31, 2000.
Under the Bank Credit Agreement, the loans may, at the option of the Company,
be either Base Rate borrowings Eurodollar borrowings or a combination thereof.
Base Rate borrowings bear interest at the prime rate or the Federal Funds Rate
plus 1.00%, whichever is higher, and Eurodollar borrowings bear interest at a
rate of LIBOR plus 1.50%. In certain events defined in the agreement, the
Eurodollar borrowing interest rate may be increased to LIBOR plus 1.75%. The
Company pays a fee of .38% per annum on the unused balance of the line of
credit. The Company can repay any borrowings at any time without penalty. The
weighted average interest rates on all amounts outstanding under the Bank Credit
Agreement as of July 1, 1996 was 7.08%. Substantially all of the assets of the
Company, ATTS, and TapeTech act as collateral under the Bank Credit Agreement.
The Term Loan has scheduled maturities which begin on September 30, 1996, of
$1,389,000 quarterly, maturing with a final payment of $1,387,000 on December
31, 2000. The Revolving Credit Loan terminates on December 31, 2000. Interest
payments are generally due quarterly. The Company is required to prepay
portions of the Term Loan in the event of a major asset sale, as defined in the
Bank Credit Agreement.
11.00% SENIOR SUBORDINATED NOTES
The Senior Subordinated Notes were issued pursuant to a trust indenture (the
"Indenture") between the Company, certain guarantors and a trustee bank and were
sold to a group of private investors as part of the Transaction (see Note 1).
Interest on the notes is payable semi-annually and the notes mature on March 15,
2001. The notes may be redeemed, at the Company's option, in full or in part on
or after March 15, 1997, at a decreasing premium rate beginning at 104.4% on
March 15, 1997. A change of control of the Company, as defined, would require
the Company to offer to redeem all notes at 101% premium.
In July 1994, the Company filed a Registration Statement with the Securities
and Exchange Commission to register the Senior Subordinated Notes under the
Securities Act of 1933. The Notes are guaranteed by the Company's domestic
subsidiaries. (See Note 6 for further information regarding these guarantees.)
In February 1995, the Company repurchased and extinguished $1,500,000 in face
amount of its Senior Subordinated Notes for $1,346,000 plus accrued interest.
RESTRICTIVE LOAN COVENANTS
The Bank Credit Agreement and the Indenture contain certain covenants which,
among other things and all as defined in the applicable agreement, require the
Company to maintain (a) a minimum net worth of $25.0 million as of June 30,
1996 (increasing to $45.0 million by December 31, 1999), (b) a minimum current
ratio of 1.3 to 1.0, (c) a minimum rolling four-quarter Consolidated EBITDA
(Earnings Before Interest, Taxes, Depreciation and Amortization), as defined, of
$16,500,000 at June 30, 1996 (increasing to $22,000,000 by December 31, 1999),
(d) a Consolidated Funded Debt, as defined, to Consolidated EBITDA return of
3.00 to 1.00 at June 30, 1996 (increasing to 2.50 to 1.00 at December 31, 1999,
(e) a Consolidated Total Liabilities, as
8
<PAGE>
defined, to Consolidated Net Worth, as defined, ratio of 3.25 to 1.00 at June
30, 1996 (increasing to 2.25 to 1.00 at December 31, 1999, and (f) a
Consolidated EBITDA to Consolidated Fixed Charges, as defined, ratio of 1.75 to
1.00 at June 30, 1996 (increasing to 2.00 to 1.00 at December 31, 1999).
In addition, the Company may not create or incur certain types of additional
debt or liens, declare dividends except as specified in the Bank Credit
Agreement, or make capital expenditures or other restricted payments, as
defined, during the term of the agreements in excess of varying amounts.
The Company was in compliance with its loan covenants as of June 30, 1996.
NOTE 5 CAPITAL STOCK
The Company has 100 shares of common stock, par value $.01 per share,
authorized, issued and outstanding, all of which are owned by Holdings.
NOTE 6 SUBSIDIARY GUARANTEES
The Company's payment obligations under the Senior Subordinated Notes are
fully and unconditionally guaranteed on a joint and several basis (collectively,
the "Subsidiary Guarantees") by Ames Taping Tool Systems, Inc. and TapeTech Tool
Co., Inc., each a wholly-owned subsidiary of the Company and each a "Guarantor."
These subsidiaries, together with the operating divisions of the Company,
represent all of the operations of the Company conducted in the United States.
The remaining subsidiaries of the Company are foreign subsidiaries. Upon the
sale of substantially all of its assets, Mid America Machine Corp. ("MAMCO") was
released as a Guarantor in 1995.
The Company's payment obligations under the Indenture are fully and
unconditionally guaranteed on a joint and several basis by the Company and each
Guarantor; the obligations of each Guarantor under its Subsidiary Guarantee are
subordinated to all senior indebtedness of such Guarantor, including the
Company's borrowings under the Bank Credit Agreement.
With the intent that the Subsidiary Guarantees not constitute fraudulent
transfers or conveyances under applicable state or federal law, the obligation
of each Guarantor under its Subsidiary Guarantee is also limited to the maximum
amount as will, after giving effect to such maximum amount and all other
liabilities (contingent or otherwise) of such Guarantor that are relevant under
such laws, and after giving effect to any rights to contribution of such
Guarantor pursuant to any agreement providing for an equitable contribution
among such Guarantor and other affiliates of the Company of payments made by
guarantees by such parties, result in the obligations of such Guarantor in
respect of such maximum amount not constituting a fraudulent conveyance.
The following consolidating condensed financial data illustrates the
composition of the combined Guarantors. Management believes separate complete
financial statements of the respective Guarantors would not provide additional
material information which would be useful in assessing the financial
composition of the Guarantors. No single Guarantor has any significant legal
restrictions on the ability of investors or creditors to obtain access to its
assets in event of default on the Subsidiary Guarantee other than its
subordination to senior indebtedness described above. Though each Guarantor is
a borrower under the Bank Credit Agreement, the Company's borrowings have not
been allocated to the Guarantors as such allocation, in the opinion of
Management, would not be meaningful.
Investments in subsidiaries are accounted for by the parent on the
equity method for purposes of the supplemental consolidating presentation.
Earnings of subsidiaries are therefore reflected in the parent's investment
accounts and earnings. The principal elimination entries eliminate investments
in subsidiaries and intercompany balances and transactions.
9
<PAGE>
CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 1996
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
and its Guarantor Non-guarantor Consolidated
Divisions Subsidiaries Subsidiaries Eliminations Totals
--------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
- - ------
CURRENT ASSETS:
Cash and cash equivalents $ (361) $ 655 $ 668 $ $ 962
Accounts receivable, net 5,724 4,149 2,822 (825) 11,870
Inventories 6,212 1,431 2,020 (491) 9,172
Prepaid income taxes and other current assets 2,165 125 122 - 2,412
Deferred income tax benefits 2,938 - - - 2,938
------- ------- ------ -------- --------
Total Current Assets $16,678 $ 6,360 $5,632 $ (1,316) $ 27,354
------- ------- ------ -------- --------
PLANT AND EQUIPMENT, AT COST:
Land $ 521 $ - $ - $ - $ 521
Buildings and improvements 6,269 18 270 - 6,557
Machinery and equipment 22,221 445 199 - 22,865
Equipment leased to others 5,337 38 13 - 5,388
------- ------- ------ -------- --------
$34,348 $ 501 $ 482 $ - $ 35,331
Less: Accumulated depreciation 9,130 272 168 - 9,570
------- ------- ------ -------- --------
Net Plant and Equipment $25,218 $ 229 $ 314 $ - $ 25,761
------- ------- ------ -------- --------
OTHER ASSETS:
Goodwill, net $32,464 $ 2,677 $ 16 $ - $ 35,157
Intangible assets, net 445 80 - - 525
Deferred charges, net 11,162 902 8 - 12,072
Investment in wholly-owned subsidiaries 12,512 - - (12,512) -
Investment in affiliates 900 - - - 900
Other assets 82 - - - 82
------- ------- ------ -------- --------
Total Other Assets $57,565 $ 3,659 $ 24 $(12,512) $ 48,736
------- ------- ------ -------- --------
TOTAL ASSETS $99,461 $10,248 $5,970 $(13,828) $101,851
======= ======= ====== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
- - ------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 5,642 $ 36 $ - $ - $ 5,678
Accounts payable 3,532 434 997 (690) 4,273
Accrued liabilities 7,528 448 790 (137) 8,629
Accrued income taxes 27 - 130 - 157
Advance account (429) 1,121 (692) - -
------- ------- ------ -------- --------
Total Current Liabilities $16,300 $ 2,039 $1,225 $ (827) $ 18,737
------- ------- ------ -------- --------
NON-CURRENT LIABILITIES:
Long-term debt, less current maturities $40,820 $ 47 $ - $ - $ 40,867
Other non-current liabilities 11,073 - - - 11,073
Deferred income taxes 2,620 - - - 2,620
------- ------- ------ -------- --------
Total Non-Current Liabilities $54,513 $ 47 $ - $ - $ 54,560
------- ------- ------ -------- --------
STOCKHOLDER'S EQUITY:
Common stock and
additional paid-in capital $16,723 $ 5,098 $2,000 $ (7,098) $ 16,723
Retained earnings 11,979 3,064 2,348 (5,903) 11,488
Additional minimum pension liability (54) - - - (54)
Cumulative translation adjustment - - 397 - 397
------- ------- ------ -------- --------
Total Stockholder's Equity $28,648 $ 8,162 $4,745 $(13,001) $ 28,554
------- ------- ------ -------- --------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $99,461 $10,248 $5,970 $(13,828) $101,851
======= ======= ====== ======== ========
</TABLE>
10
<PAGE>
CONSOLIDATING STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
and its Guarantor Non-guarantor Consolidated
Divisions Subsidiaries Subsidiaries Eliminations Totals
---------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales $32,837 $ 6,239 $6,302 $(2,769) $42,609
Net rentals 6,538 11,414 456 (6,528) 11,880
------ ------ ----- ------ ------
Net revenues $39,375 $17,653 $6,758 $(9,297) $54,489
Cost of sales $22,946 $ 3,780 $3,915 $(2,712) $27,929
Cost of rentals 1,479 9,423 296 (6,528) 4,670
Selling, general and administrative expenses 7,662 3,299 1,734 - 12,695
------ ------ ----- ------ ------
Income (loss) from operations $ 7,288 $ 1,151 $ 813 $ (57) $ 9,195
Interest expense $ 2,857 $ 5 $ 8 $ - $ 2,870
Intercompany interest expense (income) (47) 47 - - -
Other expense (income), net (951) 21 82 907 59
------ ------ ----- ------ ------
Income (loss) before income taxes $ 5,429 $ 1,078 $ 723 $ (964) $ 6,266
and extraordinary item
Provision for income taxes 1,803 473 421 - 2,697
------ ------ ----- ------ ------
Income (loss) before extraordinary item $ 3,626 $ 605 $ 302 $ (964) $ 3,569
====== ====== ===== ====== ======
</TABLE>
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
and its Guarantor Non-guarantor Consolidated
Divisions Subsidiaries Subsidiaries Eliminations Totals
---------- ------------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 6,596 $454 $ 108 $ - $ 7,158
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used for capital expenditures (1,978) (45) (6) - (2,029)
Proceeds from sale of fixed assets 13 - - - 13
------- --- ---- --- -------
Net Cash Used In Investing Activities $ (1,965) $(45) $ (6) $ - $ (2,016)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Revolving Credit Loan 2,900 - - - 2,900
Payments of other long-term debt (31,612) - - - (31,612)
Proceeds from other long-term debt 25,000 - - - 25,000
Payments of deferred financing costs (478) - - - (478)
Net increase (decrease) in advance account (11) (8) 19 - -
Intercompany dividends 196 - (196) - -
Other equity transactions 3 - 1 - 4
------- --- ---- --- -------
Net Cash Provided by (Used In)
Financing Activities $ (4,002) $ (8) $(176) $ - $ (4,186)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH - - (39) - (39)
------- --- ---- --- -------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 629 $401 $(113) $ - $ 917
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD (990) 254 781 $ - 45
------- --- ---- --- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ (361) $655 $ 668 $ - $ 962
======= === ==== === =======
</TABLE>
11
<PAGE>
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent
and its Guarantor Non-guarantor Consolidated
Divisions Subsidiaries Subsidiaries Eliminations Totals
--------- ------------ -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
- - ------
CURRENT ASSETS:
Cash and cash equivalents $ (990) $ 254 $ 781 $ - $ 45
Accounts receivable, net 6,410 3,973 3,012 (1,038) 12,357
Inventories 6,286 1,347 2,113 (432) 9,314
Prepaid income taxes and other current assets 1,738 131 102 - 1,971
Deferred income tax benefits 3,325 - - - 3,325
-------- ------ ------ -------- --------
Total Current Assets $ 16,769 $5,705 $6,008 $ (1,470) $ 27,012
-------- ------ ------ -------- --------
PLANT AND EQUIPMENT, AT COST:
Land $ 521 $ - $ - $ - $ 521
Buildings and improvements 6,296 18 303 - 6,617
Machinery and equipment 21,591 405 222 - 22,218
Equipment leased to others 4,116 34 24 - 4,174
-------- ------ ------ -------- --------
$ 32,524 $ 457 $ 549 $ - $ 33,530
Less: Accumulated depreciation 7,074 220 197 - 7,491
-------- ------ ------ -------- --------
Net Plant and Equipment $ 25,450 $ 237 $ 352 $ - $ 26,039
-------- ------ ------ -------- --------
OTHER ASSETS:
Goodwill, net $ 32,900 $2,713 $ 18 $ - $ 35,631
Intangible assets, net 586 135 - - 721
Deferred charges, net 12,004 882 7 - 12,893
Investment in wholly-owned subsidiaries 11,801 - - (11,801) -
Investment in affiliates 900 - - - 900
Other assets 92 - - - 92
-------- ------ ------ -------- --------
Total Other Assets $ 58,283 $3,730 $ 25 $(11,801) $ 50,237
-------- ------ ------ -------- --------
TOTAL ASSETS $100,502 $9,672 $6,385 $(13,271) $103,288
======== ====== ====== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
- - ------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 6,618 $ 32 $ - $ - $ 6,650
Accounts payable 3,323 346 1,062 (594) 4,137
Accrued liabilities 8,197 557 1,006 (444) 9,316
Accrued income taxes 1 - 158 - 159
Advance account (418) 1,129 (711) - -
-------- ------ ------ -------- --------
Total Current Liabilities $ 17,721 $2,064 $1,515 $ (1,038) $ 20,262
-------- ------ ------ -------- --------
NON-CURRENT LIABILITIES:
Long-term debt, less current maturities $ 43,456 $ 51 $ - $ - $ 43,507
Other non-current liabilities 11,025 - - - 11,025
Deferred income taxes 2,666 - - - 2,666
-------- ------ ------ -------- --------
Total Non-Current Liabilities $ 57,147 $ 51 $ - $ - $ 57,198
-------- ------ ------ -------- --------
STOCKHOLDER'S EQUITY:
Common stock and
additional paid-in capital $ 16,723 $5,098 $2,000 $ (7,098) $ 16,723
Retained earnings 8,965 2,459 2,244 (5,135) 8,533
Additional minimum pension liability (54) - - - (54)
Cumulative translation adjustment - - 626 - 626
-------- ------ ------ -------- --------
Total Stockholder's Equity $ 25,634 $7,557 $4,870 $(12,233) $ 25,828
-------- ------ ------ -------- --------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $100,502 $9,672 $6,385 $(13,271) $103,288
======== ====== ====== ======== ========
</TABLE>
12
<PAGE>
CONSOLIDATING STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
and its Guarantor Non-guarantor Consolidated
Divisions Subsidiaries Subsidiaries Eliminations Totals
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $30,334 $ 6,123 $7,072 $(2,929) $40,600
Net rentals 5,899 10,351 481 (5,882) 10,849
------- ------- ------ ------ -------
Net revenues $36,233 $16,474 $7,553 $(8,811) $51,449
Cost of Sales $22,463 $ 3,511 $4,253 $(2,931) $27,296
Cost of rentals 1,648 8,433 237 (5,882) 4,436
Selling, general and administrative expenses 7,433 2,987 1,948 - 12,368
------- ------- ----- ------- -------
Income from operations $ 4,689 $ 1,543 $1,115 $ 2 $ 7,349
Interest expense 3,445 4 12 - 3,461
Intercompany interest expense (income) (84) 84 - - -
Other expense (income), net (1,469) (4) 229 1,336 92
------- ------- ------ ------- -------
Income (loss) before income taxes $ 2,797 $ 1,459 $ 874 $(1,334) $ 3,796
Provision for income taxes 756 662 335 - 1,753
------- ------- ------ ------- -------
Net income (loss) $ 2,041 $ 797 $ 539 $(1,334) $ 2,043
======= ======= ====== ======= =======
</TABLE>
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
and its Guarantor Non-guarantor Consolidated Consolidated
Divisions Subsidiaries Subsidiaries Eliminations Totals
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 1,759 $ 333 $ 1,051 $ - $ 3,143
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used for capital expenditures (1,971) (135) (31) (2,137)
Proceeds from sale of fixed assets 15 38 - - 53
------- ------- ------ ------- -------
Net Cash Used in Investing Activities $(1,956) $ (97) $ (31) $ - $(2,084)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in Revolving Credit Loan 3,000 - - - 3,000
Payments of other long-term debt (4,662) 79 - - (4,583)
Dividends received from (paid by) subsidiaries 821 - (821) - -
Net increase (decrease) in advance account 544 (466) (78) - -
Other equity transactions (152) 27 13 - (112)
------- ------- ------ ------- -------
Net Cash Provided by (Used in)
Financing Activities $ (449) $ (360) $ (886) $ - $(1,695)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH - - 42 - 42
------- ------- ------ ------- -------
NET DECREASE IN CASH AND
CASH EQUIVALENTS $ (646) $ (124) $ 176 $ - $ (594)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 69 481 322 - 872
------- ------- ------ ------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ (577) $ 357 $ 498 $ - $ 278
======= ======= ====== ======= =======
</TABLE>
13
<PAGE>
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1996
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
and its Guarantor Non-guarantor Consolidated
Divisions Subsidiaries Subsidiaries Eliminations Totals
---------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales $15,053 $3,287 $2,997 $(1,485) $19,852
Net rentals 3,281 5,791 221 (3,277) 6,016
------- ------ ------ ------- -------
Net revenues $18,334 $9,078 $3,218 $(4,762) $25,868
Cost of sales $10,413 $2,003 $1,888 $(1,485) $12,819
Cost of rentals 765 4,695 144 (3,277) 2,327
Selling, general and administrative expenses 3,554 1,525 911 - 5,990
------- ------ ------ ------- -------
Income (loss) from operations $ 3,602 $ 855 $ 275 $ - $ 4,732
Interest expense 1,423 3 1 - 1,427
Intercompany interest expense (income) (21) 21 - - -
Other expense (income), net (520) 15 33 521 49
------- ------ ------ ------- -------
Income (loss) before income taxes and $ 2,720 $ 816 $ 241 $ (521) $ 3,256
extraordinary item
Provision for income taxes 860 355 181 - 1,396
------- ------ ------ ------- -------
Income (loss) before extraordinary item $ 1,860 $ 461 $ 60 $ (521) $ 1,860
======= ====== ====== ======= =======
</TABLE>
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1995
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
and its Guarantor Non-guarantor Consolidated
Divisions Subsidiaries Subsidiaries Eliminations Totals
---------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales $14,611 $3,280 $4,043 $(1,346) $20,588
Net rentals 2,965 5,216 233 (2,961) 5,453
------- ------ ------ ------- -------
Net revenues $17,576 $8,496 $4,276 $(4,307) $26,041
Cost of sales $11,285 $1,847 $2,446 $(1,379) $14,199
Cost of rentals 890 4,268 116 (2,961) 2,313
Selling, general and administrative expenses 3,626 1,499 1,082 - 6,207
------- ------ ------ ------- -------
Income (loss) from operations $ 1,775 $ 882 $ 632 $ 33 $ 3,322
Interest expense 1,713 5 7 - 1,725
Intercompany interest expense (income) (41) 41 - - -
Other expense (income), net (930) (12) 68 881 7
------- ------ ------ ------- -------
Income (loss) before income taxes $ 1,033 $ 848 $ 557 $ (848) $ 1,590
Provision for income taxes 209 360 164 - 733
------- ------ ------ ------- -------
Net income (loss) $ 824 $ 488 $ 393 $ (848) $ 857
======= ====== ====== ======= =======
</TABLE>
14
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AXIA Incorporated (the "Company") is a manufacturer, marketer and distributor
of a wide range of products used by craftsmen in the construction industry, by
dishwasher manufacturers and by the packaging industry. The Company's
operations consist of the Nestaway, Fischbein and Ames business units.
The Nestaway division ("Nestaway") is a major producer of dishwasher racks
primarily serving the premium quality dishwasher market and specializes in the
custom design and manufacture of high volume bare and coated wire products.
Nestaway's customers include major dishwasher manufacturers in the United
States, including Maytag and Whirlpool. In addition, Nestaway manufactures dish
drainers for Rubbermaid, storage systems for Heller Designs and stainless steel
basket products for medical applications.
The Fischbein division ("Fischbein business unit") manufactures and
distributes a broad line of equipment used for closing bags and for material
storage and handling purposes. The Fischbein business unit is comprised of two
businesses: bag closing equipment, which operates under the name Fischbein
Company ("Fischbein"), and material handling equipment ("Flexible"). Fischbein
is a manufacturer and distributor of sewing equipment for bag closing.
Fischbein also makes equipment for closing bags through gluing and heat
transfer. Fischbein's machines are used worldwide in the food, chemical,
agricultural and mineral industries. Flexible manufactures two product lines:
Nestainer, a nestable, portable storage rack system for warehouse storage and
transportation of goods; and Nestaflex, portable, expanding, flexible conveyors
which are sold primarily to retail chains and distribution centers. The bag
making operations of Mid America Machine Corp. ("MAMCO") were discontinued in
1995 and MAMCO's assets were sold or licensed. MAMCO accounted for less than 1%
of the Company's revenues in 1995.
The Company's Ames business unit ("Ames") is composed of Ames Taping Tool
Systems, Inc., TapeTech Tool Co., Inc., Ames Taping Tools of Canada Ltd. and the
Ames division. Ames' primary business is the rental of automatic taping and
finishing tool systems ("ATF") under the "Bazooka" (registered trademark) brand
name to drywall finishing contractors primarily through 64 leased retail stores
and 47 franchise locations located throughout the U.S. and Canada. Ames'
systems are used by professional tradesmen to finish drywall joints prior to
painting, wallpapering and other forms of final treatment. Professional
tradesmen typically prefer to rent rather than purchase ATF tool systems because
rental includes the service of maintaining the tools in good working condition
and gives tradesmen the option to return the tools to Ames when they are no
longer needed due to the completion of a job. Ames also sells other merchandise
to the professional tradesman, including hand tools and drywall tape, through
its company-operated stores.
As discussed in "Liquidity and Capital Resources," the Company entered into a
new bank credit agreement which lowers its interest rate, reduces interim
scheduled term loan maturity payments and extends the final maturity date of its
term loans. The Company wrote off $1,024,000 in unamortized deferred financing
costs from its prior bank agreement which was recorded, net of tax, as an
extraordinary item in its Consolidated Statements of Income. This charge has
not been included in the discussion and summaries included herein.
During the periods discussed below, except as noted, inflation and changing
prices have not had, and are not expected to have, a material impact on the
Company's net revenues or income from operations.
15
<PAGE>
The following Table 1 summarizes the Company's Consolidated Statements of
Income, excluding an extraordinary item previously, for the three and six-month
periods ended June 30, 1996 and June 30, 1995 (in thousands):
TABLE 1
<TABLE>
<CAPTION>
Summary of Income Statement
---------------------------
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net revenues $25,868 $26,041 $54,489 $51,449
Cost of revenues 15,146 16,512 32,599 31,732
Selling, general and administrative
expenses 5,990 6,207 12,695 12,368
------- ------- ------- -------
Income from operations $ 4,732 $ 3,322 $ 9,195 $ 7,349
Interest expense 1,427 1,725 2,870 3,461
Other expense (income), net 49 7 59 92
------- ------- ------- -------
Income before income taxes and
extraordinary item $ 3,256 $ 1,590 $ 6,266 $ 3,796
Provision for income taxes 1,396 733 2,697 1,753
------- ------- ------- -------
Income before extraordinary item $ 1,860 $ 857 $ 3,569 $ 2,043
======= ======= ======= =======
</TABLE>
The following Table 2 presents, for the periods indicated, certain items in
the Company's Consolidated Statements of Income, excluding an extraordinary
item, as a percentage of total net revenues for the three and six-month periods
ended June 30, 1996 and June 30, 1995:
TABLE 2
<TABLE>
<CAPTION>
Percentage of Total Net Revenues
--------------------------------
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Revenues............................................ 100.0% 100.0% 100.0% 100.0%
Costs and expenses
Cost of revenues............................... 58.6 63.4 59.8 61.7
Selling, general and
administrative expenses....................... 23.2 23.9 23.3 24.0
Interest expense............................... 5.5 6.6 5.3 6.7
Other expense (income), net.................... .2 - .2 .2
Provision for income taxes..................... 5.3 2.8 4.9 3.4
----- ----- ----- -----
Income before extraordinary item........................ 7.2% 3.3% 6.5% 4.0%
</TABLE>
16
<PAGE>
Table 3 below summarizes the revenues and income from operations for the
three and six-month periods ended June 30, 1996 and June 30, 1995 by business
unit (in thousands):
<TABLE>
<CAPTION>
TABLE 3
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net revenues
Nestaway $10,172 $ 9,694 $22,831 $20,290
Fischbein 6,394 8,148 13,507 14,647
Ames 9,302 8,199 18,151 16,512
------- ------- ------- -------
Total net revenues $25,868 $26,041 $54,489 $51,449
Income from operations
Nestaway $ 2,261 $ 1,479 $ 5,149 $ 3,893
Fischbein 589 933 1,275 1,520
Ames 2,606 1,727 4,379 3,656
Corporate and Eliminations (724) (817) (1,608) (1,720)
------- ------- ------- -------
Total income from operations $ 4,732 $ 3,322 $ 9,195 $ 7,349
</TABLE>
RESULTS OF OPERATIONS - YEAR-TO-DATE JUNE 30, 1996
AXIA Consolidated net revenues for the six-month period ended June 30, 1996,
increased 5.9% to $54,489,000 from $51,449,000 in the comparable period in 1995.
The increase was primarily the result of the increased sales of dish drainers at
Nestaway and increased revenue from the rental of automatic taping tools and
merchandise sales at the Ames business unit. The Company recorded revenues of
$563,000 in 1995 from MAMCO which ceased operations in the second quarter of
that year, and $775,000 in additional revenues in 1995 due to the elimination of
a one-month reporting lag for Fischbein's European operations.
Consolidated cost of revenues for the six-month period ended June 30, 1996,
increased 2.7% to $32,599,000 from $31,732,000 in the comparable period in 1995.
The growth in cost of revenues was attributable to increased revenue volumes.
Profit margins improved due to price increases on selected products and a rental
rate increase on rental tools. The Company recorded in 1996 a $107,000 refund
for workers' compensation and general/product liability insurance. An
additional $109,000 in insurance refunds were allocated to SG&A.
Consolidated selling, general and administrative expenses ("SG&A") for the
six-month period ended June 30, 1996, increased 2.6% to $12,695,000 from
$12,368,000 in the comparable period in 1995. This was primarily attributable
to expenses incurred to generate revenue growth.
Interest expense for the six-month period ended June 30, 1996, decreased 17.1%
to $2,870,000 from $3,461,000 in the comparable period in 1995. The decrease
was the result of both a reduction in outstanding debt and lower interest rates
on the Company's variable rate debt. The effects of the bank credit refinancing
will be realized in future periods.
Other expense was $59,000 for the six-month period ended June 30, 1996,
compared to other expense of $92,000 in the comparable period in 1995.
Income before income taxes (IBT) for the six-month period ended June 30, 1996,
increased 65.1% to $6,266,000 from $3,796,000 in the comparable period in 1995.
As discussed in the preceding paragraphs, this improvement was primarily the
result of increased revenues.
17
<PAGE>
Income taxes for the period ended June 30, 1996, were 43.0% of IBT compared to
46.2% in the comparable period in 1995. The Company's effective tax rate
decreased as a result of lower estimated state income taxes and the lessened
effect of non-deductible expenses, primarily goodwill amortization.
The following is an analysis of operating results for the Nestaway, Fischbein
and Ames business units.
NESTAWAY Net revenues for the six-month period ended June 30, 1996, increased
12.5% to $22,831,000 from $20,290,000 in the comparable period in 1995. The
revenue growth was primarily attributable to increased sales of dish drainers to
Rubbermaid.
Cost of revenues for the six-month period ended June 30, 1996, increased 7.0%
to $15,997,000 from $14,945,000 in the comparable period in 1995. The increase
was attributable to the above discussed revenue improvement. In 1995, Nestaway
incurred non-recurring startup expenses for a new style dish drainer and the
coating process for dish drainers.
SG&A for the six-month period ended June 30, 1996, increased 16.0% to
$1,685,000 from $1,452,000 in the comparable period in 1995. This increase was
primarily the result of expenses incurred to broaden product offerings and
increased professional services, including legal.
As a result of the impact of the events reviewed in the preceding paragraphs,
income from operations for the six-month period ended June 30, 1996, increased
32.3% to $5,149,000 from $3,893,000 in the comparable period in 1995.
FISCHBEIN Net revenues for the six-month period ended June 30, 1996, decreased
7.8% to $13,507,000 from $14,647,000 in the comparable period in 1995. This was
primarily attributable to the Company eliminating a one-month reporting lag from
the European bag closing operations which resulted in an additional $775,000 in
revenue in the second quarter of 1995. The bag making operations of MAMCO were
discontinued in 1995. This operation recorded revenues of $563,000 in the first
six months of 1995. Changes in currency translation rates did not have a
material impact on the Company's revenues or results from operations in
comparison to the prior year period.
Cost of revenues for the six-month period ended June 30, 1996 decreased 9.4%
to $8,803,000 from $9,716,000 in the comparable period in 1995. The decrease
was primarily attributable to the reduction in revenues.
SG&A for the six-month period ended June 30, 1996 increased .5% to $3,429,000
from $3,411,000 in the comparable period in 1995. The increase was primarily
attributable to increased advertising and other selling expenses incurred in the
first quarter to generate volume growth.
As a result of the impact of the events reviewed in the preceding paragraphs,
income from operations for the six-month period ended June 30, 1996 decreased
16.1% to $1,275,000 from $1,520,000 in the comparable period in 1995.
AMES Net revenues for the six-month period ended June 30, 1996 increased
9.9% to $18,151,000 from $16,512,000 in the comparable period in 1995. Revenue
growth was primarily attributable to an increase in merchandise sales through
the Company-operated stores and the impact of a rental price increase. The price
increase accounted for a 6.3% increase in revenues from the prior year.
Cost of revenues for the six-month period ended June 30, 1996 increased 10.3%
to $7,799,000 from $7,071,000 in the comparable period in 1995. Cost of
revenues increased primarily due to increased merchandise sales and expenses
incurred in the consolidation of two rental tool repair centers.
SG&A for the six-month period ended June 30, 1996 increased 3.2% to $5,973,000
from $5,785,000 in the comparable period in 1995. SG&A expense growth was
primarily attributable to increased bad debt expense and other expenses related
to revenue growth.
18
<PAGE>
As a result of the impact of the events reviewed in the preceding paragraphs,
income from operations for the six-month period ended June 30, 1996 increased
19.8% to $4,379,000 from $3,656,000 in the comparable period in 1995.
RESULTS OF OPERATIONS - QUARTER ENDED JUNE 30, 1996
AXIA Consolidated net revenues for the three-month period ended June 30, 1996,
decreased .7% to $25,868,000 from $26,041,000 in the comparable period in 1995.
The decrease was primarily the result of the discontinuance of supply contracts
for KitchenAid and Frigidaire dishracks, the discontinuance of the bag making
operations of MAMCO which contributed $526,000 in revenues in the second quarter
of 1995, and the elimination of a one-month reporting lag at Fischbein's
European operation which resulted in an additional $775,000 in the second
quarter of 1995. Ames' revenues grew as a result of increased merchandise sales
and a rental price increase.
Consolidated cost of revenues for the three-month period ended June 30, 1996,
decreased 8.3% to $15,146,000 from $16,512,000 in the comparable period in 1995.
Profit margins improved due to price increases on selected products and a rental
rate increase on rental tools. The Company recorded a $107,000 refund for
workers' compensation and general/product liability insurance. An additional
$109,000 in insurance refunds were allocated to SG&A as noted in the following
paragraph.
Consolidated selling, general and administrative expenses ("SG&A") for the
three-month period ended June 30, 1996, decreased 3.5% to $5,990,000 from
$6,207,000 in the comparable period in 1995. The Company recorded additional
pension gains and a refund in general liability and workers' compensation
insurance in 1996.
Interest expense for the three-month period ended June 30, 1996, decreased
16.9% to $1,427,000 from $1,725,000 in the comparable period in 1995. The
decrease was the result of both a reduction in outstanding debt and lower
interest rates on the Company's variable rate debt.
Other expense was $49,000 for the three-month period ended June 30, 1996,
compared to other expense of $7,000 in the comparable period in 1995.
Income before income taxes (IBT) for the three-month period ended June 30,
1996, increased 104.8% to $3,256,000 from $1,590,000 in the comparable period in
1995. As discussed in the preceding paragraphs, this improvement was primarily
the result of increased revenues, price increases and product mix.
Income taxes for the period ended June 30, 1996, were 42.9% of IBT compared to
46.1% in the comparable period in 1995. The Company's effective tax rate
decreased as a result of lower estimated state income taxes and the lessened
effect of non-deductible expenses, primarily goodwill amortization.
NESTAWAY Net revenues for the three-month period ended June 30, 1996, increased
4.9% to $10,172,000 from $9,694,000 in the comparable period in 1995. Revenue
growth was primarily attributable to increased sales of dish drainers.
Cost of revenues for the three-month period ended June 30, 1996, decreased
5.5% to $7,083,000 from $7,492,000 in the comparable period in 1995. The
decrease was attributable to the insurance refund, and the non-recurrence of
startup costs incurred in 1995 to institute the coating of dish drainers and a
new style dish drainer.
SG&A for the three-month period ended June 30, 1996, increased 14.5% to
$828,000 from $723,000 in the comparable period in 1995. This increase was
primarily the result of expenses incurred to broaden product offerings and
increased professional services, including legal.
19
<PAGE>
As a result of the impact of the events reviewed in the preceding paragraphs,
income from operations for the three-month period ended June 30, 1996, increased
52.9% to $2,261,000 from $1,479,000 in the comparable period in 1995.
FISCHBEIN Net revenues for the three-month period ended June 30, 1996,
decreased 21.5% to $6,394,000 from $8,148,000 in the comparable period in 1995
due to the discontinuance of MAMCO which contributed $526,000 in revenues in the
second quarter of 1995 and $775,000 in non-recurring revenues recorded in Europe
in 1995 due to elimination of a one-month reporting lag.
Cost of revenues for the three-month period ended June 30, 1996 decreased
23.5% to $4,100,000 from $5,360,000 in the comparable period in 1995. The
decrease was primarily attributable to decreased revenues.
SG&A for the three-month period ended June 30, 1996 decreased 8.1% to
$1,705,000 from $1,855,000 in the comparable period in 1995. The decrease was
primarily attributable to the revenue changes discussed above, including the
elimination of a one-month reporting lag in Europe.
As a result of the impact of the events reviewed in the preceding paragraphs,
income from operations for the three-month period ended June 30, 1996 decreased
36.9% to $589,000 from $933,000 in the comparable period in 1995.
AMES Net revenues for the three-month period ended June 30, 1996 increased
13.5% to $9,302,000 from $8,199,000 in the comparable period in 1995. Revenue
growth was primarily attributable to an increase in merchandise sales through
the Company-operated stores and the impact of a rental price increase. The
price increase accounted for a 6.8% increase in revenues from the prior year.
Cost of revenues for the three-month period ended June 30, 1996 increased 8.3%
to $3,963,000 from $3,660,000 in the comparable period in 1995. Cost of
revenues increased primarily due to increased merchandise sales and royalties
due to an increase in franchise locations.
SG&A for the three-month period ended June 30, 1996 decreased 2.8% to
$2,733,000 from $2,812,000 in the comparable period in 1995. SG&A expense
declined due to reduced expenditures for professional services, and advertising,
and the refund of insurance premiums.
As a result of the impact of the events reviewed in the preceding paragraphs,
income from operations for the three-month period ended June 30, 1996 increased
50.9% to $2,606,000 from $1,727,000 in the comparable period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company entered into a new bank credit agreement on June 27, 1996, which
reduced the interest rate on its variable rate bank loans by 1.25 to 1.50%,
depending on the maintaining of certain ratios and Subordinated Note repurchases
and extinguish Subordinated Notes equal to $4.0 million plus additional amounts
based on free cash flow as defined in the agreement. The agreement also
provided the Company with the ability to repurchase and extinguish Subordinated
Notes equal to $4.0 million plus additional amounts based on free cash flow as
defined. The new loan agreement consists of a $25,000,000 term loan and up to
$15,000,000 in available funds under a revolving credit loan. Less amounts
outstanding on June 30, 1996, the Company had additional revolving credit
availability of $11,117,000. The term loan matures in 18 equal quarterly
installments of $1,389,000 beginning September 30, 1996, with the final payment
due on December 31, 2000. This payment schedule results in an extended maturity
date from the prior agreement (final payment scheduled for December 31, 1999)
and reduces the scheduled quarterly term loan payments. Management believes
that, in addition to reducing its interest costs, this financing provides better
financial flexibility and will be sufficient to meet the Company's current
expectations through the period of the agreement.
20
<PAGE>
The Company generated cash from operations of $7,158,000 for the six-month
period ended June 30, 1996, compared to $3,143,000 for the six-month period
ended June 30, 1995, and had cash on hand of $962,000.
At June 30, 1996, the Company had working capital of $8,617,000 compared to
working capital of $6,750,000 at December 31, 1995. Receivables have declined
$487,000 and inventories $142,000 from December 31, 1995, principally as a
result of the termination of dishrack supply agreements with two customers of
Nestaway. Working capital, however, increased due to an increase in cash of
$917,000 and a reduction in current maturities of long-term debt of $972,000.
Capital expenditures for the six-month period ended June 30, 1996, were
$2,029,000. Management believes its cash flow from operations, together with
its revolving loan capacity, will be sufficient to meet its capital expenditure
requirements for the remainder of 1996 and 1997.
The Company's Nestaway division closed its dishwasher rack manufacturing plant
in Beaver Dam, Kentucky, in December 1994. The plant had provided dishwasher
racks to the General Electric Company's (GEC) Louisville, Kentucky plant since
1978 and GEC had advised Nestaway that it would not order dishracks from
Nestaway in 1995. Whirlpool also indicated in 1994 that the KitchenAid lower
racks currently supplied by Nestaway's Canal Winchester plant will be self-
manufactured in 1996. Both GEC and Whirlpool have the capability of producing
dishracks. In January 1995, the Company was advised by Frigidaire, a customer
of Nestaway, of their decision to reenter the dishrack manufacturing business in
1996. The decisions of Whirlpool and Frigidaire began to adversely impact the
Company's revenues and operating income beginning in the second quarter 1996.
In fiscal 1995, KitchenAid and Frigidaire accounted for a total of 11% of the
Company's consolidated revenues. The Company will continue to manufacture
components for Whirlpool.
As a result of the loss of the KitchenAid business, the Company closed its
Canal Winchester, Ohio, plant in June 1996 and has negotiated an exit to the
lease effective August 1996. The lease had previously been scheduled to
terminate on March 31, 1997. Nestaway also temporarily shut down its Clinton,
North Carolina, plant in May 1996 as a result of the discontinuance of its
supply relationship with Frigidaire. Unless the Company is able to replace this
business, this facility will be permanently closed. The Company has remaining
reserves as of June 30, 1996 of $1,360,000 for the closing of these facilities
which Management believes is adequate. Management currently plans to maintain
the Beaver Dam, Kentucky, plant to potentially consolidate any remaining
business formerly manufactured at Clinton and Canal Winchester and to
manufacture any customer requirements which cannot be fulfilled by either the
McKenzie, Tennessee or Cleveland, Ohio plants.
The only material environmental remedial obligation known to management is
related to a Buffalo facility formerly operated by the Company's predecessor,
Bliss & Laughlin Steel Co. The Company became aware of this environmental
contingency in 1991. Prior to a preliminary remedial investigation of the site
in 1993, management could not assess the potential remedial costs or the extent
of the Company's liability. Consequently, in 1991 and 1992, the Company
recorded special charges for the continuing legal and consulting expenses
estimated to be necessary to determine the Company's potential liability. The
initial remedial investigation report estimated the total cost to restore the
site to be within a range of $1,101,000 to $4,928,000, plus or minus 50% of
those costs. Accordingly, in 1993, the Company recorded an additional charge of
$1,798,000 necessary to bring the recorded reserve up to the low end of the
estimated range. A feasibility study completed in 1994 established a range of
estimated total costs of $686,000 to $2,887,000, plus or minus 30% of those
costs. The Company has established a reserve of $3,900,000 for remediation of
this site. Remediation is not likely to commence prior to 1997 and the Company
believes other entities may also be liable for a portion of these costs. In
addition, the Company has notified the insurance companies it has identified as
having provided coverage during the time period of the Company's ownership of
the property. The initial response of those insurance companies has been to
deny coverage for the liability costs. In a more recent communication, NYSDEC
has expressed concern about the possible contamination of other properties
adjacent to the site formerly owned by the Company. As this issue had not been
previously raised, the extent to which such alleged pollution may, or may not,
have occurred has not been investigated or characterized. The Company expects
to utilize its revolving loan capacity, which the Company expects to maintain
through new or amended credit agreements for the foreseeable future, to
remediate the site. In the event that remediation costs are at the high end or
exceed the current cost estimates and the Company is unable to recoup costs from
other parties, the Company's payment of such remediation costs may have a
material adverse
21
<PAGE>
effect on the Company's financial position. As another property adjoining the
site has also been in the process of addressing concerns raised by NYSDEC, the
Company has entered into discussions with parties responsible for that property
in efforts to negotiate a joint remediation plan which would prove a more
economical solution of both matters. (See also PART II Item 1. Legal
Proceedings.)
As discussed in Note 4 in the accompanying financial statements, the Bank
Credit Agreement and the Indenture of AXIA Incorporated, issuer, governing the
Notes, restrict the Company's ability to incur additional indebtedness.
Management, based upon the budgets prepared by its business units, believes that
its cash flow from operations and its revolving loan capacity will be sufficient
to meet its operational requirements, loan maturities, and capital needs for
1996 and 1997.
The Company was in compliance with all terms and restrictive covenants of its
credit agreements as of June 30, 1996.
22
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject to various federal, state and local laws and
regulations governing the use, discharge and disposal of hazardous materials.
Except as discussed below, compliance with current laws and regulations has not
had, and is not expected to have, a material adverse effect on the Company's
financial condition or operating results.
On February 25, 1991, the New York State Department of Environmental
Conservation (the "NYSDEC") sent a notice letter to the Company alleging that it
had documented the release and/or threatened release of "hazardous substances"
and/or the presence of "hazardous wastes" at a property located in Buffalo, New
York, formerly owned by Bliss and Laughlin Steel Company, a predecessor of the
Company. The NYSDEC has determined that the Company, among others, may be a
responsible party through its past ownership of the property. In the notice
letter, the NYSDEC requested that the Company agree to enter into negotiations
with the NYSDEC to execute a consent decree with respect to the financing by the
Company of a remedial investigation, as well as a feasibility study for remedial
action.
The notice letter listed four other potentially responsible parties, each of
whom received a similar letter from the NYSDEC. In addition, the Company has
notified the insurance companies it has identified as having provided coverage
during the period of the Company's ownership of the property. The initial
response of those insurance companies has been to deny coverage for the
liability costs.
In 1994, a feasibility study prepared by environmental consultants engaged by
the Company, estimated the costs of the most probable manner to remediate the
site, exclusive of any possible remediation for adjacent properties referred to
below, at $2.9 million, plus or minus 30%. The Company has established an
accrual of $3.9 million for the costs of remediation. Remediation of the site
is not expected to begin before 1997 and is dependent upon an agreement with the
NYSDEC concerning the extent and method of remediation. As another property
immediately adjoining the site has also been in the process of addressing
concerns raised by NYSDEC, the Company has entered into discussions with parties
responsible for said property in efforts to negotiate a joint remediation plan
which would prove to be a more economical solution for both matters. In the
event that remediation costs are at the high end or exceed the current cost
estimates and the Company is unable to recoup costs from other parties, the
Company's payment of such remediation costs may have a material adverse effect
on the Company's financial position.
In a more recent communication, NYSDEC has expressed concern about the
possible contamination of other properties adjacent to the site formerly owned
by the Company. As this issue had not been previously raised, the extent to
which such alleged pollution may, or may not, have occurred has not been
investigated or characterized.
The Company and certain of its subsidiaries are currently involved in civil
litigation relating to the conduct of their business. Except for the
environmental matter discussed above, though the outcome of any particular
lawsuit cannot be predicted with certainty, the Company believes that these
matters, individually or in the aggregate, will not have a material adverse
effect on its results of operations or financial condition.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
23
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
The Company's Nestaway division closed its dishwasher rack manufacturing plant
in Beaver Dam, Kentucky, in December 1994. The plant had provided dishwasher
racks to the General Electric Company's (GEC) Louisville, Kentucky plant since
1978 and GEC had advised Nestaway that it would not order dishracks from
Nestaway in 1995. Whirlpool indicated in 1994 that the KitchenAid lower racks
currently supplied by Nestaway's Canal Winchester plant will be self-
manufactured in 1996. Both GEC and Whirlpool have the capability of producing
dishracks. In January 1995, the Company was advised by Frigidaire, a customer
of Nestaway, of their decision to reenter the dishrack manufacturing business in
1996. The decisions of Whirlpool and Frigidaire began to adversely impact the
Company's revenues and operating income beginning in the second quarter 1996.
In fiscal 1995, KitchenAid and Frigidaire accounted for a total of 11% of the
Company's consolidated revenues. The Company will continue to manufacture
components for Whirlpool.
As a result of the loss of the KitchenAid business, the Company closed its
Canal Winchester, Ohio, plant in the second quarter of 1996 and has negotiated
an exit to the lease effective August 1996 on terms favorable to the Company.
The lease had previously been scheduled to terminate March 31, 1997. Nestaway
also temporarily shut down its Clinton, North Carolina, plant in the second
quarter as a result of the discontinuance of its supply relationship with
Frigidaire. Unless the Company is able to replace this business, this facility
will be permanently closed. The Company has remaining reserves as of June 30,
1996 of $1,360,000 for the closing of these facilities which Management believes
is adequate. Management currently plans to maintain the Beaver Dam, Kentucky,
plant to potentially consolidate any remaining business formerly manufactured at
Clinton and Canal Winchester and to manufacture any customer requirements which
cannot be fulfilled by either the McKenzie, Tennessee or Cleveland, Ohio plants.
On June 21, 1996, the corporate office of the Company relocated to 100 West
22nd Street, Suite 134, Lombard, Illinois 60148. The telephone and fax numbers
are (630) 629-3360 and (630) 629-3361, respectively.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
- - ------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of AXIA Incorporated./(1)/
3.2 By-Laws of AXIA Incorporated./(1)/
3.3 Certificate of Incorporation of Ames Taping Tool Systems, Inc./(1)/
3.4 By-Laws of Ames Taping Tool Systems, Inc./(1)/
3.5 Articles of Incorporation of Mid America Machine Corp./(1)/
3.6 By-Laws of Mid America Machine Corp./(1)/
3.7 Certificate of Incorporation of TapeTech Tool Co., Inc./(1)/
3.8 By-Laws of TapeTech Tool Co., Inc./(1)/
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Item 6(a) continued
<S> <C>
4.1 AXIA Incorporated, Issuer, Ames Taping Tool Systems Inc., TapeTech
Tool Co., Inc., Mid America Machine Corp., Guarantors, Series A and
Series B 11% Series Subordinated Notes Due 2001, Indenture, dated as
of March 15, 1994./(1)/
4.2 Purchase Agreement 21,000 Units Consisting of $21,000,000 Principal
Amount of 11% Subordinated Notes due 2001 of AXIA Incorporated and
63,000 Shares of Class A Common Stock of Axia Holdings Corp., March
15, 1994./(1)/
4.3 A/B Exchange Registration Rights Agreement, dated as of March 15, 1994
by, and among, AXIA Incorporated, Ames Taping Tool Systems, Inc.,
TapeTech Tool Co., Inc., Mid America Machine Corp., and Each of the
Purchasers Listed on the Signature Pages of the Purchasers
Agreement./(1)/
4.6 Guarantee of Existing Notes./(1)/
4.7 Guarantee of Exchange Notes./(1)/
4.7.1 Release of Guarantee Mid America Machine Corp./(4)/
10.1 AXIA Management Agreement, dated as of March 15, 1994 by, and among,
AXIA Incorporated and Cortec Capital Corporation./(2)/
10.3 Industrial Lease and Sublease between Harold Stebelton, Robert
Stebelton, and Rita Stebelton, as Landlord, and Canal Metal Products
Company as Sublandlord, and AXIA Incorporated, as Tenant, dated as of
March 12, 1987./(2)/
10.4 Lease Agreement between G.L. Building Company and AXIA Incorporated
executed as of January 8, 1993./(2)/
10.5 Form of Employee Bonus Agreement./(2)/
10.6 Form of Stock Option Agreement./(2)/
10.7 Form of the Stock Purchase Agreement./(2)/
10.8 Form of Employment and Non-competition Agreement./(2)/
10.9 Agreement between Nestaway Division of AXIA Incorporated and Maytag
Corporation dated November 1, 1990 and First Amendment to Agreement
dated April 6, 1993./(2)/
10.10 Exec-U-Care Medical Reimbursement Insurance./(2)/
10.11 Key Employee Posthumous Salary Continuation Plan./(2)/
10.12 AXIA Incorporated Management Incentive Compensation Plan/(2)/
10.15 Purchasing Partnering Agreement between Maytag-Jackson Dishwash
Products and Nestaway, Division of AXIA Incorporated, dated November
15, 1995./(4)/
10.16 Loan agreement dated as of June 27, 1996 among AXIA Incorporated,
Ames Taping Tool Systems, Inc., TapeTech Tool Co., Inc., as Borrower,
the Lenders named herein as Lenders and American National Bank and
Trust Company of Chicago as Agent and Lender.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Item 6(a) continued
<S> <C>
23.1 Consent of Kaye, Scholer, Fierman, Hays & Handler (included in Exhibit
5.1)./(3)/
23.2 Consent of Arthur Andersen LLP/(4)/
99.1 Form of Letter of Transmittal./(2)/
99.2 Form of Notice of Guaranteed Delivery./(2)/
</TABLE>
(b) Reports on Form 8-K.
None.
/(1)/ Previously filed as an exhibit to Registration Statement No. 33-78922
filed with the Securities and Exchange Commission on May 13, 1994.
/(2)/ Previously filed as an exhibit to Amendment No. 1 to Registration
Statement No. 33-78922 filed with the Securities and Exchange Commission
on May 24, 1994.
/(3)/ Previously filed as an exhibit to Amendment No. 2 to Registration
Statement No. 33-78922 filed with the Securities and Exchange Commission
on June 30, 1994.
/(4)/ Previously filed as an exhibit to the Company's Form 10-K for the period
ended December 31, 1995 filed with the Securities and Exchange Commission
on March 29, 1996.
26
<PAGE>
SIGNATURES
Pursuant to 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.
AXIA INCORPORATED
Date: August 12, 1996 /s/ Lyle J. Feye
-----------------------------------
Lyle J. Feye
Vice President Finance, Treasurer,
Chief Financial Officer
27
<PAGE>
EXHIBIT 10.16
- - --------------------------------------------------------------------------------
U.S. $40,000,000
LOAN AGREEMENT
Dated as of June 27, 1996
among
AXIA INCORPORATED
AMES TAPING TOOL SYSTEMS, INC.
TAPETECH TOOL CO., INC.
as Borrowers,
THE LENDERS NAMED HEREIN
as Lenders
and
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
as Agent and Lender
- - --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
SECTION PAGE
- - ------- ----
<S> <C>
1. DEFINITIONS........................................................... 1
2. AMOUNT AND TERMS OF CREDIT............................................ 23
2.1 Revolving Credit Advances....................................... 23
2.2 Term Loan....................................................... 25
2.3 Letters of Credit............................................... 26
2.4 Mandatory Prepayments........................................... 30
2.5 Reduction or Cancellation of Commitments; Optional Prepayment... 31
2.6 Single Loan..................................................... 31
2.7 Use of Proceeds; Borrowers' Representative...................... 31
2.8 Interest on the Revolving Credit Loans and the Term Loans....... 32
2.9 Requirements of Law............................................. 35
2.10 Funding Indemnification......................................... 37
2.11 LIBOR Rate Lending Unlawful..................................... 37
2.12 Lending Installations........................................... 37
2.13 Termination or Assignment of Commitments Under Certain
Circumstances................................................... 38
2.14 Fees; Unused Revolving Credit Loan Charge....................... 38
2.15 Receipt and Application of Payments............................. 38
2.16 Sharing of Payments, Etc........................................ 39
2.17 Accounting...................................................... 39
2.18 Indemnity....................................................... 39
2.19 Access.......................................................... 41
3. CONDITIONS PRECEDENT.................................................. 41
3.1 Minimum Excess Revolving Credit Loan Availability............... 41
3.2 Execution and Delivery of Agreement............................. 42
3.3 Documents and Other Agreements.................................. 42
3.4 Absence of Material Adverse Change.............................. 44
3.5 Conditions to the Initial Revolving Credit Advance.............. 44
3.6 Conditions to Each Revolving Credit Advance..................... 44
4. REPRESENTATIONS AND WARRANTIES........................................ 45
4.1 Corporate Existence; Compliance with Law........................ 45
4.2 Executive Offices............................................... 45
4.3 Subsidiaries.................................................... 46
4.4 Corporate Power; Authorization; Enforceable Obligations......... 46
4.5 Solvency........................................................ 46
4.6 Financial Statements............................................ 46
4.7 Ownership of Property; Liens.................................... 47
4.8 No Default...................................................... 48
4.9 Burdensome Restrictions......................................... 48
4.10 Labor Matters................................................... 48
4.11 Other Ventures.................................................. 49
4.12 Investment Company Act.......................................... 49
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.13 Margin Regulations.............................................. 49
4.14 Taxes........................................................... 49
4.15 ERISA........................................................... 50
4.16 No Litigation................................................... 51
4.17 Brokers......................................................... 52
4.18 Outstanding Stock; Options; Warrants, Etc....................... 52
4.19 Employment and Labor Agreements................................. 52
4.20 Patents, Trademarks, Copyrights and Licenses.................... 52
4.21 Full Disclosure................................................. 52
4.22 Liens........................................................... 53
4.23 No Material Adverse Effect...................................... 53
4.24 Environmental Matters........................................... 53
4.25 Government Contracts............................................ 54
5. FINANCIAL STATEMENTS AND INFORMATION.................................. 54
5.1 Reports and Notices............................................. 54
5.2 Communication with Accountants.................................. 57
6. AFFIRMATIVE COVENANTS................................................. 58
6.1 Maintenance of Existence and Conduct of Business................ 58
6.2 Payment of Obligations.......................................... 58
6.3 Financial Covenants............................................. 59
6.4 Books and Records............................................... 61
6.5 Litigation...................................................... 61
6.6 Insurance....................................................... 61
6.7 Compliance with Law............................................. 63
6.8 Agreements...................................................... 63
6.9 Supplemental Disclosure......................................... 64
6.10 Employee Plans.................................................. 64
6.11 SEC Filings; Certain Other Notices.............................. 65
6.12 Compliance with Taxes........................................... 65
6.13 Leases; Real Estate............................................. 65
6.14 Environmental Matters........................................... 66
7. NEGATIVE COVENANTS.................................................... 67
7.1 Mergers, Etc.................................................... 67
7.2 Investments; Loans and Advances................................. 67
7.3 Indebtedness.................................................... 68
7.4 Employee Loans.................................................. 69
7.5 Capital Structure............................................... 69
7.6 Maintenance of Business......................................... 69
7.7 Transactions with Affiliates.................................... 69
7.8 Guaranteed Indebtedness......................................... 70
7.9 Liens........................................................... 70
7.10 Capital Expenditures............................................ 71
7.11 Sales of Assets................................................. 71
7.12 Cancellation of Indebtedness.................................... 72
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
7.13 Events of Default............................................... 72
7.14 Hedging Transactions............................................ 73
7.15 Restricted Payments............................................. 73
7.16 ERISA........................................................... 73
7.17 Employment Agreements........................................... 73
7.18 Amendment of Subordinated Notes................................. 74
8. TERM AND TERMINATION................................................... 74
8.1 Termination..................................................... 74
8.2 Survival of Obligations Upon Termination of Financing
Arrangement..................................................... 74
9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES................................. 74
9.1 Events of Default............................................... 74
9.2 Remedies........................................................ 78
9.3 Waivers by Borrowers............................................ 78
9.4 Right of Set-Off................................................ 79
10. THE AGENT.............................................................. 79
10.1 Authorization and Action........................................ 79
10.2 Agent's Reliance, Etc........................................... 79
10.3 ANB and Affiliates.............................................. 80
10.4 Lender Credit Decision.......................................... 80
10.5 Indemnification................................................. 80
10.6 Successor Agent................................................. 81
11. MISCELLANEOUS.......................................................... 81
11.1 Complete Agreement; Modification of Agreement; Sale of Interest. 81
11.2 Fees and Expenses............................................... 82
11.3 No Waiver by Lender............................................. 83
11.4 Remedies........................................................ 84
11.5 MUTUAL WAIVER OF JURY TRIAL..................................... 84
11.6 Severability.................................................... 84
11.7 Parties......................................................... 84
11.8 Conflict of Terms............................................... 84
11.9 Authorized Signatories.......................................... 84
11.10 GOVERNING LAW................................................... 84
11.11 Notices......................................................... 85
11.12 Survival........................................................ 86
11.13 Section Titles.................................................. 86
11.14 Counterparts.................................................... 86
11.15 Defaulting Lender............................................... 86
12. CROSS-GUARANTY......................................................... 87
12.1 Cross-Guaranty.................................................. 87
12.2 Contribution with Respect to Guaranty Obligations............... 88
12.3 Obligations Absolute............................................ 89
12.4 WAIVER.......................................................... 89
</TABLE>
iii
<PAGE>
12.5 Recovery........................................................ 89
12.6 Liability Cumulative............................................ 89
iv
<PAGE>
<TABLE>
<CAPTION>
INDEX OF EXHIBITS AND SCHEDULES
-------------------------------
<S> <C>
Exhibit A - Form of Borrowing Base Certificate
Exhibit B - Form of Notice of Revolving Credit Advance
Exhibit C-1 - Form of Notice of Conversion/Continuation of Revolving Credit Loans
Exhibit C-2 - Form of Notice of Conversion/Continuation of Term Loans
Exhibit D - Form of Security Agreement
Exhibit E - Form of Patent and License Security Agreement
Exhibit F - Form of Trademark Collateral Assignment and Security Agreement
Exhibit G - Form of Stock Pledge Agreement
Exhibit H - Form of Revolving Credit Note
Exhibit I - Form of Term Note
Exhibit J-1 - Form of Mortgage
Exhibit J-2 - Form of Leasehold Mortgage
Exhibit K - Form of Opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP
Exhibit L - Form of Officer's Solvency Certificate
Schedule 1 - Liens
Schedule 4.2 - Offices and Other Locations
Schedule 4.3 - Subsidiaries
Schedule 4.6(c) - Material Adverse Changes
Schedule 4.7(a) - Owned Real Estate
Schedule 4.7(b) - Leased Real Estate
Schedule 4.11 - Other Ventures
Schedule 4.14 - Tax Matters
Schedule 4.15 - ERISA Matters
Schedule 4.16 - Litigation
Schedule 4.18 - Stock Ownership
Schedule 4.19 - Employment Matters
Schedule 4.20 - Patents, Trademarks, Copyrights and Licenses
Schedule 4.24 - Environmental Matters
Schedule 4.25 - Government Contracts
Schedule 6.6 - Insurance
Schedule 7.3 - Existing Indebtedness
Schedule 11.9 - Authorized Signatories
</TABLE>
v
<PAGE>
LOAN AGREEMENT
--------------
LOAN AGREEMENT, dated as of June 27, 1996, among AXIA INCORPORATED, a
Delaware corporation ("AXIA"), and its direct subsidiaries, AMES TAPING TOOL
SYSTEMS, INC., a Delaware corporation ("ATTS"), TAPETECH TOOL CO., INC., a
Delaware corporation ("TapeTech") (AXIA, ATTS and TapeTech, individually,
"Borrower", and collectively, "Borrowers"), each having an office at 100 West
22nd Street, Suite 134, Lombard, Illinois 60148, the lenders ("Lenders") named
herein, and AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a national
banking association, having an office at 33 North LaSalle Street, Chicago,
Illinois 60690 ("ANB"), as agent for Lenders hereunder (ANB, in such capacity,
being "Agent").
R E C I T A L S:
---------------
A. Borrowers desire that Lenders extend financing to enable Borrowers to
repay certain existing indebtedness and costs associated therewith and to supply
the working capital and other financial needs of Borrowers, to the extent
permitted by this Agreement, such financing to be comprised of the revolving
credit, term loan and letter of credit facilities established by this Agreement.
B. As security for the loans to be made by Lenders to, or for the account
of, Borrowers, and for the repayment of obligations incurred by Lenders for the
benefit of Borrowers, Borrowers will grant to Agent, for its benefit and the
ratable benefit of Lenders, a lien on, and a security interest in, all of their
assets.
C. Accordingly, in consideration of the mutual agreements contained
herein, and subject to the terms and conditions hereof, the parties hereto agree
as follows:
1. DEFINITIONS.
In addition to the defined terms appearing above, capitalized terms used
in this Agreement shall have (unless otherwise provided elsewhere in this
Agreement) the following respective meanings when used herein:
"ACCOUNT DEBTOR" shall mean any Person who is or who may become obligated
to any Borrower under, with respect to, or on account of, an Account Receivable.
"ACCOUNTS RECEIVABLE" shall mean all accounts, accounts receivable, other
receivables, contract rights, chattel paper, instruments, documents, and notes,
whether now owned or hereafter acquired by any Borrower.
"ADJUSTED LIBOR RATE" shall mean a per annum rate of interest equal to the
sum of (i) the LIBOR Rate, plus (ii) the Applicable Margin.
"AFFILIATE" shall mean with respect to any Person (i) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, 5% or more of the Stock having ordinary voting
power in the election of directors of such Person, (ii) each Person that
controls, is controlled by or is under common control with such Person or any
Affiliate of such Person, or (iii) each of such Person's officers, directors,
joint
<PAGE>
venturers and partners. For the purpose of this definition, "control" of a
Person shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise.
"AGENT" shall mean ANB, as agent for itself and Lenders hereunder, and any
successor agent appointed pursuant to Section 10.6.
"AGREEMENT" shall mean this Loan Agreement, including all amendments,
modifications and supplements hereto and any appendices, exhibits or schedules
to any of the foregoing, and shall refer to this Agreement as the same may be in
effect at the time such reference becomes operative.
"ALTA SURVEY" shall mean a survey prepared in accordance with the standards
adopted by the American Land Title Association and the American Congress on
Surveying and Mapping in 1992, known as the "Minimum Standard Detail
Requirements of Land Title Surveys". The ALTA Survey shall be in sufficient
form to satisfy the requirements of Commonwealth Land Title Insurance Company to
provide extended coverage over survey defects and shall also show the location
of all easements, utilities, and covenants of record, dimensions of all
improvements, encroachments from any adjoining property, and certify as to the
location of any flood plain area affecting the subject real estate. The ALTA
Survey shall contain the following certification: "To Axia Incorporated,
American National Bank and Trust Company of Chicago, as Agent and Commonwealth
Land Title Insurance Company. This is to certify that this map of plat and the
survey on which it is based were made in accordance with the "Minimum Standard
Detail Requirements for Land Title Surveys" jointly established and adopted by
ALTA and ACSM in 1992. (Signed) (SEAL) License No. ____________________".
"ALTERNATE BASE RATE" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (i) the
Base Rate in effect on such day, or (ii) the Federal Funds Effective Rate in
effect on such day, plus one percent (1%). If for any reason Agent shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Federal Funds Effective Rate for any reason,
including the inability or failure of Agent to obtain sufficient quotations in
accordance with the terms thereof, the Alternate Base Rate shall be determined
solely by reference to the Base Rate until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a
change in the Base Rate or the Federal Funds Effective Rate shall be effective
on the effective date of such change in the Base Rate or the Federal Funds
Effective Rate, respectively.
"ALTERNATE BASE RATE BORROWING" shall mean a Revolving Credit Advance
bearing interest at the Alternate Base Rate or a portion of the Term Loan
bearing interest at the Alternate Base Rate.
"ALTERNATE BASE RATE LOAN" shall mean the portion of the Revolving Credit
Loan or the Term Loan which bears interest at the Alternate Base Rate.
"APPLICABLE MARGIN" shall mean, for any Fiscal Quarter, the applicable
margin set forth below based upon the Consolidated Funded Debt to Consolidated
EBITDA Ratio of AXIA and its Subsidiaries for the four immediately preceding
Fiscal Quarters (the "Actual Ratio") set forth below:
2
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================
APPLICABLE MARGIN
REQUIRED APPLICABLE MARGIN IF ACTUAL RATIO
CONSOLIDATED IF ACTUAL RATIO EQUALS OR IS LESS
MEASUREMENT FUNDED DEBT TO EXCEEDS REQUIRED THAN REQUIRED
DATE EBITDA RATIO RATIO RATIO
("REQUIRED RATIO")
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - --------------------------------------------------------------------------------------------------
6/30/96 2.60 to 1.0 1.75% 1.50%
- - --------------------------------------------------------------------------------------------------
9/30/96 2.60 to 1.0 1.75% 1.50%
- - --------------------------------------------------------------------------------------------------
12/31/96 2.35 to 1.0 1.75% 1.50%
- - --------------------------------------------------------------------------------------------------
3/31/97 2.35 to 1.0 1.75% 1.50%
- - --------------------------------------------------------------------------------------------------
6/30/97 2.35 to 1.0 1.75% 1.50%
- - --------------------------------------------------------------------------------------------------
9/30/97 2.35 to 1.0 1.75% 1.50%
- - --------------------------------------------------------------------------------------------------
12/31/97 2.10 to 1.0 1.75% 1.50%
- - --------------------------------------------------------------------------------------------------
3/31/98 2.10 to 1.0 1.75% 1.50%
- - --------------------------------------------------------------------------------------------------
6/30/98 and at the 2.0 to 1.0 1.75% 1.50%
end of each
subsequent Fiscal
Quarter
==================================================================================================
</TABLE>
For purposes of the foregoing, the Applicable Margin shall be determined by
reference to the Actual Ratio as of the measurement date set forth above and any
change in the Applicable Margin shall become effective for all purposes on and
after the date of delivery to Agent of the certificate and applicable financial
statements required by Sections 5.1(c) and 5.1(d) relating to the Fiscal Quarter
or Fiscal Year ended as of the applicable measurement date; provided, however,
that until the first such certificate and financial statements have been
delivered to Agent, the Applicable Margin shall be 1.75%, unless AXIA shall have
delivered to Agent on the initial Closing Date an officer's certificate
certifying that the Applicable Margin, determined by AXIA in accordance with the
first part of this sentence based upon its good faith estimates, should be 1.50%
in which case the Applicable Margin shall be set at 1.50% for all purposes
hereunder until delivery of the first certificate and financial statements
pursuant to Section 5.1(c) hereof and if, upon delivery of such first financial
statements and certificate pursuant to Section 5.1(c), the certificate delivered
on the initial Closing Date proves to have been inaccurate and shall have
resulted in an understatement of the Applicable Margin, then such understatement
shall be corrected retroactively to the Closing Date and the Borrowers shall
immediately pay to Agent the amount of the shortfall. Notwithstanding the
foregoing, at any time during which AXIA has failed to deliver the certificate
and applicable financial statements described in Sections 5.1(c) and 5.1(d) with
respect to the Fiscal Quarter or Fiscal Year ending as of the applicable
measurement date in accordance with the provisions of such Sections, for more
than five Business Days after such certificate and applicable financial
statements are due, the Actual Ratio shall be deemed, solely for purposes of
this definition, to exceed the Required Ratio until such certificate and
applicable financial statements are delivered. The Applicable Margin shall be
increased by an amount equal to 0.25% per annum (the "Subordinated Debt
Repurchase Premium") in the event that (i) AXIA shall at any time repurchase any
of the Subordinated Notes or Subordinated Note Units, and (ii) at any time
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<PAGE>
during the period commencing on the date such repurchase is effected and ending
30 days after the date such repurchase is effected, the outstanding principal
balance of the Revolving Credit Loan exceeds $5,000,000. If, the Subordinated
Debt Repurchase Premium shall be in effect at any time in accordance with the
provisions of the immediately preceding sentence, then it shall remain in effect
until such time as the outstanding principal balance of the Revolving Credit
Loan is reduced to an amount equal to or less than $5,000,000 for 30 consecutive
days. If at any time following the initial repurchase of Subordinated Notes or
Subordinated Note Units occurring after the initial Closing Date the
Subordinated Debt Repurchase Premium shall not be in effect and there shall be
any additional repurchase of the Subordinated Notes or Subordinated Note Units
by AXIA, then the Applicable Margin shall again be increased by the Subordinated
Debt Repurchase Premium, if the conditions set forth above for the initial
imposition of the Subordinated Debt Repurchase Premium are satisfied in
connection with any such subsequent repurchase of Subordinated Notes or
Subordinated Note Units.
"BASE RATE" shall mean the per annum rate of interest announced or
published from time to time by Agent at its principal place of business in
Chicago, Illinois as its base or equivalent rate of interest, which rate is not
necessarily the lowest rate of interest charged by Agent with respect to
commercial loans. Any change in the Base Rate shall be effective as of the
effective date stated in the announcement by Agent of such change.
"BORROWING" shall mean either an Alternate Base Rate Borrowing or a LIBOR
Rate Borrowing, as the case may be.
"BORROWING BASE" shall mean an amount equal to (i) 85% of Eligible Domestic
Accounts Receivable, plus (ii) 70% of Eligible Foreign Accounts Receivable, plus
(iii) 50% of Eligible Inventory, plus (iv) the Borrowing Base Addition, if any.
"BORROWING BASE ADDITION" shall mean an amount equal to (i) $2,500,000
during the period from and including the Closing Date through and including
December 31, 1996, (ii) $2,000,000 during the period from and including January
1, 1997 through and including December 31, 1997, (iii) $1,500,000 during the
period from and including January 1, 1998 through and including December 31,
1998, (iv) $1,000,000 from and including January 1, 1999 through and including
December 31, 1999, and (v) zero dollars from and including January 1, 2000 and
at all times thereafter.
"BORROWING BASE CERTIFICATE" shall mean a certificate in the form attached
hereto as Exhibit A.
"BUSINESS DAY" shall mean a day, other than a Saturday or Sunday, on which
banks in Chicago, Illinois are open for the transaction of banking business and,
in the case of a Business Day which relates to a LIBOR Loan, a day on which
dealings are carried on in the London interbank market.
"CAPITAL EXPENDITURES" shall mean all payments, including, without
limitation, payments for Capital Lease Obligations, for any fixed assets or
improvements, or replacements, substitutions or additions thereto, that have a
useful life of more than one year and which are required to be capitalized under
GAAP.
"CAPITAL LEASE" shall mean, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, either would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person or otherwise be
disclosed as such in a note to such balance sheet, other than, in
4
<PAGE>
the case of any Borrower or a Subsidiary of any Borrower, any such lease under
which such Borrower or such Subsidiary is the lessor.
"CAPITAL LEASE OBLIGATION" shall mean, with respect to any Capital Lease,
the amount of the obligation of the lessee thereunder that, in accordance with
GAAP, would appear on a balance sheet of such lessee in respect of such Capital
Lease or otherwise be disclosed in a note to such balance sheet.
"CASH AND CASH EQUIVALENTS" shall mean, at any time, any assets of any
Borrower or any Subsidiary of any Borrower which are in the form of, or are
readily convertible into money, including, without limitation, cash, checks, and
other negotiable instruments, deposits with any bank or financial institution
(whether as demand deposits or time deposits, and whether or not evidenced by
certificates of deposit), and readily marketable securities of any type.
"CASH EQUIVALENTS" shall mean, for purposes of Section 2.3 hereof, cash
equivalents of the type referred to in clauses (i), (ii), (iii) and (iv) of the
proviso in Section 7.2 hereof.
"CERCLA" shall mean the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"CHARGES" shall mean all Federal, state, county, city, municipal, local,
foreign or other governmental (including, without limitation, PBGC) taxes at the
time due and payable, levies, assessments or charges upon or relating to (i) the
Collateral, (ii) the Obligations, (iii) any Borrower's or any of its
Subsidiaries' employees (other than taxes not required to be withheld), payroll,
income or gross receipts, (iv) any Borrower's or any of its Subsidiaries'
ownership or use of any of its assets, or (v) any other aspect of any Borrower's
or any of its Subsidiaries' business.
"CLOSING" shall mean the making of the advance under the Term Loan, the
making of the initial Revolving Credit Advance and the making of each subsequent
Revolving Credit Advance.
"CLOSING DATE" shall mean the date on which a Closing takes place.
"CODE" shall mean the Uniform Commercial Code of the jurisdiction with
respect to which such term is used, as in effect from time to time.
"COLLATERAL" shall mean the Collateral covered by the Security Agreement,
the Patent, and License Security Agreements and the Trademark Collateral
Assignment and Security Agreements, the pledged Collateral covered by the Stock
Pledge Agreement, and the properties covered by the Mortgages and the Leasehold
Mortgages.
"COLLATERAL DOCUMENTS" shall mean the Security Agreement, the Patent and
License Security Agreements, the Trademark Collateral Assignment and Security
Agreements, the Mortgages, the Leasehold Mortgages and the Stock Pledge
Agreement.
"COMMISSION" shall mean the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"COMMITMENT TERMINATION DATE" shall mean the earliest of (i) December 31,
2000, (ii) the date of termination of the commitment to make further Revolving
Credit Advances pursuant
5
<PAGE>
to Section 9.2 hereof, and (iii) the date of repayment or prepayment in full by
Borrower of the Term Loan in accordance with the provisions of Sections 2.2, 2.4
or 2.5 hereof.
"CONSOLIDATED AMORTIZATION EXPENSE" shall means for any Person, for any
period, the consolidated amortization expense of such Person for such period
(including amortization of any step-up in value of inventory or other assets as
may be required by purchase accounting), determined on a consolidated basis for
such Person and its Subsidiaries in conformity with GAAP.
"CONSOLIDATED CURRENT ASSETS" shall mean, with respect to any Person, at
any date of determination, the total assets of such Person and its consolidated
Subsidiaries which may properly be classified as current assets on a
consolidated balance sheet of such Person and its Subsidiaries in accordance
with GAAP.
"CONSOLIDATED CURRENT LIABILITIES" shall mean, with respect to any Person,
as at any date of determination, the total liabilities of such Person and its
consolidated Subsidiaries which may properly be classified as current
liabilities (other than the current portion of any Loans and of any Indebtedness
for borrowed money) on a consolidated balance sheet of such Person and its
consolidated Subsidiaries in accordance with GAAP.
"CONSOLIDATED DEPRECIATION EXPENSE" shall mean, with respect to any Person,
for any period, the consolidated depreciation expense of such Person for such
period, determined on a consolidated basis for such Person and its consolidated
Subsidiaries in conformity with GAAP.
"CONSOLIDATED EBITDA" shall mean, with respect to any Person, for any
period, the difference between (A) the sum of the amounts for such period of (i)
Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) Consolidated
Tax Expense, (iv) Consolidated Depreciation Expense, (v) Consolidated
Amortization Expense, (vi) the amount of any write-off of capitalized loan costs
incurred in connection with the refinancing of Indebtedness for borrowed money
with the proceeds of the Loans, and (vii) the amount of any write-off of
goodwill due to the loss of business at the Nestaway division, less (B) the sum
of the amounts for such period of (i) interest income and (ii) net gains on sale
of assets to the extent included in Consolidated Net Income, whether or not
extraordinary (excluding sales in the ordinary course of business) and other
extraordinary gains, all as determined on a consolidated basis for such Person
and its consolidated Subsidiaries in accordance with GAAP.
"CONSOLIDATED FIXED CHARGES" shall mean, with respect to any Person, for
any period, the amount of interest and regularly scheduled principal
installments payable on all Indebtedness for borrowed money of such Person and
its consolidated Subsidiaries during such period.
"CONSOLIDATED FREE CASH FLOW" shall mean, with respect to any Person, for
any period, the positive difference, if any, between (A) the sum of the amounts
for such period of (i) Consolidated Net Income, (ii) Consolidated Depreciation
Expense, and (iii) Consolidated Amortization Expense, less (B) the sum of (i)
the current portion of Consolidated Funded Debt, plus (ii) Capital Expenditures
incurred during the period, all as determined on a consolidated basis for such
Person and its consolidated Subsidiaries in accordance with GAAP.
"CONSOLIDATED FUNDED DEBT" shall mean, with respect to any Person, at any
date of determination thereof, the total of all Funded Debt of such Person and
its consolidated Subsidiaries outstanding on such date determined in accordance
with GAAP, after eliminating all intercompany transactions.
6
<PAGE>
"CONSOLIDATED FUNDED DEBT TO CONSOLIDATED EBITDA RATIO" shall mean, at any
date of determination thereof, the ratio of (a) Consolidated Funded Debt
outstanding on such date to (b) Consolidated EBITDA for the relevant period
determined in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" shall mean, with respect to any Person, for
any period, the sum of (x) total interest expense (including that attributable
to Capital Leases in accordance with GAAP) and (y) total cash dividends paid on
any preferred stock, in each case of such Person and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness and preferred
stock of such Person and its Subsidiaries, including, without limitation, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, but excluding, however, any
amortization of deferred financing costs, all as determined on a consolidated
basis for such Person and its consolidated Subsidiaries in accordance with GAAP.
For purposes of clause (y) above, dividend requirements shall be increased to an
amount representing the pretax earnings that would be required to cover such
dividend requirements; accordingly, the increased amount shall be equal to such
dividend requirements multiplied by a fraction, the numerator of which is such
dividend requirement and the denominator of which is 1 minus the applicable
actual combined Federal, state, local and foreign income tax rate of such Person
and its subsidiaries (expressed as a decimal), on a consolidated basis, for the
Fiscal Year immediately preceding the date of the transaction giving rise to the
need to calculate Consolidated Interest Expense.
"CONSOLIDATED NET INCOME" shall mean, with respect to any Person, for any
period, the net income (or loss) of such Person and its Subsidiaries on a
consolidated basis for such period taken as a single accounting period
determined on a consolidated basis for such Person and its consolidated
Subsidiaries in conformity with GAAP; provided that there shall be excluded (i)
the income (or loss) of any other Person (other than consolidated Subsidiaries
of such Person) in which any third Person (other than such Person or any of its
consolidated Subsidiaries) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to such Person or any
of its Subsidiaries by such other Person during such period, (ii) the income (or
loss) of any other Person accrued prior to the date it becomes a consolidated
Subsidiary of such Person or is merged into or consolidated with such Person or
any of its consolidated Subsidiaries or such other Person's assets are acquired
by such Person or any of its consolidated Subsidiaries, and (iii) the income of
any consolidated Subsidiary of such Person to the extent that the declaration or
payment of dividends or similar distributions by that consolidated Subsidiary of
that income is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that consolidated Subsidiary.
"CONSOLIDATED NET WORTH" shall mean, with respect to any Person, at any
date of determination thereof, the sum of the capital stock and additional paid-
in capital plus retained earnings (or minus accumulated deficit) of such Person
and its consolidated Subsidiaries, and, in the case of AXIA, plus the amount of
any write-off of goodwill occurring since March 31, 1996 due to the loss of
business at the Nestaway division all as determined on a consolidated basis for
such Person and its consolidated Subsidiaries in conformity with GAAP.
"CONSOLIDATED TAX EXPENSE" shall mean for any Person, for any period, the
consolidated tax expense of such Person for such period, determined on a
consolidated basis for such Person and its consolidated Subsidiaries in
conformity with GAAP.
"CONSOLIDATED TOTAL LIABILITIES" shall mean, with respect to any Person,
as at any date of determination, the total liabilities of such Person and its
consolidated Subsidiaries which
7
<PAGE>
may properly be classified as liabilities on a consolidated balance sheet of
such Person and its consolidated Subsidiaries in accordance with GAAP.
"CORTEC" means Cortec Capital Corporation, the general partner of Cortec
Group Fund, L.P.
"DEFAULT" shall mean any event which, with the passage of time or notice or
both, would, unless cured or waived, become an Event of Default.
"DEFINED CONTRIBUTION PLAN" shall mean, with respect to any Borrower or any
Subsidiary of any Borrower, at any time, an employee pension benefit plan as
defined in Section 3(2) of ERISA that is not covered by Title IV of ERISA, that
is not subject to the minimum funding standards under Section 412 of the IRC and
that is maintained for the employees of Borrower or any Subsidiary of Borrower.
"DOL" shall mean the United States Department of Labor.
"DOMESTIC ACCOUNT DEBTOR" shall mean an Account Debtor located in the
continental United States or Hawaii.
"DOMESTIC SUBSIDIARY" shall mean a Subsidiary incorporated under the laws
of any state of the United States and whose business operations are conducted in
the continental United States or Hawaii.
"ELIGIBLE ACCOUNTS RECEIVABLE" shall mean all Accounts Receivable which are
determined, in the discretion of Agent, to be exercised in a commercially
reasonable manner, to be eligible for advance. The following categories of
Accounts Receivable shall be excluded from eligibility, together with such other
exclusions as Agent shall from time to time determine in its discretion, to be
exercised in a commercially reasonable manner, including, but not limited to,
Agent's right to exclude and reserve designated Accounts Receivable from
eligibility due to any liens, claims or risks which Agent in its discretion, to
be exercised in a commercially reasonable manner, believes are reasonably likely
to impair the value of such Accounts Receivable, Agent's rights and interests
therein and/or Borrowers' ability to repay the Obligations:
1. Any Account Receivable unpaid for more than ninety (90) days from
the date of invoice with respect to Accounts Receivable the invoice for
which provides that payment is due in thirty (30) days or less from the
date of such invoice;
2. Any Account Receivable payable by a Domestic Account Debtor unpaid
for more than thirty (30) days after the original payment date thereof with
respect to Accounts Receivable the invoice for which provides that payment
is due more than thirty (30) days from the date of such invoice; provided,
however, that the aggregate amount of all Accounts Receivable payable by
Domestic Account Debtors providing for payment more than thirty (30) days
from the date of the invoice that may constitute Eligible Accounts
Receivable shall not exceed $250,000 at any one time;
3. Any Account Receivable which, when aggregated with all other
Accounts Receivable of the same Account Debtor (or any Affiliate thereof),
exceeds twenty percent (20%) in face value of all Accounts Receivable of
Borrowers then outstanding, to the extent of such excess;
8
<PAGE>
4. Any Account Receivable from any Domestic Account Debtor having
fifty percent (50%) or more of its aggregate accounts receivables due to
Borrowers unpaid for more than sixty (60) days from the dates of the
respective invoices;
5. Any Account Receivable against the payment of which the Account
Debtor therein claims to have, may have or has any defense, setoff or
counterclaim, except for instances in which an Account Receivable would be
deemed ineligible solely on account of this paragraph 5 due to the fact
that a Borrower has an account payable to such Account Debtor and the
Account Debtor has not asserted any claim, defense, right of set-off or
counterclaim with respect to the Account Receivable;
6. Any Account Receivable on which the Account Debtor is an Affiliate
of any Borrower;
7. Any Account Receivable with respect to which goods are placed on
consignment, guaranteed sale or other terms, including but not limited to
delivery of goods, which are conditions precedent to payment by the Account
Debtor;
8. Any Account Receivable with respect to which the Account Debtor is
the United States government or any department, agency or instrumentality
of the United States government unless appropriate assignment of claims
forms are executed in advance;
9. Any Account Receivable with respect to which the Account Debtor is
a foreign government or any department, agency or instrumentality thereof;
10. Any Account Receivable due more than ninety (90) days from the
date of invoice in the case of a Domestic Account Debtor;
11. Any Account Receivable not arising out of Borrowers' ordinary
course of trade or business;
12. Any Account Receivable with respect to which the applicable
representations and warranties contained in Section 4 of the Security
Agreement are not true and correct in all material respects (determined
without regard to any exceptions thereto indicated in any writing delivered
by Borrowers pursuant to Section 4(e) of the Security Agreement); and
13. Any Account Receivable which Agent elects in its discretion, to
be exercised in a commercially reasonable manner, to exclude because of the
unsatisfactory credit standing or payment record of the Account Debtor.
"ELIGIBLE DOMESTIC ACCOUNTS RECEIVABLE" shall mean Eligible Accounts
Receivable payable by a Domestic Account Debtor.
"ELIGIBLE FOREIGN ACCOUNTS RECEIVABLE" shall mean Eligible Accounts
Receivable payable by a Foreign Account Debtor.
"ELIGIBLE INVENTORY" shall mean such Inventory which is unencumbered and
which is determined, in the discretion of Agent, to be exercised in a
commercially reasonable manner, to be eligible for advance, valued at the lowest
of Borrowers' cost (on a FIFO basis) or market. The following categories of
Inventory shall be excluded from eligibility, together with such
9
<PAGE>
other exclusions as Agent shall from time to time determine in its discretion,
to be exercised in a commercially reasonable manner, including, but not limited
to, Agent's right to exclude and reserve designated categories of Inventory from
eligibility due to any liens, claims or risks which Agent in its discretion, to
be exercised in a commercially reasonable manner, believes are reasonably likely
to impair the value of such Inventory, Agent's rights and interests therein
and/or Borrowers' ability to repay the Obligations:
1. Any Inventory which is obsolete, slow-moving in relation to
customary industry practice, not in good condition or not currently usable
or currently salable in the ordinary course of Borrowers' business;
2. Any Inventory with respect to which Agent does not have a first
and valid fully perfected security interest;
3. Any Inventory not located in the continental United States or
Hawaii;
4. Any Inventory consisting of goods returned and rejected by
Borrower's customers;
5. Any Inventory in transit to third parties (other than agents
or warehousemen with respect to which Borrowers have satisfied the
requirements of Section 4(f)(ii) of the Security Agreement);
6. Any Inventory with respect to which the applicable representations
and warranties contained in Section 4 of the Security Agreement are not
true and correct in all material respects (determined without regard to any
exceptions thereto indicated in any writing delivered by Borrowers pursuant
to Section 4(f) of the Security Agreement);
"EMPLOYEE HOUSING LOANS" shall mean loans from any Borrower to an employee
of such Borrower to cover moving and housing costs incurred in connection with
the relocation of such employee.
"EMPLOYEE STOCK LOANS" shall mean loans from any Borrower to an employee of
such Borrower to enable such employee to purchase equity securities of Holdings
pursuant to Equity Agreements.
"ENVIRONMENTAL LAWS" shall mean all federal, state and local laws,
statutes, ordinances, regulations, and policies, now or hereafter in effect,
and in each case as amended or supplemented from time to time, and any judicial
or administrative interpretation thereof having the force of law, including,
without limitation, any applicable judicial or administrative order, or consent
decree having the force of law or judgment, relative to the applicable Real
Estate, including any facility, as defined in 42 U.S.C. (S)9601(9), relating to
the regulation and protection of human health or safety from environmental or
workplace hazards, and the protection of the environment and natural resources
(including, without limitation, ambient air, surface water, groundwater,
wetlands, land surface or subsurface strata, wildlife, aquatic species and
vegetation). Environmental Laws include but are not limited to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. (S)9601 et seq.) ("CERCLA"); the Hazardous Material Transportation Act,
as amended (49 U.S.C. (S)1801 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended (7 U.S.C. (S)136 et seq.); the Resource Conservation
and Recovery Act, as amended (42 U.S.C. (S)6901 et seq.) ("RCRA"); the Toxic
Substance Control Act (15 U.S.C. (S)2601 et seq.); the Clean
10
<PAGE>
Air Act, as amended (42 U.S.C. (S)740 et seq.); the Occupational Safety and
Health Act, as amended (29 U.S.C. (S)651 et seq.) ("OSHA"); the Oil Pollution
Act of 1990 (p.L. 101-380, August 18, 1990; the Emergency Planning and Community
Right to Know Act of 1986 (42 U.S.C. (S)11001 et seq.); and the Safe Drinking
Water Act, as amended (42 U.S.C. (S)300f et seq.); any and all regulations
promulgated thereunder, and all analogous state and local counterparts or
equivalents and any environmental transfer of ownership notification or approval
statutes such as, by way of example, the New Jersey Industrial Site Recovery Act
(1993 N.J. Sess. Law Serv. ch. 139, Senate 1070).
"EQUIPMENT" shall mean any "equipment", as such term is defined in Section
9-109(2) of the Code, now owned or hereafter acquired by any Borrower and, in
any event, shall include, without limitation, all machinery, equipment,
furnishings, fixtures, vehicles and computers and other electronic data
processing and other office equipment now owned or hereafter acquired by any
Borrower, and any and all additions, substitutions and replacements of any of
the foregoing, wherever located, together with all attachments, components,
parts, equipment and accessories installed thereon or affixed thereto.
"EQUITY AGREEMENT" shall mean any agreement or plan pursuant to which
members of management of any Borrower may acquire Stock of Holdings or options
or other rights to acquire such equity.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any regulations promulgated thereunder.
"ERISA AFFILIATE" shall mean, with respect to any Borrower, all trades or
businesses (whether or not incorporated) which, together with any Borrower, are
treated as a single employer under the applicable provisions of ERISA or the IRC
including, but not limited to, Sections 414(b), (c), (m) or (o) of the IRC.
"ERISA EVENT" shall mean, with respect to any Borrower or any ERISA
Affiliate, (a) a Reportable Event, (b) the withdrawal of any Borrower or any
ERISA Affiliate from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, (c) the filing or other
distribution of a notice of intent to terminate a Plan or the treatment of a
Plan amendment as a termination under Section 4041 of ERISA, (d) the institution
of proceedings to terminate a Plan by the PBGC under Section 4042(a) of ERISA,
or (e) any other event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan or to cause the imposition of
any liability in excess of $10,000 under Title IV of ERISA.
"EVENT OF DEFAULT" shall have the meaning assigned to it in Section 9.1
hereof.
"EXCESS REVOLVING CREDIT LOAN AVAILABILITY" shall mean the positive
difference, if any, between (i) the lesser of the Maximum Revolving Credit Loan
and the Borrowing Base and (ii) the aggregate amounts outstanding in respect of
the Revolving Credit Loan.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"FACILITY FEE" shall have the meaning assigned to it in Section 2.14(b).
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"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations for that day of such transactions received by Agent from three
Federal funds brokers of recognized standing selected by it.
"FINANCIALS" shall mean the financial statements referred to in Section
4.6(a) hereof.
"FISCAL YEAR" shall mean the twelve-month period (or shorter period with
respect to the first Fiscal Year within the Term hereof) that ends on December
31. Subsequent changes of the fiscal year of Borrower shall not change the term
"Fiscal Year," unless the Required Lenders shall consent in writing to such
changes.
"FOREIGN ACCOUNT DEBTOR" shall mean an Account Debtor which is not located
in the continental United States or Hawaii.
"FOREIGN SUBSIDIARY" shall mean any Subsidiary which is not incorporated
under the laws of one of the states of the United States or whose business
operations are not conducted in the continental United States or Hawaii;
"FUNDED DEBT" shall mean, with respect to any Person, all Indebtedness for
borrowed money of such Person which by the terms of the agreement governing, or
instrument evidencing, such Indebtedness matures more than one year from, or is
directly or indirectly renewable or extendible at the option of the debtor under
a revolving credit or similar agreement obligating the lender or lenders to
extend credit over a period of more than one year from, the date of creation
thereof, including current maturities of long-term debt, revolving credit and
short-term debt extendible beyond one year at the option of the debtor and, in
respect of Borrowers, including the Term Notes and the Subordinated Notes and
any unamortized portion of original issue discount with respect to the
Subordinated Notes.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as in effect from time to time.
"GUARANTEED INDEBTEDNESS" shall mean, as to any Person, any obligation of
such Person guaranteeing any indebtedness, lease, dividend, or other obligation
("primary obligations") of any other Person (the "primary obligor") in any
manner including, without limitation, any obligation or arrangement of such
Person (a) to purchase or repurchase any such primary obligation, (b) to advance
or supply funds (i) for the purchase or payment of any such primary obligation
or (ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet condition
of the primary obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (d) to indemnify the owner of such primary obligation against
loss in respect thereof.
"HAZARDOUS SUBSTANCE" shall have the meanings set forth in CERCLA (42
U.S.C. (S)9601(14) and, in addition, shall include petroleum, as defined in RCRA
(42 U.S.C. (S)6991(2)(B)) and pollutants or contaminants as defined in CERCLA
(42 U.S.C. (S)9601 (33)).
"HOLDINGS" shall mean AXIA Holdings Corp., a Delaware corporation.
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"INDEBTEDNESS" shall mean all liabilities, obligations and indebtedness of
any and every kind and nature, including, without limitation, all liabilities
and all obligations to trade creditors, whether now or hereafter owing, arising,
due or payable, from any Borrower or any of its Subsidiaries to any Person and
howsoever evidenced, created, incurred, acquired or owing, whether primary,
secondary, direct, contingent, fixed or otherwise. Without in any way limiting
the generality of the foregoing, Indebtedness shall specifically include the
following without duplication:
(a) amounts outstanding under this Agreement, including, without
limitation, amounts outstanding under the Term Note, the Revolving Credit
Note and the Letter of Credit Obligations;
(b) all obligations or liabilities of any Person that are secured by
any Lien upon property owned by any Borrower or any of its Subsidiaries,
even though such Borrower shall not have assumed or become liable for the
payment thereof;
(c) all obligations and indebtedness of any Borrower for borrowed
money or for notes, bonds, debentures and other debt securities;
(d) all obligations or liabilities created or arising under any lease
or conditional sale or other title retention agreement with respect to
property used or acquired by any Borrower or any of its Subsidiaries, even
though the rights and remedies of the lessor, seller or lender thereunder
are limited to repossession of such property;
(e) all obligations or liabilities under Guaranteed Indebtedness; and
(f) all Charges.
"INTEREST RATE AGREEMENT" shall mean any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, interest rate
futures contract, interest rate option contract or other similar agreement or
arrangement to which AXIA is a party, designed to protect AXIA or any of its
Subsidiaries against fluctuations in interest rates.
"INVENTORY" shall mean any and all now owned or hereafter acquired raw
material, work-in-process and finished goods inventory and other tangible
personal property intended for sale or lease, in the custody or possession,
actual or constructive, of any Borrower or in transit to any Borrower, including
such inventory as is on consignment to third parties, leased to customers of any
Borrower, or otherwise temporarily out of the custody or possession of any
Borrower.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and any
successor thereto, and any regulations or notices promulgated thereunder.
"IRS" shall mean the Internal Revenue Service.
"LEASEHOLD MORTGAGE" shall mean the leasehold mortgages, leasehold deeds of
trust or other similar leasehold security agreement in form reasonably
satisfactory to Agent, made or to be made by any Borrower having an interest in
the Lease to be encumbered, in favor of Agent to secure payment of the
Obligations creating a first priority lien on Leases particularly designated on
Schedule 4.7(b) or for which Leasehold Mortgages are required in accordance with
the terms of this Agreement.
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"LEASES" shall mean all of those leasehold estates in real property now
owned or hereafter acquired by any Borrower or any Subsidiary of any Borrower,
as lessee.
"LENDER(S)" shall mean each Lender, including ANB, listed on the signature
pages hereof and any future holder of all or any portion of the Notes.
"LETTER OF CREDIT OBLIGATIONS" shall mean all outstanding obligations
incurred by ANB at the request of AXIA, whether direct or indirect, contingent
or otherwise, due or not due, in connection with the issuance or guarantee, by
ANB or another, of letters of credit. The amount of such Letter of Credit
Obligations shall equal the maximum amount which may be payable by ANB thereupon
or pursuant thereto.
"LETTERS OF CREDIT" shall mean commercial or standby letters of credit
issued at the request of AXIA and for the account of any Borrower for which ANB
has incurred Letter of Credit Obligations pursuant thereto.
"LIBOR BASE RATE" shall mean, with respect to a LIBOR Rate Loan for the
relevant LIBOR Rate Interest Period, any interest rate per annum determined by
Agent to be the rate per annum (rounded upwards, if necessary, to the next 1/16
of 1%) at which deposits in United States Dollars in immediately available funds
are offered by Agent to first-class banks in the London interbank market at
approximately 11:00 (London time) two (2) Business Days prior to the first day
of such LIBOR Rate Interest Period, in the approximate amount of the LIBOR Rate
Loan and having a maturity approximately equal to the LIBOR Rate Interest
Period.
"LIBOR RATE" shall mean, for the relevant LIBOR Rate Interest Period, the
quotient of (i) the LIBOR Base Rate applicable to that LIBOR Rate Interest
Period, divided by (ii) one minus the Reserve Requirement (expressed as a
decimal) applicable to that LIBOR Rate Interest Period.
"LIBOR RATE BORROWING" shall mean a Revolving Credit Advance bearing
interest at the LIBOR Rate or a portion of the Term Loan bearing interest at the
Adjusted LIBOR Rate.
"LIBOR RATE INTEREST PERIOD" shall mean, with respect to a LIBOR Rate Loan,
a period of 30, 60, 90 or 180 days commencing on a Business Day selected by AXIA
pursuant to this Agreement. If a LIBOR Rate Interest Period would otherwise end
on a day which is not a Business Day, such LIBOR Rate Interest Period shall end
on the next succeeding Business Day.
"LIBOR RATE LOAN" shall mean the portion of the Revolving Credit Loan or
the Term Loan which bears interest at the Adjusted LIBOR Rate.
"LIEN" shall mean any mortgage, leasehold mortgage or deed of trust
(including any Mortgage), pledge, hypothecation, assignment, deposit
arrangement, lien, security interest, easement or encumbrance, or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any lease intended as security
or any title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the Code or
comparable law of any jurisdiction).
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, the Collateral
Documents and the Other Agreements.
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"LOANS" shall mean, collectively, the Revolving Credit Loan and the Term
Loan.
"MANAGEMENT AGREEMENT" shall mean the management agreement between Cortec
and AXIA.
"MATERIAL ADVERSE EFFECT" shall mean material adverse effect on (i) the
business, assets, operations or financial or other condition of Borrowers taken
as a whole, (ii) Borrowers' collective ability to pay the Obligations in
accordance with the terms thereof, and (iii) the Collateral or Agent's Liens on
the Collateral or the priority of such Liens.
"MAXIMUM LAWFUL RATE" shall have the meaning assigned to it in Section
2.8(h) hereof.
"MAXIMUM REVOLVING CREDIT LOAN" shall mean, at any particular time, an
amount equal to $15,000,000, as at any time reduced pursuant to Section 2.5.
"MORTGAGE" shall mean each mortgage, deed of trust or similar security
agreement in form reasonably satisfactory to Agent, made or to be made by any
Borrower having an interest in the Real Estate to be encumbered, in favor of
Agent to secure the payment of the Obligations, creating a first priority lien
on the Real Estate particularly designated on Schedule 4.7(a) or for which
Mortgages are required in accordance with the terms of this Agreement.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as defined in
Sections 4001(a)(3) or 3(37)(A) of ERISA, and to which any Borrower or any ERISA
Affiliate is making, or is obligated to make, contributions or has made, or been
obligated to make, contributions.
"NOTES" shall mean the collective reference to the Term Notes and the
Revolving Credit Notes.
"NOTICE OF REVOLVING CREDIT ADVANCE" shall mean a notice in the form
attached hereto as Exhibit B.
"OBLIGATIONS" shall mean all loans, advances, debts, liabilities, and
obligations, for monetary amounts (whether or not such amounts are liquidated or
determinable) owing by Borrowers or any or all of their Subsidiaries or all of
them to Lenders or Agent, and all covenants and duties regarding such amounts,
of any kind or nature, present or future, whether or not evidenced by any note,
agreement or other instrument, arising under any of the Loan Documents. This
term includes, without limitation, all interest, Facility Fees, charges,
expenses, attorneys' fees and any other sum chargeable to any Borrower under any
of the Loan Documents.
"OTHER AGREEMENTS" shall mean all Supplemental Documentation and all
agreements, instruments and documents, including, without limitation, notes,
guarantees, mortgages, deeds of trust, chattel mortgages, pledges, powers of
attorney, consents, assignments, contracts, notices, security agreements,
leases, financing statements, subordination agreements, trust account agreements
and all other written matter whether heretofore, now, or hereafter executed by
or on behalf of any Borrower and delivered to Agent, any Lender or any Person
participating with Lenders in the loans made hereunder, with respect to this
Agreement.
"PATENT AND LICENSE SECURITY AGREEMENTS" shall mean the Patent and License
Security Agreements made in favor of Agent by AXIA and ATTS, in substantially
the form attached hereto as Exhibit E including all amendments, modifications
and supplements thereto, and shall
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refer to the Patent and License Security Agreements, as the same may be in
effect at the time such reference becomes operative.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions.
"PERMITTED ENCUMBRANCES" shall mean the following encumbrances: (i) Liens
for taxes or assessments or other governmental charges or levies, either not yet
due and payable or to the extent that nonpayment thereof is permitted by the
terms of this Agreement; (ii) pledges or deposits securing obligations under
workmen's compensation, unemployment insurance, social security or public
liability laws or similar legislation; (iii) pledges or deposits securing bids,
tenders, contracts (other than contracts for the payment of money) or leases to
which any Borrower is a party as lessee made in the ordinary course of business;
(iv) deposits securing public or statutory obligations of any Borrower or any of
its Subsidiaries; (v) workers', mechanics', suppliers', carriers',
warehousemen's, landlords' or other similar liens arising in the ordinary course
of business; (vi) deposits securing or in lieu of surety, appeal or customs
bonds in proceedings to which Borrower or any of its Subsidiaries is a party;
(vii) any attachment or judgment Lien, unless the judgment it secures shall not,
within 30 days after the entry thereof, have been discharged or execution
thereof stayed pending appeal, or shall not have been discharged within 5 days
after the expiration of any such stay; (viii) zoning restrictions, easements,
licenses, or other restrictions on the use of real property or other minor
irregularities in title (including leasehold title) thereto, so long as the same
do not materially impair the present use, value or marketability of such real
property, leases or leasehold estates; (ix) liens on fixtures granted to lessors
pursuant to Leases; and (x) the Liens listed on Schedule 1 hereto.
"PERSON" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, entity or government
(whether Federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"PLAN" shall mean, with respect to any Borrower or any ERISA Affiliate, at
any time, an employee pension benefit plan as defined in Section 3(2) of ERISA
(including a Multiemployer Plan) that is covered by Title IV of ERISA or subject
to the minimum funding standards under Section 412 of the IRC or Section 302 of
ERISA and is maintained for the employees of any Borrower or any ERISA
Affiliate.
"RCRA" shall mean the Resource Conservation and Recovery Act, as amended.
"REAL ESTATE" shall mean all of those plots, pieces or parcels of land now
owned or hereafter acquired by any Borrower (the "Land"), including, without
limitation, those listed on Schedule 4.7(a) hereto and more particularly
described in the Mortgages and Leasehold Mortgages, together with the right,
title and interest, if any, of any Borrower in and to the streets, the land
lying in the bed of any streets, roads or avenues, opened or proposed, in front
of, adjoining, or abutting the Land to the center line thereof, the air space
and development rights pertaining to the Land and right to use such air space
and development rights, all rights of way, privileges, liberties, tenements,
hereditaments, and appurtenances belonging or in any way appertaining thereto,
all fixtures, all easements now or hereafter benefiting the Land and all
royalties and rights appertaining to the use and enjoyment of the Land,
including, without limitation, all alley, vault, drainage, mineral, water, oil,
and gas rights, together with all of the buildings and other improvements now or
hereafter erected on the Land, and all fixtures and
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articles of personal property appertaining thereto and all additions thereto and
substitutions and replacement thereof.
"RELEASE" shall have the meanings assigned to it in CERCLA (42 USC
(S)9601(22)).
"REPORTABLE EVENT" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than an event for which
the 30-day notice requirement has been waived under the aforementioned
regulations.
"REQUIRED LENDERS" shall mean, as of any date, the holders of Notes
evidencing at least sixty-six and two-thirds percent (66-2/3%) of the sum of the
aggregate unpaid principal amount of the Term Notes plus the aggregate principal
amount of the Revolving Credit Loan Commitments; provided, however, that any
amendment to, modification of, or supplementation to this Agreement or waiver of
a Default or an Event of Default hereunder that would have the effect of
reinstating the obligations to make Revolving Credit Advances from and after the
date such obligations have been terminated or changing the terms of, amount of
or obligation to make Revolving Credit Advances shall require the affirmative
consent thereto of the Required Revolving Credit Lenders.
"REQUIRED REVOLVING CREDIT LENDERS" shall mean, as of any date, the holders
of Revolving Credit Notes evidencing at least sixty-six and two-thirds percent
(66-2/3%) of the aggregate principal amount of the Revolving Credit Loan
Commitments.
"RESERVE REQUIREMENT" shall mean, with respect to a LIBOR Rate Interest
Period, the maximum aggregate reserve requirement (including all basic,
supplemental, marginal and other reserves) which is imposed under Regulation D
of the Federal Reserve Board on "Eurocurrency Liabilities" having a term
approximately equal or comparable to that of such LIBOR Rate Interest Period.
"RESTRICTED PAYMENT" shall mean (i) the declaration of any dividend or the
incurrence of any liability to make any other payment or distribution of cash or
other property or assets in respect of Stock issued by any Borrower, or (ii) any
payment on account of the purchase, redemption or other retirement of Stock
issued by any Borrower or any other payment or distribution made in respect
thereof, either directly or indirectly.
"REVOLVING CREDIT ADVANCE" shall have the meaning assigned to it in Section
2.1(a) hereof.
"REVOLVING CREDIT ALTERNATE BASE RATE BORROWING" shall mean a Revolving
Credit Advance bearing interest at the Alternate Base Rate.
"REVOLVING CREDIT LIBOR BORROWING" shall mean a Revolving Credit Advance
bearing interest at the Adjusted LIBOR Rate.
"REVOLVING CREDIT LOAN" shall mean the aggregate amount of Revolving Credit
Advances outstanding at any time.
"REVOLVING CREDIT LOAN COMMITMENT" shall have the meaning assigned to it in
Section 2.1(a) hereof.
"REVOLVING CREDIT NOTE(S)" shall have the meaning assigned to it in Section
2.1(b) hereof.
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"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SECURITY AGREEMENT" shall mean the Security Agreement entered into between
Agent and Borrowers, in substantially the form attached hereto as Exhibit D,
including all amendments, modifications and supplements thereto, and shall refer
to the Security Agreement as the same may be in effect at the time such
reference becomes operative.
"SOLVENT" shall mean, when used with respect to any Person, that:
(a) the fair value and present fair saleable value of such Person's
assets is in excess of the total amount of such Person's stated liabilities
including identified contingent liabilities;
(b) the present fair saleable value of such Person's assets is in
excess of the amount that will be required to pay such Person's probable
liability on such Person's debts as they become absolute and mature;
(c) such Person does not have unreasonably small capital to carry on
the business in which such Person is engaged and all businesses in which
such Person is about to engage; and
(d) such Person has not incurred debts beyond such Person's ability to
pay such debts as they mature.
"STATED RATE" shall have the meaning assigned to it in Section 2.8(h)
hereof.
"STOCK" shall mean all shares, options, warrants, interests, participations
or other equivalents (regardless of how designated) of or in a corporation or
equivalent entity, whether voting or nonvoting, including, without limitation,
common stock, preferred stock, or any other "equity security" (as such term is
defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended).
"STOCK PLEDGE AGREEMENT" shall mean Stock Pledge Agreement entered into
between Agent and AXIA, in substantially the form attached hereto as Exhibit G,
including all amendments, modifications and supplements thereto, and shall refer
to the Stock Pledge Agreement as the same may be in effect at the time such
reference becomes operative.
"SUBORDINATED NOTES" shall mean the 11% Senior Subordinated Notes Due 2001,
Series A and Series B, issued by AXIA pursuant to an Indenture, dated as of
March 15, 1994, among AXIA, ATTS, TapeTech, Mid America Machine Corp. and Marine
Midland Bank, as Trustee.
"SUBORDINATED NOTE UNITS" shall mean the investment units composed of
$1,000 principal amount Subordinated Notes and three shares of Holdings' Class A
Common Stock, par value $0.01 per share, which were offered to the original
purchasers of the Subordinated Notes.
"SUBSIDIARY" shall mean, with respect to any Person, (i) any corporation of
which an aggregate of more than 50% of the outstanding Stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power
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by reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person and/or one or more
Subsidiaries of such Person, and (ii) any partnership, limited liability
company, association, joint venture or other entity in which such Person
directly or indirectly through Subsidiaries has more than a 50% equity interest.
"SUPPLEMENTAL DOCUMENTATION" shall mean agreements, instruments, documents,
financing statements, warehouse receipts, bills of lading, notices of assignment
of accounts, schedules of accounts assigned, mortgages, leasehold mortgages and
other written matter necessary or requested by Agent to perfect and maintain
perfected Agent's and Lenders' security interest in the Collateral.
"TERM" shall mean that period from and including the initial Closing Date
through the Termination Date.
"TERM LOAN" shall have the meaning assigned to it in Section 2.2(a) hereof.
"TERM NOTE(S)" shall have the meaning assigned to it in Section 2.2(a)
hereof.
"TERMINATION DATE" shall mean the date on which all Obligations hereunder
have been completely discharged and Borrowers shall have no further right to
borrow any monies hereunder.
"TRADEMARK COLLATERAL ASSIGNMENT AND SECURITY AGREEMENTS" shall mean the
Trademark Collateral Assignment and Security Agreements made in favor of Agent
by AXIA and ATTS, in substantially the form attached hereto as Exhibit F,
including all amendments, modifications and supplements thereto, and shall refer
to the Trademark Collateral Assignment and Security Agreement as the same may be
in effect at the time such reference becomes operative.
"TYPE" shall mean the interest rate (i.e. the Alternate Base Rate or the
Adjusted LIBOR Rate) which is to be applicable to any particular Revolving
Credit Advance or any portion of the Term Loan.
"WELFARE PLAN" shall mean, with respect to any Borrower or any ERISA
Affiliate, at any time, an employee welfare benefit plan as defined in Section
3(1) of ERISA that is maintained for the employees of Borrower or any ERISA
Affiliate.
Any accounting term used in this Agreement shall have, unless otherwise
specifically provided herein, the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly
modified by the phrase "in accordance with GAAP" shall in no way be construed to
limit the foregoing. In the event that changes in GAAP shall be mandated by the
Financial Accounting Standards Board and/or the American Institute of Certified
Public Accountants or any similar accounting body of comparable standing, or
shall be recommended by Borrowers' certified public accountants, to the extent
that such changes would modify such accounting terms or the interpretation or
computation thereof as contemplated by the Loan Documents at the time of their
execution, then in such event such changes shall be followed in defining such
accounting terms only after Borrowers and the Required Lenders shall have agreed
to amend the Loan Documents to reflect their original intent in light of such
changes. All other undefined terms contained in this Agreement shall, unless
the context indicates otherwise, have the meanings provided for by the Code as
in effect in the State of Illinois to the extent the same are used or defined
therein. The words "herein," "hereof" and "hereunder" and other
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words of similar import refer to this Agreement as a whole, including the
Exhibits and Schedules hereto, as the same may from time to time be amended,
modified or supplemented and not to any particular section, subsection or clause
contained in this Agreement.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.
2. AMOUNT AND TERMS OF CREDIT
2.1 REVOLVING CREDIT ADVANCES.
(a) The aggregate amount of the Revolving Credit Loan to be made by
each Lender (such Lender's "Revolving Credit Loan Commitment") shall be the
amount set below such Lender's name on the signature pages hereof. The
aggregate principal amount of the Revolving Credit Loan Commitments is
$15,000,000. The percentage equal to the quotient of (x) each Lender's
Revolving Credit Loan Commitment, divided by (y) the aggregate of all
Revolving Credit Loan Commitments, is that Lender's "Revolving Credit
Percentage". Upon and subject to the terms and conditions hereof, each
Lender, severally and for itself alone, agrees to make available, from time
to time, on and after the initial Closing Date and until the Commitment
Termination Date, for Borrowers' use and upon the request of AXIA on behalf
of Borrowers therefor, advances (each, a "Revolving Credit Advance")
against Eligible Domestic Accounts Receivable, Eligible Foreign Accounts
Receivable and Eligible Inventory, in an aggregate amount outstanding
which, together with that Lender's Revolving Credit Percentage of all
outstanding Letter of Credit Obligations, whether or not due and payable,
shall not at any given time exceed the product of (A) that Lender's
Revolving Credit Percentage multiplied by (B) the lesser of (1) the Maximum
Revolving Credit Loan or (2) the Borrowing Base. Subject to the provisions
of Section 2.4 and Section 9.2 hereof and until all amounts outstanding in
respect of the Revolving Credit Loan shall become due and payable on the
Commitment Termination Date, AXIA on behalf of Borrowers may from time to
time borrow, repay and reborrow under this Section 2.1(a). Each Revolving
Credit Advance shall be made on notice (i) in the case of a Revolving
Credit LIBOR Borrowing, given not later than 11:00 A.M. (Chicago time)
three Business Days prior to the proposed Revolving Credit Advance, and
(ii) in the case of a Revolving Credit Alternate Base Rate Borrowing, given
not later than 11:00 A.M. (Chicago time) on the Business Day of the
proposed Revolving Credit Advance, by AXIA to Agent, which shall give to
each Lender prompt written notice thereof by telecopy, telex or cable. Each
such notice (a "Notice of Revolving Credit Advance") shall be in writing or
by telephone to the Loan Administrator of Agent at (312) 661-6451,
confirmed immediately in writing, in substantially the form of Exhibit B
hereto, specifying therein (i) the requested date (which shall be a
Business Day) and amount of the Revolving Credit Advance, (ii) whether the
Revolving Credit Advance is to be an Alternate Base Rate Borrowing or a
LIBOR Rate Borrowing, and (iii) if such Revolving Credit Advance is to be a
LIBOR Rate Borrowing, the LIBOR Rate Interest Period with respect thereto.
If no election as to the Type of Revolving Credit Advance is specified in
any such notice, than the requested Revolving Credit Advance shall be an
Alternate Base Rate Borrowing. If no LIBOR Rate Interest Period with
respect to any LIBOR Rate Borrowing is specified in such notice, then AXIA
shall be deemed to have selected a LIBOR Rate Interest Period of one
month's duration. Each Lender shall, not later than 2:00 P. M. (Chicago
time) on each requested date, wire to a bank designated by Agent the amount
of that Lender's Revolving Credit Percentage of
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the requested Revolving Credit Advance. Agent shall, before 2:00 P.M.
(Chicago time) on the date of the proposed Revolving Credit Advance, upon
fulfillment of the applicable conditions set forth in Section 3 and to the
extent received from the Lenders, wire to a bank designated by AXIA and
reasonably acceptable to Agent, the amount of such Revolving Credit
Advance. The failure of any Lender to make the Revolving Credit Advance to
be made by it shall not relieve any other Lender of its obligation
hereunder to make its Revolving Credit Advance. No Lender shall be
responsible for the failure of any other Lender to make the Revolving
Credit Advance to be made by such other Lender. Unless Agent shall have
received notice from a Lender prior to the date of any Revolving Credit
Advance that such Lender will not make available to Agent an amount equal
to such Lender's Revolving Credit Percentage of such Revolving Credit
Advance, Agent may assume that such Lender has made such amount available
to Agent on the date of such Revolving Credit Advance in accordance with
this Section 2.1 and Agent may, in reliance upon such assumption, make
available to Borrowers on such date a corresponding amount. If and to the
extent that such Lender shall not have made such portion available to
Agent, such Lender and Borrowers severally agree to repay to Agent
forthwith on demand such corresponding amount together with interest
thereon, for each day, from the date such amount is made available to
Borrowers until the date such amount is repaid to Agent at (i) in the case
of Borrowers, the interest rate applicable at the time to the Revolving
Loan comprising such Revolving Credit Advance and (ii) in the case of such
Lender, the Federal Funds Effective Rate. If such Lender shall repay to
Agent such corresponding amount, such amount shall constitute such Lender's
Revolving Credit Percentage of such Revolving Credit Advance for purposes
of this Agreement.
(b) The Revolving Credit Loan shall be evidenced by promissory notes
to be executed and delivered by each Borrower at the time of the initial
Revolving Credit Advance, the form of which is attached hereto and made a
part hereof as Exhibit H (the "Revolving Credit Notes"). Each Revolving
Credit Note shall be payable to the order of a Lender and shall represent
the obligation of each Borrower to pay the amount of such Lender's
Revolving Credit Loan Commitment or, if less, the aggregate unpaid
principal amount of all Revolving Credit Advances made by such Lender to
Borrowers with interest thereon as prescribed in Section 2.8(a). The date
and amount of all Revolving Credit Advances by each Lender and the payment
of principal with respect thereto shall be recorded on the books and
records of each Lender, which books and records shall constitute prima
facie evidence of the accuracy of the information therein recorded. The
entire unpaid balance of the Revolving Credit Loan shall be due and payable
on the Commitment Termination Date.
(c) Agent shall establish reserves against the Borrowing Base at such
times and in such amounts as deemed necessary and appropriate in the
discretion of the Required Revolving Credit Lenders exercised in a
commercially reasonable manner and shall adjust or cancel such reserves as
directed by Required Revolving Credit Lenders in their discretion exercised
in a commercially reasonable manner.
2.2 TERM LOAN.
(a) Upon and subject to the terms and conditions hereof, each Lender
agrees to make a term loan (the "Term Loan") to Borrower on the initial
Closing Date, in an aggregate principal amount equal to the amount set
forth below such Lender's name on the signature pages hereof (such Lender's
"Term Loan Commitment"). The aggregate amount of the Term Loan Commitments
is $25,000,000. The Term Loan shall be evi-
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denced by promissory notes to be executed and delivered by Borrowers at
the time of such Term Loan, the form of which is attached hereto and made a
part hereof as Exhibit I (the "Term Notes").
(b) The Term Loan shall be made on notice (i) if on the initial
Closing Date any portion of the Term Loan is to be a LIBOR Borrowing, given
not later than 11:00 A.M. (Chicago time) three Business Days prior to the
initial Closing Date, and (ii) if on the initial Closing Date the entire
Term Loan is to be an Alternate Base Rate Borrowing, given not later than
11:00 A.M. (Chicago time) one Business Day prior to the initial Closing
Date, by AXIA to Agent, which shall give to each Lender prompt notice
thereof by telecopy, telex or cable. Such notice from AXIA shall be by
telephone to the Loan Administrator of ANB at (312) 661-6451, confirmed
immediately in writing, and shall specify the initial Closing Date and
whether the Term Loan is to be an Alternate Base Rate Borrowing or a LIBOR
Borrowing, and if any part of the Term Loan is the be a LIBOR Borrowing,
the LIBOR Rate Interest Period with respect thereto. If no election as to
the Type of Term Loan is specified in such notice, then the Term Loan shall
initially be an Alternate Base Rate Borrowing. If no LIBOR Rate Interest
Period with respect to any LIBOR Rate Borrowing is specified in such
notice, then AXIA shall be deemed to have selected a LIBOR Rate Interest
Period of one month's duration. On the initial Closing Date, upon
fulfillment of the applicable conditions set forth in Section 3, each
Lender shall wire to a bank designated by Agent the amount of such Lender's
Term Loan Commitment. Agent shall, before 2:00 P.M. (Chicago Time) on the
initial Closing Date, upon receipt of funds from each Lender in the amount
of each such Lender's Term Loan Commitment, wire to a bank designated by
AXIA and reasonably acceptable to Agent, the amount of each Lender's Term
Loan Commitment.
(c) The aggregate principal amount of the Term Notes shall be payable
in eighteen (18) quarterly installments on the last day of each March,
June, September and December within the Term hereof, commencing on
September 30, 1996 and ending on December 31, 2000, with the amount of the
first seventeen (17) installments being equal to $1,389,000 and with the
amount of the eighteenth (18th) and final installment being equal to the
remaining outstanding principal balance of the Term Loan.
2.3 LETTERS OF CREDIT.
(a) ANB agrees, subject to the terms and conditions hereinafter set
forth, to incur, from time to time on written request of AXIA, Letter of
Credit Obligations in respect of Letters of Credit supporting obligations
of Borrowers arising in the ordinary course of business; provided, however,
that the amount of all Letter of Credit Obligations incurred by ANB
pursuant to this Section 2.3(a) at any one time outstanding (whether or not
then due and payable) shall not exceed an amount equal to $1,000,000; and
further provided, however, that (A) no such Letter of Credit shall have an
expiry date which is more than one year following the date of issuance
thereof, and (B) ANB shall be under no obligation to incur Letter of Credit
Obligations in respect of any Letter of Credit having an expiry date which
is later than the Commitment Termination Date. At the time of each request
by AXIA that a Letter of Credit be issued, ANB, at its option, may require
Borrowers to execute and deliver to ANB an application for such Letter of
Credit in the form customarily prescribed by ANB to issue Letters of Credit
(the "Applications"). This Agreement supersedes any terms of the
Applications which are irrevocably inconsistent with the terms hereof.
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(b) In the event that ANB shall make any payment on or pursuant to any
Letter of Credit Obligation, such payments shall then be deemed to
constitute a Revolving Credit Advance under Section 2.1(a) hereof.
(c) In the event that any Letter of Credit Obligation, whether or not
then due and payable, shall for any reason be outstanding on the Commitment
Termination Date, Borrowers will pay to ANB cash or Cash Equivalents in an
amount equal to the outstanding Letter of Credit Obligations. Such funds
or Cash Equivalents shall be held by ANB in a cash collateral account (the
"Cash Collateral Account"). The Cash Collateral Account shall be in the
name of ANB (as a cash collateral account), and shall be under the sole
dominion and control of ANB and subject to the terms of this Section 2.3.
Borrowers hereby pledge, and grant to ANB a security interest in, all such
funds or Cash Equivalents held in the Cash Collateral Account from time to
time and all proceeds thereof, as security for the payment of all amounts
due in respect of the Letter of Credit Obligations, whether or not then
due.
From time to time after funds are deposited in the Cash Collateral
Account, ANB may apply such funds or Cash Equivalents then held in the Cash
Collateral Account to the payment of any amounts, in such order as ANB may
elect, as shall be or shall become due and payable by Borrowers to ANB with
respect to such Letter of Credit Obligations.
Neither Borrowers nor any person or entity claiming on behalf of or
through Borrowers shall have any right to withdraw any of the funds or Cash
Equivalents held in the Cash Collateral Account, except that upon the
expiration or the termination of any Letter of Credit Obligations in
accordance with its terms and the payment of all amounts payable by
Borrower to ANB in respect thereof, any funds or Cash Equivalents remaining
in the Cash Collateral Account in excess of the then remaining Letter of
Credit Obligations shall be returned to Borrowers.
ANB shall not have any obligation to invest the funds in the Cash
Collateral Account or deposit such funds in an interest-bearing account,
and interest and earnings thereon, if any, shall be the property of ANB.
Interest and earnings on the Cash Equivalents in the Cash Collateral
Account shall be the property of Borrowers.
(d) In the event that ANB shall incur any Letter of Credit Obligations
pursuant hereto with respect to standby Letters of Credit at the request of
AXIA or on behalf of Borrowers hereunder, Borrowers agree to pay (i) to
ANB, solely for its account, as compensation to ANB for such Letter of
Credit Obligations by ANB, all customary issuance and administrative fees
and charges customarily imposed for the issuance and administration of
standby Letters of Credit, and (ii) commencing with the month in which such
Letter of Credit Obligations are incurred by ANB and monthly thereafter for
each month during which such Letter of Credit Obligations shall remain
outstanding, to Agent for the ratable benefit of Lenders, a fee in an
amount equal to the quotient of (x) the sum of the products of the daily
outstanding amount of such Letter of Credit Obligations on each day during
the previous month, multiplied by a rate equal to the Applicable Margin,
divided by (y) 360, and (iii) to ANB, solely for its account, a fee in an
amount equal to the quotient of (x) the sum of the products of the daily
outstanding amount of such Letter of Credit Obligations on each day during
the previous month multiplied by a rate equal to 0.125%, divided by (y)
360. Fees payable in respect of Letter of Credit Obligations shall be paid
in arrears, on the first day of each month.
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(e) In the event that ANB shall incur any Letter of Credit Obligations
pursuant hereto with respect to commercial Letters of Credit at the request of
AXIA or on behalf of Borrowers hereunder, Borrowers agree to pay to ANB, as
compensation to ANB for such Letter of Credit Obligations, (i) all customary
issuance and administrative fees and charges customarily imposed by ANB for the
issuance and administration of commercial Letters of Credit, and (ii) on the
date on which such Letter of Credit Obligations are incurred by ANB, to ANB,
solely for its account, an issuance fee in an amount equal to one-quarter of one
percent (0.25%) of the face amount of such Letter of Credit (and in any event
such fee shall not be less than $130).
(f) The reimbursement obligation of Borrowers under this Section 2.3 with
respect to each Letter of Credit Obligation shall be absolute, unconditional and
irrevocable and shall remain in full force and effect until all such obligations
of Borrowers to Lenders and Agent with respect to such Letter of Credit
Obligations shall have been satisfied, and such obligations of Borrowers shall
not be affected, modified or impaired upon the happening of any of the following
events, whether or not with notice to, or the consent of, Borrowers:
(i) Any lack of validity or enforceability of any Letter of Credit or any
documentation relating to any Letter of Credit or to any transaction related in
any way to such Letter of Credit (the "Letter of Credit Documents");
(ii) Any amendment, modification, waiver, consent, or any substitution,
exchange or release of or failure to perfect any interest in collateral or
security, with respect to any of the Letter of Credit Documents;
(iii) The existence of any claim, setoff, defense or other right which a
Borrower may have at any time against any beneficiary or any transferee of any
Letter of Credit (or any persons or entities for whom any such beneficiary or
any such transferee may be acting), ANB, Agent or any Lender or any other
Person, whether in connection with any of the Letter of Credit Documents, the
transactions contemplated herein or therein or any unrelated transactions;
(iv) Any draft or other statement or document presented under any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(v) Payment by ANB to the beneficiary under any Letter of Credit against
presentation of documents which do not comply with the terms of the Letter of
Credit, including failure of any documents to bear any reference or adequate
reference to such Letter of Credit;
(vi) Any failure, omission, delay or lack on the part of ANB, Agent or any
Lender or any party to any of the Letter of Credit Documents to enforce, assert
or exercise any right, power or remedy conferred upon ANB, Agent, any Lender or
any such party; or
(vii) Any other event or circumstance that would, in the absence of this
clause, result in the release or discharge by operation of law or otherwise of a
Borrower from the performance or observance of any obligation, covenant or
agreement contained in this Section 2.3.
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No setoff, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature which a Borrower has or may have against the
beneficiary of any Letter of Credit shall be available hereunder to a Borrower
against ANB, Agent or any Lender. Nothing in this Section 2.3 shall limit the
liability, if any, of ANB, Agent or any Lender to a Borrower pursuant to Section
2.3(g) hereof.
(g) Borrowers hereby, jointly and severally, indemnify and agree to hold
harmless the Lenders, ANB, Agent, and their respective officers, directors,
employees and agents, harmless from and against any and all claims, damages,
losses, liabilities, costs or expenses of any kind or nature whatsoever which
the Lenders, ANB, Agent or any such Person may incur or which may be claimed
against any of them by reason of or in connection with any Letter of Credit, and
neither any Lender, ANB, Agent or any of their respective officers, directors,
employees or agents shall be liable or responsible for: (i) the use which may be
made of any Letter of Credit or for any acts or omissions of any beneficiary in
connection therewith; (ii) the validity, sufficiency or genuineness of documents
or of any endorsement thereon, even if such documents should in fact prove to be
in any or all respects invalid, insufficient, fraudulent or forged; (iii) except
as set forth below payment by ANB to the beneficiary under any Letter of Credit
against presentation of documents which do not comply with the terms of any
Letter of Credit, including failure of any documents to bear any reference or
adequate reference to such Letter of Credit; (iv) any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit; or (v) any
other event or circumstance whatsoever arising in connection with any Letter of
Credit; provided, however, that Borrowers shall not be required to indemnify ANB
and ANB shall be liable to Borrowers to the extent, but only to the extent, of
any direct, as opposed to consequential or incidental, damages suffered by
Borrowers which were caused by (A) ANB's wrongful dishonor of any Letter of
Credit after the presentation to it by the beneficiary thereunder of a draft or
other demand for payment and other documentation strictly complying with the
terms and conditions of such Letter of Credit, or (B) the payment by ANB to the
beneficiary under any Letter of Credit against presentation of documents which
do not comply with the terms of the Letter of Credit to the extent, but only to
the extent, that such payment constitutes gross negligence or willful misconduct
of ANB. It is understood that in making any payment under a Letter of Credit ANB
will rely on documents presented to it under such Letter of Credit as to any and
all matters set forth therein without further investigation and regardless of
any notice or information to the contrary, and such reliance and payment against
documents presented under a Letter of Credit substantially complying with the
terms thereof shall not be deemed gross negligence or willful misconduct of ANB
in connection with such payment.
2.4 MANDATORY PREPAYMENTS.
(a) In the event that the outstanding balance of the Revolving Credit
Loan shall, at any time, exceed the lesser of (i) the Maximum Revolving
Credit Loan or (ii) the Borrowing Base, as determined from time to time by
Agent, based upon information set forth in the most recent Borrowing Base
Certificate and such other information as Borrowers may from time to time
provide to Agent, Borrowers shall, within two Business Days after notice of
such determination by Agent, repay the Revolving Credit Loan in the amount
of such excess.
(b) Subject to the provisions of Section 7.11 hereof, Borrowers shall
prepay the principal installments of the Term Notes in an amount equal to
100% of the net cash proceeds (after deducting all expenses, including
commissions, taxes payable and amounts payable to holders of prior liens,
if any, and an appropriate reserve for income
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taxes in connection therewith) from the sale of assets outside of the
ordinary course of business and as required by Sections 7.11A. and 7.11D.;
provided, however, that Borrowers shall not be required to make any
prepayment of any LIBOR Rate Borrowing pursuant to this Section 2.4(b)
until the last day of the applicable LIBOR Rate Interest Period with
respect thereto, so long as an amount equal to such prepayment is deposited
by Borrowers in an interest-bearing cash collateral account maintained with
Agent to be held in such account on terms reasonably satisfactory to Agent.
Each such prepayment or prepayment deposit shall be delivered to Agent
within five Business Days following the closing of such sale and shall be
applied pro rata to the unpaid scheduled installments of the Term Loan;
provided further, however, that if at any time the amount of any prepayment
otherwise payable under this Section 2.4(b) shall be less than $50,000,
Borrower shall not be obligated to make any such prepayment until the
aggregate amount otherwise payable under this Section 2.4(b) shall equal at
least $50,000, at which time the full amount of all payments deferred to
such date shall be due and payable.
(c) Any mandatory prepayment pursuant to this Section 2.4 shall be
accompanied by the payment of accrued and unpaid interest on the amount
being prepaid through the date of such prepayment.
(d) No prepayment fee shall be payable in respect of any mandatory
prepayment under this Section 2.4 or under Section 2.8(h) hereof.
2.5 REDUCTION OR CANCELLATION OF COMMITMENTS; OPTIONAL PREPAYMENT.
(a) The Revolving Credit Loan Commitments shall be automatically
terminated on the Commitment Termination Date.
(b) Upon at least three Business Days' prior irrevocable written
notice to Agent, which shall promptly notify Lenders, AXIA, on behalf of
Borrowers, may at any time and from time to time permanently reduce all or
a portion of the Revolving Credit Loan Commitments for unutilize Revolving
Credit Loans and Letter of Credit Obligations, in minimum amounts of
$1,000,000 and integral multiples of $100,000; provided, however, that the
Revolving Credit Loan Commitments shall not be reduced to an amount less
than the aggregate Revolving Credit Loans and Letter of Credit Obligations
then outstanding.
(c) Each reduction in the Revolving Credit Loan Commitments hereunder
shall be made ratably among the Lenders in accordance with their respective
Revolving Credit Loan Commitments.
(d) AXIA, on behalf of Borrowers, shall have the right at any time and
from time to time to prepay Revolving Credit Loans and/or the Term Loan, in
whole or in part, upon prior written or telecopy notice (or telephone
notice promptly confirmed by written or telecopy notice) to Agent before
10:00 a.m., Chicago time, (i) three Business Days prior to prepayment, in
the case of LIBOR Rate Borrowings; and (ii) one Business Day prior to
prepayment, in the case of Alternate Base Rate Borrowings; provided,
however, that each partial prepayment shall be in the minimum amount of
$250,000 and integral multiples of $50,000. Prepayments of the Term Loan
shall be applied pro rata to the unpaid scheduled installments thereof.
Each notice of an optional prepayment shall specify the prepayment date and
the principal amount of Term Loan or Revolving Credit Loans to be prepaid,
shall be irrevocable and shall commit Borrowers to prepay
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such Term Loan or Revolving Credit Loans by the amount stated therein on
the date stated therein. All optional prepayments under this Section 2.5
shall be subject to Section 2.10 but otherwise without premium or penalty.
All prepayments of the Term Loan under this Section 2.5 shall be
accompanied by accrued interest on the principal amount being prepaid to
the date of payment.
2.6 SINGLE LOAN. The Revolving Credit Loan, the Term Loan, and all of the
other Obligations of Borrower arising under this Agreement and the other Loan
Documents shall constitute one general obligation of Borrowers secured, until
the Termination Date, by all of the Collateral.
2.7 USE OF PROCEEDS; BORROWERS' REPRESENTATIVE.
(a) Borrowers shall apply the proceeds of the Term Loan to the payment
of their outstanding indebtedness and the proceeds of the Revolving Credit
Loan for working capital and general corporate purposes and to the payment
of outstanding indebtedness; provided, however, that not more than
$5,000,000 of the proceeds of the Revolving Credit Loan may be utilized for
the repayment of indebtedness of AXIA under the Credit Agreement, dated as
of March 15, 1994, among AXIA, Banque Indosuez, as agent, and the lenders
named therein. In addition to the foregoing, AXIA may apply proceeds of
Revolving Credit Advances to the payment of the purchase price of
Subordinated Notes or Subordinated Note Units; provided, however, that the
maximum amount of proceeds of Revolving Credit Advances which may be
utilized for such purpose shall not exceed in the aggregate at any date of
determination the sum of (i) $4,000,000, plus (ii) commencing at the end of
the Fiscal Year ending December 31, 1996, an amount equal to twenty-five
percent (25%) of Consolidated Free Cash Flow of AXIA and its Subsidiaries
for each complete Fiscal Year (or portion thereof with respect to the first
Fiscal Year) from the initial Closing Date to the date of determination.
(b) Notwithstanding anything contained in this Agreement or in any
other Loan Document to the contrary, AXIA shall act as agent for all
Borrowers for purposes of this Agreement, including for purposes of
initiating borrowing requests and requests for the issuance of Letters of
Credit, receipt and delivery of notices and selection of interest rate
options hereunder. Each Borrower (other than AXIA) hereby constitutes and
appoints AXIA as its duly authorized agent for purposes of this Agreement,
including for purposes of initiating borrowing requests and requests for
the issuance of Letters of Credit, receipt of delivery of notices and
selection of interest rate options hereunder.
2.8 INTEREST ON THE REVOLVING CREDIT LOANS AND THE TERM LOANS.
(a) With respect to Alternate Base Rate Borrowings, Borrowers shall
pay to Agent, for the ratable benefit of Lenders, interest in arrears on
each March 31, June 30, September 30 and December 31, commencing June 30,
1996, in an amount equal to the quotient of (i) the sum of the products of
the daily unpaid principal amounts of the Alternate Base Rate Borrowings
outstanding on each day during the preceding Fiscal Quarter, multiplied by
a rate equal to the Alternate Base Rate on each such day during such Fiscal
Quarter divided by (ii) 360. With respect to LIBOR Rate Borrowings,
Borrowers shall pay to Agent, for the ratable benefit of Lenders, interest
in arrears on the last day of each LIBOR Rate Interest Period (provided,
that in the case of any LIBOR Rate Borrowing having a LIBOR Rate Interest
Period of 180 days duration, such
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interest shall be payable on the last day of each Fiscal Quarter occurring
in such LIBOR Rate Interest Period and on the last day of such LIBOR Rate
Interest Period), in an amount equal to the quotient of (i) the sum of the
products of the daily unpaid principal amounts of LIBOR Rate Borrowings
outstanding on each day since the last day for which interest was paid,
multiplied by the Adjusted LIBOR Rate for each LIBOR Borrowing during the
LIBOR Rate Interest Period, divided by (ii) 360.
(b) AXIA shall have the right, with respect to any Borrowing, at any
time upon prior irrevocable notice to Agent (i) not later than 11:00 A.M.
(Chicago time), on the same Business Day, to convert any LIBOR Borrowing
into an Alternate Base Rate Borrowing, (ii) not later than 11:00 A.M.
(Chicago time), three Business Days prior to conversion or continuation, to
convert any Alternate Base Rate Borrowing into a LIBOR Rate Borrowing or to
continue any LIBOR Rate Borrowing as a LIBOR Rate Borrowing for an
additional LIBOR Rate Interest Period, and (iii) not later than 11:00 A.M.
(Chicago time), three Business Days prior to conversion, to convert the
LIBOR Rate Interest Period with respect to any LIBOR Rate Borrowing to
another permissible LIBOR Rate Interest Period, subject in each case to the
following:
(i) each conversion or continuation shall be made pro rata
among the Lenders in accordance with the respective principal amounts
of the Revolving Credit Loans and Term Loans comprising the converted
or continued Borrowing;
(ii) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, the aggregate principal
amount of such Borrowing converted or continued shall be not less than
$1,000,000 and integral multiples of $100,000 in the case of any
Revolving Credit LIBOR Borrowing and not less than $100,000 and
integral multiples of $10,000 in the case of an Alternate Base Rate
Borrowing;
(iii) each conversion with respect to a Borrowing under the
Revolving Credit Loan shall be effected by each Lender by applying the
proceeds of the new Revolving Credit Advance of such Lender resulting
from such conversion to the Revolving Credit Loan (or portion thereof)
of such Lender being converted; accrued interest on a Borrowing under
the Revolving Credit Loan (or portion thereof) being converted shall
be paid by Borrowers at the time of conversion;
(iv) if any LIBOR Borrowing is converted at a time other than
the end of the LIBOR Rate Interest Period applicable thereto,
Borrowers shall pay, upon demand, any amounts due to Lenders pursuant
to Section 2.10 hereof;
(v) any portion of a Borrowing maturing or required to be
repaid in less than one month may not be converted into or continued
as a LIBOR Rate Borrowing; and
(vi) any portion of a LIBOR Rate Borrowing which cannot be
continued by reason of clause (v) above shall be automatically
converted at the end of the LIBOR Rate Interest Period in effect for
such LIBOR Rate Borrowing into an Alternate Base Rate Borrowing.
Each notice pursuant to this Section 2.8(b) shall be in substantially
the form of Exhibit C-1, with respect to Borrowings under the Revolving
Credit Loan, and C-2 with
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respect to Borrowings under the Term Loan. Such notice shall be irrevocable
and shall refer to this Agreement and specify (i) the identity and amount
of the Borrowing that AXIA requests be converted or continued, (ii) whether
such Borrowing is to be converted to or continued as a LIBOR Rate Borrowing
or an Alternate Base Rate Borrowing, (iii) if such notice requests a
conversion, the date of such conversion (which shall be a Business Day) and
(iv) if such Borrowing is to be converted to or continued as a LIBOR Rate
Borrowing, the LIBOR Rate Interest Period with respect thereto. If no LIBOR
Rate Interest Period is specified in any such notice with respect to any
conversion to or continuation as a LIBOR Rate Borrowing, AXIA shall be
deemed to have selected a LIBOR Rate Interest Period of one month's
duration. Agent shall advise the other Lenders of any notice given pursuant
to this Section 2.8(b) and of each such Lender's portion of any converted
or continued Borrowing. If AXIA shall not have given notice in accordance
with this Section 2.8(b) to continue any LIBOR Rate Borrowing into a
subsequent LIBOR Rate Interest Period (and shall not otherwise have given
notice in accordance with this Section 2.8(b) to convert such Borrowing),
such LIBOR Rate Borrowing shall, at the end of the LIBOR Rate Interest
Period applicable thereto (unless repaid pursuant to the terms hereof),
automatically be continued as an Alternate Base Rate Borrowing.
(c) AXIA shall not have the option to select the LIBOR Rate at any
time that a Default or an Event of Default exists. In the event that a
Default or an Event of Default exists at the time of the expiration of a
LIBOR Rate Interest Period, all LIBOR Rate Borrowings shall bear interest
at the Alternate Base Rate commencing on the expiration of the LIBOR Rate
Interest Period applicable thereto and continuing thereafter until such
time as no Default or Event of Default exists and AXIA shall have timely
provided Agent with a notice requesting the Adjusted LIBOR Rate and
specifying the amount of the LIBOR Rate Borrowing and the LIBOR Rate
Interest Period applicable thereto. AXIA shall select LIBOR Rate Interest
Periods with respect to Borrowings so that the last day of each LIBOR Rate
Interest Period is prior to December 31, 2000.
(d) Alternate Base Rate Borrowings shall each be in minimum amounts of
$100,000 and integrated multiples of $10,000.
(e) LIBOR Rate Borrowings shall each be in minimum amounts of
$1,000,000 and integral multiples of $100,000 and, at any time, the
aggregate number of tranches of LIBOR Rate Borrowings shall not be more
than four.
(f) Any change in Alternate Base Rate resulting from a change in the
applicable Base Rates or Federal Funds Effective Rate shall be effective as
of the date of the relevant change. If any payment on the Revolving Credit
Loan or the Term Loan becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest thereon
shall be payable at the then applicable rate during such extension.
(g) Notwithstanding anything to the contrary set forth in this Section
2.8, upon the occurrence of and during the continuation of an Event of
Default under Section 9.1(a), the interest rate applicable to the Revolving
Credit Loan and the Term Loan shall be increased by 2% per annum above the
rate otherwise applicable (the "Default Rate").
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(h) Notwithstanding anything to the contrary set forth in this
Section 2.8, if at any time until payment in full of all of the Obligations
the interest rate calculated pursuant to the foregoing paragraphs of this
Section 2.8 (the "Stated Rate") exceeds the highest rate of interest
permissible under any law which a court of competent jurisdiction shall, in
a final determination, deem applicable hereto (the "Maximum Lawful Rate"),
then in such event and so long as the Maximum Lawful Rate would be so
exceeded, the rate of interest payable hereunder shall be equal to the
Maximum Lawful Rate; provided, however, that if at any time thereafter the
Stated Rate is less than the Maximum Lawful Rate, Borrowers shall continue
to pay interest hereunder at the Maximum Lawful Rate until such time as the
total interest received by Lenders from the making of advances hereunder is
equal to the total interest which Lenders would have received had the
Stated Rate been (but for the operation of this Section 2.8(h)) the
interest rate payable since the initial Closing Date. Thereafter, the
interest rate payable hereunder shall be the Stated Rate unless and until
the Stated Rate again exceeds the Maximum Lawful Rate, in which event this
paragraph shall again apply. In no event shall the total interest received
by Lenders pursuant to the terms hereof exceed the amount which Lenders
could lawfully have received had the interest due hereunder been calculated
for the full term hereof at the Maximum Lawful Rate. In the event the
Maximum Lawful Rate is calculated pursuant to this paragraph, such interest
shall be calculated at a daily rate equal to the Maximum Lawful Rate
divided by the number of days in the year in which such calculation is
made. In the event that a court of competent jurisdiction, notwithstanding
the provisions of this Section 2.8(h), shall make a final determination
that Lenders have received interest hereunder or under any of the Loan
Documents in excess of the Maximum Lawful Rate, Lenders shall, to the
extent permitted by applicable law, promptly apply such excess first to any
interest due and not yet paid under the Revolving Credit Loan or the Term
Loan, then to any due and payable principal of the Revolving Credit Loan or
the Term Loan, then to the remaining principal amount of the Revolving
Credit Loan or the Term Loan, then to other unpaid Obligations and
thereafter shall refund any excess to Borrowers or as a court of competent
jurisdiction may otherwise order.
2.9 REQUIREMENTS OF LAW.
(a) INCREASED COSTS. In the event that at any time or from time to
time after the date hereof any new or changed law, rule, regulation or
directive or any new or changed interpretation or application thereof by
any domestic or foreign governmental authority charged with the
administration or interpretation thereof, or compliance by any Lender with
any request or directive (whether or not having the force of law) received
from any central bank or monetary authority or other governmental authority
after the date hereof:
(i) does or shall subject any Lender to any tax of any kind
whatsoever or change therein with respect to any LIBOR Rate Loans
hereunder, or change the basis of taxation of payments to such Lender
of principal or interest or any other amount payable hereunder (except
for changes in the rate of tax on the overall net income of such
Lender); or
(ii) does or shall impose, modify or hold applicable or change
any reserve (including, without limitation, basic, supplemental,
marginal and emergency reserves), special deposit, compulsory loan or
similar requirement against assets held by, or deposits or other
liabilities in or for the account of, advances or loans by, or other
credit extended by, or any other acquisition of funds by, any office
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of any Lender which are not otherwise included in the determination of
the LIBOR Rate hereunder; or
(iii) does or shall impose on any Lender any other condition, or
change therein;
and the result of any of the foregoing is to increase the net cost to such
Lender of making, committing to make, renewing, converting or maintaining
LIBOR Rate Loans or to reduce any net amount receivable thereunder, then,
in any such case, Borrowers shall promptly pay to such Lender, upon its
demand, such additional amount which will compensate such Lender for such
additional cost or reduced amount receivable which such Lender deems to be
material as determined by such Lender with respect to this Agreement, the
Notes or the Loans hereunder. Notwithstanding the foregoing, each Lender
shall take all reasonable actions available to it (including, but not
limited to, actions of the type permitted by Section 2.12), consistent with
legal and regulatory requirements, that will limit or eliminate the amounts
otherwise payable by Borrowers under this Section, so long as such actions
are not in the reasonable judgment of such Lender materially
disadvantageous to such Lender.
(b) CAPITAL ADEQUACY. In the event that after the date hereof any
Lender shall have determined that the adoption of any law, rule, regulation
or guideline regarding capital adequacy, or any change therein or in the
interpretation or application thereof by any governmental authority charged
with the administration or interpretation thereof or compliance by any
Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) from any central bank or governmental
authority including, without limitation, the issuance of any final rule,
regulation or guideline, does or shall have the effect of reducing the rate
of return on such Lender's or its holding company's capital as a
consequence of its obligations hereunder to a level below that which such
Lender could have achieved but for such adoption, change or compliance
(taking into consideration such Lender's policies with respect to capital
adequacy) by any amount deemed by such Lender to be material, then from
time to time, within 15 days after demand by such Lender, Borrowers shall
pay to such Lender such additional amount or amounts as will compensate
such Lender for such reduction. Notwithstanding the foregoing, such Lender
shall take all reasonable actions available to it (including, but not
limited to, actions of the type permitted by Section 2.12), consistent with
legal and regulatory requirements, that will limit or eliminate the amounts
otherwise payable by Borrowers under this Section, so long as such actions
are not in the reasonable judgment of the Lender materially disadvantageous
to such Lender.
(c) NOTICE. If any Lender becomes entitled to claim any additional
amounts pursuant to this Section 2.9, it shall notify AXIA thereof within
30 days after such Lender becomes aware of the nature and extent of such
claim and shall also notify Agent thereof. A certificate as to any
additional amounts payable pursuant to this Section 2.9 submitted by a
Lender to AXIA shall be conclusive absent manifest error. Such certificate
shall outline in reasonable detail the computation of any amounts claimed
by it under this Section 2.9 and the assumptions underlying such
computation. No Lender shall, however, be required to disclose, in such
certificate or otherwise, any proprietary or confidential information.
2.10 FUNDING INDEMNIFICATION. If during any LIBOR Rate Interest Period any
payment of the LIBOR Rate Loans occurs on a date which is not the last day of
the applicable
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LIBOR Rate Interest Period, whether because of acceleration, prepayment or
otherwise, Borrowers will indemnify each Lender for any loss or cost incurred by
Lenders resulting therefrom, including, without limitation, any loss or cost
incurred in liquidating or employing deposits acquired to fund or maintain such
LIBOR Rate Loans.
2.11 LIBOR RATE LENDING UNLAWFUL. If any Lender shall determine (which
determination shall, upon notice thereof to AXIA, be conclusive and binding on
Borrowers) that the introduction of or any change in or in the interpretation of
any law makes it unlawful, or any central bank or other governmental authority
asserts that it is unlawful, for such Lender to make, continue or maintain any
Loan as, or to convert any Loan into, a LIBOR Rate Loan, the obligation of such
Lender to make, continue, maintain or convert any such Loan shall, upon such
determination, forthwith be suspended until such Lender shall notify Borrowers
that the circumstances causing such suspension no longer exist, and all LIBOR
Rate Loans shall, as to such Lender, automatically convert into Alternate Base
Rate Loans at the end of the then current LIBOR Rate Interest Periods with
respect thereto or sooner, if required by such law or assertion.
2.12 LENDING INSTALLATIONS. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBOR Rate Loans hereunder by causing
one of its foreign branches or affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBOR Rate Loans; provided,
however, that such LIBOR Rate Loans shall nonetheless be deemed to have been
made and to be held by such Lender, and the obligations of Borrowers to repay
such LIBOR Rate Loans shall nevertheless be to such Lender for the account of
such foreign branch, affiliate or international banking facility.
2.13 TERMINATION OR ASSIGNMENT OF COMMITMENTS UNDER CERTAIN CIRCUMSTANCES.
In the event that any Lender shall have delivered a notice or certificate
pursuant to Section 2.9(c), Borrowers shall have the right, at their own
expense, upon notice to such Lender and Agent, to require such Lender to
transfer and assign without recourse (in accordance with and subject to the
restrictions contained in Section 11.1) all its interests, rights and
obligations under this Agreement to another financial institution which shall
assume such obligations; provided that (i) no such assignment shall conflict
with any law, rule or regulation or order of any governmental authority, and
(ii) the assignee shall pay to the affected Lender in immediately available
funds on the date of such termination or assignment the outstanding principal of
and interest accrued to the date of payment on the Revolving Credit Loans and
Term Loan made by such Lender hereunder and all other amounts accrued for such
Lender's account or owed to it hereunder.
2.14 FEES; UNUSED REVOLVING CREDIT LOAN CHARGE.
(a) On the initial Closing Date, and on each anniversary thereof
during the Term hereof, Borrowers shall pay to ANB, as Agent, a non-
refundable agency fee as separately agreed by Borrowers.
(b) On the initial Closing Date, Borrowers shall pay to Agent for the
ratable benefit of Lenders a non-refundable facility fee (the "Facility
Fee") equal to $100,000.
(c) If during any Fiscal Quarter prior to the Commitment Termination
Date (or portion of a Fiscal Quarter with respect to the first Fiscal
Quarter following the initial Closing Date), the average daily balance of
the Revolving Credit Loan, plus the outstanding Letter of Credit
Obligations (exclusive of Letter of Credit Obligations with respect to
commercial Letters of Credit), is less than the Maximum Revolving Credit
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Loan, Borrowers shall pay to Lenders, in addition to any interest, late
charges or liquidated damages due under this Agreement, an amount ("Unused
Revolving Credit Loan Charge") equal to the quotient of (i) the sum of the
products of (A) the positive differences between (x) the Maximum Revolving
Credit Loan, and (y) the average daily balance of the Revolving Credit Loan
plus the outstanding Letter of Credit Obligations (exclusive of Letter of
Credit Obligations with respect to commercial Letters of Credit), for each
day during such Fiscal Quarter (or portion of a Fiscal Quarter with respect
to the First Quarter following the initial Closing Date), multiplied by (B)
a rate per annum equal to 0.375%, divided by (ii) 365. The amount of any
Unused Revolving Credit Loan Charge shall be payable in arrears for each
Fiscal Quarter within five days after determination thereof by Agent and
notice to Borrower of the amount thereof.
2.15 RECEIPT AND APPLICATION OF PAYMENTS. Until checks and other
instruments delivered to Agent in payment or on account of Borrowers'
Obligations are actually paid to Agent, Borrowers agree that such items
constitute conditional payment only. Agent may bill Borrowers for accrued
interest and all fees payable, or, at the request of AXIA, make advances of
principal, under the Revolving Credit Loan for payment of accrued interest.
Notwithstanding anything to the contrary herein, all such items of payment
shall, solely for purposes of determining the occurrence of a Default or an
Event of Default, be deemed received upon actual receipt by Agent, unless the
same are subsequently dishonored for any reason whatsoever. After an Event of
Default, the proceeds of all Collateral shall be applied to the Obligations in
the manner set forth in the Collateral Documents.
Upon receipt from Borrower of good funds, Agent will promptly thereafter
cause to be distributed like funds relating to the payment of principal,
interest or, if applicable, fees, ratably to Lenders based upon the respective
principal amounts of the Notes held by each Lender, and like funds relating to
the payment of any other amount payable to any Lender to such Lender, in each
case to be applied in accordance with the terms of this Agreement.
2.16 SHARING OF PAYMENTS, ETC. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of the Term Loan or Revolving Credit Loan made by it in
excess of its ratable share of payments on account on the Term Loan or Revolving
Credit Loan made by all Lenders, such Lender shall forthwith purchase from each
other Lender such participations in the Term Loan or Revolving Credit Loan as
shall be necessary to cause such purchasing Lender to share the excess payment
ratably with each other Lender; provided, however, that if all or any portion of
such excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
Borrowers agree that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.16 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 were the direct
creditor of Borrowers in the amount of such participation.
2.17 ACCOUNTING. Agent will provide a quarterly accounting of transactions
under the Revolving Credit Loan and the Term Loan to Borrowers. Each and every
such accounting shall (absent manifest error) be deemed final, binding and
conclusive upon Borrowers in all respects as to all matters reflected therein,
unless Borrowers, within 30 days after the accounting is received, shall notify
Agent in writing of any objection which Borrowers may have to any such
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accounting, describing the basis for such objection with specificity. In that
event, only those items expressly objected to in such notice shall be deemed to
be disputed by Borrowers. Agent's determination, based upon the facts
available, of any item objected to by Borrowers in such notice shall (absent
manifest error) be final, binding and conclusive on Borrowers, unless Borrowers
shall commence a judicial proceeding to resolve such objection within 30 days
following Agent's notifying Borrowers of such determination.
2.18 INDEMNITY. Each Borrower hereby indemnifies Agent, Lenders, and their
respective directors, officers, employees, Affiliates and agents (collectively,
"Indemnified Persons") against, and agrees to hold each such Indemnified Person
harmless from, any and all losses, claims, damages and liabilities, including
claims brought by any stockholder or former stockholder of any Borrower, and
related expenses, including reasonable counsel fees and expenses, incurred by
such Indemnified Person arising out of any claim, litigation, investigation or
proceeding (whether or not such Indemnified Person is a party thereto) relating
to any transactions, services or matters that are the subject of the Loan
Documents; provided, however, that such indemnity shall not apply to any such
losses, claims, damages, or liabilities or related expenses determined by a
court of competent jurisdiction to have arisen from the gross negligence or
willful misconduct of such Indemnified Person. If any litigation or proceeding
is brought against any Indemnified Person in respect of which indemnity may be
sought against Borrowers pursuant to this Section 2.18, such Indemnified Person
shall promptly notify Borrowers in writing of the commencement of such
litigation or proceeding, but the omission so to notify Borrowers shall not
relieve Borrowers from any other obligation or liability which they may have to
any Indemnified Person otherwise than under this Section 2.18. Failure of the
Indemnified Person to timely notify Borrowers of the commencement of such
litigation or proceeding shall not relieve Borrowers of their obligations under
this Section 2.18, except where such failure irrevocably prejudices Borrowers'
ability to defend such litigation or proceeding and to hold such Indemnified
Person harmless therefrom. In case any such litigation or proceeding shall be
brought against any Indemnified Person and such Indemnified Person shall notify
Borrowers of the commencement of such litigation or proceeding, Borrowers shall
be entitled to participate in such litigation or proceeding and, after written
notice from Borrowers to such Indemnified Person, to assume the defense of such
litigation or proceeding with counsel of their choice at their expense, provided
that such counsel is satisfactory to the Indemnified Person in the exercise of
its reasonable judgment. Notwithstanding the election of Borrowers to assume
the defense of such litigation or proceeding, such Indemnified Person shall have
the right to employ separate counsel and to participate in the defense of such
litigation or proceeding, and Borrowers shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of counsel chosen by
Borrowers to represent such Indemnified Person would present such counsel with a
conflict of interest; (ii) the defendants in, or targets of, any such litigation
or proceeding include both an Indemnified Person and a Borrower, and such
Indemnified Person shall have reasonably concluded that there may be legal
defenses available to it which are different from or additional to those
available to such Borrower (in which case Borrowers shall not have the right to
direct the defense of such action on behalf of the Indemnified Person); (iii)
Borrowers shall not have employed counsel satisfactory to such Indemnified
Person in the exercise of the Indemnified Person's reasonable judgment to
represent such Indemnified Person within a reasonable time after notice of the
institution of such litigation or proceeding; or (iv) Borrowers shall authorize
such Indemnified Person to employ separate counsel at the expense of Borrowers,
provided that Borrowers shall not be liable for the fees, costs and expenses of
more than one separate counsel at the same time for all such Indemnified Persons
in connection with the same action and any separate but substantially similar or
related action in the same jurisdiction. No Borrower shall consent to the entry
of any judgment or enter into any settlement in any such litigation or
proceeding unless such judgment or settlement includes
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as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Person of a release from all liability in respect to such claim or
litigation.
The agreements of Borrowers in this Section 2.18 shall be in addition to
any liability that Borrowers may otherwise have. All amounts due under this
Section 2.18 shall be payable as incurred upon written demand therefor, which
demand shall include reasonably detailed calculations of such amounts and a
reasonably detailed description of the reasons such amounts are due.
2.19 ACCESS. Agent and each Lender and any of their officers, employees
and/or agents shall have the right, exercisable as frequently as Agent or any
Lender determines to be reasonably appropriate during normal business hours (or
at such other times as may reasonably be requested by Agent or any Lender), to
inspect the properties and facilities of any Borrower and its Domestic
Subsidiaries and to inspect, audit and make extracts from all of any Borrower's
and its Domestic Subsidiaries' records, files and books of account. Unless an
Event of Default shall have occurred, (i) not more than two such on-site
inspections or audits will be conducted by Agent or Lenders in any calendar
year, and (ii) Borrowers shall not be obligated to reimburse Agent and Lenders
for costs of any such inspections or audits which are in excess of $10,000 for
any calendar year. Each Borrower shall deliver any document or instrument
reasonably necessary for Agent or Lenders, as any of them may request, to obtain
records from any service bureau maintaining records for any Borrower or its
Domestic Subsidiaries, and shall maintain duplicate records or supporting
documentation on media, including, without limitation, computer tapes and discs
owned by such Borrower and its Domestic Subsidiaries. Each Borrower shall
instruct its and its Domestic Subsidiaries' banking and other financial
institutions to make available to Agent and each Lender such information and
records as Agent and each Lender may reasonably request. Agent and each Lender
will utilize its customary practices to maintain as confidential any information
obtained from any Borrower or its Domestic Subsidiaries, (other than information
which (i) at the time of disclosure or thereafter is generally available to and
known by the public (other than as a result of a disclosure directly or
indirectly by Agent or a Lender or any of their representatives), (ii) is
available to Agent or such Lender on a non-confidential basis from a source
other than such Borrower or its Domestic Subsidiaries, provided that such source
was not at the time bound by a confidentiality agreement with such Borrower or
its Domestic Subsidiaries, or (iii) has been independently developed by Agent or
such Lender) but in no event (other than gross negligence or willful misconduct)
shall Agent or any Lender be liable for damages resulting from the disclosure of
any such confidential information obtained from any Borrower or its Domestic
Subsidiaries.
3. CONDITIONS PRECEDENT
This Agreement shall become effective upon the satisfaction of the
following conditions precedent:
3.1 MINIMUM EXCESS REVOLVING CREDIT LOAN AVAILABILITY. Agent shall have
determined, based upon the initial Borrowing Base Certificate and any other
information submitted by Borrowers to Agent, that immediately after Lenders have
made the loans and advances to Borrowers contemplated hereby on the initial
Closing Date, the sum of Excess Revolving Credit Loan Availability plus
Borrowers' Cash and Cash Equivalents, minus Borrowers' closing costs incurred in
connection with this Agreement, as determined by Borrowers, will not be less
than $5,000,000.
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3.2 EXECUTION AND DELIVERY OF AGREEMENT. This Agreement or counterparts
thereof shall have been duly executed by, and delivered to, Borrowers, Lenders
and Agent.
3.3 DOCUMENTS AND OTHER AGREEMENTS. Lenders shall have received all of
the following, each in form and substance satisfactory to Agent:
A. Revolving Credit Notes of Borrowers payable to Lenders as required
by Section 2.1(b);
B. Term Notes of Borrowers payable to Lenders as required by Section
2.2(a);
C. The Security Agreement executed by Borrowers and in the form
attached hereto as Exhibit D;
D. Patent and License Security Agreements executed by AXIA and ATTS
and in the form attached hereto as Exhibit E;
E. Trademark Collateral Assignment and Security Agreements executed
by AXIA and ATTS and in the form attached hereto as Exhibit F;
F. Stock Pledge Agreement executed by AXIA and in the form attached
hereto as Exhibit G;
G. Duly executed and acknowledged Mortgages and Leasehold Mortgages
covering each parcel of real property described in Schedule 4.7(a) hereto,
together with evidence of the payment, or provision for payment, of all
recording charges and taxes and filing fees to be incurred in connection
with the recording of the Mortgages and Leasehold Mortgages required
hereunder;
H. (i) ALTA Form B or equivalent mortgagee title insurance policies
issued by a title company acceptable to Agent insuring that each such
Mortgage is a valid first priority Lien on the Real Estate or leasehold
estate described in such Mortgage or Leasehold Mortgage, subject only to
such exceptions to title as shall be acceptable to Agent in its reasonable
discretion and containing such endorsements and affirmative insurance as
Agent may require, and true copies of each document, instrument or
certificate required by the terms of each such title insurance policy,
Mortgage and/or Leasehold Mortgage, to be, or to have been, filed,
recorded, executed or delivered in connection therewith, (ii) opinions
satisfactory to Agent of local counsel retained by Agent with respect to
the validity and enforceability of each such Mortgage (and with respect to
the Leases to be encumbered by a Leasehold Mortgage, each such Leasehold
Mortgage), and (iii) the UCC-1 Financing Statements filed in connection
with such Mortgages in each state where such may be filed;
I. ALTA Survey and surveyor's certification satisfactory in form
and substance to Agent as to all Real Estate;
J. A Certificate of the Secretary of each Borrower, together with
true and correct copies of the Certificate of Incorporation and Bylaws of
each Borrower, and all amendments thereto, true and correct copies of the
resolutions of the Board of Directors of each Borrower authorizing or
ratifying the execution, delivery and performance of this Agreement, the
Notes, the Security Agreement, the Mortgages, the Leasehold Mortgages, the
other Loan Documents and the Other Agreements and the names of the
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officer or officers of Borrower authorized to sign this Agreement, the
Notes, the Security Agreement, the Mortgages, the Leasehold Mortgages, the
other Loan Documents and the Other Agreements together with a sample of the
true signature of each such officer;
K. Certified copies of all documents evidencing any other necessary
corporate action, consents and governmental approvals (if any) with respect
to this Agreement, the Notes, the Security Agreement, the Mortgages, the
Leasehold Mortgages, the other Loan Documents and the Other Agreements;
L. The opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP,
counsel for Borrowers, addressed to Lenders and Agent in the form of
Exhibit K attached hereto and made a part hereof;
M. The Certificate of Incorporation of each Borrower certified by the
Secretary of State of Delaware;
N. Good Standing Certificates for AXIA from the Secretaries of State
of such States as Agent may designate;
O. Good Standing Certificates for ATTS from the Secretaries of State
of such States as Agent may designate;
P. Good Standing Certificates for TapeTech from the Secretaries of
State of such States as Agent may designate;
Q. UCC lien search reports of filings against Borrowers and tax lien
and judgment searches relating to Borrowers for such jurisdictions as Agent
deems appropriate;
R. UCC financing statements filed against Borrowers in respect to the
locations listed in Schedule 4.2;
S. Landlord Waivers with respect to each leased facility listed on
Schedule 4.7(b) as Agent deems appropriate;
T. The Officer's Solvency Certificate executed by Borrower's chief
financial officer as required by Section 4.5 and in the form attached
hereto and incorporated herein as Exhibit L;
U. Originals or copies of each policy of insurance and evidence of
payment of all premiums therefor as required by Section 6.6, together with
a properly executed Lender's Loss Payable Clause or collateral assignment
of the proceeds thereof;
V. Accountant's Letter;
W. Pay-off letters and releases and UCC Termination Statements with
respect to existing liens and encumbrances, affecting the Collateral.
3.4 ABSENCE OF MATERIAL ADVERSE CHANGE. No material and adverse change in
the business, assets, properties, operations, prospects or financial condition
of Borrowers shall have
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occurred or be continuing. Borrowers shall have paid their Indebtedness in
accordance with good business and historical practices.
3.5 CONDITIONS TO THE INITIAL REVOLVING CREDIT ADVANCE. It shall be a
condition to the initial Revolving Credit Advance that the conditions contained
in Sections 3.1, 3.2, 3.3 and 3.4 shall have been fulfilled, that the funding of
the Term Loan shall have occurred, and that Borrowers shall have delivered to
Agent a Notice of Revolving Credit Advance and a Borrowing Base Certificate (as
of April 30, 1996).
3.6 CONDITIONS TO EACH REVOLVING CREDIT ADVANCE. It shall be a further
condition to the funding of the initial Revolving Credit Advance and each
subsequent Revolving Credit Advance after the initial Revolving Credit Advance
that the following statements shall be true on the date of each such funding or
advance:
(a) All of the representations and warranties of Borrowers contained
herein or in any of the Loan Documents shall be correct in all material
respects as to Borrowers and their Subsidiaries taken as a whole on and as
of the date of each such Revolving Credit Advance as though made on and as
of such date, except (i) to the extent that any such representation or
warranty expressly relates to an earlier date, and (ii) for changes therein
permitted or contemplated by this Agreement. All of the representations
and warranties of Borrowers contained in any of the Other Agreements shall
be correct in all material respects as of the date delivered, except to the
extent that any such representation or warranty expressly relates to an
earlier date.
(b) No event shall have occurred and be continuing, or would result
from the funding of the Revolving Credit Advance, which constitutes or
would constitute a Default or an Event of Default.
(c) The aggregate unpaid principal amount of the Revolving Credit Loan
plus the amount of all outstanding Letter of Credit Obligations, after
giving effect to such Revolving Credit Advance, shall not exceed the lesser
of (i) the Maximum Revolving Credit Loan and (ii) the Borrowing Base.
The acceptance by Borrowers of the proceeds of any Revolving Credit Advance
shall be deemed to constitute, as of the date of such acceptance, (i) a
representation and warranty by Borrowers that the conditions in this Section 3.6
have been satisfied and (ii) a confirmation by Borrowers of the granting and
continuance of Agent's Lien pursuant to the Collateral Documents executed by
Borrowers.
4. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Revolving Credit Loan and the Term Loan, each
as herein provided for, Borrowers make the following representations and
warranties to Lenders:
4.1 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Borrower and each
Domestic Subsidiary of each Borrower (i) is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation; (ii) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification (except for
jurisdictions in which such failure to so qualify or to be in good standing
could not reasonably be expected to have a Material Adverse Effect); (iii) has
the requisite corporate power and authority and the legal right to own, pledge,
mortgage or otherwise encumber and operate its properties, to
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lease the property it operates under lease, and to conduct its business as now,
heretofore and proposed to be conducted; (iv) has all licenses, permits,
consents or approvals from or by, and has or will have made all filings with,
and has or will have given all notices to, all governmental authorities having
jurisdiction, to the extent required for such ownership, operation and conduct
(except for such licenses, etc., the absence of which, and such filings and
notices, as to which the failure to make or give, could not reasonably be
expected to have a Material Adverse Effect); (v) is in compliance with its
certificate or articles of incorporation and by-laws; and (vi) is in compliance
with all applicable provisions of law, including, without limitation, ERISA,
those regarding the collection, payment and deposit of employees' income,
unemployment and Social Security taxes and those relating to environmental
matters, except where the failure to comply could not reasonably be expected to
have a Material Adverse Effect.
4.2 EXECUTIVE OFFICES. The location of each Borrower's and each of its
Domestic Subsidiaries' chief executive office, principal place of business, and
other offices and places of business are set forth on Schedule 4.2 hereto, and
are the sole offices and places of business of Borrower and its Domestic
Subsidiaries.
4.3 SUBSIDIARIES. There exist no Subsidiaries of any Borrower other than
as set forth on Schedule 4.3 hereto, which sets forth such Subsidiaries,
together with their respective jurisdictions of organization, the authorized and
outstanding capital Stock of each such Subsidiary, by class and number and
percentage of each class legally owned by any Borrower or a Subsidiary of any
Borrower or any other Person. There are no options, warrants, rights to
purchase or similar rights covering capital Stock for any such Subsidiary.
4.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by each Borrower of the Loan Documents and
Other Agreements, to the extent they are parties thereto, and the creation of
all Liens provided for herein and therein: (i) are within such Borrower's
corporate power; (ii) have been, will be, duly authorized by all necessary or
proper corporate action; (iii) are not in contravention of any provision of such
Borrower's certificate of incorporation or bylaws; (iv) will not violate any law
or regulation, or any order or decree of any court or governmental
instrumentality; (v) will not conflict with or result in the breach or
termination of, constitute a default under, or accelerate any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which such Borrower or any of its Domestic Subsidiaries is a party
or by which Borrower or any of its Domestic Subsidiaries or any of their
property is bound (except for such conflict, breach, termination, default or
acceleration as could not reasonably be expected to have a Material Adverse
Effect); (vi) will not result in the creation or imposition of any Lien upon any
of the property of any Borrower or any of its Domestic Subsidiaries other than
those in favor of Agent, all pursuant to the Loan Documents; and (vii) do not
require the consent or approval of any governmental body, agency, authority or
any other Person, other than those which have been obtained. At or prior to the
initial Closing Date, each of the Loan Documents to be delivered at such time
shall have been duly executed and delivered for the benefit of or on behalf of
each Borrower, and each shall then constitute a legal, valid and binding
obligation of each Borrower, to the extent they are parties thereto, enforceable
against them in accordance with its terms.
4.5 SOLVENCY. After giving effect to the initial Revolving Credit
Advance, if made on the initial Closing Date, and the funding of the Term Loan,
the transactions contemplated by the Loan Documents and the Other Agreements,
and the payment of all estimated legal, investment banking, accounting and other
fees related hereto and thereto, Borrowers will be Solvent as of and on the
initial Closing Date and at all times thereafter. On the initial Closing
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Date, AXIA shall deliver to Agent an Officer's Solvency Certificate, in the form
of Exhibit L, attached hereto and incorporated herein.
4.6 FINANCIAL STATEMENTS.
(a) All of the following consolidated balance sheets and statements of
income and cash flow of AXIA and its Subsidiaries, copies of which have
been furnished to Agent prior to the date of this Agreement, have been,
except as noted therein, prepared in conformity with GAAP (except with
respect to the financial statements referred to in clause (i) below)
consistently applied throughout the periods involved and present fairly the
consolidated financial position of AXIA and its consolidated Subsidiaries
in each case as at the dates thereof, and the results of operations and the
statements of cash flows for the periods then ended (as to the unaudited
interim financial statements, subject to normal year-end audit adjustments
and the absence of footnotes):
(i) the unaudited consolidated balance sheet of AXIA and its
Subsidiaries as at April 30, 1996, and the related consolidated
statements of income and cash flows for the four months then ended;
and
(ii) the audited consolidated balance sheet of AXIA and its
Subsidiaries as at December 31, 1995, and the related consolidated
statements of income and cash flows for the year then ended, with the
opinion thereon of Arthur Andersen LLP.
(b) AXIA and its Subsidiaries as of April 30, 1996 had no obligations,
contingent liabilities or liabilities for Charges, long-term leases or
unusual forward or long-term commitments which are not reflected in the
unaudited consolidated balance sheet of AXIA and its Subsidiaries and which
could reasonably be expected to have a Material Adverse Effect.
(c) Except as set forth on Schedule 4.6(c), there has been no material
adverse change in the business, assets, operations or financial or other
condition of AXIA and its Subsidiaries taken as a whole since April 30,
1996 (it being understood that this representation and warranty shall be
subject to the fact that Borrowers shall have consummated the transactions
contemplated by this Agreement and shall have incurred the Obligations
hereunder). No dividends or other distributions have been declared, paid
or made upon any shares of Stock of Borrowers or any of the Subsidiaries,
nor have any shares of Stock of Borrowers or any of the Subsidiaries been
redeemed, retired, purchased or otherwise acquired for value by Borrowers
or its Subsidiaries since April 30, 1996, except for dividends paid by CIE
Fischbein S.A. to AXIA.
4.7 OWNERSHIP OF PROPERTY; LIENS.
(a) Borrowers own good and marketable fee simple title to all of the
Real Estate described on Schedule 4.7(a) hereto and good and valid
leasehold interests in the Leases described in Schedule 4.7(b) hereto, and
good and merchantable title to, or valid leasehold interest in, all of its
other properties and assets and none of the properties and assets of
Borrowers or their Subsidiaries, including, without limitation, the Real
Estate and Leases, are subject to any Liens, except Liens permitted by
Section 7.9 hereof; and Borrowers and their Domestic Subsidiaries shall
have received all deeds, assignments, waivers, consents, non-disturbance
and recognition or similar agreements, bills of sale and other documents,
and duly effected all recordings, filings and other actions
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necessary to establish, protect and perfect Borrowers' and their Domestic
Subsidiaries' right, title and interest in and to all such property except
where the failure to have received such documents or effected such actions
could not reasonably be expected to have a Material Adverse Effect.
(b) All real property owned or leased by any Borrower or any Domestic
Subsidiary is as set forth on Schedules 4.7(a) and 4.7(b) respectively. No
Borrower and no Domestic Subsidiary owns any other Real Estate or are
lessee or lessor under any leases other than as set forth therein.
Schedules 4.7(a) and 4.7(b) are true and correct in all material respects.
Schedule 4.7(b) hereto sets forth all leases of real property which are
held by any Borrower or any Domestic Subsidiary as lessee. Each of such
leases are valid and enforceable in accordance with its terms and are in
full force and effect. Borrowers have delivered or made available to Agent
true and complete copies of each of such leases set forth on Schedule
4.7(b) and all documents affecting the rights or obligations of any
Borrower or any Domestic Subsidiary which is a party thereto, including,
without limitation, any non-disturbance and recognition agreements,
subordination agreements, attornment agreements and agreements regarding
the term or rental of any of the leases. No Borrower and no Domestic
Subsidiary and no other party to any such lease is in default of its
obligations thereunder or has delivered or received any notice of default
under any such lease, nor has any event occurred which, with the giving of
notice, the passage of time or both, would constitute a default under any
such lease, except for any default which could not reasonably be expected
to have a Material Adverse Effect.
4.8 NO DEFAULT. No Borrower and no Domestic Subsidiary is in default,
nor, to the knowledge of any executive officer of any Borrower after a
reasonable investigation, is any third party in default, under or with respect
to any contract, agreement, lease or other instrument to which it is a party,
except for any default which (either individually or collectively with other
defaults arising out of the same event or events) could not reasonably be
expected to have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
4.9 BURDENSOME RESTRICTIONS. No contract, lease, agreement or other
instrument to which any Borrower or any Domestic Subsidiary is a party or is
bound could reasonably be expected to have a Material Adverse Effect.
4.10 LABOR MATTERS. There are no strikes or other labor disputes against
any Borrower or any of its Subsidiaries pending or, to any Borrower's knowledge,
threatened which could reasonably be expected to have a Material Adverse Effect.
Hours worked by and payment made to employees of each Borrower and its
Subsidiaries have not been in violation of the Fair Labor Standards Act or any
other applicable law dealing with such matters which could reasonably be
expected to have a Material Adverse Effect. All payments due from any Borrower
or any of its Subsidiaries on account of employee health and welfare insurance
which could reasonably be expected to have a Material Adverse Effect if not paid
have been paid or accrued as a liability on the books of such Borrower or such
Subsidiary.
4.11 OTHER VENTURES. Except as set forth in Schedule 4.11, no Borrower and
no Subsidiary of any Borrower is engaged in any joint venture or partnership
with any other Person.
4.12 INVESTMENT COMPANY ACT. No Borrower and no Subsidiary of any Borrower
is an "investment company" or an "affiliated person" of, or "promoter" or
"principal underwriter"
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for, an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended. The making of the Revolving Credit Advances
and the funding of the Term Loan by Lenders, the application of the proceeds and
repayment thereof by Borrowers and the consummation of the transactions
contemplated by this Agreement and the other Loan Documents will not result in
the violation by any Borrower or any of its Subsidiaries of any provision of
such act or any rule, regulation or order issued by the Commission thereunder.
4.13 MARGIN REGULATIONS. Neither Borrower nor its Subsidiaries own any
"margin security", as that term is defined in Regulations G and U of the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"), and
the proceeds of the Revolving Credit Advances and the Term Loan will be used
only for the purposes contemplated hereunder. Neither the Revolving Credit
Advances nor the Term Loan will be used, directly or indirectly, for the purpose
of purchasing or carrying any margin security, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the loans
under this Agreement to be considered a "purpose credit" within the meaning of
Regulations G, T, U or X of the Federal Reserve Board. No Borrower will take or
permit any agent acting on its behalf to take any action which might cause this
Agreement or any document or instrument delivered pursuant hereto to violate any
regulation of the Federal Reserve Board. The making of either the Revolving
Credit Loan or the Term Loan will not constitute a violation of such Regulations
G, T, U or X.
4.14 TAXES. All federal, state, local and foreign tax returns, reports and
statements required to be filed by any Borrower and its Subsidiaries (other than
immaterial state, local and foreign filings) have been filed with the
appropriate governmental agencies and all Charges and other impositions shown
thereon to be due and payable have been paid prior to the date on which any
fine, penalty, interest or late charge may be added thereto for nonpayment
thereof, or any such fine, penalty, interest, late charge or loss has been paid.
Each Borrower and its Subsidiaries has paid when due and payable all requisite
Charges upon the books of such company, as the case may be, except such Charges
being contested pursuant to Sections 6.2(b) or (c) hereof. Proper and accurate
amounts have been withheld by each Borrower and its Subsidiaries from their
respective employees for all periods in full and complete compliance with the
tax, social security and unemployment withholding provisions of applicable
federal, state, local and foreign law (except possible inadvertent under
withholdings which do not exceed $10,000 in the aggregate at any time), and such
withholdings have been timely paid to the respective governmental agencies.
Schedule 4.14 sets forth, for each Borrower and its Subsidiaries, those taxable
years for which its tax returns are currently being audited by the IRS or any
other applicable governmental authority. Except as described in Schedule 4.14
hereto, no Borrower nor any of its Subsidiaries has executed or filed with the
IRS or any other governmental authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any Charges. No Borrower nor any of its Subsidiaries has filed a
consent pursuant to IRC Section 341(f) or agreed to have IRC Section 341(f)(2)
apply to any dispositions of subsection (f) assets (as such term is defined in
IRC Section 341(f)(4)), except as disclosed in Schedule 4.14. None of the
property owned by any Borrower or any of its Subsidiaries is property which such
company is required to treat as being owned by any other Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately prior to the enactment of the Tax Reform Act of 1986
or is "tax-exempt use property" within the meaning of IRC Section 168(h)(1).
Except as set forth on Schedule 4.14 hereto, no Borrower nor any of its
Subsidiaries has agreed or has been requested to make any adjustment under IRC
Section 481(a) by reason of a change in accounting method or otherwise. Except
as set forth
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on Schedule 4.14 hereto, no Borrower and none of its Subsidiaries has any
obligation under any written tax sharing agreement.
4.15 ERISA. Except as otherwise stated in Schedule 4.15 hereto: (i) no
Borrower nor any ERISA Affiliate maintains or contributes to any Plan, Defined
Contribution Plan or Welfare Plan; (ii) each Defined Contribution Plan or Plan,
other than a Multiemployer Plan, which is intended to be tax qualified under IRC
Section 401(a) has been determined by the IRS to qualify under IRC Section
401(a), and the trusts created thereunder have been determined to be exempt from
tax under the provisions of IRC Section 501(a) (except with respect to
amendments required by legislation or regulations for which the remedial
amendment period under IRC Section 401(b) has not lapsed), and nothing has
occurred which could cause the loss of such qualification or the imposition on
any Borrower or any of its Subsidiaries of any liability or penalty under the
IRC or ERISA in excess of $50,000; (iii) with respect to each Plan, each Defined
Contribution Plan and each Welfare Plan (in each case, other than a
Multiemployer Plan), all reports required under ERISA or any other applicable
law or regulation to be filed by any Borrower or any ERISA Affiliate with the
relevant governmental authority have been duly filed and all such reports are
true and correct in all material respects as of the date given if the failure of
which reports to be filed or to be true and correct in all material respects
could reasonably be expected to result in a liability of any Borrower or any of
its Subsidiaries in excess of $50,000; (iv) no Borrower nor any ERISA Affiliate
has engaged in a "prohibited transaction," as such term is defined in IRC
Section 4975 or Title I of ERISA, in connection with any Plan, Defined
Contribution Plan or Welfare Plan which would subject any Borrower or any of its
Subsidiaries (after giving effect to any prohibited transaction exemption) to
the tax on prohibited transactions imposed by IRC Section 4975 or any other
liability, provided that such liability is in excess of $50,000; (v) no Plan
which is not a Multiemployer Plan has been terminated, nor has any accumulated
funding deficiency (as defined in IRC Section 412(a)) been incurred (without
regard to any waiver granted under IRC Section 412), nor has any funding waiver
from the IRS been received or requested, nor has any Borrower or any ERISA
Affiliate failed to make any contributions or to pay any amounts due and owing
as required by the terms of any Plan; (vi) there has not been any Reportable
Event or any event requiring disclosure under Section 4041(c)(3)(C) or 4063(a)
of ERISA with respect to any Plan (other than a Multiemployer Plan); (vii) the
value of the assets of all Plans (excluding any Multiemployer Plan or a Plan
with no unfunded Benefit Liabilities (as defined in Section 4001(a)(16) of
ERISA)) were not more than $600,000 less than the present value of the Benefit
Liabilities of all of such Plans as of the last day of the plan years most
recently ended (determined in accordance with Statement of Financial Accounting
Standards No. 35) and, as of the initial Closing Date, the value of the assets
of each of such Plan were not more than $600,000 less than the present value of
its Benefit Liabilities as of the last day of the plan year most recently ended
(determined in accordance with PBGC termination actuarial assumptions currently
in effect or other actuarial assumptions certified by the Plan's actuary as
reasonable for purposes of a Standard Termination (as described in Section
4041(b) of ERISA)); (viii) there are no claims (other than claims for benefits
in the normal course), actions or lawsuits asserted or instituted against, and
no Borrower nor any ERISA Affiliate has knowledge of any threatened litigation
or claims against (a) the assets of any Plan (other than a Multiemployer Plan)
or Defined Contribution Plan or against any fiduciary of such plan with respect
to the operation of such plan or (b) the assets of any Welfare Plan or against
any fiduciary thereof with respect to the operation of any such plan, which, in
either case, if adversely determined, could reasonably be expected to have a
Material Adverse Effect; (ix) any bond required to be obtained by any Borrower
or any of its Subsidiaries under ERISA with respect to any Plan, Defined
Contribution Plan or Welfare Plan has been obtained and is in full force and
effect; (x) no Borrower and no ERISA Affiliate has incurred (a) any liability to
the PBGC or to a trust (for Plan terminations instituted prior to December 18,
1987) described in
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Section 4049 of ERISA (prior to its repeal), (b) any withdrawal liability (and
no event has occurred which, with the giving of notice under Section 4219 of
ERISA, would result in such liability) under Section 4201 of ERISA as a result
of a complete or partial withdrawal (within the meaning of Section 4203 or 4205
of ERISA) from a Multiemployer Plan, which would result in annual withdrawal
liability payments in excess of $50,000, or (c) any liability under ERISA
Section 4062, 4063 or 4064 to the PBGC, to a trust terminated under ERISA
Section 4041 or 4042 or to a trustee appointed under ERISA Section 4042; (xi) no
Borrower and no ERISA Affiliate nor any organization to which any Borrower or
any such ERISA Affiliate is a successor or parent corporation within the meaning
of ERISA Section 4069(b) has engaged in a transaction within the meaning of
ERISA Section 4069; and (xii) no Borrower and none of its Subsidiaries maintains
or has established any Welfare Plan which provides for continuing benefits or
coverage for any participant or any beneficiary of a participant after such
participant's termination of employment except as may be required by IRC Section
4980B or Section 601(et. seq.) of ERISA, or under any state law and at the
expense of the participant or the beneficiary of the participant.
4.16 NO LITIGATION. Except as set forth on Schedule 4.16 hereto, no
action, claim or proceeding is now pending or, to the knowledge of any Borrower,
threatened against any Borrower or any Subsidiary of Borrower at law, in equity
or otherwise, before any court, board, commission, agency or instrumentality of
any federal, state, or local government or of any agency or subdivision thereof,
or before any arbitrator or panel of arbitrators, which, if determined
adversely, could reasonably be expected to have a Material Adverse Effect, nor
to the knowledge of any Borrower does a state of facts exist which is reasonably
likely to give rise to such proceedings. Except as expressly set forth on
Schedule 4.16, none of the matters set forth therein questions the validity of
any of the Loan Documents or the Other Agreements or any action taken or to be
taken pursuant thereto, or could reasonably be expected to have either
individually or in the aggregate a Material Adverse Effect.
4.17 BROKERS. No broker or finder acting on behalf of any Borrower brought
about the obtaining, making or closing of the loans made pursuant to this
Agreement, and no Borrower has any obligation to any other Person in respect of
any finder's or brokerage fees in connection with the loans contemplated by this
Agreement.
4.18 OUTSTANDING STOCK; OPTIONS; WARRANTS, ETC. The Common Stock of
Holdings and AXIA owned, respectively, by the Persons and in the amounts set
forth on Schedule 4.18 will constitute all of the issued and outstanding Stock
of Holdings and AXIA immediately following the initial Closing Date. AXIA has
no outstanding rights, options, warrants or agreements pursuant to which it may
be required to issue or sell any Stock or other equity security.
4.19 EMPLOYMENT AND LABOR AGREEMENTS. Except as set forth on Schedule
4.19, there are no employment agreements covering executive officers of any
Borrower or any of Borrowers' Domestic Subsidiaries and there are no collective
bargaining agreements or other labor agreements covering any employees of any
Borrower or any of its Domestic Subsidiaries. A true and complete copy of each
such agreement has been furnished to Agent. Each Borrower and its Domestic
Subsidiaries are in compliance with the terms and conditions of all such
collective bargaining agreements and other labor agreements except where the
failure to so comply could not reasonably be expected to have a Material Adverse
Effect.
4.20 PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Each Borrower and its
Subsidiaries own all material licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications, and trade names
necessary to continue to conduct their
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business as heretofore conducted by them, now conducted by them and proposed to
be conducted by them, each of which is listed, together with Patent and
Trademark Office application or registration numbers, where applicable, on
Schedule 4.20 hereto. Each Borrower and its Subsidiaries conduct their
respective businesses without infringement or claim of infringement of any
license, patent, copyright, service mark, trademark, trade name, trade secret or
other intellectual property right of others, except where such infringement or
claim of infringement could not reasonably be expected to have a Material
Adverse Effect. To the best knowledge of Borrowers, there is no infringement or
claim of infringement by others of any material license, patent, copyright,
service mark, trademark, trade name, trade secret or other intellectual property
right of any Borrower or any of its Subsidiaries.
4.21 FULL DISCLOSURE. No information contained in this Agreement, the
other Loan Documents, the Financials or any written statement furnished by or on
behalf of any Borrower or its Subsidiaries pursuant to the terms of this
Agreement, which has previously been delivered to Agent, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading at the time and in
light of the circumstances under which made.
4.22 LIENS. The Liens granted to Agent pursuant to the Collateral
Documents will at the initial Closing Date be fully perfected first priority
Liens in and to the Collateral described therein, subject only to the Liens
permitted by Section 7.9 hereof.
4.23 NO MATERIAL ADVERSE EFFECT. Except as set forth on Schedule 4.6(c),
no event has occurred since April 30, 1996 and is continuing which has had or
could reasonably be expected to have a Material Adverse Effect.
4.24 ENVIRONMENTAL MATTERS.
(a) Except as disclosed in Schedule 4.24, and to Borrower's knowledge,
all facilities owned, leased or operated by each Borrower or any Domestic
Subsidiary of such Borrower or, to the actual knowledge of any executive
officer of such Borrower, any predecessor in interest for which Borrower is
a successor corporation, have been, and continue to be, owned, leased or
operated in compliance in all material respects with all applicable
Environmental Laws.
(b) To Borrower's knowledge, Schedule 4.24 identifies with respect to
each Borrower and each Domestic Subsidiary of each Borrower, (i) all
environmental site assessments and subsurface investigations undertaken by,
or at the direction of, or in the possession or control of, any Borrower or
any Domestic Subsidiary of any Borrower with respect to the facilities
owned, leased or operated by Borrower or a Subsidiary of Borrower; and (ii)
all investigations and inspections undertaken by a federal or state
governmental authority of any facility owned, leased or operated by
Borrower or a Domestic Subsidiary of Borrower, and all claims, complaints
or other written communications, which allege or may reasonably result in
potential liability under any Environmental Law on the part of Borrower or
a Domestic Subsidiary of Borrower in excess of $250,000.
(c) Except as disclosed in Schedule 4.24, each Borrower and/or its
Domestic Subsidiaries, have reported to appropriate authorities each
Release of a Hazardous Substance at any facility leased, owned or operated
by such Borrower or any Domestic Subsidiary of such Borrower which is
required to be reported pursuant to any applicable Environmental Law. Each
such reported Release of any Hazardous
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Substances, which may reasonably result in potential liability on the part
of Borrower or a Domestic Subsidiary of Borrower in excess of $250,000, is
also disclosed in Schedule 4.24.
(d) Except as disclosed in Schedule 4.24, and to Borrower's knowledge,
neither any Borrower nor any Domestic Subsidiary of such Borrower nor, to
the actual knowledge of any executive officer of any Borrower, any
predecessor in interest for which Borrower is a successor corporation, has
stored, disposed, treated, or arranged for the storage, disposal or
treatment of, any Hazardous Substance at a site or location, or has leased,
owned or operated a site or location, which pursuant to CERCLA or other
similar state laws: (A) has been placed on the National Priorities List or
its state equivalent; (B) the United States Environmental Protection Agency
or relevant state authority has proposed, or is proposing, to place, on the
National Priorities List or state equivalent; (C) is on any state
Comprehensive Environmental Response Compensation Liability Information
System list.
(e) Except as set forth in Schedule 4.24, all above ground and
underground storage tanks owned and/or operated by Borrower or any Domestic
Subsidiary of Borrower are owned and/or operated in material compliance
with all applicable Environmental Laws.
(f) Except as set forth in Schedule 4.24, and except as may reasonably
result in potential liability on the part of Borrower or a Domestic
Subsidiary of Borrower in an amount less than $250,000, to Borrower's
knowledge, there are no Hazardous Substances or wastes, drums or containers
containing Hazardous Substances disposed of, released upon or buried on, in
or under the ground or any surface waters or groundwater located on any
premises owned or operated by any Borrower or any Domestic Subsidiary of
any Borrower.
(g) Except as set forth in Schedule 4.24, and except as may reasonably
result in potential liability on the part of Borrower or a Domestic
Subsidiary of Borrower in an amount less than $250,000, to Borrower's
knowledge, there are (i) no water wells, injection wells, surface
impoundments, waste water ponds, landfills, waste piles or facilities for
land disposal, and (ii) no polychlorinated biphenyls, asbestos or urea
formaldehyde in or on premises or facilities owned or operated by any
Borrower or any Domestic Subsidiary of such Borrower.
4.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 4.25, no
Borrower nor any Domestic Subsidiary of any Borrower is a party to any contract
or agreement with the United States government or any department, agency or
instrumentality thereof pursuant to which such Borrower or any of its Domestic
Subsidiaries provide goods or services to such Persons and which is subject to
the Federal Assignment of Claims Act (41 U.S.C. (S)15, 31 U.S.C. (S)3727)
relative to the assignment of Accounts Receivable thereunder.
5. FINANCIAL STATEMENTS AND INFORMATION
5.1 REPORTS AND NOTICES. Borrowers covenant and agree that from and after
the initial Closing Date and until the Termination Date, they shall deliver to
Agent:
(a) Within 15 Business Days after the end of each fiscal month, a
Borrowing Base Certificate in the form attached hereto as Exhibit A and
with content satisfactory to Agent which provides the following
information: (1) total Accounts
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Receivable/Inventory and Eligible Domestic Accounts Receivable/Eligible
Foreign Accounts Receivable/Eligible Inventory, (2) total loan
availability, (3) the current loan balance, and (4) unused loan
availability. If Borrowers fail to deliver any such Borrowing Base
Certificate within 25 days after the end of any such month, the Borrowing
Base shall be deemed to be zero dollars ($0) until such time as Borrowers
shall deliver the required Borrowing Base Certificate.
(b) Within 30 Business Days after the end of each fiscal month, copies
of the unaudited consolidated balance sheet of AXIA and its operating units
and Subsidiaries as of the end of such month, and the related consolidated
statements of income and statement of consolidated cash flows (with respect
to the cash flows and income statement, in a form customarily prepared by
AXIA management) for that portion of the Fiscal Year ending as of the end
of such month, prepared in accordance with GAAP (subject to normal year end
adjustments), setting forth in comparative form in each case the projected
consolidated figures for such period and accompanied by the certification
of the chief executive officer or chief financial officer of AXIA that all
such financial statements present fairly in accordance with GAAP (subject
to normal year end adjustments), the consolidated financial position and
results of operations of AXIA and its Subsidiaries as at the end of such
month and for the period then ended, and that there was no Default or Event
of Default in existence as of such time or, if there was any Default or
Event of Default in existence as of such time, setting forth a description
of such Default or Event of Default and specifying the action, if any,
taken by Borrowers to remedy the same.
(c) Within 45 days after the end of each of the first three Fiscal
Quarters, copies of the unaudited consolidated balance sheet of AXIA and
its operating units and Subsidiaries as of the close of such quarter, and
the related consolidated statements of income and statement of consolidated
cash flows for that portion of the Fiscal Year ending as of the close of
such quarter prepared in accordance with GAAP (subject to normal year end
adjustments), the delivery of which financial statements may be satisfied
by the delivery to Agent of the Form 10-Q filed by AXIA with the Commission
for such Fiscal Quarter, and accompanied by (A) a statement in reasonable
detail showing the calculations used in determining the financial covenants
under Sections 6.3 and 7.10 hereof, and (B) the certification of the chief
executive officer or chief financial officer of AXIA that all such
financial statements present fairly in accordance with GAAP (subject to
normal year end adjustments) the consolidated financial position and
results of operations and the consolidated statement of cash flows of AXIA
and its Subsidiaries as at the end of such quarter and for the period then
ended, and that there was no Default or Event of Default in existence as of
such time or, if there was any Default or Event of Default in existence as
of such time, setting forth a description of such Default or Event of
Default and specifying the action, if any, taken by Borrowers to remedy the
same.
(d) Within 90 days after the close of each Fiscal Year, a copy of the
annual audited consolidated financial statements of AXIA and its operating
units and Subsidiaries consisting of consolidated balance sheets and
consolidated statements of income and retained earnings and statement of
consolidated cash flows, setting forth in comparative form in each case the
consolidated figures for the previous Fiscal Year, which financial
statements shall be prepared in accordance with GAAP, certified (only with
respect to the consolidated financial statements) without qualification as
to its scope of audit or the financial condition of AXIA and its
Subsidiaries on a consolidated basis as a going concern by a firm of
independent certified public accountants of
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recognized national standing selected by AXIA and acceptable to Agent, the
delivery of which financial statements may be satisfied by the delivery to
Agent of the Form 10-K filed by AXIA with the Commission for such Fiscal
Year, and accompanied by (i) a statement in reasonable detail showing the
calculations used in determining the financial covenants under Sections 6.3
and 7.10 hereof, (ii) a report from such accountants to the effect that in
connection with their audit examination, nothing, with respect to
accounting matters, has come to their attention to cause them to believe
that a Default or Event of Default had occurred or, if anything has come to
their attention to cause them to believe that a Default or Event of Default
had occurred, a description of such Default or Event of Default, and (iii)
a certification of the chief executive officer or chief financial officer
of AXIA that all such financial statements present fairly in accordance
with GAAP the consolidated financial position and results of operations and
the consolidated statement of cash flows of AXIA and its Subsidiaries as at
the end of such year and for the period then ended, and that there was no
Default or Event of Default in existence as of such time or, if there was
any Default or Event of Default in existence as of such time, setting forth
a description of such Default or Event of Default and specifying the
action, if any, taken by Borrowers to remedy the same.
(e) As soon as practicable, but in any event within five (5) Business
Days after any executive officer of any Borrower becomes aware of the
existence of any Default or Event of Default, or any development or other
information which could reasonably be expected to have a Material Adverse
Effect, telephonic or telecopy notice specifying the nature of such Default
or Event of Default or development or information, including the
anticipated effect thereof, which notice shall be promptly confirmed in
writing within seven (7) Business Days.
(f) Within 30 days after the beginning of each Fiscal Year;
(i) projected consolidated balance sheets of AXIA and
individual balance sheets for each operating unit of AXIA,
in each case, on a monthly basis for such Fiscal Year, in
a form customarily prepared by AXIA management;
(ii) projected consolidated cash flow statements of AXIA and
individual cash flow statements for each operating unit of
AXIA, in each case, for such Fiscal Year, in a form
customarily prepared by AXIA management;
(iii) a capital budget by month for such Fiscal Year; and
(iv) projected consolidated income statements of AXIA and
individual income statements for each operating unit of
AXIA, in each case, for such Fiscal Year on a monthly
basis;
together with such supporting details as reasonably requested by Agent.
(g) If requested by Agent, a copy of all federal, state, local and
foreign tax returns and reports in respect of income, franchise or other
taxes on or measured by income (excluding sales, use or like taxes) filed
by AXIA or any of its Subsidiaries.
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<PAGE>
(h) Promptly upon receipt thereof, a copy of any management letter
with respect to the business, financial condition and other affairs of AXIA
and any of its Subsidiaries, submitted to AXIA by its independent public
accountants in connection with any annual audit made by such accountants of
the books of AXIA or any of its Subsidiaries.
(i) If requested by Agent, a monthly Inventory status report in form
and content satisfactory to Agent, and, within forty-five (45) days after
taking a complete physical count of Inventory, which physical count is
required on at least an annual basis, a written report of Borrowers
summarizing any adjustments covering such physical count.
(j) Upon the request of Agent, detailed schedules showing the aging of
Accounts Receivable and a listing of accounts payable in a form customarily
prepared by Borrowers.
(k) As and when set forth therein, the notices required under Section
5(n) of the Security Agreement.
(l) Such other information respecting any Borrower's or any of its
Subsidiaries' business, financial condition or prospects as Agent may, from
time to time, reasonably request.
(m) Within five (5) days after the earlier of the last day of each
Fiscal Year and the date Borrowers engage independent certified public
accountants to audit Borrowers' financial statements, a letter from
Borrowers addressed to such independent certified public accountants
indicating that it is a primary intention of Borrowers in engaging such
accountants that Agent and Lenders rely upon such financial statements of
Borrowers and their Subsidiaries.
5.2 COMMUNICATION WITH ACCOUNTANTS. AXIA authorizes Agent to communicate
directly with its independent certified public accountants and authorizes those
accountants to disclose to Agent any and all financial statements and other
supporting financial documents and schedules. Unless any Event of Default shall
have occurred, (i) Agent shall notify AXIA prior to initiating any such
communication of a formal nature, and (ii) any such communication by Agent shall
not occur more than once during any Fiscal Year without AXIA's consent. At or
before the initial Closing Date, AXIA shall deliver a letter addressed to such
accountants instructing them to comply with the provisions of this Section 5.2.
6. AFFIRMATIVE COVENANTS
Borrowers covenant and agree that, unless the Required Lenders shall
otherwise consent in writing, from and after the initial Closing Date and until
the Termination Date:
6.1 MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Each Borrower shall
and shall cause each of its Domestic Subsidiaries to (a) do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence, rights and franchises; (b) continue to conduct its business
substantially as now conducted or as otherwise permitted hereunder; (c) at all
times maintain, preserve and protect all of its patents, trademarks, service
marks and trade names (except as otherwise provided in the Patent and License
Security Agreements and the Trademark Collateral Assignment and Security
Agreements), and preserve all the remainder of its property, in use or useful in
the conduct of its business, and keep the
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<PAGE>
same in good operating condition (taking into consideration ordinary wear and
tear) and from time to time make, or cause to be made, all needful and proper
repairs, renewals and replacements, betterments and improvements thereto
consistent with industry practices, so that the business carried on in
connection therewith may continue to be conducted at all times; and (d) transact
business and invoice all Accounts Receivable in such Borrower's or such Domestic
Subsidiary's corporate names or such trade styles (i.e. tradenames) as such
Borrower shall specify to Agent not less than 30 days prior to the first date
such trade style is used.
6.2 PAYMENT OF OBLIGATIONS.
(a) Subject to paragraphs (b) and (c) of this Section 6.2, each
Borrower shall and shall cause each of its Subsidiaries to (i) pay and
discharge or cause to be paid and discharged all its Indebtedness,
including, without limitation, all the Obligations, as and when due and
payable or in accordance with good business practices, and (ii) pay and
discharge or cause to be paid and discharged promptly all (A) Charges
imposed upon it, its income and profits, or any of its property (real,
personal or mixed), and (B) lawful claims for labor, materials, supplies
and services or otherwise before any thereof shall become in default.
(b) Each Borrower and its Subsidiaries may in good faith contest, by
proper legal actions or proceedings, the validity or amount of any Charges,
Liens or claims arising under Section 6.2(a)(ii), provided that such
Borrower gives Agent advance notice of its intention to contest the
validity or amount of any such Charge, Lien or claim that exceeds $50,000,
and that, with respect to the contest of any Charge, Lien or claim, at the
time of commencement of any such action or proceeding, and during the
pendency thereof (i) no Default or Event of Default shall have occurred;
(ii) adequate reserves with respect thereto are maintained on the books of
such Borrower or such Subsidiary, in accordance with GAAP; (iii) such
contest operates to suspend collection of the contested Charges or claims
and is maintained and prosecuted continuously with diligence; (iv) none of
the Collateral would be subject to forfeiture or loss of any Lien by reason
of the institution or prosecution of such contest; (v) no Lien shall exist
for such Charges or claims during such action or proceeding; (vi) such
Borrower or such Subsidiary shall promptly pay or discharge such contested
Charges and all additional charges, interest, penalties and expenses, if
any, and shall deliver to Agent evidence acceptable to Agent of such
compliance, payment or discharge, if such contest is terminated or
discontinued adversely to such Borrower or such Subsidiary; and (vii) Agent
has not advised such Borrower or such Subsidiary in writing that Agent
reasonably believes that nonpayment or nondischarge thereof would have a
Material Adverse Effect; provided, however, that if Agent so advises such
Borrower or such Subsidiary, such Borrower or such Subsidiary may
nonetheless exercise its contest rights permitted under Section 6.2(c).
(c) In addition to the right to contest pursuant to the provisions of
Section 6.2(b) hereof, each Borrower and each of its Subsidiaries shall
have the right to contest any Lien, Charge or claim, in good faith and by
appropriate proceedings, if, with respect to any such Lien, Charge or claim
so contested either (i) such Borrower provides Agent with a bond or
indemnity insuring the payment of such Lien, Charge or claim, or (ii)
Agent, upon request by AXIA, has established a reserve against the
Borrowing Base for such Lien, Charge or claim, provided that there then
exists sufficient Revolving Credit Availability to establish such reserve.
In addition, each Borrower and each of its Subsidiaries shall have the
right to pay the Charges or claims
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<PAGE>
and to discharge the Liens and in good faith and by appropriate proceedings
contest the validity or amount of such Charges, Liens or claims.
6.3 FINANCIAL COVENANTS. AXIA and its Subsidiaries shall have, on a
consolidated basis:
(a) MINIMUM CONSOLIDATED EBITDA. At the end of each Fiscal Year
listed below and at the end of each of the first three Fiscal Quarters of
the immediately succeeding Fiscal Year, a Consolidated EBITDA for the
immediately preceding four Fiscal Quarters not less than the amounts set
forth opposite such Fiscal Years:
<TABLE>
<CAPTION>
MINIMUM
CONSOLIDATED
FISCAL YEAR EBITDA
----------- ------------
<S> <C>
1995 $16,500,000
1996 $18,000,000
1997 $19,500,000
1998 $21,000,000
1999 $22,000,000
</TABLE>
(b) CONSOLIDATED FUNDED DEBT TO CONSOLIDATED EBITDA RATIO. As at the
end of each Fiscal Year listed below and as at the end of each of the first
three Fiscal Quarters of the immediately succeeding Fiscal Year, a
Consolidated Funded Debt to Consolidated EBITDA Ratio for the immediately
preceding four Fiscal Quarters not greater than the ratios set forth
opposite such Fiscal Year:
<TABLE>
<CAPTION>
CONSOLIDATED FUNDED
DEBT TO CONSOLIDATED
FISCAL YEAR EBITDA RATIO
----------- ------------
<S> <C>
1995 3.00 to 1.0
1996 2.80 to 1.0
1997 2.65 to 1.0
1998 2.50 to 1.0
1999 2.50 to 1.0
</TABLE>
(c) MINIMUM NET WORTH. At all times during the periods listed below,
a Consolidated Net Worth (calculated for the purposes of this Section
6.3(c) without giving effect to any extraordinary gain with respect to any
existing accrual for environmental liability for the Ramco site) not less
than the amounts set forth opposite such periods:
<TABLE>
<CAPTION>
MINIMUM
PERIOD NET WORTH
------ ---------
<S> <C>
December 31, 1995 to December 30, 1996 $25,000,000
December 31, 1996 to December 30, 1997 $28,000,000
December 31, 1997 to December 30, 1998 $33,000,000
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
December 31, 1998 to December 30, 1999 $38,000,000
December 31, 1999 and thereafter $45,000,000
</TABLE>
(d) CONSOLIDATED TOTAL LIABILITIES TO CONSOLIDATED NET WORTH RATIO.
As at the end of each Fiscal Quarter during the periods listed below, a
ratio of Consolidated Total Liabilities to Consolidated Net Worth
(calculated for purposes of this Section 6.3(d) without giving effect to
any extraordinary gain with respect to any existing accrual for
environmental liability for the Ramco site) not greater than the ratios set
forth opposite such periods:
<TABLE>
<CAPTION>
RATIO OF CONSOLIDATED
PERIOD TOTAL LIABILITIES TO
------ CONSOLIDATED NET WORTH
----------------------
<S> <C>
December 31, 1995 to December 30, 1996 3.25 to 1.0
December 31, 1996 to December 30, 1997 3.00 to 1.0
December 31, 1997 to December 30, 1998 2.75 to 1.0
December 31, 1998 to December 30, 1999 2.50 to 1.0
December 31, 1999 and thereafter 2.25 to 1.0
</TABLE>
(e) CONSOLIDATED EBITDA TO CONSOLIDATED FIXED CHARGES RATIO. As at
the end of each Fiscal Year listed below and as at the end of each of the
first three Fiscal Quarters of the immediately succeeding Fiscal Year, a
ratio of Consolidated EBITDA to Consolidated Fixed Charges for the
immediately preceding four Fiscal Quarters not less than the ratios set
forth opposite such Fiscal Years:
<TABLE>
<CAPTION>
RATIO OF CONSOLIDATED EBITDA
FISCAL YEAR TO CONSOLIDATED FIXED CHARGES
----------- -----------------------------
<S> <C>
1995 1.75 to 1.0
1996 1.75 to 1.0
1997 1.85 to 1.0
1998 2.00 to 1.0
1999 2.00 to 1.0
</TABLE>
(f) CURRENT RATIO. At all times, a ratio of Consolidated Current
Assets to Consolidated Current Liabilities of not less than 1.3 to 1.0
6.4 BOOKS AND RECORDS. Each Borrower shall and shall cause each of its
Domestic Subsidiaries to keep adequate records and books of account with respect
to its business activities, in which proper entries, reflecting all of their
financial transactions, are made in accordance with GAAP and on a basis
consistent with the Financials referred to in Section 4.6(a) hereof.
6.5 LITIGATION. Each Borrower shall (i) notify Agent in writing, promptly
upon any executive officer of such Borrower learning thereof, of any litigation
commenced against any Borrower and/or any Subsidiary of such Borrower, and of
the institution against any of them
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<PAGE>
of any suit or administrative proceeding that, in each case, could reasonably be
expected to involve an amount in excess of $250,000 in any one instance or could
reasonably be expected to have a Material Adverse Effect, and (ii) as soon as
practicable and in any event within 45 days after the end of each Fiscal
Quarter, provide to Agent a report describing any litigation, suit or
administrative proceeding pending against such Borrower or any Subsidiary of
such Borrower that could reasonably be expected to involve an amount in excess
of $25,000 in any one instance or could reasonably be expected to have a
Material Adverse Effect.
6.6 INSURANCE. Each Borrower shall, at its sole cost and expense,
maintain "All Risk" physical damage insurance on all real and personal property
including, but not limited to, fire and extended coverage, boiler and machinery
coverage, flood, earthquake, liquids, theft, explosion, collapse, and all other
hazards and risks ordinarily insured against by owners or users of such
properties in similar businesses. The physical damage insurance shall be
written on a repair or replacement cost basis, with Inventory insured on the
basis of cost, except Inventory consisting of finished goods, which shall be
insured on the basis of selling price (coinsurance is not acceptable). All
policies of insurance on such real and personal property shall contain an
endorsement, in form and substance reasonably acceptable to Agent, showing loss
payable to Agent as its interest may appear. Such endorsement, or an
independent instrument furnished to Agent, shall provide that the insurance
companies will give Agent at least 30 days prior written notice before any such
policy or policies of insurance shall be altered or cancelled and that no act or
default of any Borrower or any other person shall affect the right of Agent to
recover under such policy or policies of insurance in case of loss or damage.
Each Borrower shall, at its sole cost and expense, maintain comprehensive
general liability insurance on an "occurrence basis" (unless such insurance
cannot be reasonably obtained at commercially reasonable rates, in which case
such insurance shall be on a "claims made" basis) against claims for personal
injury, bodily injury and property damage with a minimum limit of $1,000,000 per
occurrence and $2,000,000 in the aggregate. Such coverage shall include but not
be limited to premises/operations, broad form contractual liability,
underground, explosion and collapse hazard, independent contractors, broad form
property damage and personal injury, products and completed operations
liability.
Each Borrower shall, at its sole cost and expense, maintain workers'
compensation insurance including employers liability in the amount of $1,000,000
for each accident, $1,000,000 disease-policy limit, and $1,000,000 disease-each
employee.
Each Borrower shall, at its sole cost and expense, maintain automobile
liability insurance for all owned, non-owned or hired automobiles against claims
for personal injury, bodily injury and property damage with a minimum combined
single limit of $1,000,000 per occurrence.
Each Borrower shall, at its sole cost and expense, maintain products
liability insurance providing coverage against liabilities arising from the
manufacture or sale of goods and merchandise by such Borrower.
All policies of insurance required to be maintained under this Agreement
shall be in form and with insurers recognized as adequate by Agent and all such
policies shall be in such amounts as may from time to time be satisfactory to
Agent. Each Borrower shall, upon the request of Agent, deliver to Agent the
original (or copy) of each policy of insurance and shall, concurrently with the
delivery of the annual financial statements under Section 5.1(d), deliver to
Agent a certificate of insurance, in form and content acceptable to Agent,
providing
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<PAGE>
evidence of payment of all premiums thereof and of compliance with all
provisions of this Agreement. Each Borrower hereby directs all insurers under
such policies of insurance to pay all proceeds payable under such insurance on
Borrowers' real and personal property directly to Agent. If the proceeds payable
under any policy of property insurance is $250,000 or less, such Borrower shall
have the right to use such proceeds to repair or replace the damaged or
destroyed property, provided that a Default or an Event of Default shall not
have occurred and be continuing at the time the proceeds are paid. Each Borrower
irrevocably makes, constitutes and appoints Agent (and all officers, employees
or agents designated by Agent) as such Borrower's true and lawful agent and
attorney-in-fact for the purpose of making, settling and adjusting claims under
policies of property insurance (provided that unless a Default or Event of
Default has occurred and is continuing Agent shall obtain the consent of such
Borrower (which consent shall not be unreasonably withheld or delayed) prior to
finally making, settling or adjusting claims under such policies of insurance),
endorsing the name of Borrower on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance. In the event any
Borrower at any time or times hereafter shall fail to obtain or maintain any of
the policies of insurance required by this Section 6.6 or to pay any premium in
whole or in part relating thereto, Agent, without waiving or releasing any
obligations or default by such Borrower hereunder, may at any time or times
thereafter (but shall not be obligated to) obtain and maintain such policies of
insurance and pay such premium and take any other action with respect thereto
which Agent deems advisable. All sums so disbursed by Agent, including
reasonable attorneys' fees, court costs, expenses and other charges relating
thereto, shall be payable, on demand, by Borrowers to Agent or, subject to the
consent of the Required Lenders, may be charged against the Revolving Credit
Loan, and shall be additional Obligations hereunder secured by the Collateral.
Agent reserves the right at any time, upon review of any Borrower's risk
profile, to require additional forms and limits of insurance to, in Agent's
discretion, to be exercised in a commercially reasonable manner, adequately
protect Lenders' investment. Schedule 6.6 hereto lists all insurance maintained
by each Borrower and each Domestic Subsidiary of such Borrower (except for
health and medical and benefit insurance), together with a summary of the terms
of such insurance.
6.7 COMPLIANCE WITH LAW. Each Borrower shall and shall cause each of its
Subsidiaries to comply with all federal, state and local laws and regulations
applicable to it, including, without limitation, ERISA, those regarding the
collection, payment and deposit of employees' income, unemployment and Social
Security taxes and those relating to environmental matters where the failure to
comply could reasonably be expected to have a Material Adverse Effect.
6.8 AGREEMENTS. Each Borrower shall and shall cause each of its
Subsidiaries to perform, within any required time period (after giving effect to
any applicable grace periods), all of its obligations and enforce all of its
rights under each agreement to which it is a party, including, without
limitation, collective bargaining agreements and leases to which any such
company is a party, where the failure to so perform and enforce could reasonably
be expected to have a Material Adverse Effect. No Borrower shall, and each
Borrower shall cause each of its Subsidiaries not to, terminate or modify in any
manner adverse to any such company any provision of any agreement to which it is
a party which termination or modification could reasonably be expected to have a
Material Adverse Effect.
6.9 SUPPLEMENTAL DISCLOSURE. Within 45 days after the end of each Fiscal
Quarter Borrowers will supplement or amend and deliver to Agent each Schedule or
representation herein with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been required to
be set forth or described in such Schedule or
54
<PAGE>
as an exception to such representation or which is necessary to correct any
information in such Schedule or representation which has been rendered
inaccurate thereby.
6.10 EMPLOYEE PLANS.
(a) For each Plan or Defined Contribution Plan hereafter adopted by
any Borrower or any Subsidiary of any Borrower which is intended to be tax
qualified under IRC Section 401(a), such Borrower shall or shall cause such
Subsidiary to (i) use its best efforts to seek and receive determination
letters from the IRS to the effect that such plan is qualified within the
meaning of IRC Section 401(a) and the trust created under such plan is tax-
exempt under IRC Section 501(a); (ii) use its best efforts to cause such
plan to be qualified within the meaning of IRC Section 401(a) and to be
administered in all material respects in accordance with the requirements
of ERISA and IRC Section 401(a); and (iii) take no action which would cause
such Plan or Defined Contribution Plan to lose its qualified status or not
to administer such plan in all material respects in accordance with the
requirements of ERISA and IRC Section 401(a).
(b) As soon as possible, and in any event within ten days after any
Borrower or any ERISA Affiliate knows or has reason to know that any ERISA
Event has occurred, such Borrower shall and shall cause such ERISA
Affiliate to deliver to Agent a statement of the chief financial officer of
such Borrower or such ERISA Affiliate describing such ERISA Event, together
with any correspondence with, or filings made with, the PBGC or DOL, and
the action, if any, which such Borrower or such ERISA Affiliate proposes to
take with respect thereto.
(c) Each Borrower shall and shall cause each ERISA Affiliate to
deliver to Agent: (i) if requested by Agent, promptly after the filing
thereof by such Borrower or such ERISA Affiliate with the DOL, IRS or the
PBGC, copies of each annual and other report with respect to each Plan,
Defined Contribution Plan or Welfare Plan; (ii) within 10 days after
receipt thereof, a copy of any notice, determination letter, ruling or
opinion such Borrower or such ERISA Affiliate may receive from the PBGC,
DOL or IRS with respect to any Plan, Defined Contribution Plan or Welfare
Plan; (iii) promptly, and in any event within ten Business Days, after
receipt thereof, a copy of any correspondence such Borrower or such ERISA
Affiliate receives from the Plan Sponsor (as defined by ERISA Section
4001(a)(10)) of any Plan concerning potential withdrawal liability pursuant
to ERISA Section 4219 and/or Section 4202, and a statement from the chief
financial officer of such Borrower or such ERISA Affiliate setting forth
details as to the events giving rise to such potential withdrawal liability
and the action which such Borrower or such ERISA Affiliate proposes to
take with respect thereto; (iv) notification within 30 days of any material
increases in the benefits of any existing Plan, Defined Contribution Plan
or Welfare Plan which is not a Multiemployer Plan, or the establishment of
any new Plans, Defined Contribution Plans or Welfare Plans, or the
commencement of contributions to any such plan to which Borrower or such
ERISA Affiliate was not previously contributing; and (v) notification
within ten days of a request for a minimum funding waiver under IRC Section
412 or a prohibited transaction exemption under ERISA Section 408(a) with
respect to any Plan.
6.11 SEC FILINGS; CERTAIN OTHER NOTICES. AXIA shall furnish to Agent (i)
promptly after the filing thereof with the Securities and Exchange Commission, a
copy of each report, notice or other filing, if any, by any Borrower with the
Securities and Exchange Commission, (ii) a copy of each written communication
received by any Borrower from or delivered by any
55
<PAGE>
Borrower to the Securities and Exchange Commission promptly after each such
receipt or delivery. AXIA shall also promptly furnish to Agent copies of such
other reports, notices, certificates, findings and other documents which AXIA
submits to the holders of the Subordinated Notes or to the Trustee under the
Indenture pursuant to which the Subordinated Notes were issued and which are not
otherwise required to be submitted by Borrowers to Agent under this Agreement.
6.12 COMPLIANCE WITH TAXES. Each Borrower shall pay all transfer, excise,
or Mortgage or Leasehold Mortgage recording or similar taxes (but excluding
income or franchise taxes) in connection with the issuance, sale, delivery or
transfer by Borrowers to Lenders of the Term Notes, or the Revolving Credit
Notes, and the execution and delivery of the Loan Documents and any other
agreements and instruments contemplated thereby, and shall save Lenders harmless
against any and all liabilities with respect to such taxes. Borrowers shall not
be responsible for any taxes in connection with the transfer of the Term Notes
or the Revolving Credit Notes by the holder thereof. The obligations of
Borrowers under this Section 6.12 shall survive the payment, prepayment or
redemption of the Term Notes and the Revolving Credit Notes and the termination
of this Agreement.
6.13 LEASES; REAL ESTATE.
(a) Each Borrower shall, or shall cause the applicable Subsidiary to,
make available to Agent and, if requested, provide Agent with, copies of
all leases of real property or similar agreements (and all amendments
thereto) entered into by such Borrower or any Subsidiary of such Borrower
after the initial Closing Date, whether as lessor or lessee. Each Borrower
shall, and shall cause each of its Subsidiaries to, comply with all of its
and their obligations under all Leases now existing or hereafter entered
into by it or them with respect to, real property including, without
limitation, all Leases listed on Schedule 4.7(b) hereto, if the failure to
so comply could reasonably be expected to have a Material Adverse Effect.
Each Borrower shall, or shall cause the appropriate Subsidiary to, (i) make
available to Agent and, if requested, provide Agent with, a copy of each
notice of default received by such Borrower or such Subsidiary under any
such lease and make available to Agent and, if requested, provide Agent
with, a copy of each notice of default sent by such Borrower or such
Subsidiary under any such lease; (ii) notify Agent, on or before the 30
days after the end of each Fiscal Quarter, of any new leased premises or
lease that such Borrower or such Subsidiary plans to take possession of
during the following Fiscal Quarter or has become liable for during the
preceding Fiscal Quarter; (iii) obtain and deliver to Agent, if available
and upon Agent's request, a non-disturbance agreement and landlord's
waiver, prior to entering into any new lease.
(b) From time to time at the request of Agent, (i) each Borrower and
its Subsidiaries shall execute a first priority Mortgage or Leasehold
Mortgage, as the case may be (subordinate only to such mortgages as are
necessary to permit such Borrower or such Subsidiary to purchase such Real
Estate) in favor of Agent covering any Real Estate and material Leases now
or hereafter owned or held by such Borrower or its Subsidiaries, in form
and substance reasonably satisfactory to Agent and provide Agent with title
and extended coverage insurance covering such Real Estate or Lease in an
amount equal to the purchase price of such Real Estate (or in the case of a
Lease, the amount reasonably requested by Agent) as well as a current ALTA
Survey thereof, together with a surveyor's certificate in form and
substance satisfactory to Agent, and (ii) with respect to any such Real
Estate or Lease, such Borrower shall obtain from any prior mortgagee or
landlord thereof, a mortgagee or landlord waiver in form and
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substance acceptable to Agent; provided, however, that, during the period
commencing on the initial Closing Date and ending 90 days thereafter, the
failure of any Borrower to obtain a landlord waiver with respect to any
leased premises at which Inventory is located shall not by itself result in
Agent declaring the Inventory located at such premises to fail to qualify
as Eligible Inventory.
6.14 ENVIRONMENTAL MATTERS.
(a) Each Borrower shall and shall cause each of its Domestic
Subsidiaries to (i) comply in all material respects with all applicable
Environmental Laws, (ii) notify the proper governmental agency in the event
of any Release of any Hazardous Substance that is required to be reported
under any applicable Environmental Law, (iii) forward to Agent a copy of
any order, notice, or other written communication, which alleges or may
reasonably result in potential liability under any Environmental Law on the
part of any Borrower or a Domestic Subsidiary of any Borrower in excess of
$250,000, and (iv) annually forward to Agent a written report summarizing
any then pending environmental compliance or liability issues relating to
the owned or leased facilities or operations of Borrowers and their
Domestic Subsidiaries which could reasonably be expected to result in
potential liability in excess of $250,000. The parties agree that any
Borrower's failure to comply with the covenants contained in Section
6.14(a)(i) and (ii) above will not be deemed an Event of Default if such
failure does not reasonably result in potential liability on the part of
such Borrower or a Domestic Subsidiary of such Borrower in excess of
$250,000.
(b) Borrowers, jointly and severally, shall indemnify Lender and Agent
and hold Lender and Agent harmless from and against any loss, liability,
damage or expense, including attorneys' fees, suffered or incurred by
Lender and/or Agent, whether as mortgagee pursuant to any Mortgage or
Leasehold Mortgage, as mortgagee in possession, or as successor in interest
to any Borrower or any of its Domestic Subsidiaries as owner or lessee by
virtue of foreclosure or acceptance of deed in lieu of foreclosure (i)
under or on account of the Environmental Laws, including the assertion of
any Lien thereunder; (ii) with respect to any Release of any Hazardous
Substance at or from any facility owned, operated or leased by any Borrower
or a Domestic Subsidiary of any Borrower; or (iii) with respect to any
other environmental matter arising at, on or in connection with, any
facility owned, operated or leased by any Borrower or a Domestic Subsidiary
of any Borrower; provided, however, that Borrowers will not be liable for
such indemnification to Lender and/or Agent to the extent that any such
loss, liability, damage or expense results from the gross negligence or
willful misconduct of the Person who would otherwise be entitled to be
indemnified pursuant to this Section 6.14(b). The procedure to be followed
as to any indemnity pursuant to this Section 6.14(b) shall be as set forth
in Section 2.18 hereof.
7. NEGATIVE COVENANTS
Borrowers covenant and agree that, unless the Required Lenders shall
otherwise consent in writing, from and after the initial Closing Date and
until the Termination Date:
7.1 MERGERS, ETC. No Borrower nor any of its Subsidiaries shall
directly or indirectly, by operation of law or otherwise, merge or
consolidate with or into, acquire all or substantially all of the assets or
capital stock of, or otherwise combine with, any Person nor form any
Subsidiary, provided that, with the prior written consent of the Required
Lenders, which shall
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not be unreasonably withheld, any Subsidiary of any Borrower may be merged
with and into such Borrower.
7.2 INVESTMENTS; LOANS AND ADVANCES. Except as otherwise permitted by
Sections 7.3 or 7.4 hereof and except for loans or capital contributions by
AXIA to ATTS or TapeTech, no Borrower shall and shall not permit any
Subsidiary of such Borrower to make any investment in, or make or accrue
loans or advances of money to any Person, through the direct or indirect
holding of securities or otherwise; provided, however, that any Borrower
may make and own investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency
thereof maturing within one year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one year from the date of creation
thereof and currently having a rating from either Standard & Poor's Ratings
Group of A-1 or higher or Moody's Investors Service, Inc. of P-1 or higher,
(iii) certificates of deposit, maturing no more than one year from the date
of creation thereof, issued by commercial banks incorporated under the laws
of the United States of America, each having combined capital, surplus and
undivided profits of not less than $200,000,000 and having a rating of "A"
or better by a nationally recognized rating agency; (iv) time deposits,
maturing no more than 30 days from the date of creation thereof with
commercial banks having membership in the Federal Deposit Insurance
Corporation and in amounts not exceeding the maximum amounts of insurance
thereunder; (v) money market mutual funds, all of the assets of which are
invested in securities and instruments of the types set forth in clauses
(i) through (iii) above; (vi) repurchase agreements with any Lender or any
primary dealer maturing within one year from the date of acquisition that
are fully collateralized by investment instruments of the types described
in clauses (i) through (v) above; provided that the terms of such
repurchase agreements comply with the guidelines set forth in the Federal
Financial Institutions Examination Council Supervisory Policy -- Repurchase
Agreements of Depository Institutions With Securities Dealers and Others,
as adopted by the Comptroller of the Currency on October 31, 1985, and
(vii) deposits in local currencies in bank accounts of non-U.S. Affiliates
of Borrowers not to exceed in the aggregate at any time $1,000,000 of which
amounts in excess of $250,000 shall be maintained for the sole purpose of
making payments to Borrowers for inventory in a manner consistent with past
practices; further provided, however, that (x) any Borrower may make
capital contributions in or loans to Foreign Subsidiaries not to exceed
$100,000 in the aggregate at any time outstanding, (y) any Foreign
Subsidiary may make loans to any other Foreign Subsidiary, and (z) AXIA may
maintain its existing investment in Andamios Atlas, S.A.
7.3 INDEBTEDNESS.
(a) Except as otherwise expressly permitted by this Section 7.3 or by
any other Section of this Agreement, no Borrower shall or shall permit any
of its Subsidiaries to, create, incur, assume or permit to exist any
Indebtedness, whether recourse or nonrecourse, and whether superior or
junior, resulting from borrowings, loans, advances or the granting of
credit, whether secured or unsecured, except (i) Indebtedness secured by
Liens permitted under Section 7.9 hereof, (ii) the Revolving Credit Loan
and the Term Loan, (iii) the Subordinated Notes, (iv) Indebtedness owed to
Cortec under the Management Agreement, (v) Guaranteed Indebtedness
permitted under Section 7.8 hereof, (vi) trade credit incurred to acquire
goods, supplies, services, including, without limitation, obligations
incurred to employees for compensation for services rendered in the
ordinary course of business, or merchandise on terms similar to those
granted to purchasers in similar lines of business as such Borrower or such
Subsidiary and incurred in the ordinary and normal course of business,
(vii) lease payment obligations under leases which such Borrower or such
Subsidiary is not
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prohibited from entering into under the Loan Documents, (viii) all deferred
taxes, (ix) all unfunded pension and other employee benefit plan
obligations and liabilities but only to the extent they are permitted to
remain unfunded under applicable law, (x) the Indebtedness set forth on
Schedule 7.3 hereto, which, except as otherwise stated on Schedule 7.3,
shall be repaid in full on the initial Closing Date, and, as to such
amounts as are not to be repaid, any refinancing, extension, renewal,
rearrangement or replacement thereof, provided that any such refinancing,
extension, renewal, rearrangement or replacement thereof shall be on terms
which, both taken as a whole and specifically as such terms relate to the
identity of the obligors, repayments of principal, covenants, events of
default and security in the property of the debtor, are in each event no
less favorable to Lenders than the correlative terms of such existing
Indebtedness, (xi) Indebtedness not exceeding $1,000,000 at any time
outstanding incurred to finance the cost of the acquisition of real or
personal tangible property (including Capital Leases); provided that such
Indebtedness shall be at least 70% and shall not exceed 100% of the fair
value (as determined in good faith by the Board of Directors of AXIA) of
such property, and provided, further that such Indebtedness is not secured
by any Lien other than a Lien referred to in clause (d) of Section 7.9,
(xii) other unsecured Indebtedness not exceeding $500,000 in the aggregate
at any time outstanding, (xiii) currency hedging arrangements effected by
CIE Fischbein S.A. in the ordinary course of business and in accordance
with past practices, and (xiv) Indebtedness incurred in the ordinary course
of business other than Indebtedness for borrowed money.
(b) Except as otherwise expressly permitted by Section 7.11 hereof, no
Borrower shall and shall not permit any Subsidiary of such Borrower to sell
or transfer, either with or without recourse, any assets, of any nature
whatsoever, in respect of which a Lien is granted or to be granted to Agent
pursuant to any Loan Document or engage in any sale-leaseback or similar
transaction involving any of its assets existing on the date hereof.
7.4 EMPLOYEE LOANS. No Borrower shall and shall not permit any Domestic
Subsidiary of such Borrower to make or accrue any loans or other advances of
money to any director, officer or employee of such Borrower or such Domestic
Subsidiary, except for loans to employees of Borrowers (including, but not
limited to, Employee Stock Loans and Employee Housing Loans) not to exceed
$1,000,000 in the aggregate outstanding at any time.
7.5 CAPITAL STRUCTURE. AXIA shall not and shall not permit any Domestic
Subsidiary of AXIA to issue or agree to issue any of their respective authorized
but not outstanding shares of Stock (including treasury shares).
7.6 MAINTENANCE OF BUSINESS. Except as otherwise permitted by this
Agreement, no Borrower shall and shall not permit any Domestic Subsidiary of
such Borrower to engage in any business other than the business currently
engaged in by such Borrower or such Domestic Subsidiary.
7.7 TRANSACTIONS WITH AFFILIATES.
(a) No Borrower shall or shall permit any of its Subsidiaries to enter
into or be a party to any transaction with any Affiliate of any Borrower or
such Subsidiary, except as otherwise provided herein or in the ordinary
course of and pursuant to the reasonable requirements of such Borrower's or
such Subsidiary's business and upon fair and reasonable terms that, with
respect to transactions involving $25,000 or more, are
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fully disclosed to Agent and, in any event, are no less favorable to such
Borrower or such Subsidiary than would obtain in a comparable arm's length
transaction with a Person not an Affiliate of such Borrower or such
Subsidiary.
(b) No Borrower shall or shall permit any of its Domestic Subsidiaries
to enter into any agreement or transaction to pay to any Person any
management or similar fee based on or related to Borrower's or any of its
Domestic Subsidiaries' operating performance or income or any percentage
thereof, nor pay any management or similar fee to an Affiliate; provided,
however, that the provisions of this Section 7.7(b) shall not prohibit the
engagement of third parties to provide services in the ordinary course of
business with respect to which their compensation is measured on the basis
of cost savings to Borrowers.
(c) The foregoing provisions of this Section 7.7 shall not apply to
(i) transactions between Borrowers or between any Borrower and its wholly-
owned Subsidiaries, (ii) payments to Cortec pursuant to the Management
Agreement for management services not to exceed the lesser of 1.0% of
quarterly sales or $125,000 in any Fiscal Quarter including reimbursement
of out-of-pocket expenses; provided, however, that payments for management
fees accrued and unpaid due to the operation of this Section 7.7(c) shall
not be included in the foregoing limitation but shall be subject to there
being no payment Default or payment Event of Default at the time of and
after giving effect to such payment and to the next two succeeding
provisos; provided, that in the event that a Default or Event of Default
continues for two consecutive Fiscal Quarters such management fees shall be
currently paid at the rate of up to $62,500 plus reimbursement of out-of-
pocket expenses for the following Fiscal Quarter and any succeeding Fiscal
Quarters during which such Default or Event of Default continues; provided,
further, that for the Fiscal Quarter following any Fiscal Quarter in which
such Default or Event of Default is cured, current payment of such
management fees shall be restored to up to $125,000 for that and succeeding
Fiscal Quarters provided such restoration does not cause a Default or Event
of Default, and provided, further, that this clause (ii) shall be
interpreted in a manner consistent with the terms of the Management
Agreement.
7.8 GUARANTEED INDEBTEDNESS. No Borrower shall or shall permit any
Subsidiary of such Borrower to incur any Guaranteed Indebtedness except (i) by
endorsement of instruments of items of payment for deposit to the general
account of such Borrower or such Subsidiary, (ii) Interest Rate Agreements,
(iii) guarantees by ATTS and TapeTech of the Subordinated Notes, (iv) guaranties
by AXIA of the obligations of its Foreign Subsidiaries under leases entered into
in the ordinary course of business and not exceeding $400,000 in the aggregate;
(v) Guaranteed Indebtedness incurred for the benefit of such Borrower or any
Subsidiary of such Borrower if the primary obligation is permitted by this
Agreement and (vi) other Guaranteed Indebtedness not to exceed $250,000
outstanding at any time.
7.9 LIENS. No Borrower shall or shall permit any Subsidiary of such
Borrower to create or permit any Lien on any of its properties or assets except:
(a) presently existing or hereinafter created Liens in favor of Agent;
(b) Permitted Encumbrances;
(c) Liens permitted by Section 6.2 hereof;
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(d) Liens upon real or tangible personal property acquired by any
Borrower after the date hereof; provided that (i) any such Lien is created
solely for the purpose of securing Indebtedness representing, or incurred
to finance, the cost of the item of property subject thereto, (ii) the
principal amount of the Indebtedness secured by such Lien is at least 70%,
and does not exceed 100%, of the fair value (as determined in good faith by
the board of directors of AXIA) of the respective property at the time it
was so acquired, (iii) such Lien does not extend to or cover any other
property other than such item of property and (iv) the incurrence of such
Indebtedness secured by such Lien is permitted by Section 7.3; and
(e) Liens on any property existing as of the date hereof securing
Indebtedness set forth on Schedule 7.3 hereto which is not repaid on the
initial Closing Date and any refinancing, extension, renewal or
rearrangement thereof provided that such Lien does not extend to or cover
any other property other than items of property encumbered as of the date
hereof.
7.10 CAPITAL EXPENDITURES. Borrowers shall not and shall not permit any of
their Subsidiaries to make Capital Expenditures that, in the aggregate, shall
exceed the amounts set forth below during the Fiscal Years set forth opposite
such amounts.
<TABLE>
<CAPTION>
MAXIMUM CAPITAL
FISCAL YEAR EXPENDITURES
----------- ------------
<S> <C>
1996 $7,000,000
1997 $7,000,000
1998 $6,000,000
1999 $6,000,000
2000 and each $6,000,000
Fiscal Year thereafter
</TABLE>
7.11 SALES OF ASSETS. Except as expressly set out in this Section 7.11, no
Borrower shall or shall permit any Subsidiary of such Borrower to sell,
transfer, convey or otherwise dispose of any assets or properties, other than
the sale of inventory in the ordinary course of business. Notwithstanding the
foregoing:
A. AXIA may sell its 50% interest in the Real Estate having a street
address of 5821 Randolph Street, Commerce City, California, provided that
the sales price thereof is not less than $300,000 and AXIA promptly
delivers to Agent all of the net cash proceeds thereof (after deducting all
expenses, including commissions, taxes payable, and an appropriate reserve
for income taxes in connection therewith) for application to the
outstanding principal installments of the Term Notes in accordance with the
provisions of Section 2.4(b);
B. ATTS may sell its rental Equipment and may issue billings for lost
tools, each in the ordinary course of business and in accordance with past
practices;
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C. Any Borrower and any Subsidiary of such Borrower may sell other
assets having a book value of not more than $50,000 individually or
$150,000 in the aggregate with respect to all Borrowers and their
Subsidiaries during any Fiscal Year; and
D. Any Borrower and any Subsidiary of any Borrower may sell,
transfer, convey or otherwise dispose of any obsolete or redundant assets
or other properties and may transfer any assets or other properties in
connection with any condemnation thereof, provided that (x) such Borrower
promptly delivers to Agent all of the net cash proceeds (after deducting
all expenses, including commissions, taxes payable, and amounts payable to
holders of prior liens, if any, and an appropriate reserve for income taxes
in connection therewith) thereof or therefrom, which proceeds, except as
otherwise provided below, shall be applied to the repayment of the
Obligations pursuant to Section 2.4(b) hereof, or (y) such Borrower or such
Subsidiary uses the proceeds thereof or therefrom to purchase new,
additional, replacement or substitute assets or properties (collectively
"Replacement Assets"), and promptly delivers to Agent written notice of the
use of such proceeds for such purpose. Any Replacement Asset purchased by
any Borrower or any Subsidiary of such Borrower shall be free and clear of
all Liens, except for the Lien of Agent and those permitted hereunder.
With respect to any disposition of assets or other properties permitted
pursuant to this Section 7.11, Agent agrees to release its Lien on such assets
or other properties in order to permit the Borrower to effect such disposition
and shall execute and deliver to such Borrower appropriate UCC-3 termination
statements and other releases. Borrowers may, at their option, utilize either
Paragraph C. above or Paragraph D. above with respect to any disposition of
assets which qualifies under the provisions of both of such paragraphs.
7.12 CANCELLATION OF INDEBTEDNESS. No Borrower shall or shall permit any
Subsidiary of such Borrower to cancel any claim or debt owing to it, except for
reasonable consideration or in the ordinary course of business.
7.13 EVENTS OF DEFAULT. No Borrower shall or shall permit any Subsidiary
of such Borrower to take or omit to take any action, which act or omission would
constitute (i) a default or an event of default pursuant to, or noncompliance
with any of, the terms of any of the Loan Documents or the Other Agreements or
(ii) a material default or an event of default pursuant to, or non-compliance
with any other contract, lease, mortgage, deed of trust or instrument to which
it is a party or by which it or any of its property is bound, or any document
creating a Lien, unless, in either case, such default, event of default or non-
compliance could not reasonably be expected to have a Material Adverse Effect.
7.14 HEDGING TRANSACTIONS. Except (i) as otherwise permitted hereunder,
(ii) currency hedging in the ordinary course of business and (iii) Interest Rate
Agreements relating to the Loans pursuant to arrangements and documentation
acceptable to Agent, no Borrower shall or shall permit any of its Subsidiaries
to engage in any interest rate hedging, swaps, caps or similar transaction.
7.15 RESTRICTED PAYMENTS. No Borrower shall make any Restricted Payments
or permit any Subsidiary to make a Restricted Payment; provided, however, that
(i) any Subsidiary of a Borrower may pay dividends to its parent corporation if
such parent corporation is a Borrower or a wholly-owned Subsidiary of a
Borrower, (ii) AXIA may make payments to
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Holdings, to permit Holdings to pay administrative, corporate and other
customary fees and expenses not to exceed $75,000 in the aggregate in any Fiscal
Year, (iii) any Subsidiary of AXIA may pay to AXIA any amounts required for the
payment of any taxes payable (x) by AXIA or (y) by AXIA and/or its Subsidiaries
on a consolidated, combined or unitary basis, and (iv) subject to the
limitations set forth in Section 2.7, AXIA may repurchase Subordinated Notes or
Subordinated Note Units.
7.16 ERISA. No Borrower shall directly or indirectly, and will not permit
any ERISA Affiliate to directly or indirectly (i) terminate any Plan subject to
Title IV of ERISA so as to result in any liability to any Borrower or any ERISA
Affiliate which could reasonably be expected to have a Material Adverse Effect
(ii) permit to exist any ERISA Event or any other event or condition which
presents the risk of liability of such Borrower or any ERISA Affiliate which
could reasonably be expected to have a Material Adverse Effect, (iii) make a
complete or partial withdrawal (within the meaning of Section 4201 of ERISA)
from any Multiemployer Plan so as to result in any liability to such Borrower or
any ERISA Affiliate which could reasonably be expected to have a Material
Adverse Effect, (iv) enter into any new Plan or modify any existing Plan so as
to increase its obligations thereunder, except in the ordinary course of
business consistent with past practice or solely to the extent necessary to
comply with applicable law, which could result in any liability to such Borrower
or any ERISA Affiliate which could reasonably be expected to have a Material
Adverse Effect, or (v) permit the present value of all Benefit Liabilities under
all Plans (excluding any Multiemployer Plan or a Plan with no unfunded Benefit
Liabilities and determined in accordance with Statement of Financial Accounting
Standards No. 35) to exceed the fair market value of the Plans' assets by
$600,000, all determined as of the then most recent valuation date for each such
Plan.
7.17 EMPLOYMENT AGREEMENTS. No Borrower shall or shall permit any
Subsidiary to, (i) enter into any employment agreement with its officers or
senior management employees other than those employment agreements listed on
Schedule 4.19, and other employment agreements with additional or replacement
officers or senior management employees on substantially similar terms, or (ii)
amend or modify in any material respect any of the employment agreements listed
on Schedule 4.19 or any employment agreement for any additional or replacement
officer or senior management employee.
7.18 AMENDMENT OF SUBORDINATED NOTES. Borrowers shall cause or permit to
occur any amendment to the terms of the Subordinated Notes or of the Indenture
pursuant to which the Subordinated Notes were issued.
8. TERM AND TERMINATION
8.1 TERMINATION. Subject to the provisions of Sections 2 and 9.2 hereof,
the financing arrangements contemplated hereby in respect of the Revolving
Credit Loan and Letter of Credit Obligations shall be in effect until the
Commitment Termination Date; provided, however, that in the event of a
prepayment of all or any part of the Revolving Credit Loan prior to the
Revolving Credit Loan Commitment Termination Date with the proceeds of funds
borrowed from any Person other than Lenders, Borrowers shall simultaneously
therewith pay to Lenders, in immediately available funds, all Obligations in
full, in accordance with the terms of the agreements creating and instruments
evidencing such Obligations.
8.2 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF FINANCING ARRANGEMENT.
Except as otherwise expressly provided for in the Loan Documents, no termination
or cancellation (regardless of cause or procedure) of any financing arrangement
under this Agreement shall in any way affect or impair the powers, obligations,
duties, rights and liabilities of Borrowers
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or the rights of Lenders or Agent relating to any transaction or event occurring
prior to such termination. Except as otherwise expressly provided herein or in
any other Loan Document, all undertakings, agreements, covenants, warranties and
representations contained in the Loan Documents shall survive such termination
or cancellation and shall continue in full force and effect until such time as
all of the Obligations have been performed and paid in full in accordance with
the terms of the agreements creating such Obligations, at which time the same
shall terminate.
9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
9.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following
events (regardless of the reason therefor) shall constitute an "Event of
Default" hereunder:
(a) Borrowers shall fail to make any payment of principal of the
Revolving Credit Loan or the Term Loan when due and payable or declared due
and payable.
(b) Borrowers shall fail to make any payment of interest on the
Revolving Credit Loan or the Term Loan when due and payable or declared due
and payable and such failure shall have remained unremedied for five (5)
days.
(c) Borrowers shall fail to make any payment of expenses payable under
this Agreement, or fail to pay any of the other Obligations owing under any
Loan Document, and such failure shall have remained unremedied for a period
of five (5) days after Borrowers have received notice of such failure from
Agent or any Lender.
(d) Borrowers shall fail or neglect to perform, keep or observe any of
the provisions of Section 6.3 ("Financial Covenants") or Section 7 of this
Agreement.
(e) Borrowers shall fail or neglect to perform, keep or observe any
other provision of this Agreement or of any of the other Loan Documents,
and the same shall remain unremedied for a period ending on the first to
occur of 15 days after Borrowers shall receive written notice of any such
failure from Agent or any Lender or 20 days after the chief executive
officer, chief operating officer or chief financial officer of any Borrower
shall become aware thereof; provided, however, that if such failure cannot
be remedied during such 15 or 20 day period despite all reasonable efforts
of Borrowers, then such 15 or 20 day period, as the case may be, shall be
extended by an additional 30 days or such longer period of time (but not
more than 60 days without the consent of Agent, which shall not be
unreasonably withheld) as is necessary to cure such failure as long as
Borrowers are proceeding diligently to cure such failure and the delay
could not reasonably be expected to have a Material Adverse Effect.
(f) A default shall occur under any other agreement, document or
instrument to which any Borrower is a party or by which any Borrower or any
Borrower's property is bound and such default is not cured within any
applicable grace period or waived in writing, or being contested pursuant
to the provisions of Section 6.2 and such default either (i) involves the
failure to make any payment when due of an amount in excess of $150,000
(whether of principal, interest or otherwise and whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) in
respect of any Indebtedness (other than trade payables) of such Borrower,
or (ii) causes (or permits any holder of such Indebtedness (other than
trade payables) or a trustee to cause) such Indebtedness or a portion
thereof in an aggregate amount exceeding $300,000 to become due prior to
its stated maturity or prior to its regularly scheduled dates of payment.
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(g) Any representation or warranty herein or in any Loan Document or
in any written statement pursuant thereto or hereto, report, financial
statement or certificate made or delivered to Lender by any Borrower shall
be untrue or incorrect in any material respect as to Borrowers and their
Subsidiaries taken as a whole, as of the date when made or deemed made
(including those made or deemed made pursuant to Section 3.6).
(h) Any of the assets of any Borrower shall be attached, seized,
levied upon or subjected to a writ or distress warrant, or come within the
possession of any receiver, trustee, custodian or assignee for the benefit
of creditors of any Borrower and shall remain unstayed or undismissed for
30 consecutive days; or any Person shall apply for the appointment of a
receiver, trustee or custodian for any of the assets of any Borrower and
shall remain unstayed or undismissed for 30 consecutive days; or any
Borrower, shall have concealed, removed or permitted to be concealed or
removed, any part of its property with intent to hinder, delay or defraud
its creditors or any of them or made or suffered a transfer of any of its
property or the incurring of an obligation which may be fraudulent under
any bankruptcy, fraudulent conveyance or other similar law.
(i) A case or proceeding shall have been commenced against any
Borrower in a court having competent jurisdiction seeking a decree or order
in respect of such Borrower (i) under title 11 of the United States Code,
as now constituted or hereafter amended or any other applicable Federal,
state or foreign bankruptcy or other similar law, (ii) appointing a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or
similar official) of such Borrower or of any substantial part of its
properties, or (iii) ordering the winding-up or liquidation of the affairs
of such Borrower and such case or proceeding shall remain undismissed or
unstayed for 60 consecutive days or such court shall enter a decree or
order granting the relief sought in such case or proceeding.
(j) Any Borrower shall (i) file a petition seeking relief under title
11 of the United States Code, as now constituted or hereafter amended, or
any other applicable Federal, State or foreign bankruptcy or other similar
law, (ii) consent to the institution of proceedings thereunder or to the
filing of any such petition or to the appointment of or taking possession
by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or
similar official) of such Borrower or of any substantial part of its
properties, (iii) fail generally to pay its debts as such debts become due,
or (iv) take any corporate action in furtherance of any such action.
(k) Final judgment or judgments (after the expiration of all times to
appeal therefrom) for the payment of money in excess of $50,000
individually or $100,000 in the aggregate shall be rendered against any
Borrower and the same shall not (i) be fully covered by insurance in
accordance with Section 6.6 hereof, or (ii) within 30 days after the entry
thereof, have been discharged or execution thereof stayed pending appeal,
or shall not have been discharged within five days after the expiration of
any such stay.
(l) With respect to any Plan: (i) or any Defined Contribution Plan or
Welfare Plan, any Borrower or any ERISA Affiliate or any other party-in-
interest or disqualified person shall engage in any transactions which in
the aggregate would reasonably result in a final assessment or liability to
such Borrower or any Subsidiary of such Borrower in excess of $10,000 under
Section 409 or 502 of ERISA or IRC Section 4975, which assessment or
liability has not been paid within 30 days of final
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assessment and which is not being contested pursuant to Sections 6.2(b) or
(c) hereof; (ii) any Borrower or any Subsidiary of such Borrower shall
incur any accumulated funding deficiency, as defined in IRC Section 412, in
the aggregate in excess of $50,000, or request a funding waiver from the
IRS for contributions in the aggregate in excess of $10,000; (iii) any
Borrower or any ERISA Affiliate shall not pay any withdrawal liability
which involves annual withdrawal liability payments which exceed $50,000,
as a result of a complete or partial withdrawal within the meaning of
Section 4203 or 4205 of ERISA, within 30 days after the date such payment
becomes due, unless such payment is being contested pursuant to Sections
6.2(b) or (c) hereof; (iv) any Borrower or any ERISA Affiliate shall fail
to make a required contribution by the due date under Section 412 of the
IRC or Section 302 of ERISA which would result in the imposition of a lien
under Section 412 of the IRC or Section 302 of ERISA within 30 days after
the date such payment becomes due, unless such payment is being contested
pursuant to Sections 6.2(b) or (c) hereof; or (v) an ERISA Event with
respect to a Plan has occurred, and within the time period described below,
such ERISA Event has not been corrected, with the time periods to correct
such ERISA Event being as follows: (A) with respect to an event described
in clause (a) of the definition of ERISA Event, within 60 days after the
occurrence of such event; (B) with respect to an event described in clause
(b) of the definition of ERISA Event, within 30 days after the date on
which withdrawal liability under Section 4063 becomes due and owing; (C)
with respect to an event described in clause (c) of the definition of ERISA
Event, before the final distribution of the assets from the Plan that was
terminated; or (D) with respect to an event described in clause (d) or
clause (e) of the definition of ERISA Event, within 30 days after the
institution of proceedings by the PBGC to terminate such Plan or any
Borrower or any ERISA Affiliate has incurred liability under Title IV of
ERISA for such Plan; provided, however, that an ERISA Event shall not
constitute an Event of Default if the maximum liability (determined after
the time periods for correction described above) which any Borrower or any
Subsidiary of any Borrower could incur under Section 4062, 4063, 4064,
4201, 4219 or 4243 of ERISA, or any other provision of law with respect to
a Plan, as a result of such event does not exceed $50,000 (computed by the
actuary for the Plan taking into account any applicable rules or
regulations of the PBGC and based on actuarial assumptions used by the
Plan), or the ERISA Event is being contested under Sections 6.2(b) or (c)
hereof.
(m) Any material provision of any Collateral Document after delivery
thereof pursuant to Section 3.3, shall for any reason cease to be valid or
enforceable in accordance with its terms, or any security interest created
under any Collateral Document shall cease to be a valid and perfected first
priority security interest or Lien (except as otherwise permitted herein or
therein) in any of the Collateral purported to be covered thereby.
(n) There exists any uncorrected violation by any Borrower or any
Subsidiary of any Borrower of any Environmental Laws which requires, or may
require, a "response", as defined under CERCLA, or other remedial action by
any Borrower or any Subsidiary of Borrower under any Environmental Laws,
such uncorrected violation could reasonably be expected to have a Material
Adverse Effect, and such "response" or other remedial action is not
completed within 90 days from the date of written notice from Agent to such
Borrower of the violation, or such longer period of time as is necessary to
cure such violation as long as such Borrower or such Subsidiary is
proceeding diligently to cure such violation and the delay could not
reasonably be expected to have a Material Adverse Effect.
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(o) (i) Cortec (which for purposes of this Section 9.1(o) shall be
deemed to include: (A) Cortec, (B) Cortec Group Fund L.P., (C) all
directors and executive officers of Cortec, and (D) any relative, spouse or
relative of the spouse of a person specified in clause (C) (a "Cortec
Person") who has the same principal residence as such Cortec Person and any
trust for the benefit of any Cortec Person or any such relative, spouse or
relative of a spouse), together with its Affiliates, shall cease to own and
control both (x) at least 51% (on a fully diluted basis) of the issued and
outstanding shares of capital stock of Holdings and (y) at least 51% (on a
fully diluted basis) of the capital stock of any class or classes of
Holdings entitled to vote for the election of the Board of Directors of
Holdings or (ii) Holdings shall own less than 100% (on a fully diluted
basis) of the issued and outstanding capital stock of AXIA (each of the
events described in clause (i) or (ii), a "Change of Control"); provided,
however, that there shall be no Change of Control if the ownership and
control of shares by Cortec and its Affiliates is reduced below 51% as a
result of a public offering of any such shares and, after such offering,
Cortec and its Affiliates own and control at least 35% of such shares and
no other person or group (as defined in Section 13(d) of the Exchange Act)
owns or controls a greater number of such shares.
(p) An "Event of Default" occurs and is continuing under the Indenture
for the Subordinated Notes.
9.2 REMEDIES. If any Event of Default shall have occurred and be
continuing, Agent may, or at the request of the Required Lenders, shall, without
notice, (i) terminate this facility with respect to further Revolving Credit
Advances or further Letter of Credit Obligations, whereupon no Revolving Credit
Advances may be made hereunder and no additional Letters of Credit will be
issued hereunder, and/or (ii) declare all Obligations to be forthwith due and
payable, whereupon all Obligations shall become and be due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
expressly waived by Borrower; provided, however, that upon the occurrence of an
Event of Default specified in Sections 9.1(i) or (j) hereof, the Obligations
shall become due and payable without declaration, notice or demand by Agent.
Agent shall take such action with respect to any Default or Event of
Default as shall be directed by the Required Lenders; provided that, unless and
until Agent shall have received such directions, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of Agent and Lenders holding Revolving Credit Notes and Term Notes
taken as a whole, including any action (or the failure to act) pursuant to the
Loan Documents.
9.3 WAIVERS BY BORROWERS. Except as otherwise provided for in this
Agreement and applicable law, Borrowers waive (i) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to accelerate,
notice of acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by Agent or any Lender on which any Borrower may in any way be
liable and hereby ratifies and confirms whatever Agent or any Lender may do in
this regard, (ii) all rights to notice and a hearing prior to Agent's or any
Lender's taking possession or control of, or to Agent's or Lender's replevy,
attachment or levy upon, the Collateral or any bond or security which might be
required by any court prior to allowing Agent or any Lender to exercise any of
its remedies, and (iii) the benefit of all valuation, appraisal and exemption
laws. Borrowers acknowledge that they have been advised by counsel of its
choice with respect
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to this Agreement, the other Loan Documents and the transactions evidenced by
this Agreement and the other Loan Documents.
9.4 RIGHT OF SET-OFF. Upon the occurrence and during the continuance of
any Event of Default and Agent's termination of this facility or Agent's
declaring all Obligations to be forthwith due and payable pursuant to the
provisions of Section 9.2 hereof, each Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by such Lender
to or for the credit or the account of any Borrower against any and all of the
obligations of Borrowers now or hereafter existing under this Agreement, and the
Notes held by such Lender irrespective of whether or not such Lender shall have
made any demand under this Agreement or any such Note and although such
obligations may be unmatured. Each Lender agrees promptly to notify Borrowers
after any such set-off and application made by such Lender; provided, however,
that the failure to give such notice shall not affect the validity of such set-
off and application. The rights of each Lender under this Section 9.4 are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which such Lender may have.
10. THE AGENT
10.1 AUTHORIZATION AND ACTION. Each Lender hereby appoints and authorizes
Agent to take such action on its behalf and to exercise such powers under this
Agreement, and the other Loan Documents as are delegated to Agent by the terms
hereof and thereof, together with such powers as are reasonably incidental
thereto. As to any matters not expressly provided for by this Agreement and the
other Loan Documents (including, without limitation, enforcement or collection
of the Notes), 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 (or, with respect to those actions to be taken at the
direction of Required Revolving Credit Lenders, upon the instruction of Required
Revolving Credit Lenders), and such instructions shall be binding upon all
Lenders; provided, however, that Agent shall not be required to take any action
which exposes Agent to personal liability or which is contrary to this Agreement
or the other Loan Documents or applicable law. Agent agrees to give each Lender
prompt notice of each notice given to it by any Borrower pursuant to the terms
of this Agreement and the other Loan Documents.
10.2 AGENT'S RELIANCE, ETC. Neither 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 this Agreement or the other
Loan Documents, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, Agent: (i)
may treat the payee of any Note as the holder thereof until Agent receives
written notice of the assignment or transfer thereof signed by such payee and in
form satisfactory to Agent; (ii) may consult with legal counsel, 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, (iii) makes no warranty or
representations to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (iv) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of this Agreement or the other Loan Documents on the part of
Borrowers or to inspect the property (including the books and records) of
Borrowers; (v) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
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Agreement or the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; and (vi) shall incur no liability under or
in respect of this Agreement or the other Loan Documents by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telecopy, telegram, cable or telex) believed by it to be genuine and signed or
sent by the proper party or parties.
10.3 ANB AND AFFILIATES. With respect to its commitment hereunder to make
Revolving Credit Advances and loans under the Term Loan made by it, ANB shall
have the same rights and powers under this Agreement and the other Loan
Documents as any other Lender and may exercise the same as though it were not
Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include ANB in its individual capacity. ANB and its Affiliates may
lend money to, and generally engage in any kind of business with, Borrowers, any
of their Subsidiaries and any Person who may do business with or own securities
of Borrowers or any such Subsidiary, all as if ANB were not Agent and without
any duty to account therefor to Lenders.
10.4 LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the financial statements referred to in Section 4.6 and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.
10.5 INDEMNIFICATION. Lenders agree to indemnify Agent (to the extent not
reimbursed by Borrowers), ratably according to the respective principal amounts
of the Notes then held by each of them, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against Agent in any way relating to or
arising out of this Agreement or any other Loan Document or any action taken or
omitted by Agent under this Agreement, provided that no Lender shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
Agent's gross negligence or wilful misconduct. Without limitation of the
foregoing, each Lender agrees to reimburse Agent promptly upon demand for its
ratable shares of any out-of-pocket expenses (including counsel fees) incurred
by Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement and each other Loan Document,
to the extent that Agent is not reimbursed for such expenses by Borrowers.
10.6 SUCCESSOR AGENT. Agent may resign at any time by giving written
notice thereof to Lenders and Borrowers. Upon any such resignation, the Required
Lenders shall have the right to appoint a successor Agent which shall be
reasonably acceptable to Borrowers. 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 notice of resignation, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be a commercial bank or financial institution organized under the laws of
the United States of America or of any State thereof and having a combined
capital and surplus of at least $50,000,000 and which shall be reasonably
acceptable to Borrowers. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of
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the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations under this Agreement and the other Loan Documents. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Section
10 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement and the other Loan Documents.
11. MISCELLANEOUS
11.1 COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT; SALE OF INTEREST. The
Loan Documents constitute the complete agreement between the parties with
respect to the subject matter hereof and may not be modified, altered or amended
except by an agreement in writing signed by Borrowers, Agent and Required
Lenders. No Borrower may sell, assign or transfer any of the Loan Documents or
any portion thereof, including without limitation, Borrowers' rights, title,
interests, remedies, powers and duties hereunder or thereunder. Each Borrower
hereby consents to Agent's and any Lender's sale of participations, assignment,
transfer or other disposition, at any time or times, of any of the Loan
Documents or of any portion thereof or interest therein, including, without
limitation, Agent's and any Lender's rights, title, interests, remedies, powers
or duties thereunder, whether evidenced by a writing or not; provided, however,
that any assignment (but not the sale of a participation interest) of its
Revolving Credit Commitment or its Term Note shall require the consent of
Borrowers (which consent shall not be unreasonably withheld or delayed), except
that consent shall not be required for an assignment to an affiliate (i.e. an
entity controlling, controlled by or under common control with the assigning
Lender) and consent shall not be required during the existence and continuance
of a Default or an Event of Default; each Borrower agrees that it will use its
best efforts to assist and cooperate with Agent in any manner reasonably
requested by Agent to effect the sale of participations in or assignments of any
of the Loan Documents or of any portion thereof or interest therein, including,
without limitation, assistance in the preparation of appropriate disclosure
documents or placement memoranda and executing appropriate amendments to the
signature pages hereto to reflect the addition of any Lenders and such Lender's
respective commitments.
In the event Agent or any Lender assigns or otherwise transfers all or any
part of its Term Note or Revolving Credit Note, Agent or any such Lender shall
so notify AXIA and AXIA shall, upon the request of Agent or such Lender, issue
new Term Notes or Revolving Credit Notes in exchange for the old Term Notes or
Revolving Credit Notes.
No amendment or waiver of any provision of this Agreement or the Notes or
any other Loan Document, nor consent to any departure by Borrowers therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Required Lenders, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given; provided,
however: (a) that no amendment, waiver or consent shall, unless in writing and
signed by each Lender affected thereby do any of the following: (i) increase the
Maximum Revolving Credit Loan or subject any Lender to any additional
obligations, (ii) reduce the principal of, or interest on, the Notes or other
amounts payable hereunder other than those payable only to ANB which may be
reduced by ANB unilaterally, (iii) postpone any date fixed for any payment of
principal of, or interest on, the Notes or other amounts payable hereunder,
other than those payable only to ANB which may be postponed by ANB unilaterally,
(iv) change the aggregate unpaid principal amount of the Notes, or the number of
Lenders which shall be required for the Lenders or any of them to take any
action hereunder, (v) release or discharge any Person liable for the performance
of any obligations of Borrower hereunder or under any of the Loan Documents,
(vi) release any portion of the Collateral, except as permitted hereunder or
under any of the Loan Documents, or (vii) amend this
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Section 11.1; (b) as to matters solely affecting the Revolving Credit Loan,
Required Revolving Credit Lenders may unilaterally agree to an amendment to,
modification of, or supplementation to this Agreement; and (c) that no
amendment, waiver or consent shall be effective unless in writing and signed by
Agent in addition to the Required Lenders required above to take such action,
affect the rights or duties of Agent under this Agreement, any Note or any Loan
Document.
11.2 FEES AND EXPENSES. Borrowers shall pay all reasonable out-of-pocket
expenses of Agent in connection with the preparation of the Loan Documents
(including the reasonable fees and expenses of all of its counsel retained in
connection with the Loan Documents and the transactions contemplated thereby).
If, at any time or times, regardless of the existence of any Event of Default
(except with respect to paragraphs (iii) and (iv) below, which shall be subject
to an Event of Default having occurred and be continuing), Agent (or in the case
of paragraphs (ii), (iii) and (iv) below, any Lender) shall employ counsel for
advice or other representation in connection with or shall incur reasonable
legal or other costs and expenses in connection with:
(i) any amendment, modification, termination, or waiver, or consent
with respect to, any of the Loan Documents;
(ii) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent or any Lender, any Borrower, any
Subsidiary of any Borrower or any other Person) in any way
relating to the Collateral, any of the Loan Documents or any
other agreements to be executed or delivered in connection
herewith;
(iii) any attempt to enforce any rights of Agent or any Lender
against any Borrower, any Subsidiary of any Borrower or any other
Person, that may be obligated to any Lender by virtue of any of
the Loan Documents;
(iv) any attempt to verify, protect, collect, sell, liquidate or
otherwise dispose of the Collateral;
then, and in any such event, the reasonable attorneys' fees arising from such
services, including those of any appellate proceedings, and all reasonable
expenses, costs, charges and other fees incurred by such counsel in any way or
respect arising in connection with or relating to any of the events or actions
described in this Section 11.2 shall be payable, on demand, by Borrowers to
Agent or such Lender and shall be additional Obligations secured under this
Agreement and the other Loan Documents. Without limiting the generality of the
foregoing, such expenses, costs, charges and fees may include: paralegal fees,
costs and expenses; accountants' fees, costs and expenses; court costs and
expenses; photocopying and duplicating expenses; word processing charges, court
reporter fees, costs and expenses; long distance telephone charges; air express
charges; telegram charges; secretarial overtime charges; and expenses for
travel, lodging and food paid or incurred in connection with the performance of
such legal services.
11.3 NO WAIVER BY LENDER. Agent's or any Lender's failure, at any time or
times, to require strict performance by Borrowers of any provisions of this
Agreement and any of the other Loan Documents shall not waive, affect or
diminish any right of Agent or such Lender thereafter to demand strict
compliance and performance therewith. Any suspension or waiver by Required
Lenders of an Event of Default by Borrowers under the Loan Documents shall not
suspend, waive or affect any other Event of Default by Borrowers under this
Agreement and
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any of the other Loan Documents whether the same is prior or subsequent thereto
and whether of the same or of a different type. None of the undertakings,
agreements, warranties, covenants and representations of Borrowers contained in
this Agreement or any of the other Loan Documents and no Event of Default by
Borrowers under this Agreement and no defaults by Borrowers under any of the
other Loan Documents shall be deemed to have been suspended or waived by Agent
or any Lender, unless such suspension or waiver is by an instrument in writing
signed by an officer of Agent and Required Lenders and directed to Borrowers
specifying such suspension or waiver.
11.4 REMEDIES. Agent's and each Lender's rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
which Agent and Lenders may have under any other agreement, including without
limitation, the Loan Documents, by operation of law or otherwise. Recourse to
the Collateral shall not be required.
11.5 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER
THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR ANY OF THE OTHER AGREEMENTS.
11.6 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
11.7 PARTIES. This Agreement and the other Loan Documents shall be
binding upon, and inure to the benefit of, the successors of Borrowers, Agent
and Lenders and the assigns, transferees and endorsees of Agent and Lenders.
Nothing in this Agreement or the other Loan Documents, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, any benefit or any legal or equitable right, remedy or claim under
this Agreement.
11.8 CONFLICT OF TERMS. Except as otherwise provided in this Agreement or
any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and control.
11.9 AUTHORIZED SIGNATORIES. Until Agent shall be notified by AXIA to the
contrary, the signature upon any document or instrument delivered pursuant
hereto of an officer of any Borrower listed in Schedule 11.9 hereto shall bind
Borrowers and be deemed to be the act of Borrowers affixed pursuant to and in
accordance with resolutions duly adopted by Borrowers' Boards of Directors.
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11.10 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE
LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE,
WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. AGENT, EACH LENDER AND
BORROWERS AGREE TO SUBMIT TO PERSONAL JURISDICTION AND TO WAIVE ANY OBJECTION AS
TO VENUE IN THE COUNTY OF COOK, STATE OF ILLINOIS. SERVICE OF PROCESS ON
BORROWERS, AGENT OR ANY LENDER IN ANY ACTION ARISING OUT OF OR RELATING TO ANY
OF THE LOAN DOCUMENTS SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY AT THE ADDRESS
LISTED IN SECTION 11.11 HEREOF. BORROWERS HEREBY IRREVOCABLY APPOINT CT
CORPORATION SYSTEM AS BORROWERS' AGENT FOR THE PURPOSE OF ACCEPTING THE SERVICE
OF ANY PROCESS WITHIN THE STATE OF ILLINOIS. BORROWERS AGREE NOTHING HEREIN
SHALL PRECLUDE AGENT, ANY LENDER OR ANY BORROWER FROM BRINGING SUIT OR TAKING
OTHER LEGAL ACTION IN ANY OTHER JURISDICTION.
11.11 NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by another, or whenever any of the parties desires to give or serve upon
another any communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and shall be delivered in person (by personal delivery, delivery
service or overnight courier service) with receipt acknowledged, or telecopied
and confirmed immediately in writing by a copy mailed by registered or certified
mail, return receipt requested, postage prepaid, addressed as hereafter set
forth, or mailed by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
(a) If to Agent, at: American National Bank and Trust
Company of Chicago
33 North LaSalle Street
Chicago, Illinois 60690
Attention: Peter K. Gillespie
Telecopier No.: (312) 661-3566
(b) If to Borrower, at: AXIA Incorporated
100 West 22nd Street
Suite 134
Lombard, Illinois 60148
Attention: Lyle J. Feye,
Chief Financial Officer
Telecopier No.: (708) 629-3361
with a copy to: Cortec Group
200 Park Avenue
New York, New York
Attention: Richard Fishbein
Telecopier No.: (212) 682-4195
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(c) If to any Lender, at its address indicated on the signature pages
hereof or in a notice to Borrowers of assignment of a Note, or at such
other address as may be substituted by notice given as herein provided. The
giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be
deemed to have been duly given or served on the date on which personally
delivered, in person, by delivery service or by overnight courier service,
with receipt acknowledged, or the date of the telecopy transmission, or
three (3) Business Days after the same shall have been deposited in the
United States mail. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to
the persons designated above to receive copies shall in no way adversely
affect the effectiveness of such notice, demand, request, consent,
approval, declaration or other communication.
11.12 SURVIVAL. The representations and warranties of Borrowers in this
Agreement shall survive the execution, delivery and acceptance hereof by the
parties hereto and the closing of the transactions described herein or related
hereto.
11.13 SECTION TITLES. The Section titles and Table of Contents contained
in this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
11.14 COUNTERPARTS. This Agreement may be executed in any number of
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
11.15 DEFAULTING LENDER. In the event that any Lender fails to fund its
Term Loan or its Revolving Credit Percentage of any Revolving Credit Advance
requested or deemed requested by Borrowers which such Lender is obligated to
fund under the terms of this Agreement (the funded portion of such borrowing
being hereinafter referred to as a "Non Pro Rata Loan"), until the earlier of
such Lender's cure of such failure or the termination of Term Loan Commitments
and the Revolving Credit Loan Commitments, upon AXIA's request, the proceeds of
all amounts thereafter repaid to Agent by Borrowers and otherwise required to be
applied to such Lender's share of all other Obligations pursuant to the terms of
this Agreement, shall be advanced to Borrowers by Agent on behalf of such Lender
to cure, in full or in part, such failure by such Lender, but shall nevertheless
be deemed to have been paid to such Lender in satisfaction of such other
Obligations. Notwithstanding anything in this Agreement to the contrary:
(i) the foregoing provisions of this Section 11.15 shall apply only
with respect to the proceeds of payments of Obligations and shall not
affect the conversion or continuation of Loans pursuant to Section 2.8;
(ii) any such Lender shall be deemed to have cured its failure to
fund its Term Loan or its Revolving Credit Percentage at such time as an
amount equal to such Lender's original Term Loan or Revolving Credit
Percentage of the requested principal portion of such Term Loan or
Revolving Credit Advance is fully funded to Borrowers, whether made by such
Lender itself or by operation of the terms of this Section 11.15 and
whether or not the Non Pro Rata Loan with respect thereto has been
converted or continued;
(iii) amounts advanced to Borrowers to cure, in full or in part, any
such Lender's failure to fund its Term Loan or its Revolving Credit
Percentage of any
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Revolving Credit Advance ("Cure Loans") shall bear interest at the rate
applicable to Alternate Base Rate Borrowings under Section 2.8 in effect
from time to time, and for all other purposes of this Agreement shall be
treated as if they were Alternate Base Rate Borrowings;
(iv) regardless of whether or not an Event of Default has occurred
or is continuing, and notwithstanding the instructions of Borrowers as to
their desired application, all repayments of principal which would be
applied to the outstanding Alternate Base Rate Borrowings shall be applied
first, ratably to all Alternate Base Rate Borrowings constituting Non Pro
Rata Loans, second, ratably to Alternate Base Rate Borrowings other than
those constituting Non Pro Rata Loans or Cure Loans and, third, ratably to
Alternate Base Rate Borrowings constituting Cure Loans;
(v) for so long as and until the earlier of any such Lender's cure
of the failure to fund its Revolving Credit Percentage of any Revolving
Credit Advance and the termination of the Revolving Credit Loan
Commitments, the terms "Required Lenders" and "Required Revolving Credit
Lenders" for all purposes of this Agreement shall exclude all Lenders whose
failure to fund their respective Revolving Credit Percentage of such
Revolving Credit Advance have not been so cured; and
(vi) for so long as and until any such Lender's failure to fund its
Revolving Credit Percentage of any Revolving Credit Advance is cured in
accordance with this Section 11.15, such Lender shall not be entitled to
any Unused Revolving Credit Loan Charges with respect to its Revolving
Credit Loan Commitment.
12. CROSS-GUARANTY
12.1 CROSS-GUARANTY. Each Borrower hereby acknowledges and agrees that
such Borrower is jointly and severally liable for, and hereby absolutely and
unconditionally guarantees to each other Borrower, Agent and Lenders the full
and prompt payment of, all Obligations owed or hereafter owing to Agent and/or
Lenders by each other Borrower.
12.2 CONTRIBUTION WITH RESPECT TO GUARANTY OBLIGATIONS.
(a) To the extent that any Borrower shall make a payment under this
Section 12 of all or any of the Obligations for which such Borrower is not
primarily liable (a "Guarantor Payment") which, taking into account all other
Guarantor Payments then previously or concurrently made by the other Borrowers,
exceeds the amount which such Borrower would otherwise have paid if each
Borrower had paid the aggregate Obligations satisfied by such Guarantor Payment
in the same proportion that such Borrower's "Allocable Amount" (as defined
below) (in effect immediately prior to such Guarantor Payment) bore to the
aggregate Allocable Amounts of all Borrowers in effect immediately prior to the
making of such Guarantor Payment, then such Borrower shall be entitled to
receive contribution and indemnification payments from, and be reimbursed by,
each of the other Borrowers for the amount of such excess, pro rata based upon
their respective Allocable Amounts in effect immediately prior to such Guarantor
Payment. Each Borrower agrees not to exercise any rights which it may acquire by
way of contribution, indemnification or subrogation as a result of any Guarantor
Payment and not to seek reimbursement from any other Borrower in respect of a
Guarantor Payment, unless and until all Obligations (other than contingent
indemnification obligations) shall have been performed and paid in full, and if
any payment shall be made to a Borrower on account of such contribution,
indemnification or subrogation rights at any time when the Obligations shall not
have been performed and paid in full, each and every amount
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so paid shall forthwith be paid to Agent and Lenders to be credited and applied
against the Obligations, whether matured or unmatured. Each Borrower
subordinates any such contribution, indemnification or subrogation rights to the
Obligations.
(b) As of any date of determination, the "Allocable Amount" of any
Borrower shall be equal to the maximum amount of the claim which could then be
recovered from such Borrower under this Section 12 without rendering such claim
voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or
under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent
Conveyance Act or similar statute or common law.
(c) This Section 12.2 is intended only to define the relative rights of
Borrowers and nothing set forth in this Section 12.2 is intended to or shall
impair the obligations of Borrowers, jointly and severally, to pay any amounts
as and when the same shall become due and payable in accordance with the terms
of this Agreement, including, without limitation, Section 2 hereof, and nothing
contained in this Section 12.2, shall limit the liability of any Borrower to pay
the Obligations for which it is primarily liable.
(d) The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets of any Borrower to which such
contribution and indemnification is owing.
12.3 OBLIGATIONS ABSOLUTE. The liability of each Borrower to Agent and
Lenders hereunder shall not be affected or impaired by any of the following acts
by Agent or any Lender: (i) any acceptance of collateral security, guarantors,
accommodation parties or sureties for any or all Obligations; (ii) one or more
extensions or renewals of Obligations (whether or not for longer than the
original period) or any modification of the interest rates, fees, maturities or
principal amount of, or other contractual terms applicable to any Obligations;
(iii) any waiver or indulgence granted to a Borrower, any delay or lack of
diligence in the enforcement of Obligations, or any failure to institute
proceedings, file a claim, give any required notices or otherwise protect any
Obligations; (iv) any full or partial release of, compromise or settlement with,
or agreement not to sue a Borrower or any guarantor or other person liable in
respect of any Obligations; (v) any release, surrender, cancellation or other
discharge of any evidence of Obligations or the acceptance of any instrument in
renewal or substitution therefore; (vi) any failure to obtain collateral
security (including rights of setoff) for Obligations, or to obtain or maintain
the proper or sufficient creation and perfection thereof, or to establish the
priority thereof, or to preserve, protect, insure, care for, exercise or enforce
any collateral security; or any modification, alteration, substitution,
exchange, surrender, cancellation, termination, release or other change,
impairment, limitation, loss or discharge of any collateral security; (vii) any
collection, sale, lease or disposition of, or any other foreclosure or
enforcement of or realization on, any collateral security; (viii) any
assignment, pledge or other transfer of any Obligations or any evidence thereof;
or (ix) any manner, order or method of application of any payments or credits
upon Obligations. Each Borrower hereby waives any and all defenses and
discharges available to a surety, guarantor, or accommodation co-obligor.
12.4 WAIVER. EACH BORROWER HEREBY WAIVES PRESENTMENT, DEMAND FOR PAYMENT,
NOTICE OF DISHONOR OR NONPAYMENT, AND PROTEST OF ANY INSTRUMENT EVIDENCING
OBLIGATIONS.
12.5 RECOVERY. If any payment is applied by Agent or any Lender to the
Obligations and is thereafter set aside, recovered, rescinded or required to be
returned for any reason
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<PAGE>
(including, without limitation, the bankruptcy, insolvency or reorganization of
a Borrower or any other obligor), the Obligations to which such payment was
applied shall for the purposes of this Section 12 be deemed to have continued in
existence, notwithstanding such payment and application and this cross guaranty
shall be enforceable as to such Obligations as fully as if such payment and
application had never been made.
12.6 LIABILITY CUMULATIVE. The liability of Borrowers under this Section
12 is in addition to and shall be cumulative with all liabilities of each
Borrower to Agent and Lenders under this Agreement and the other Loan Documents
to which such Borrower is a party or in respect of any Obligations or obligation
of the other Borrowers, without any limitation as to amount, unless the
instrument or agreement evidencing or creating such other liability specifically
provides to the contrary.
77
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
AXIA INCORPORATED
AMERICAN NATIONAL BANK AND TRUST
By:_______________________________ COMPANY OF CHICAGO, as Agent and
Name: Lyle J. Feye as Lender
Title: Vice President
By:____________________________________
Name: Georgy Ann Peluchiwski
AMES TAPING TOOL SYSTEMS, INC. Title: Second Vice President
Term Loan Commitment: $10,000,000
By:_______________________________
Name: Lyle J. Feye Revolving Credit Loan Commitment:
Title: Vice President $6,000,000
TAPETECH TOOL CO., INC. THE NORTHERN TRUST COMPANY, as Lender
By:_______________________________
Name: Lyle J. Feye By:____________________________________
Title: Vice President
Name:_______________________________
Title:______________________________
Address:
50 South LaSalle Street
Chicago, Illinois 60675
Attention: Arthur J. Fogel
Telecopier No.: (312) 444-7028
Term Loan Commitment: $7,500,000
Revolving Credit Loan Commitment:
$4,500,000
NATIONAL CITY BANK, as Lender
By:____________________________________
Name: Diego Tobon
Title: Vice President
Address:
1900 East 9th Street
Locator 2104
Cleveland, Ohio 44114
Attention: Diego Tobon
Telecopier No.: (216) 575-9396
Term Loan Commitment: $7,500,000
Revolving Credit Loan Commitment:
$4,500,000
78
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