SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGEACT OF 1934 [No Fee Required]
For the transition period from to
Commission file number 1-7117
GENERAL HOUSEWARES CORP.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of 41-0919772
incorporation or organization) (I.R.S. Employer
Identification No.)
1536 Beech Street 47804
Terre Haute, Indiana (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (812) 232-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $.33 1/3 par value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
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<PAGE>
On March 13, 1995, 3,743,414 shares of the registrant's Common Stock, $.33-1/3
par value, were outstanding. The aggregate market value of the Common Stock
(based upon the closing price of the Common Stock on the New York Stock Exchange
Composite Transactions) held by non-affiliates of the registrant at March 13,
1995 was $52,407,796.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for 1995 Annual
Meeting of Stockholders, which will be filed
on or prior to March 31, 1995, to the extent
stated in this report. Part III
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PART I
Item 1. Business
General Housewares Corp. (hereinafter referred to as the "Company") manufactures
and markets consumer durable goods. The Company limits itself to product
categories in which, through market share, product innovation or brand image it
is considered a leader. Through the acquisition and/or development of products
that "delight and excite" the consumer, i.e., deliver unexpected value, simplify
and enhance a task or redefine a task, the Company believes that it is able to
establish such a leadership position. The Company currently enjoys such a
position in the following product categories: cookware, cutlery, kitchen tools
and precision cutting tools.
Approximately 70% of the products sold by the Company during 1994 were produced
domestically, primarily in factories owned and operated by the Company. The
remaining products are obtained from foreign sources primarily located in the
Far East.
COOKWARE: The Company is one of the country's largest manufacturers and
marketers of cookware, distributing its products throughout the United States,
Canada and selected European markets. The Company's collection of leading,
brand-name cookware products enables it to deliver, to both retailers and
consumers, products which satisfy a complete range of functional, aesthetic and
value requirements. The Company competes in four main cookware product
categories, covering a broad range of materials, designs, colors and prices. The
Company's cookware product categories are:
Cast Aluminum - Through its premium priced polished and black anodized aluminum
cookware products sold under the Magnalite(R) and Magnalite Professional(R)
brand names, respectively, the Company is a major manufacturer of cast aluminum
products. In 1993, the Company introduced a line of non-stick cast aluminum
cookware called Magnalite Professional(R) with Eclipse(TM) and in 1994 added the
Eclipse(TM) coating to certain products in its Magnalite(R) line. The products
are sold by mass merchants, department stores, and specialty cookware shops and
have been favorably received by the consumer because of their excellent cooking
performance and styling.
Enamelware - The Company is the only domestic manufacturer of this type of
product and has developed a leading market share. Ceramic On Steel(TM) cookware
products produced by the Company are sold under the Columbian and Graniteware
brand names. As of September 1, 1994 the Company acquired the Normandy line of
enamelware from National Housewares Corp. Normandy enamelware products, which
are similar to the Company's Ceramic On Steel(TM) cookware products, are
manufactured in Mexico. Enamelware is in demand because of its easy cleanup and
popular price. It is particularly popular for roasting and specialty
top-of-stove uses (e.g., spaghetti cookers and vegetable steamers). Products in
this category are primarily sold in discount stores, mass merchandise outlets
and warehouse clubs.
Cast Iron - These medium priced cookware products are sold nationally to all
retail channels under the Wagner's(TM) 1891 Original Cast Iron brand. The
Company is one of two major domestic manufacturers in this product category.
Wagner(TM) cast iron is purchased by consumers for its even heating, natural
non-stick surface and durability. It is particularly useful for skillet and
regional style cooking.
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Stamped and Spun Aluminum - These heavy gauge, large capacity products are
marketed under the brand name Leyse Professional(TM) and distributed through
department stores, mass merchants and specialty shops. Leyse products are
purchased from a domestic manufacturer.
During 1993, the Company sold its stainless steel cookware operations. In
conjunction with the sale, the Company entered into a licensing and royalty
agreement pursuant to which the purchaser may continue to use the Magnalite(R)
and Magnalite Professional(R) brand names on stainless steel cookware. The
Company believes that the sale will not have a material impact on its ongoing
cookware operations.
The total United States market for cookware, defined as metal pots and pans used
for top-of-stove and oven cooking, is estimated by the Cookware Manufacturers
Association at approximately $1.6 billion in terms of annual sales. Domestic
industry unit sales have remained relatively flat during the past five years
and, as a result, domestic manufacturers have lost market share to imports,
which the Association estimates have grown from 42% of the market in 1990 to 45%
in 1994. Imported merchandise, principally from Korea, Taiwan, Mexico and the
Peoples Republic of China, has been successful in penetrating the market through
comparable quality products at lower prices.
Through market research and a better understanding of the American consumer, the
Company believes it has successfully repositioned its product lines to
differentiate them from competing imports.
The cookware industry is highly competitive and fragmented. In addition, it is
characterized by little product differentiation. The Company believes that known
brand names, price-value relationships, product design, quality and creative
merchandising programs, as well as responsive, superior customer service, are
key factors contributing to success. While there are a number of manufacturers
and marketers of cookware, only a few are larger in the marketplace, or have
greater financial resources than the Company.
CUTLERY: The Company is a manufacturer and marketer of quality kitchen cutlery
with the leading domestic brand name (Chicago Cutlery(R)) and market share in
its industry. The Company markets, under the Chicago Cutlery(R) brand umbrella,
three complete lines of kitchen knives for consumers, sharpening tools, storage
units and cutting boards. Its most popular household cutlery line is The Walnut
Tradition(R), which features a solid American walnut handle with a Taper
Grind(R) edge on the blade. The Company manufactures and sells a popular priced
knife under the Cherrywood(TM) brand name. For the consumer that prefers a
synthetic handled knife, the Company manufactures and sells the Metropolitan(TM)
product line which features a durable high-impact plastic handle and a Taper
Grind(R) edge.
All Chicago Cutlery(R) blades are made from high carbon stainless steel that
resists rusting, pitting and staining. The Taper Grind(R) edge provides a
uniform and smooth taper, thereby facilitating the blade's movement through the
object being cut.
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<PAGE>
During 1992, the Company repositioned its cutlery products that had been sold
under the Mendix name as a promotional cutlery category under the banner
"Designed and Marketed by Chicago Cutlery(R)". These products compete in both
the fine edge and "never-needs-sharpening" segment of the cutlery industry and
are purchased from suppliers in the Far East. Promotional cutlery "Designed and
Marketed by Chicago Cutlery(R)" consists of thirteen separate cutlery brands,
seven of which are sold exclusively through department stores, and the remaining
lines are distributed through department stores, mass merchandisers and catalog
showrooms.
While the overall market for kitchen cutlery in the United States has remained
relatively unchanged in recent years, foreign products have made significant
inroads. The Company believes that imports in 1994 accounted for more than half
of domestic sales in dollars and 75% of domestic sales in units. In general,
foreign competition has been concentrated at the lower end and the very high end
of the retail price range. As a result of its widely recognized brand name and
reputation for high quality at a good price, Chicago Cutlery(R) has gained
market share even as the rest of the domestic industry has lost ground.
The Company also manufactures a full line of knives for the commercial poultry
processing market. These molded handle knives are designed to meet the special
needs of professionals and have specialized blade shapes for specific cutting
jobs. The handles are textured to be slip-resistant and feature a finger guard
for safety, and in some cases ergonomic handles.
KITCHEN TOOLS: Effective October 1, 1992, the Company purchased all of the
partnership interests in OXO International L.P. ("OXO"), a New York limited
partnership, marketing a broad line of kitchen tools under the Good Grips(R),
Prima(TM) Plus(TM) and Basics(TM) brand names. The products are primarily made
by manufacturers located in the Far East according to OXO's designs and
specifications. The kitchen tools sold by OXO generally utilize a proprietary
handle which is covered by patents owned by the Company. OXO(R) kitchen tools
are distributed primarily in the United States through department stores,
gourmet and specialty outlets and mass merchandisers.
OXO also sells a line of garden tools, under the Sierra Club(TM) name, that
utilizes its proprietary handle. Garden tools are primarily distributed through
specialty outlets.
CUTTING BOARDS: The Company, under the Idaho Woodworks name, manufactures and
markets cutting boards made of wood, polyethylene, and combinations of wood and
acrylic, marble or polyethylene.
PRECISION CUTTING TOOLS: Effective October 1, 1994, the Company purchased
certain assets of Walter Absil Company Limited and Olfa Products Corp.,
(collective referred to as the "Olfa Products Group"). The Olfa Products Group
is the exclusive distributor, in the United States and Canada, of precision
cutting tools and accessories manufactured by Olfa Corporation of Osaka, Japan.
Products of the Olfa Products Group are sold both to distributors and direct to
hobby, craft, hardware and fabric stores.
The North American hobby and craft market is both large and diverse with sales
exceeding $10 billion. Products distributed through the Olfa Products Group
compete in small selected segments in this market. Typically, these products
compete on the basis of performance and value.
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Cookware and cutlery products are sold by the Company to most major retail and
wholesale distribution organizations in the United States and Canada through its
direct sales force and, to a limited degree, through independent commissioned
sales representatives. The OXO(R) kitchen tools and Idaho Woodworks(TM) cutting
boards are sold primarily through independent commissioned sales
representatives. The Olfa Products Group utilizes a combination of a direct
sales force and independent commissioned sales representatives. In addition the
Company sells products through a chain of manufacturers' retail outlet stores
operating under the name "Chicago Cutlery etc., Inc."
MAJOR CUSTOMERS
During 1994, the ten largest customers of the Company accounted for 42% of the
Company's net sales. Sales to the Company's largest customer, Wal-Mart Stores,
Inc., were $12.1 million or approximately 13% of total net sales. The Company
has had good long-term relationships with its major customers.
CUSTOMER SERVICE
The Company believes it has a unique advantage as a supplier of primarily
American-made products which are shipped to its customers typically within five
days of order, as contrasted to direct retailer imports which typically require
a three to six month lead time.
EMPLOYEES
The Company employs approximately 725 persons, of whom about 575 are involved in
manufacturing with the balance serving in sales, general and administrative
capacities. The Company believes that its relations with employees are good.
Approximately 352 employees are represented by three different labor
organizations, which have contracts expiring in February, March and July of
1996.
EXPORT SALES
Exports account for less than 7% of the Company's total sales.
RAW MATERIALS
The principal raw materials used in manufacturing the Company's products are
steel, aluminum ingot, ceramic compounds, plastic compounds and hardwood
products. All of these materials are generally available from numerous suppliers
and the Company believes that the loss of any one supplier would not have a
significant impact on its operations.
SEASONALITY
Shipments are higher in the second half of the year and highest in the fourth
quarter due to the seasonality of housewares retail sales.
Item 2. Properties
The following table sets forth the location and size of the Company's principal
properties.
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<PAGE>
OPERATING FACILITIES
<TABLE>
Property Owned:
<CAPTION>
APPROXIMATE
FLOOR AREA
LOCATION NATURE OF USE OF PROPERTY (Square Feet)
<S> <C> <C>
Terre Haute, Manufacturing, distribution and 469,000
Indiana administrative (Ceramic on Steel(TM)
cookware and distribution of
cutlery products)
Sidney, Ohio Manufacturing (cast iron, cast 186,500
aluminum cookware)
Wauconda, Manufacturing (cutlery) 65,000
Illinois
Property Leased:
<CAPTION>
APPROXIMATE EXPIRATION
NATURE OF FLOOR AREA DATE
LOCATION USE OF PROPERTY (Square Feet) OF LEASE
<S> <C> <C> <C>
Sidney, OH Warehouse 32,000 July 31, 1995
Terre Haute, IN Warehouse 86,400 Apr. 30, 1995
New York, NY Administrative 1,330 Sep. 30, 1995
Stamford, CT Administrative 5,000 May 7, 1995
Sandpoint, ID Manufacturing 22,000 Oct. 6, 1995
St. Laurent, Quebec Administrative
Canada and Warehouse 16,230 Nov. 30, 1997
Plattsburgh, NY Warehouse 27,700 Oct 1, 1997
</TABLE>
In addition, the Company leases an average of 2,700 square feet of retail space
in 28 factory outlet malls with initial lease terms ranging from 3 to 7 years.
In the opinion of the Company's management, the properties and plants described
above are in good condition and repair and are adequate for the particular
operations for which they are used.
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<PAGE>
NON-OPERATING FACILITIES
Property Owned: (Reported as "other assets" in the financial statements
in this Report).
<TABLE>
<CAPTION>
APPROXIMATE
FLOOR AREA
LOCATION NATURE OF USE OF PROPERTY (Square Feet)
<S> <C> <C>
New Hope, Manufacturing/
Minnesota Distribution facility
(leased to third parties) 65,280
New Hope, Manufacturing/
Minnesota Distribution facility
(leased to third party) 21,500
Hyannis, Candle manufacturing facility
Massachusetts (leased to third party) 74,600
Antrim, Manufacturing facility
New Hampshire 55,400
</TABLE>
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Item 3. Legal Proceedings
The Company and its wholly owned subsidiary, Chicago Cutlery, Inc., instituted
an action on February 2, 1995 against the personal representatives of the Estate
of Ronald J. Gangelhoff in the United States District Court for the District of
Minnesota, Fourth Division. The action was instituted in February in order to
comply with Minnesota probate practices for settling claims against estates. The
action seeks indemnity and/or contribution for all losses and expenses suffered
and incurred, and to be suffered and incurred, by the plaintiffs arising from
the New Hampshire Department of Environmental Services mandated clean-up of
hazardous substances generated at the Antrim, New Hampshire manufacturing site
owned by Chicago Cutlery, Inc. and arising from the remediation of the site and
the landfill at which some of the substances were disposed. The action also
seeks a declaratory judgement that the defendants are liable to the Company. The
action is brought on the basis of the breach of representations and warranties
in the 1988 Stock Purchase Agreement pursuant to which the Company purchased the
stock of Chicago Cutlery, Inc. from Ronald J. Gangelhoff. It is also brought
under the provisions of the Comprehensive Environmental Response, Compensation,
and Liability Act, the provisions of the New Hampshire Hazardous Waste Clean-up
and Contribution statutes and under common law causes of action.
Before the death of Mr. Gangelhoff, Chicago Cutlery, Inc. had instituted an
action on October 8, 1993 against David D. Hurlin in the United States District
Court for the District of New Hampshire seeking damages and a declaratory
judgement that Mr. Hurlin is liable to plaintiff for losses and expenses
suffered and incurred, and to be suffered and incurred, arising from the
mandated clean-up of hazardous substances generated at the Antrim, New Hampshire
manufacturing site during the period it was owned by Goodell Company and arising
from remediation of the site. The basis of the action against Mr. Hurlin is that
as chief executive officer, a director and substantial stockholder of the
Goodell Company he was in control of, or in a position to control and direct,
hazardous substances handling and disposal practices at the site when hazardous
substances were improperly released to the environment. The action is brought
under the provisions of the Comprehensive Environmental Response, Compensation,
and Liability Act, the provisions of the New Hampshire Hazardous Waste Clean-up
and Contribution statutes and under common law causes of action. To the extent
that recovery is made against David D. Hurlin, the amount of the Company's claim
against the assets of the late Ronald J. Gangelhoff will be reduced.
For information concerning various environmental matters with which the Company
is involved, see Note to Consolidated Financial Statements on page 22 of this
Report.
In connection with the examination of the Company's 1991 tax return, the
Internal Revenue Service has proposed an adjustment with regard to the
deductions related to a covenant not to compete applying to tax years 1991
through 1993. While the ultimate resolution of this matter can not be assessed
at this time, the Company believes that it has adequate support for its position
and that the final resolution will not have a material adverse effect on the
Company's financial position, results of operations or cash flow.
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Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
EXECUTIVE OFFICERS OF THE COMPANY
The following individuals are executive officers of the Company, each of whom
will serve in the capacities indicated until May 2, 1995, or until the election
and qualification of a successor.
<TABLE>
<CAPTION>
Name Position with Company Age
<S> <C> <C>
Paul A. Saxton Chairman of the Board, President, 56
and Chief Executive Officer
Gordon R. Erickson Secretary and General Counsel 66
Stephen M. Evans Controller 53
Robert L. Gray Vice President, Finance and 44
Treasurer
</TABLE>
Messrs. Saxton and Erickson have been executive officers of the Company for more
than five years. Mr. Evans has been an executive officer of the Company since
July 1, 1990. Prior thereto Mr. Evans held various administrative and managerial
positions in the Company's cookware group. Mr. Gray has been employed by the
Company since April, 1990 and an executive officer since July 1, 1990. Prior
thereto he was Treasurer of Helene Curtis Industries, Inc.
PART II
Item 5. Market for the Company's Common Stock and Related Stockholder Matters
The market on which the Company's Common Stock is traded is the New York Stock
Exchange, Inc. The high and low sales prices of the Company's Common Stock and
the cash dividends declared for each quarterly period during the last two fiscal
years appear on page 11 of this Report.
The approximate number of holders of Common Stock as of March 15, 1995,
including beneficial owners of shares held in nominee accounts of whom the
Company is aware, was 1,000.
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Item 6. Selected Financial Data
<TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands except for per share amounts)
<CAPTION>
Year Ended December 31, 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Net sales $96,515 $87,452 $79,382 $74,028 $68,967
Operating income 6,637 6,415 8,342 8,379 9,513
Interest expense, net 1,699 1,299 1,319 1,590 2,622
Income from continuing
operations before
income taxes $ 4,938 $ 5,116 $ 7,023 $ 6,789 $ 6,891
Income taxes $ 2,188 $ 2,080 $ 2,599 $ 2,919 $ 3,027
Income from continuing
operations $ 2,750 $ 3,036 $ 4,424 $ 3,870 $ 3,864
Average number of
common shares
outstanding including
common stock
equivalents 3,440 3,340 3,295 3,217 2,949
Income from continuing
operations per common
share $ 0.80 $ 0.91 $ 1.34 $ 1.20 $ 1.31
Income from continuing
operations per common
share assuming full
dilution $ 0.80 $ 0.91 $ 1.34 $ 1.20 $ 1.25
Dividends per common
share $ 0.32 $ 0.32 $ 0.32 $ 0.32 $ 0.24
Financial Summary:
Total assets $98,358 $72,017 $72,001 $61,832 $57,315
Total debt 34,313 17,000 20,053 14,824 12,847
Net worth 50,255 43,929 41,696 37,252 33,371
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Continuing Operations
The operating results described below reflect the results of the cutlery,
cookware, kitchen tool (acquired in October of 1992), precision cutting tool
(acquired in October of 1994) and retail outlet store operations.
Year Ended December 31, 1994 versus 1993
Net sales for 1994 were $96,515,000, an increase of 10% when compared to net
sales of $87,452,000 for 1993. Sales increased as a result of growth in the
Company's kitchen tool and retail outlet store businesses and as a result of
acquisitions. While the dollar amount of gross profit increased modestly, gross
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profit margins declined reflecting competitive pricing pressures and increased
raw material costs. Selling, general and administrative expense increased
slightly. Increased costs related to the higher sales volume and a partial
year's amortization of goodwill (related to the purchases of the assets of
Walter Absil Company Limited, Olfa Products Corp. and National Housewares, Inc.)
were offset by reduced general and administrative costs. Included in operating
expense were additions of $391,000 to bad debt reserves to cover customer
bankruptcies during the year and $153,000 (exclusive of amounts for which
recovery from unaffiliated third parties is expected) to the reserve provisions
for environmental remediation.
Net income was $2,750,000 or $0.80 per share in 1994 compared to $3,036,000 or
$0.91 per share in 1993. The effective tax rate applied to pre-tax income
increased to 44% in 1994, compared to 41% in 1993. The effective tax rate
increased to provide for potential assessments with regard to ongoing review by
the Internal Revenue Service of years 1991-1993.
Year Ended December 31, 1993 versus 1992
Net sales for 1993 were $87,452,000, an increase of 10% when compared to net
sales of $79,382,000 for 1992. Sales increased primarily as a result of growth
in the Company's kitchen tool and retail outlet store businesses. Despite the
increase in sales and benefit from the decrease of the cost of goods sold
($285,000) resulting from the reduction of the LIFO Reserve, operating income
decreased from $8,342,000 to $6,415,000. The decline in operating income was
largely attributable to a combination of pricing issues, incremental costs and
one-time charges. Competitive pressures prevented the Company from realizing
price increases on cookware lines sufficient to cover increases in costs.
Further, in response to these pressures, the Company reduced prices on its key
Magnalite Professional cookware line by more than 10%. In addition, closeout
sales on slow moving inventories at low margins resulted in below average profit
realizations. Operating expenses for the year included incremental expenses
(versus 1992) of $2,372,000 related to the full year operation of the kitchen
tool business (acquired in October of 1992), $470,000 added to the provision for
environmental remediation costs and $420,000 of costs related to the
streamlining of operations.
Net income was $3,036,000 or $0.91 per share in 1993 compared to $4,424,000 or
$1.34 per share ($4,642,000 or $1.40 per share after the favorable adjustment
for the cumulative effect of a change in accounting for income taxes in
accordance with FAS No. 109) in 1992. The effective income tax rate in 1993 was
40.7% compared to 37.0% in 1992. The tax rate in 1992 was abnormally low due to
the availability of certain state tax benefits.
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<PAGE>
Seasonality
Sales are higher in the second half of the year and highest in the fourth
quarter due to the seasonality of housewares retail sales.
Capital Resources and Liquidity
On November 30, 1994, the Company completed a financing package consisting of a
$30,000,000 three year bank loan agreement ($3,000,000 outstanding at December
31, 1994) and the private placement of $20,000,000 of 8.41% Senior Notes.
Proceeds from the new financing package were used to refinance existing bank
loans incurred to support working capital requirements and for acquisitions. As
a result of the new financing, the Company believes that it has sufficient
liquidity to fund existing operations and to continue to make acquisitions.
Substantially all of the expenditures made by the Company to comply with
environmental regulations are for the remediation of previously contaminated
sites. The Company has established a reserve to cover such expenses (see Note 9
to the Consolidated Financial Statements). In addition to the amounts provided
for in the reserve, the Company may be required to make certain additional
capital expenditures which, in aggregate, are not expected to be material.
Subsequent to the completion of the remediation contemplated in setting the
reserve, the Company believes that the ongoing costs of compliance with
environmental regulation, including the cost of monitoring, pollution abatement
and disposal of hazardous materials, will not be material.
Effect of Inflation
For the year ended December 31, 1994, price increases in certain commodities
used by the Company (e.g., aluminum ingot (47%), steel (6%) and packaging
materials (10%)) had an adverse effect on the operations of the Company. There
was no such effect in the years ended December 31, 1993 or 1992.
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Item 8. Financial Statements and Supplementary Data
Index to Financial Statements Page
Financial Statements:
Report of Independent Accountants 14
Consolidated Statement of Income for the three years ended
December 31, 1994 15
Consolidated Balance Sheet at December 31, 1994 and 1993 17-18
Consolidated Statement of Cash Flows for the three years ended
December 31, 1994 19-20
Consolidated Statement of Changes in Stockholders' Equity
for the three years ended December 31, 1994 16-17
Notes to Consolidated Financial Statements 21-33
Financial Statement Schedule:
For the five years ended December 31, 1994
II - Valuation and Qualifying Accounts 11
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of General Housewares Corp.
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
General Housewares Corp., and its subsidiaries at December 31, 1994 and 1993,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the financial statements, the Company adopted
Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes
in 1992.
PRICE WATERHOUSE LLP
Indianapolis, Indiana
January 30, 1995
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<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
<CAPTION>
For the year ended December 31, 1994 1993 1992
(in thousands except for per share amounts)
<S> <C> <C> <C>
Net sales $96,515 $87,452 $79,382
Cost of goods sold 61,505 52,798 48,095
Gross profit . 35,010 34,654 31,287
Selling, general and administrative
expenses 28,373 28,239 22,945
Operating income 6,637 6,415 8,342
Interest expense, net 1,699 1,299 1,319
Income before income taxes 4,938 5,116 7,023
Income taxes 2,188 2,080 2,599
Income before cumulative effect
of accounting change 2,750 3,306 4,424
Cumulative effect of change
in accounting for income taxes - - 218
Net income $ 2,750 $ 3,036 $ 4,642
Earnings per common share, primary
and fully diluted:
Income before cumulative effect
of accounting change $ 0.80 $ 0.91 $ 1.34
Cumulative effect of change in
accounting for income taxes - - 0.06
Earnings per share $ 0.80 $ 0.91 $ 1.40
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
<TABLE>
Consolidated Statement of Stockholders' Equity
<CAPTION>
Common Common Capital in Cumulative Cost of Minimum
Stock Stock Excess of Translation Retained Treasury Pension
Shares Amount Par Value Adjustments Earnings Shares Liability Total
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances,
December 31,
1991 3,444 $1,148 $16,553 - $22,766 $(3,215) - $37,252
Restricted stock
activity - - 95 - - - - 95
Shares issued upon
exercise of
options 84 28 672 - - - - 700
Shares issued for
employee
stock purchase
plan 3 1 37 - - - - 38
Dividends - - - - (1,031) - - (1,031)
Net income - - - - 4,642 - - 4,642
Balances,
December 31,
1992 3,531 1,177 17,357 - 26,377 (3,215) - 41,696
Restricted stock
activity - - 49 - - (1) - 48
Shares issued upon
exercise of
options 30 10 254 - - - - 264
Shares issued for
employee
stock purchase
plan 6 2 91 - - - - 93
Tax benefit from
exercise of stock
options - - 283 - - - - 283
Minimum pension
liability - - - - - - (446) (446)
Dividends - - - - (1,045) - - (1,045)
Net income - - - - 3,036 - - 3,036
Balances
December 31, 1993 3,567 1,189 18,034 - 28,368 (3,216) (446) 43,929
-16-
<PAGE>
Restricted stock
activity (23) (5) 82 - - - - 77
Shares issued upon
exercise of
options 16 5 141 - - - - 146
Shares issued for
employee
stock purchase
plan 7 2 70 - - - - 72
Tax benefit from
exercise of stock
options - - 14 - - - - 14
Shares issued for
acquisition 400 133 4,367 - - - - 4,500
Translation
adjustments - - - (215) - - - (215)
Minimum pension
liability - - - - - - 71 71
Dividends - - - - (1,089) - - (1,089)
Net income - - - - 2,750 - - 2,750
Balances December
31, 1994 3,967 $1,324 $22,708 $(215) $30,029 $(3,216) $(375) $50,255
</TABLE>
See notes to consolidated financial statements.
<TABLE>
CONSOLIDATED BALANCE SHEET
<CAPTION>
December 31, 1994 1993
(in thousands except per share amounts)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,993 $ 785
Accounts receivable, less
allowances of $5,312
($3,379 in 1993) 16,854 11,656
Inventories 20,841 11,765
Deferred tax asset 2,184 1,601
Other current assets 905 1,410
Total current assets 43,777 27,217
Property, Plant & Equipment, Net 13,001 12,620
Other Assets 7,455 7,213
Patents and Other Intangible Assets 4,294 4,757
Cost in Excess of Net Assets
Acquired 29,831 20,210
------- -------
$98,358 $72,017
-17-
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term
debt $ 1,122 $-
Deferred payment obligation 2,382 -
Accounts payable 3,544 1,959
Salaries, wages and related
benefits 2,525 2,399
Property taxes 420 402
Accrued liabilities 2,309 1,727
Income taxes payable 1,141 733
Total current liabilities 13,443 7,220
Long-Term Debt 30,809 17,000
Deferred Liabilities 3,851 3,868
Commitments and Contingent Liabilities
(Note 9)
Stockholders' Equity:
Preferred stock - $1.00 par value:
Authorized - 1,000,000 shares
Common stock - $.33-1/3 par value:
Authorized - 10,000,000 shares
Outstanding - 1994 - 3,966,705
and 1993 - 3,567,383 shares 1,324 1,189
Capital in excess of par value 22,708 18,034
Treasury stock at cost - 1994
and 1993 - 243,760
shares (3,216) (3,216)
Retained earnings 30,029 28,368
Cumulative translation
adjustment (215) -
Minimum pension liability (375) (446)
Total stockholders' equity 50,255 43,929
------- -------
$98,358 $72,017
</TABLE>
See notes to consolidated financial statements.
-18-
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
For the year ended December 31, 1994 1993 1992
(in thousands)
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $2,750 $3,036 $4,642
Adjustments to reconcile net income
to net cash provided by operating
activities -
Depreciation and amortization 3,623 3,240 2,567
Foreign exchange gain (95) - -
Compensation related to stock awards 76 48 95
(Increase) decrease in deferred
tax assets (546) (333) 400
(Increase) decrease in operating assets:
Accounts receivable (2,636) 1,177 (1,073)
Inventory (2,761) 755 (2,728)
Other assets (482) (719) (838)
Increase (decrease) in operating liabilities:
Accounts payable 1,585 (993) 194
Salaries, wages & related benefits,
property taxes and accrued
liabilities 109 1,687 (687)
Income taxes payable 408 187 473
------ ------- -------
Net cash provided by
operating activities 2,031 8,085 3,045
Cash flows used for investing
activities:
Additions to property, plant and
equipment, net (2,545) (2,823) (3,122)
Payment for acquisitions (8,643) (609) (5,269)
Net cash used for investing ------- -------- --------
activities (11,188) (3,432) (8,391)
-19-
<PAGE>
<CAPTION>
Cash flows from financing activities:
Collection of notes receivable 1,018 242 -
Long-term debt (repayment) borrowings (8,783) (3,488) 3,284
Issuance of senior notes 20,000 - -
Proceeds from stock options and employee
stock purchases 219 357 739
Dividends paid (1,089) (1,045) (1,031)
Net cash provided by (used for) ------ ------ ------
financing activities 11,365 (3,934) 2,992
Net increase (decrease) in cash and ====== ====== ======
cash equivalents 2,208 719 (2,354)
Cash and cash equivalents at
beginning of year 785 66 2,420
Cash and cash equivalents at ======= ======= =======
end of year $2,993 $785 $66
</TABLE>
See notes to consolidated financial statements.
-20-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands except for per share amounts)
1. Accounting Policies
Principles of Consolidation - The Consolidated Financial Statements include the
accounts of General Housewares Corp. and its subsidiaries, all of which are
wholly owned.
Inventories - Inventories are stated at the lower of cost or market and at
December 31 were comprised of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Raw Materials $ 4,293 $ 2,630
Work in Process 2,292 1,885
Finished Goods 16,064 8,827
------- -------
$22,649 $13,342
LIFO Reserve ( 1,808) ( 1,577)
======= =======
$20,841 $11,765
</TABLE>
Cost at December 31, 1994, is determined on a last-in, first-out (LIFO) basis
for approximately 80% of the Company's inventories. The remaining inventories
are determined on a first-in, first-out (FIFO) basis. During 1993, inventory
quantities were reduced. This reduction resulted in a liquidation of LIFO
inventory quantities carried at lower costs prevailing in prior years as
compared with the cost of 1993 purchases, the effect of which decreased cost of
goods sold by approximately $285 and increased net income by approximately $170.
There were no such liquidations in 1994.
Property, Plant and Equipment - Property, plant and equipment is recorded at
cost and depreciated over estimated useful lives using the straight-line method.
<TABLE>
<CAPTION>
Property, Plant and Equipment is as follows:
1994 1993
<S> <C> <C>
Land $ 674 $ 642
Buildings 4,245 4,381
Machinery and Equipment 28,129 26,905
------- -------
33,048 31,928
Less Depreciation 20,047 19,308
======= =======
$13,001 $12,620
</TABLE>
Other Current Assets - Included in other current assets is a receivable arising
from the sale of stainless steel tooling and inventories of $153 ($922 in 1993),
as well as a receivable related to an anticipated recovery of $400 of estimated
environmental costs and other miscellaneous receivables and prepaid expenses.
-21-
<PAGE>
Other Assets - Included in other assets are three manufacturing facilities (Land
and Buildings - cost of $5,866 with accumulated depreciation of $1,416) that the
Company no longer operates. All of the facilities are currently being leased to
unaffiliated third parties under non-cancelable leases. Income generated by
these leases is not significant to the consolidated operations of the Company.
Each of these facilities is being depreciated over its estimated useful life
using the straight-line method. Other assets also include prepaid pension
expense.
Intangible Assets - The cost in excess of net assets acquired is amortized using
the straight-line method over periods ranging from 10 to 40 years. Other
intangible assets arising from acquisitions are included in patents and other
intangible assets and are amortized using the straight-line method over periods
of 5 to 15 years. Amortization of intangible assets was approximately $1,179 in
1994 ($1,008 in 1993 and $646 in 1992) and accumulated amortization was $4,768
and $3,589 at December 31, 1994 and 1993, respectively. In addition, at December
31, 1994 and 1993 the Company recognized an intangible asset related to the
recording of a minimum pension liability in accordance with Statement of
Financial Accounting Standards No. 87.
Income Taxes - Effective January 1, 1992, the Company adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (FAS 109).
The adoption of FAS 109 increased net income in 1992 by $218.
Deferred Liabilities - Deferred liabilities include a minimum pension liability,
deferred federal income taxes and deferred compensation.
Earnings per Share - Earnings per share are computed using the weighted average
number of shares of common stock and common stock equivalents outstanding during
the year.
Sales to a Significant Customer - During 1994 and 1993, the Company had net
sales to a single customer of $12,100 and $12,000, respectively, which
represented approximately 13% and 14% of total net sales for 1994 and 1993,
respectively.
Accounts Receivable - Substantially all accounts receivable are uncollateralized
and arise from sales to the retail industry. Accounts receivable allowances
include reserves for doubtful accounts, returns, adjustments and co-op
advertising allowances to customers.
Reclassification - Certain 1993 and 1992 amounts have been reclassified to
conform with the 1994 presentation.
Cash Equivalents - The Company considers all highly liquid temporary cash
investments with low interest rate risk to be cash equivalents. Temporary cash
investments are stated at cost, which approximates market value.
Currency Translation - The net assets of foreign operations are translated into
U.S. dollars using current exchange rates. Revenue, costs and expenses are
translated at average exchange rates during the reporting period.
-22-
<PAGE>
2. Acquisitions
Effective October 1, 1994, the Company purchased the assets of Walter Absil
Company Limited and Olfa Products Corp. (collectively referred to as "Olfa
Products Group"). The Olfa Products Group is the exclusive North American
distributor of precision cutting tools and accessories manufactured by Olfa
Corporation of Osaka, Japan. Assets acquired include accounts receivable,
inventories and equipment.
The purchase price was $13,576 and consisted of a cash payment of $6,843,
Subordinated Promissory Notes in the principal amount of $2,233 bearing interest
at 6% per annum and 400,000 restricted shares (valued at $4,500) of the
Company's common stock. The common stock issued in connection with this
acquisition is restricted as to both sale and voting rights. All such
restrictions will expire no later than September 30, 1999.
The acquisition has been accounted for as a purchase and the net assets and
results of operations are included in the Company's Consolidated Financial
Statements beginning October 1, 1994. The purchase price has been allocated to
the assets acquired and liabilities assumed of the Olfa Products Group based on
their estimated respective fair values. Cost in excess of net assets acquired
was $6,349 and is being amortized over 20 years.
In connection with the issuance of restricted common stock related to the
acquisition of Olfa Products Group, the Company has agreed, under certain
circumstances, to make payments of up to $600 to the former owners upon sale of
the restricted common stock. In addition, the Company has agreed to make
payments of up to approximately $3,565 to the management of the Olfa Products
Group based upon the achievement of a specific aggregate financial target for
the three year period ending December 31, 1997.
Effective September 1, 1994, the Company purchased the assets of the Normandy,
enamel on steel cookware, business of National Housewares, Inc. for a cash
consideration of $1,800 and deferred payments equal to $3,767 plus an incentive
payment of $382 based upon operational performance for the remainder of 1994.
The cash payment was equivalent to the fair market value of the inventories
acquired. Cost in excess of net assets acquired is $4,149 and is being amortized
over 10 years.
The following unaudited pro forma information combines the consolidated results
of operations of the Company, the Olfa Products Group and Normandy as if the
acquisitions had occurred at the beginning of 1994 and 1993. The pro forma
information is not necessarily indicative of the results of operations which
would have actually occurred during such periods.
-23-
<PAGE>
<TABLE>
<CAPTION>
(Unaudited) 1994 1993
<S> <C> <C>
Net sales $114,184 $110,057
Income before taxes 5,831 6,971
Net income 3,277 4,137
Earnings per average
common share $ 0.88 $ 1.11
</TABLE>
On August 19, 1993, the Company purchased the assets of Idaho Woodworks, Inc., a
manufacturer of cutting boards. Receivables, inventories and equipment were
purchased at book value for $609.
Effective October 1, 1992, the Company purchased all of the partnership
interests in OXO International L.P. ("OXO"), a New York limited partnership
marketing a broad line of kitchen tools. Kitchen tools sold by OXO utilize a
proprietary handle which is subject to a patent owned by the Company. The assets
acquired consisted primarily of inventory, accounts receivable and patents, and
include tooling used to manufacture the OXO products.
The purchase price was $6,250 and consisted of a cash payment of $5,500 and
Subordinated Promissory Note in the principal amount of $750 bearing interest at
8% per annum.
The acquisition has been accounted for as a purchase and the net assets and
results of operations are included in the Company's Consolidated Financial
Statements beginning October 1, 1992. The purchase price has been allocated to
the assets acquired (including amounts assigned to patents of $4,100 and
covenants not to compete of $650) and liabilities assumed of OXO based on their
estimated respective fair values. Cost in excess of net assets acquired was $463
and is being amortized over 40 years.
The following unaudited pro forma information combines the consolidated results
of operations of the Company and OXO as if the acquisition had occurred at the
beginning of 1992. The pro forma information is not necessarily indicative of
the results of operations which would have actually occurred during such
periods.
<TABLE>
<CAPTION>
(Unaudited)
1992
<S> <C>
Net sales $82,655
Income before taxes 6,871
Net income 4,540
Earnings per average
common share $ 1.38
</TABLE>
-24-
<PAGE>
3. Debt
<TABLE>
Long-term debt includes the following:
<CAPTION>
December 31, 1994 1993
<S> <C> <C>
Bank Credit Agreement $ 3,000 $12,000
8.41% senior notes
payable in equal annual
installments commencing
1998 through 2004 20,000 -
12% subordinated note
payable in equal annual
installments commencing
1996 through 2000 5,000 5,000
Deferred payment obligation
due in quarterly installments
of $125,000 from January, 1995
through September, 1998
(discounted at 6%) 1,793 -
6% subordinated notes
payable in equal annual
installments in Canadian dollars
commencing 1995 through 1997 2,138 -
------- -------
31,931 17,000
Less current portion 1,122 -
======= =======
Long-term debt $30,809 $17,000
</TABLE>
-25-
<PAGE>
At December 31, 1994 and 1993, all of the Company's debt outstanding was
unsecured.
The bank debt outstanding at December 31, 1994, relates to a Credit Agreement
with two banks with an aggregate commitment of $30,000 of which $5,000 is
reserved for letters of credit at December 31, 1994. The commitment will expire
on November 30, 1997, and may be renewed, under certain circumstances, for two
additional one year periods. Drawings under the Credit Agreement are priced
based on Prime or LIBOR with spreads calculated on an incentive formula. At
December 31, 1994, the Company could borrow under the Credit Agreement at Prime
or LIBOR + 1%. The interest rate on outstanding amounts on December 31, 1994,
was 7.125%. The agreement replaced a $20,000 Revolving Credit Agreement with the
same banks. In addition during 1994 the Company sold $20,000 of 8.41% Senior
Notes payable to a group of institutional investors.
Terms of the Credit Agreement and the Senior Notes require among other things
that the Company maintain certain minimum financial ratios. In addition the
agreements provide for limits on dividends and certain investments.
The deferred payment obligation was incurred in connection with the acquisition
of assets of the Normandy, enamel on steel cookware, business of National
Housewares, Inc. In addition to the obligation listed in the above table, the
Company has additional obligations related to the transaction of $2,382,000 all
of which were payable January 1995.
Terms of the Deferred Payment Obligation and all of the Subordinated Notes
provide for the right of offset upon the occurrence of certain events.
Aggregate principal payments for the five years subsequent to December 31, 1994,
are as follows:
1995 $1,122
1996 2,147
1997 5,174
1998 4,345
1999 and thereafter 19,143
Cash paid during 1994 for interest, net of cash received, was $1,614 (1993 -
$1,361; 1992 - $1,258).
4. Common Stock and Rights
Common stock reserved at December 31, 1994, included 231,404 shares reserved for
outstanding stock options.
In February 1989, the Company effected a dividend distribution of one Right for
each outstanding share of common stock. Under certain circumstances, each Right
may be exercised to purchase 1/100th of a share of Series A Junior Participating
Preferred Stock, at a purchase price of $25, subject to adjustment to prevent
dilution. Each preferred share fraction is designed to be equivalent in voting
and dividend rights to one share of common stock. The Rights may only be
exercised after a person acquires, or has the right to acquire, 21% or more of
the common stock or makes an offer for 30% or more of the common stock. The
Rights, which do not have voting rights and do not entitle the holder to
dividends, expire on February 27, 1999, and may be redeemed by the Company prior
to their being exercisable at a price of $.01 per Right.
-26-
<PAGE>
5. Stock Plans
The Company maintains a stock plan for key employees which provides for the
granting of options or awards of restricted stock until January 31, 2003. A
summary of transactions under the plan follows:
<TABLE>
<CAPTION>
Restricted Stock
Stock Options
<S> <C> <C>
Outstanding December 31, 1991 53,300 267,601
Granted during 1992 2,219 37,000
Canceled during 1992 (4,900) (4,233)
Released or exercised
during 1992 (5,219) (83,699)
Outstanding December 31, 1992 45,400 216,669
Granted during 1993 - 68,000
Canceled during 1993 (3,400) (1,335)
Released or exercised
during 1993 (4,000) (29,596)
Outstanding December 31, 1993 38,000 253,738
Granted during 1994 10,500 5,000
Canceled during 1994 (34,000) (11,035)
Released or exercised
during 1994 (4,000) (16,299)
Outstanding December 31, 1994 10,500 231,404
</TABLE>
Options granted under the plan provide for the issuance of common stock at not
less than 100% of the fair market value on the date of grant. When options are
exercised, proceeds received are credited to common stock and capital in excess
of par value. Stock options were exercised at prices ranging from $7.125 to
$13.375 in 1994. Options outstanding at December 31, 1994, were granted at
prices ranging from $7.125 to $13.75 per share. Options for 170,567 shares were
exercisable at December 31, 1994.
Restricted stock granted under the plan is subject to restrictions relating to
earnings targets of the Company and/or continuous employment or other
relationships.
-27-
<PAGE>
On July 1, 1992, the Company introduced its Employee Stock Purchase Plan. The
plan, administered by a Committee appointed by the Board of Directors, is
intended to qualify as an "employee stock purchase plan" within the meaning of
Section 423 of the Internal Revenue Code. The Employee Stock Purchase Plan
provides that shares of the Company's Common Stock will be purchased at the end
of each calendar quarter with funds deducted from the payroll of eligible
employees. Employees receive a bargain purchase price equivalent to 90% of the
lower of the opening or closing stock price of each calendar quarter. Dividends
paid to the Employee Stock Purchase Plan fund are reinvested in the fund to buy
additional shares. At December 31, 1994, the balance in the plan consisted of
13,072 shares of General Housewares Corp. Common Stock (8,700 shares in 1993).
6. Employee Benefit Plans
The Company sponsors four defined benefit pension plans which cover
substantially all salaried and hourly employees. Pension benefit formulas are
related to final average pay or fixed amount per year of service. It is the
Company's policy to fund at least the minimum amounts required by applicable
regulations.
<TABLE>
<CAPTION>
Net periodic pension cost included the following components:
<S> <C> <C> <C>
1994 1993 1992
Service cost-benefits
earned during the period $ 458 $ 410 $ 375
Interest cost on projected
benefit obligation 1,166 1,079 1,044
Actual return on plan assets (34) (1,180) (865)
Net amortization and deferral (919) 168 (58)
------ ------ ------
Net periodic pension cost $ 671 $ 477 $ 496
</TABLE>
-28-
<PAGE>
<TABLE>
The funded status of the plans as of December 31 was as follows:
<CAPTION>
1994 1993
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
<S> <C> <C> <C> <C>
Accumulated benefit
obligation
- vested $12,315 $2,233 $12,405 $2,289
- non vested 220 47 224 45
12,535 2,280 12,629 2,334
Effect of projected salary
increases 953 - 1,002 -
Projected benefits
obligation 13,488 2,280 13,631 2,334
Plan assets at fair
value 13,090 2,172 12,898 1,895
Plan assets less than
projected benefits
obligation (398) (108) (733) (439)
Unrecognized net transition
(asset) liability (960) 111 (1,097) 126
Unrecognized net loss from
experience differences 2,131 672 2,282 675
Unrecognized prior service
cost 920 336 1,036 361
Adjustment to recognize
minimum liability - (1,119) - (1,162)
Prepaid (accrued) pension cost
recognized in balance
sheet $ 1,693 $ (108) $ 1,488 $ (439)
</TABLE>
-29-
<PAGE>
In accordance with the provisions of Statement of Financial Accounting Standards
No. 87 - Employers' Accounting for Pensions, the Company has recorded an
additional minimum liability at December 31, 1994 and 1993, representing the
excess of the accumulated benefit obligation over the fair value of plan assets
and prepaid pension asset. The minimum liability for plans with accumulated
benefits in excess of assets of $ 1,119 at December 31, 1994, has been included
in the Company's consolidated balance sheet as a deferred liability with an
offset in other intangible assets and equity. In addition, a deferred tax asset
of $298 has been recognized for the minimum liability charge to equity.
The actuarial present value of the projected benefit obligation at December 31,
1994 and 1993, was determined using a weighted average discount rate of 8.0% and
7.5%, respectively, and a rate of increase in future compensation levels of 4%.
The weighted average expected long-term rate of return on assets was 9% at
December 31, 1994 and 1993. As of December 31, 1994, approximately 59% (1993 -
33%) of the plan's assets were invested in fixed income funds.
In addition to the defined benefit plans described above, the Company also
sponsors a 401 (K) plan for all full-time employees. The Company matches a
portion of each employee contribution. The Company's contribution expense was
$302 in 1994 ($335 in 1993 and $306 in 1992).
The Company maintains a non-qualified, unfunded deferred compensation plan for
certain key executives providing payments upon retirement. The present value of
the deferred compensation is included in deferred liabilities and the annual
charge to earnings is not significant.
-30-
<PAGE>
7. Income Taxes
The components of the provision for income taxes were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Current income tax expense:
Federal $2,382 $2,043 $1,987
State 352 370 212
Total current income tax ------ ------ ------
expense 2,734 2,413 2,199
Deferred federal income tax
expense (benefit) (546) (333) 400
====== ====== ======
Total income tax expense: $2,188 $2,080 $2,599
</TABLE>
The Company did not have a significant source of foreign income in each of the
years ended December 31, 1994, 1993 and 1992.
A reconciliation of the federal statutory rate to the Company's effective tax
rate is as follows:
<TABLE>
<CAPTION>
Percent of pretax income
1994 1993 1992
<S> <C> <C> <C>
Federal statutory rate 34.0% 34.0% 34.0%
State income taxes, net
of federal income tax
benefit 4.7 4.8 2.0
Amortization of excess
purchase price 4.0 3.9 2.8
Prior years accrual
adjustment 1.4 (2.5) -
Miscellaneous items .2 .5 (1.6)
---- ---- ----
44.3% 40.7% 37.2%
</TABLE>
-31-
<PAGE>
Federal income tax returns for all years prior to 1991 are closed. The Internal
Revenue Service is currently conducting a review of the Company's tax returns
for the years 1991-1993. The Company believes that it has made adequate
provision for income taxes that may become payable with respect to the years
under review.
Deferred tax assets (liabilities) are comprised of the following at December 31:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Gross deferred tax assets:
Accounts receivable
allowances $849 $404
Vacation 210 200
Self-insurance 119 300
Pension 509 388
Environmental reserve 539 338
Other, miscellaneous 355 351
------ ------
Gross deferred tax assets $2,581 $1,981
<CAPTION>
Gross deferred tax liabilities:
<S> <C> <C>
Property, plant and equipment ($1,296) ($1,646)
Pension (912) (746)
Other current receivables (136) -
Other, miscellaneous (264) (230)
-------- --------
Gross deferred tax liabilities ($2,608) ($2,622)
======== ========
Net deferred tax
liabilities ($ 27) ($ 641)
</TABLE>
Cash paid for income taxes during 1994 was $1,659 (1993 - $1,939; 1992 - $1,988)
-32-
<PAGE>
8. Operating Leases
The Company principally leases warehouses, administrative offices, computer
equipment and retail outlet store space. Certain of the retail store leases
provide for contingent rental payments, generally based on the sales volume of
the applicable retail unit. All of these leases are classified as operating
leases.
Future minimum annual lease payments under these operating leases, the majority
of which have initial or remaining non-cancelable lease terms in excess of one
year, were as follows at December 31, 1994:
1995 $1,395
1996 1,127
1997 1,042
1998 732
1999 417
Later Years 343
Certain leases require payments of real estate taxes, insurance, repairs and
other charges. Total rental expense was $1,455 in 1994 (1993 - $1,106; 1992 -
$840).
9. Commitments and Contingent Liabilities
The Company is currently involved in the review and evaluation, or remediation,
of seven sites posing potential or identified environmental contamination
problems. Based on information currently available, management's best estimate
of probable remediation costs, recorded as a liability, is $1,549 at December
31, 1994 ($994 at December 31, 1993) -- which aggregate amount management
believes will be paid out during the course of the next five years. The Company
expects that it will recover approximately $400 from unaffiliated sources.
Within a range of reasonably possible environmental cleanup liabilities
established on the basis of current information, the recorded liability
represents approximately 90% of the currently estimable maximum loss that has
been identified by the Company and its environmental advisors. While neither the
timing nor the amount of the ultimate costs associated with environmental
matters can be accurately determined, management does not expect that these
matters will have a material effect on the Company's consolidated financial
position, results of operations or cash flow.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in or disagreements with the Company's independent
accountants on accounting and financial disclosure.
-33-
<PAGE>
PART III
The information required by Part III, Items 10, 11, 12 and 13 with respect
to the directors and executive officers of the Company has been omitted because
this information appears on pages 1 to 9 of the Company's definitive proxy
statement which the Company expects to file with the Securities and Exchange
Commission on or prior to March 31, 1995, and which is incorporated herein by
reference, except with respect to the identification and business experience of
executive officers required by Item 10, which is set forth under the caption
"Executive Officers of the Company" in Part I of this Report. The Report of the
Compensation Committee and the Performance Graph, which begin on page 9 and on
page 12, respectively, of the Company's definitive proxy statement, are not
incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements - See item 8 - index to financial
statements.
(a) 2. Financial Statement Schedule - See item 8 - index to
financial statements.
(a) 3. Exhibits
3.(i) Restated Certificate of Incorporation, filed May 7, 1987
(filed as Exhibit 3 to the Company's Annual Report on Form
10-K for the year ended December 31, 1988, and incorporated
herein by reference).
(ii) By-laws as amended February 7, 1995.
5. Rights Agreement dated as of February 22, 1989 (filed with
the Securities and Exchange Commission as an Exhibit to a
Registration Statement on Form 8-A, and incorporated herein
by reference).
10. Material Contracts
10.1 Note Purchase Agreement, dated November 30, 1994 among
the Company and certain institutional investors.
10.2 Credit Agreement, dated November 30, 1994, between the
Company and Harris Trust and Savings Bank as agent, and
The First National Bank of Chicago.
*10b. Employment and Consulting Agreement, dated July 1,
1990, between the Company and John H. Muller, Jr.
(filed as Exhibit 10b to the Company's Annual Report on
Form 10-K for the year ended December 31, 1990, and
incorporated herein by reference).
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*10c. Compensation Agreement, dated August 7, 1987, between
the Company and Paul A. Saxton relating to retirement
and termination arrangements (filed as Exhibit 10c to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1992, and incorporated herein by
reference).
*10e. Employment Agreement, dated April 12, 1990, between the
Company and Robert L. Gray, relating, among other
matters, to termination arrangements (filed as Exhibit
10e to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992, and incorporated herein
by reference).
*10f. The Company's Severance Compensation Plan, as amended
and restated August 6, 1985, in which all of the named
executive officers participate, and form of designation
of participation.
11a. Computation of primary earnings per share.
21. Subsidiaries of the registrant.
23. Consent of Price Waterhouse, independent accountants,
to the incorporation by reference constituting part of
Registration Statements on Form S-8 (Nos. 33-33328,
2-77798 and 33-48336) of their report dated January 30,
1995.
99. Audited financial statements of the Company's Employee
Stock Purchase Plan.
* Represents a contract, plan or arrangement pursuant to which
compensation or benefits are provided to certain Executive Officers or
Directors of the Company.
(b) Reports on Form 8-K
Form 8-K was filed during the last quarter of 1994 documenting the
acquisition of the assets of Walter Absil Company Limited and Olfa Products
Corp. and is incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
GENERAL HOUSEWARES CORP.
By /s/ Robert L. Gray
Robert L. Gray 3/28/94
Vice President, Finance and Treasurer Date
Principal Financial Officer
By /s/ Stephen M. Evans 3/28/94
Stephen M. Evans Date
Corporate Controller
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Paul A. Saxton 3/28/94
Paul A. Saxton Date
Chairman of the Board
President and Chief Executive Officer
/s/ Charles E. Bradley 3/28/94
Charles E. Bradley - Director Date
/s/ John S. Crowley 3/28/94
John S. Crowley - Director Date
/s/ Thomas L. Francis 3/28/94
Thomas L. Francis - Director Date
/s/ Joseph Hinsey IV 3/28/94
Joseph Hinsey IV - Director Date
/s/ Ann Manix 3/28/94
Ann Manix - Director Date
/s/ John H. Muller, Jr. 3/28/94
John H. Muller, Jr. - Director Date
/s/ Phillip A. Ranney 3/28/94
Phillip A. Ranney - Director Date
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INDEX TO EXHIBITS
Exhibit No.
3(ii) Amended By-Laws
10.1 Note Purchase Agreement
10.2 Corporate Credit Agreement
11a Computation of primary earnings per share
21 Subsidiaries of the registrant
23 Consent of Price Waterhouse
27 Financial Data Schedule
99 Financial statements of the Company's Employee
Stock Purchase Plan
GENERAL HOUSEWARES CORP.
RESTATED BY-LAWS
As Amended February 7, 1995
ARTICLE I
Offices
SECTION 1. Principal Office. The principal office or place of business of the
Corporation in the State shall be the Corporation's registered office in the
City of Wilmington, County of New Castle, State of Delaware.
SECTION 2. Other Offices. The Corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or as the business of the Corporation may from
time to time require.
ARTICLE II
Stockholders
SECTION 1. Place of Meeting. All meetings of the stockholders shall be held at
the registered office of the Corporation in the State of Delaware or at such
other place within or without the State of Delaware as may from time to time be
designated by the Board of Directors or as stated in the notice of such meeting.
SECTION 2. Annual Meetings. The annual meeting of the stockholders of the
Corporation shall be on such date and time each year as may be designated by
resolution of the Board of Directors from time to time for the purpose of
electing directors for the ensuing year and for the transaction of such other
proper business, notice of which is given in the notice of such meeting.
SECTION 3. Special Meetings. Special meetings of the stockholders for any
purpose or purposes may be called by the Board of Directors, the Chairman of the
Board or the President, and shall be called by the Chairman of the Board, the
President, or Secretary upon receipt of a request in writing signed by a
majority of the Board of Directors. Such request shall state the purpose or
purposes of the proposed meeting and the matters proposed to be acted upon
thereat.
SECTION 4. Notice of Meetings. Not less than 10 days nor more than 60 days
written or printed notice of every meeting of stockholders, stating the place,
date and time thereof, and, in the case of a special meeting (and the annual
meeting, if so required by law), the purpose or purposes for which the meeting
is called, shall be given to each stockholder entitled to vote thereat by
leaving the same with him or at his residence or usual place of business or by
mailing it, postage prepaid, and addressed to him at his address as it appears
on the records of the Corporation.
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No notice of the time, date, place or purpose of any meeting
of stockholders need be given to any stockholder entitled to such notice who
attends in person or is represented by proxy (except when the stockholder
attends a meeting for the express purpose of objecting at the beginning of the
meeting to the transaction of any business on the grounds that the meeting is
not lawfully called or convened), or to any stockholder entitled to such notice
who, in writing executed and filed with the records of the meeting either before
or after the time thereof, waives such notice. Neither the business to be
transacted at, nor the purpose of, any annual or special meeting of stockholders
need be specified in any such written waiver of notice.
SECTION 5. Record Dates. The Board of Directors may fix in advance a date, not
exceeding 60 days preceding the date of any meeting of stockholders or of any
express consent to corporate action in writing without a meeting, any dividend
payment date, any date of any other distribution, any date for the allotment of
any rights, or any date for the exercise of any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
and, in the case of any meeting of stockholders, not less than 10 days, as a
record date for the determination of the stockholders entitled to notice of or
to vote at such meeting or to express consent to corporate action in writing
without a meeting, or entitled to receive such dividends or other distributions
or rights, or to exercise such rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful action, as the case
may be; and only stockholders of record on such dates shall be entitled to
notice of and to vote at such meeting or to express consent to corporate action
in writing without a meeting, or to receive such dividends or other
distributions or rights, or to exercise such rights in respect of any change,
conversion or exchange of stock, as the case may be.
SECTION 6. List of Stockholders Entitled to Vote. The officer who has charge of
the stock ledger of the Corporation shall prepare and make, at least 10 days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order and showing the
address and number of shares registered in the name of each stockholder. Such
list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, either at a place within the city where the
meeting is to be held or, if such place is not specified in the notice of such
meeting, at the place where the meeting is to be held; and such list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
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SECTION 7. Quorum, Adjournment of Meetings. The presence in person or by proxy
of the holders of record of a majority of the shares of stock of the Corporation
issued and outstanding and entitled to be voted thereat shall constitute a
quorum at all meetings of stockholders, except as otherwise may be required by
law. In the absence of a quorum, the holders of record of a majority of the
shares of stock present in person or by proxy and entitled to be voted thereat
shall have power to adjourn the meeting from time to time, without notice other
than an announcement at the meeting of the time and place of such adjournment
(except as otherwise provided in this SECTION 7) until the requisite number of
shares of stock entitled to be voted at such meeting shall be present in person
or by proxy. At any such adjourned meeting at which the requisite number of
shares of stock entitled to be voted thereat shall be present in person or by
proxy, any business may be transacted which might have been transacted at the
meeting as originally called and notified.
A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of
such meeting unless the Board of Directors fixes a new record date for the
adjourned meeting. If an adjournment of any meeting of stockholders shall be for
more than 30 days, or if after adjournment a new record date is fixed by the
Board of Directors for the adjourned meeting, a notice of adjourned meeting
shall be given to each stockholder of record entitled to notice of or to vote at
the meeting.
SECTION 8. Conduct of Meetings. The meetings of the stockholders shall be
presided over by the Chairman of the Board or the President, or if neither be
present, by a Vice President, or if none of them is present, by a chairman to be
elected at the meeting. The Secretary of the Corporation, if present, shall act
as secretary of such meeting, or if he is not present, an Assistant Secretary
shall so act, or if neither the Secretary nor an Assistant Secretary is present,
then the meeting shall elect its secretary.
SECTION 9. Voting and Inspectors. Each stockholder entitled to vote at a meeting
of stockholders or to consent or dissent to corporate action in writing without
a meeting may vote, consent or dissent in person or by proxy, but no proxy need
be sealed, witnessed or acknowledged. No proxy may be voted upon or acted upon
after three years from its date unless such proxy shall provide for a longer
period.
All elections shall be had and all questions decided by a
majority of the votes cast at a duly constituted meeting, except as otherwise
required by the Certificate of Incorporation, these By-Laws or a specific
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statutory provision superseding requirements contained in the Certificate of
Incorporation or in these By-Laws.
At any election of directors, the chairman of the meeting may,
and if required by law, shall, appoint one or more inspectors or judges of
election who shall first subscribe an oath or affirmation to execute faithfully
their duties at such election with strict impartiality and according to the best
of their ability, and shall after the election make a certificate of the result
of the vote taken. No candidate for the office of director shall be appointed
such inspector or judge.
All elections of directors shall be by written ballot. The
chairman of the meeting may cause the vote to be taken on any other matters to
be by written ballot.
SECTION 10. Validity of Proxies and Ballots. At every meeting of the
stockholders, all proxies shall be received and taken in charge of, and all
ballots, if any, shall be received and canvassed by, the secretary of the
meeting, who shall decide all questions touching the qualification of voters,
the validity of the proxies, and the acceptance or rejection of votes, unless
inspectors or judges of election shall have been appointed, in which event such
inspectors or judges of election shall so act.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business property and affairs of the Corporation
shall be conducted and managed under the supervision of a Board of Directors.
The Board of Directors shall have and exercise, or cause to be exercised, in the
name and on behalf of the Corporation all the powers of the Corporation, except
those conferred upon or reserved to stockholders expressly by statute, the
Certificate of Incorporation or these By-Laws.
SECTION 2. Number and Tenure of Office. The number of directors which shall
constitute the whole Board shall be such as from time to time may be fixed by
resolution of the Board of Directors at a duly held regular or special meeting,
but in no case shall the number be less than three. The directors shall be
classified with respect to the time for which they shall severally hold office
by dividing them into three classes, each class to consist of such number of
directors as the directors may determine, provided that the whole number of
directors of any class shall not exceed the whole number of directors of any
other class by more than one. At each annual meeting, the successors to the
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directors of the class whose terms shall expire in that year shall be elected to
hold office for a term of three years from the date of their election and until
the election and qualification of their successors, so that the term of office
of one class of directors shall expire in each year. Notwithstanding the
provisions of this SECTION 2 of ARTICLE III, whenever the holders of any series
of non-voting Preferred Stock shall be entitled, voting separately as a class,
to elect directors, the terms of all directors elected by such holders shall
expire on the next succeeding annual meeting of stockholders. Directors need not
be stockholders.
SECTION 3. Vacancies. In case of any vacancy in the Board of Directors through
death, resignation, removal, increase in the number of directors, or other
cause, such vacancy may be filled by the vote of a majority of the remaining
directors, although such majority shall not constitute a quorum. Any successor
director so elected shall hold office for the unexpired term of the director
whose office has been vacated.
SECTION 4. Removal of Directors. Any director may be removed from office, for
cause at any time, by the vote of at least two-thirds of the whole Board of
Directors or by the vote at a special meeting, called for such purpose, of the
holders of at least two-thirds of all shares outstanding and entitled to vote
for the election of directors.
SECTION 5. Place of Meeting; Maintenance of Books and Records. The directors may
hold their meetings, whether regular or special, and keep the books, records of
account and stock ledgers of the Corporation either within or without the State
of Delaware, at any office or offices of the Corporation or at any place as they
may from time to time by resolution determine, or, in the case of meetings, as
shall be specified or fixed in the respective notices, waivers of notice, or
consents with respect thereto.
SECTION 6. Regular Meeting. Regular meetings of the Board of Directors shall be
held at such times and at such places either within or without the State of
Delaware as the directors may from time to time determine. No notice of any
regular meeting need be given to any director, except as otherwise provided in
ARTICLE XI hereof.
The annual meeting of the Board of Directors shall be held as
soon as practicable after the annual meeting of the stockholders for the
election of directors, and no notice of such meeting shall be necessary if held
at the same place as the annual meeting of stockholders following such meeting,
except as otherwise provided in ARTICLE XI hereof.
SECTION 7. Special Meetings. Special meetings of the Board of Directors may be
held from time to time at such places either within or without the State of
Delaware upon call of the Chairman of the Board or the President, or by a quorum
of the Board, by written notice duly served on each director, sent by means of
electronic transmission or mailed, postage prepaid, to each director at his
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address as it appears on the records of the Corporation, not less than 48 hours
before such meeting. No notice need be given to any director who attends the
meeting in person or to any director who, in writing executed and filed with the
records of the meeting either before or after the holding thereof, waives such
notice. Such notice or waiver of notice may but need not state the business to
be transacted at, or the purpose or purposes of, such meeting.
SECTION 8. Quorum. One-third of the total number of directors shall constitute a
quorum for the transaction of any and all business, provided that a quorum shall
in no case be less than two directors. If at any meeting of the Board there
shall be less than a quorum present, a majority of those present shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting of the time and place of such adjourned meeting,
until a quorum shall have been obtained. The act of the majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board, except as may be otherwise specifically provided by statute, by the
Certificate of Incorporation or by these By-Laws.
SECTION 9. Committees. The Board of Directors may at any time, by the
affirmative vote of a majority of the whole Board, appoint from among its
members an Executive Committee composed of two or more directors, and may
delegate by resolution to such Executive Committee, in the intervals between
meetings of the Board of Directors, any or all of the powers of the Board of
Directors respecting the business, affairs and property of the Corporation, and
the power to authorize the seal of the Corporation to be affixed to all papers
which may require it; provided, however, that nothing herein shall be deemed to
prohibit the designation of additional committees for limited and appropriate
purposes with such memberships as may be provided in the resolution of the Board
of Directors designating any such committee. In the absence or disqualification
of any member of any such committee at a meeting thereof, the member or members
thereof present at such meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint a member of the Board of
Directors to act at such meeting in the place of any such absent or disqualified
member. All such committees shall report the action taken or principal matters
considered to the Board of Directors at the next succeeding regular or special
meeting, and any action by the committees which in all cases shall be by a
majority of those present at a meeting at which there is quorum shall be subject
to revision and alteration by the Board of Directors, provided that no rights of
third persons shall be affected by any such revision or alteration. The Board of
Directors may at any time, by the affirmative vote of a majority of the whole
Board, remove, with or without cause, any member of any such committee and fill
vacancies therein.
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SECTION 10. Informal Action. Any action required or permitted to be taken at any
meeting of the Board of Directors, or of any committee, may be taken without a
meeting, if consents in writing, setting forth such action are signed by all
members of the Board or of such committee, as is the case may be, and such
written consents are filed with the minutes of proceedings of the Board or such
committee.
SECTION 11. Compensation. Directors and members of any committee of the
Corporation contemplated by these By-Laws or otherwise provided for by
resolution of the Board of Directors who are not salaried officers of the
Corporation shall, in consideration of their serving as such, receive from the
Corporation such amount per annum or such fees, for attendance at meetings of
the Board of Directors or of such committee, or both, as the Board may from time
to time determine.
All directors and members of any such committee shall receive
reimbursement for the reasonable expenses incurred by them in connection with
their attendance at meetings or the performance of their duties. Nothing
contained herein shall preclude any director or any member of such committee
from serving the Corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV
Officers
SECTION 1. Election; Appointment; Vacancies. The executive officers of the
Corporation shall be chosen by the Board of Directors as soon as may be
practicable after the annual meeting of stockholders. Such executive officers
may include a Chairman of the Board, a Vice Chairman of the Board and one or
more Vice President and shall include a President, a Secretary and a Treasurer.
The Board of Directors may also in its discretion appoint Assistant Secretaries,
Assistant Treasurers, a Controller, Assistant Controllers, and other officers,
agents and employees, or may, by resolution delegate this authority to the
Chairman of the Board or President of the Corporation. The Board of Directors,
or the Chairman of the Board or President if authorized as aforesaid, may fill
any vacancy which may occur in any office, except that vacancies in executive
offices shall be filled by the Board of Directors. Any number of offices, except
those of President and Vice President and those of Treasurer and Controller, may
be held by the same person, but no officer shall execute, acknowledge or verify
any instrument in more than one capacity, if such instrument is required by law,
these By-Laws or otherwise to be executed, acknowledged or verified by two or
more officers.
SECTION 2. Tenure of Office; Removal. Executive officers, and other officers if
to be elected by the Board, shall be elected at the first meeting of the Board
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of Directors, or as soon thereafter as practicable, after the annual meeting of
stockholders to hold office until their successors are chosen and qualified.
Other officers, if appointed by the Chairman of the Board or President as
provided in SECTION 1 of this ARTICLE IV., shall have a tenure in office until
their successors be chosen and qualified. Executive officers and any other
officers, agents, or employees elected by the Board may be removed from office
at any time with or without cause by the Board of Directors and officers, agents
or employees appointed by the Chairman of the Board or President as aforesaid,
may be removed from office at any time with or without cause by such officers or
by the Board of Directors, but any such removal shall be without prejudice to
contractual rights with the Corporation, if any, of the officers, agents, or
employees so removed.
SECTION 3. Powers and Duties. Officers, agents and employees shall have such
powers and duties in the management of the business, property and affairs of the
Corporation as are provided by statute, the Certificate of Incorporation and
these By-Laws, as well as such powers and duties as generally pertain to their
respective offices and such powers and duties as may from time to time be
conferred by resolution of the Board of Directors.
SECTION 4. Salaries. The salaries of all officers, agents and employees of the
Corporation shall be fixed by or pursuant to the authority of the Board of
Directors.
SECTION 5. Fidelity Bonds. The Board of Directors may require any officer, agent
or employee of the Corporation to give bond for the faithful discharge of his
duties, in such sum and of such character as the Board of Directors may from
time to time prescribe.
ARTICLE V
Checks, Notes, Etc.
All checks and drafts on the Corporation's bank accounts and
all bills of exchange and promissory notes, and all acceptances, guarantees,
obligations, evidences of indebtedness and other instruments for the payment of
money, and all certificates or other instruments representing the Corporation's
stock or other securities, and any indentures, mortgages or agreements with
respect thereto, shall be signed by such officer or officers, agent or agents,
as shall be thereunto authorized from time to time by the Board of Directors.
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ARTICLE VI
Capital Stock
SECTION 1. Certificate of Shares. The interest of each stockholder of the
Corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may from time to time prescribe, except insofar as
provided by law. No certificate shall be valid unless it is signed by the
Chairman of the Board, the President or a Vice President, and by the Secretary,
an Assistant Secretary, the Treasurer or an Assistant Treasurer of the
Corporation and sealed with its seal (which seal may be in facsimile), and if
such certificate is countersigned by a transfer agent or registered by a
registrar (in each case other than the Corporation or its employees), the
signatures of the aforesaid officers of the Corporation may be by facsimile. In
the event that any such officer so signing a certificate manually or by
facsimile is no longer an officer of the Corporation or holds a different office
at the time the certificate is issued, shall have the same force and effect as
if such officer held at such time the office held by him when so signing,
whether manually or by facsimile, the certificate.
SECTION 2. Transfer of Shares. Shares of the Corporation shall be transferable
on the books of the Corporation by the holder thereof in person or by his duly
authorized attorney or legal representative, upon surrender and cancellation of
certificates for the same number of shares of the same class or series, duly
endorsed or accompanied by proper instruments of assignment and transfer, with
such proof of the authenticity of the signature as the Corporation or its agents
may reasonably require. The Board of directors shall designate an officer of the
Corporation to act as transfer clerk in the absence of the appointment of a
transfer agent.
SECTION 3. Stock Ledgers. The stock ledgers of the Corporation, containing the
names and addresses of the stockholders and the number of shares held by them
respectively, shall be kept at the office of the Secretary of the Corporation,
whether within or without the State of Delaware, in the custody of the transfer
clerk or, if the Corporation employs a transfer agent, at the offices ofsuch
transfer agent, and shall during the usual business hours of every business day
be open for inspection and for copying for any proper purpose by any person
authorized by the laws of the State of Delaware and the Certificate of
Incorporation to do so.
SECTION 4. Lost, Stolen or Destroyed Certificates. The Board of Directors may
determine the conditions upon which a new certificate representing shares of any
class or series may be issued in place of a certificate which is alleged to have
been lost stolen or destroyed; and may, in their discretion, require the owner
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of such certificate or his legal representative to give bond, with sufficient
surety to the Corporation and the transfer agent, if any, to indemnify it and
such transfer agent against any and all loss or claims which may arise by reason
of the issue of a new certificate in the place of the one so lost, stolen or
destroyed.
ARTICLE VII
Corporate Seal
The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization, the words "Corporate Seal,
Delaware", and such other inscriptions, if any, as the Board of Directors may
from time to time determine. The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
Fiscal Year
The fiscal year of the Corporation shall cover such period of
12 calendar months as the Board of Directors may determine. In the absence of
any such determination, the accounts of the Corporation shall be kept on a
calendar year basis.
ARTICLE IX
Voting the Stock of Other Corporations
Any stock or other securities of other corporations, which may
from time to time be held by the Corporation, may be represented and voted at
any meeting of stockholders or security holders of such other corporations by
the Chairman of the Board, the President, or any Vice President of the
Corporation, or by proxy or proxies appointed by any such person, or otherwise
pursuant to authorization thereunto given by resolution of the Board of
Directors.
ARTICLE X
Indemnification of Directors, Officers and Others
SECTION 1. Indemnification of Directors and Officers. The Corporation shall, to
the fullest extent permitted by applicable law, indemnify any person (and the
heirs, executors and administrators thereof) who was or is made, or threatened
to be made, a party to an action, suit or proceeding, whether civil, criminal,
administrative or investigative, whether involving any actual or alleged breach
of duty, neglect or error, any accountability, or any actual or alleged
misstatement, misleading statement or other act or omission and whether brought
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or threatened in any court or administrative or legislative body or agency,
including an action by or in the right of the Corporation to procure a judgment
in its favor and an action by or in the right of any other corporation of any
type or kind, domestic or foreign, or any partnership, joint venture, trust,
employee benefit plan or other enterprise, which any director or officer of the
Corporation is serving or served in any capacity at the request of the
Corporation, by reason of the fact that he, his testator or intestate is or was
a director or officer of the Corporation, or is serving or served such other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise in any capacity, against judgments, fines, amounts paid in
settlement, and costs, charges and expenses, including attorneys' fees, incurred
therein or in any appeal thereof.
SECTION 2. Indemnification of Others. The Corporation shall indemnify other
persons and reimburse the expenses thereof, to the extent required by applicable
law, and may indemnify any other person to whom the Corporation is permitted to
provide indemnification of the advancement of expenses, whether pursuant to
rights granted pursuant to, or provided by, the Delaware General Corporation Law
or otherwise.
SECTION 3. Advances or Reimbursement of Expenses. The Corporation shall, from
time to time, reimburse or advance to any person referred to in SECTION 1 upon
receipt of a written undertaking by or on behalf of such person to repay such
amount(s) if a judgment or other final adjudication adverse to the director or
officer establishes that (i) his acts were committed in bad faith or were the
result of active and deliberate dishonesty and, if either case, were material to
the cause of action so adjudicated, (ii) he personally gained in fact a
financial profit or other advantage to which he was not legally entitled, or
(iii) his conduct was otherwise of a character such that Delaware law would
require that such amount(s) be repaid.
SECTION 4. Service of Certain Entities Deemed Requested. Any director or officer
of the Corporation serving (i) another corporation of which a majority of the
shares entitled to vote in the election of its directors is held by the
Corporation, or (ii) any employee benefit plan of the Corporation or any
corporation referred to in clause (i), in any capacity shall be deemed to be
doing so at the request of the Corporation.
SECTION 5. Interpretation. Any person entitled to be indemnified or to the
reimbursement or advancement of expenses as a matter of right pursuant to this
Article may elect to have the right to indemnification (or advancement of
expenses) interpreted on the basis of the applicable law in effect at the time
of the occurrence of the event or events giving rise to the action, suit or
proceeding, to the extent permitted by applicable law, or on the basis of the
applicable law in effect at the time indemnification is sought.
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SECTION 6. Indemnification Right. The right to be indemnified or to the
reimbursement or advancement of expenses pursuant to this Article (i) is a
contract right pursuant to which the person entitled thereto may bring suit as
if the provisions hereof were set forth in a separate written contract between
the Corporation and the director or officer, (ii) is intended to be retroactive
and shall be available with respect to events occurring prior to the adoption
hereof, and (iii) shall continue to exist after the rescission or restrictive
modification hereof with respect to events occurring prior thereto.
SECTION 7. Indemnification Claims. If a request to be indemnified or of the
reimbursement or advancement of expenses pursuant hereto is not paid in full by
the Corporation within 30 days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled also to be paid the expenses of
prosecuting such claim. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) to have made
a determination prior to the commencement of such action that indemnification of
or reimbursement or advancement of expenses to the claimant is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) that the
claimant is not entitled to indemnification or to the reimbursement or
advancement of expenses shall be a defense to the action or create a presumption
that claimant is not so entitled.
ARTICLE XI
Amendments
The By-Laws of the Corporation may be altered, amended, added
to or repealed at any annual or special meeting of stockholders at which a
quorum is present or represented, provided notice of the proposed alteration,
amendment, addition or repeal is set forth in the notice of such meeting, by the
affirmative vote of a majority of the shares of stock present or represented at
such meeting and entitled to vote thereat, or by the Board of Directors at any
regular or special meeting of the Board if notice of the proposed alteration,
amendment, addition or repeal is contained in the notice of any such meeting or
in the waivers or consents with respect thereto. Any action of the Board of
Directors of the Corporation taken under this ARTICLE XI may be altered,
amended, added to or repealed by the stockholders at such meeting or at any
other meeting. In no event shall the Board of Directors of the Corporation have
power to alter, amend, add to or repeal this ARTICLE XI.
* * * * *
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General Housewares Re:
$20,000,000 8.41% Senior Notes
Corp. Note Agreement Dated as of November 15, 1994
Due November 15, 2004
TABLE OF CONTENTS
(NOT A PART OF THE AGREEMENT
SECTION HEADING PAGE
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.......... ....................1
Section 1.1. Description of Notes...........................................1
Section 1.2. Commitment, Closing Date.......................................2
Section 1.3. Other Agreements...............................................2
SECTION 2. PREPAYMENT OF NOTES..............................................2
Section 2.1. Required Prepayments...........................................2
Section 2.2 Optional Prepayment with Premium................................2
Section 2.3. Notice of Optional Prepayments.................................3
Section 2.4. Application of Prepayments.....................................3
Section 2.5. Direct Payment.................................................3
SECTION 3. REPRESENTATIONS..................................................4
Section 3.1. Representation of the Company..................................4
Section 3.2. Representation of the Purchaser................................4
SECTION 4. CLOSING CONDITIONS...............................................4
Section 4.1. Conditions.....................................................4
Section 4.2. Waiver of Conditions...........................................6
SECTION 5. COMPANY COVENANTS................................................6
Section 5.1. Corporate Existence, Etc.......................................6
Section 5.2. Insurance......................................................6
Section 5.3. Taxes, Claims for Labor and Materials;
Compliance with Laws...........................................6
Section 5.4. Maintenance....................................................7
Section 5.5. Nature of Business.............................................7
Section 5.6. Current Ratio..................................................7
Section 5.7. Fixed Charges Coverage Ratio...................................7
Section 5.8. Consolidated Net Worth.........................................7
Section 5.9. Limitations on Funded Debt and Current Debt....................7
Section 5.10. Limitation on Liens............................................8
Section 5.11. Investments...................................................10
Section 5.12. Restricted Payments...........................................11
Section 4.15. Mergers, Consolidations and Sales of Assets...................12
<PAGE>
Section 5.14. Repurchase of Notes...........................................14
Section 5.15. Transactions with Affiliates..................................14
Section 5.16. Reports and Rights of Inspection..............................14
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.........................17
Section 6.1. Events of Default.............................................17
Section 6.2. Notice to Holders.............................................18
Section 6.3. Acceleration of Maturities....................................19
Section 6.4. Recission of Acceleration.....................................19
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS................................20
Section 7.1. Consent Required..............................................20
Section 7.2. Solicitation of Holders.......................................20
Section 7.3. Effect of Amendment or Waiver.................................20
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS........................20
Section 8.1. Definitions...................................................20
Section 8.2. Accounting Principles.........................................28
Section 8.3. Directly or Indirectly........................................28
SECTION 9. MISCELLANEOUS...................................................28
Section 9.1. Registered Notes..............................................28
Section 9.2. Exchange of Notes.............................................29
Section 9.3. Loss, Theft, Etc. of Notes....................................29
Section 9.4. Expenses, Stamp Tax Indemnity.................................29
Section 9.5. Powers and Rights Not Waived; Rememdies
Cumulative....................................................30
Section 9.6. Notices.......................................................30
Section 9.7. Successors and Assigns........................................30
Section 9.8. Survival of Covenants and Representations.....................30
Section 9.9. Severability..................................................31
Section 9.10. Governing Law.................................................31
Section 9.11. Captions......................................................31
Signature Page................................................................32
ii
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ATTACHMENTS TO NOTE AGREEMENT:
Schedule I Names and Addresses of Purchasers and Amounts of Commitments
Schedule II Description of Debt and Leases; Subsidiaries of the Company
Schedule III Liens Existing as of the Closing Date Securing Funded Debt
of the Company and Its Restricted Subsidiaries
Exhibit A Form of 8.41% Senior Note Due November 15, 2004
Exhibit B Representations and Warranties of the Company
Exhibit C Description of Special Counsel's Closing Opinion
Exhibit D Description of Closing Opinion of Counsel to the Company
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<PAGE>
GENERAL HOUSEWARES CORP.
1536 Beech Street
Terre Haute, Indiana 47804
NOTE AGREEMENT
Re: $20,000,000 8.41% Senior Notes
Due November 15, 2004
Dated as of
November 15, 1994
To the Purchaser named in Schedule I
hereto which is a signatory of this
Agreement
Ladies and Gentlemen:
The undersigned, General Housewares Corp., a Delaware corporation (the
"Company"), agrees with you as follows:
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.
Section 1.1. Description of Notes. The Company will authorize the issue and
sale of $20,000,000 aggregate principal amount of its 8.41 % Senior Notes (the
"Notes") to be dated the date of issue, to bear interest from such date at the
rate of 8.41% per annum, payable semiannually on the fifteenth day of May and
November in each year (commencing May 15, 1995) and at maturity and to bear
interest on overdue principal (including any overdue required or optional
prepayment payment of principal) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest at the rate of 9.41 % per
annum after the date due, whether by acceleration or otherwise, until paid, to
be expressed to mature on November 15, 2004, and to be substantially in the form
attached hereto as Exhibit A. Interest on the Notes shall be computed on the
basis of a 360-day year of twelve 30-day months. The Notes are not subject to
prepayment or redemption at the option of the Company prior to their expressed
maturity dates except on the terms and conditions and the amounts and with the
premium, if any, set forth in Section 2 of this Agreement. The term "Notes" as
used herein shall include each Note delivered pursuant to this Agreement and the
separate agreements with the other purchasers named in Schedule I. You and the
other purchasers named in Schedule I are hereinafter sometimes referred to as
the "Purchasers". The terms which are capitalized herein shall have the meanings
set forth in Section 8.1 unless the context shall otherwise require.
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Section 1.2. Commitment, Closing Date. Subject to the terms and conditions
hereof and on the basis of the representations and warranties hereinafter set
forth, the Company agrees to issue and sell to you, and you agree to purchase
from the Company, Notes in the principal amount set forth opposite your name on
Schedule I hereto at a price of 100% of the principal amount thereof on the
Closing Date hereafter mentioned.
Delivery of the Notes will be made at the offices of Chapman and Cutler,
111 West Monroe Street, Chicago, Illinois 60603, against payment therefor in
Federal Reserve or other funds current and immediately available at the
principal office of Harris Trust and Savings Bank, Chicago, Illinois, in the
amount of the purchase price at 10:00 A.M., Chicago, Illinois, time on November
30, 1994 or such later date as shall mutually be agreed upon by the Company and
the Purchasers (the "Closing Date"). The Notes delivered to you on the Closing
Date will be delivered to you in the form of a single registered Note in the
form attached hereto as Exhibit A for the full amount of your purchase (unless
different denominations are specified by you), registered in your name or in the
name of such nominee, as may be specified in Schedule I attached hereto.
Section 1.3 Other Agreements. Simultaneously with the execution and
delivery of this Agreement, the Company is entering into similar agreements with
the other Purchasers under which such other Purchasers agree to purchase from
the Company the principal amount of Notes set opposite such Purchasers' names in
Schedule I, and your obligation and the obligations of the Company hereunder are
subject to the execution and delivery of the similar agreements by the other
Purchasers. This Agreement and said similar agreements with the other Purchasers
are herein collectively referred to as the "Agreements". The obligations of each
Purchaser shall be several and not joint and no Purchaser shall be liable or
responsible for the acts of any other Purchaser.
SECTION 2. PREPAYMENT OF NOTES.
Section 2.1 Required Prepayments. In addition to paying the entire
outstanding principal amount and the interest due on the Notes on the maturity
date thereof, the Company agrees that on November 15 in each year, commencing
November 15, 1998 and ending November 15, 2003, both inclusive, it will prepay
and apply and there shall become due and payable on the principal indebtedness
evidenced by the Notes an amount equal to the lesser of (a) $2,857,142 or (b)
the principal amount of the Notes then outstanding. The entire remaining
principal amount of the Notes shall become due and payable on November 15, 2004.
No premium shall be payable in connection with any required prepayment made
pursuant to this Section 2.1. In the event that the Company shall prepay less
than all of the Notes pursuant to Section 2.2 hereof, the amount of such
prepayment shall be deemed to be applied first to the amount of principal
scheduled to be paid at maturity and then to the remaining scheduled principal
payments in inverse order of their scheduled maturities.
Section 2.2. Optional Prepayment with Premium. In addition to the payments
required by Section 2.1, upon compliance with Section 2.3, the Company shall
have the privilege, at any time and from time to time of prepaying the
outstanding Notes, either in whole or in part (but if in part then in a minimum
principal amount of $1,000,000), by payment of the principal amount of the
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Notes, or portion thereof to be prepaid, and accrued interest thereon to the
date of such prepayment, together with a premium equal to the Make-Whole Amount,
determined as of five Business Days prior to the date of such prepayment
pursuant to this Section 2.2.
Section 2.3. Notice of Optional Prepayments. The Company will give notice
of any prepayment of the Notes pursuant to Section 2.2 to each holder thereof
not less than 15 days nor more than 60 days before the date fixed for such
optional prepayment specifying (a) such date, (b) the principal amount of the
holder's Notes to be prepaid on such date, (c) that a premium may be payable,
(d) the date when such premium will be calculated, (e) the estimated premium,
together with a reasonably detailed computation of such estimated premium, and
(f) the accrued interest applicable to the prepayment. Such notice of prepayment
shall also certify all facts, if any, which are conditions precedent to any such
prepayment. Notice of prepayment having been so given, the aggregate principal
amount of the Notes specified in such notice, together with accrued interest
thereon and the premium, if any, payable with respect thereto shall become due
and payable on the prepayment date specified in said notice. Two Business Days
prior to the prepayment date specified in such notice, the Company shall provide
each holder of a Note written notice of the premium, if any, payable in
connection with such prepayment and, whether or not any premium is payable, a
reasonably detailed computation of the Make-Whole Amount.
Section 2.4. Application of Prepayments. All partial prepayments made
pursuant to Section 2.1 or Section 2.2 shall be applied on all outstanding Notes
ratably in accordance with the unpaid principal amounts thereof.
Section 2.5. Direct Payment. Notwithstanding anything to the contrary
contained in this Agreement or the Notes, in the case of any Note owned by you
or your nominee or owned by any subsequent Institutional Holder which has given
written notice to the Company requesting that the provisions of this Section 2.5
shall apply, the Company will punctually pay when due the principal thereof,
interest thereon and premium, if any, due with respect to said principal,
without any presentment thereof, directly to you, to your nominee or to such
subsequent Institutional Holder at your address or your nominee's address set
forth in Schedule I hereto or such other address as you, your nominee or such
subsequent Institutional Holder may from time to time designate in writing to
the Company or, if a bank account with a United States bank is designated for
you or your nominee on Schedule I hereto or in any written notice to the Company
from you, from your nominee or from any such subsequent Institutional Holder,
the Company will make such payments in immediately available funds to such bank
account, no later than 11:00 A.M. Chicago, Illinois time on the date due, marked
for attention as indicated, or in such other manner or to such other account in
any United States bank as you, your nominee or any such subsequent Institutional
Holder may from time to time direct in writing. If for any reason whatsoever the
Company makes any such payment after such 11:00 A.M. transmittal time on the due
date or after 11:00 A.M. Chicago, Illinois time on any date after the due date,
such payment shall be deemed to have been made on the next following Business
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Day and for any overdue period such payment shall bear interest at the rate of
9.41% per annum as provided in Section 1.1 of this Agreement.
SECTION 3 REPRESENTATIONS.
Section 3.1. Representations of the Company. The Company represents and
warrants that all representations and warranties set forth in Exhibit B are true
and correct as of the date hereof and are incorporated herein by reference with
the same force and effect as though herein set forth in full.
Section 3.2. Representations of the Purchaser. (a) You represent, and in
entering into this Agreement the Company understands, that you are acquiring the
Notes for the purpose of investment and not with a view to the distribution
thereof, and that you have no present intention of selling, negotiating or
otherwise disposing of the Notes; it being understood, however, that the
disposition of your property shall at all times be and remain within your
control.
(b) You further represent that either: (1) you are acquiring Notes with
assets from your general account and not with the assets of any separate account
in which any employee benefit plan has any interest; (2) no part of the funds to
be used by you to purchase the Notes constitutes assets allocated to any
separate account maintained by you such that the application of such funds
constitutes a prohibited transaction under Section 406 of ERISA; or (3) all or a
part of such funds constitute assets of one or more separate accounts, trusts or
a commingled pension trust maintained by you, and you have disclosed to the
Company the names of such employee benefit plans whose assets in such separate
account or accounts or pension trusts exceed 10% of the total assets or are
expected to exceed 10% of the total assets of such account or accounts or trusts
as of the date of such purchase and the Company has advised you in writing (and
in making the representations set forth in this clause (3) you are relying on
such advice) that the Company is not a party-in-interest nor are the Notes
employer securities with respect to the particular employee benefit plan
disclosed to the Company by you as aforesaid (for the purpose of this clause
(3), all employee benefit plans maintained by the same employer or employee
organization are deemed to be a single plan). As used in this Section 3.2(b),
the terms "Separate Account", "Party-in-Interest", "Employer Securities" and
"Employee Benefit Plan" shall have the respective meanings assigned to them in
ERISA.
SECTION 4. CLOSING CONDITIONS.
Section 4.1. Conditions. Your obligation to purchase the Notes on the
Closing Date shall be subject to the performance by the Company of its
agreements hereunder which by the terms hereof are to be performed at or prior
to the time of delivery of the Notes and to the following further conditions
precedent:
(a) Closing Certificate. You shall have received a certificate dated
the Closing Date, signed by the President or a Vice President of the
Company,
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the truth and accuracy of which shall be a condition to your obligation to
purchase the Notes proposed to be sold to you and to the effect that (1)
the representations and warranties of the Company set forth in Exhibit B
hereto are true and correct on and with respect to the Closing Date, (2)
the Company has performed all of its obligations hereunder which are to be
performed on or prior to the Closing Date, and (3) no Default or Event of
Default has occurred and is continuing.
(b) Legal Opinions. You shall have received from Chapman and Cutler,
who are acting as your special counsel in this transaction, and from Gordon
R. Erickson, Esq., General Counsel for the Company, their respective
opinions dated the Closing Date, in form and substance satisfactory to you,
and covering the matters set forth in Exhibits C and D, respectively,
hereto.
(c) Company's Existence and Authority. On or prior to the Closing
Date, you shall have received, in form and substance reasonably
satisfactory to you and your special counsel, such documents and evidence
with respect to the Company as you may reasonably request in order to
establish the existence and good standing of the Company and the
authorization of the transactions contemplated by this Agreement.
(d) Related Transactions. The Company shall have consummated the sale
of the entire principal amount of the Notes scheduled to be sold on the
Closing Date pursuant to this Agreement and the other agreements referred
to in Section 1.3.
(e) Private Placement Number. On or prior to the Closing Date, special
counsel to the Purchasers shall have duly made the appropriate filings with
Standard & Poor's CUSIP Service Bureau, as agent for the National
Association of Insurance Commissioners, in order to obtain a private
placement number for the Notes.
(f) Funding Instructions. At least three Business Days prior to the
Closing Date, you shall have received written instructions executed by a
Responsible Officer of the Company directing the manner of the payment of
funds and setting forth (1) the name and address of the transferee bank,
(2) such transferee bank's ABA number, (3) the account name and number into
which the purchase price for the Notes is to be deposited, and (4) the name
and telephone number of the account representative responsible for
verifying receipt of such funds.
(g) Legality of Investment. The Notes to be purchased by you shall be
a legal investment for you under the laws of each jurisdiction to which you
may be subject (without resort to any so-called "Basket Provisions" to such
laws).
(h) Satisfactory Proceedings. All proceedings taken in connection with
the transactions contemplated by this Agreement, and all documents
necessary to the consummation thereof, shall be satisfactory in form and
substance to you and your special counsel, and you shall have received a
copy (executed or certified as may be appropriate) of all legal documents
or proceedings taken in connection with the consummation of said
transactions.
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Section 4.2. Waiver of Conditions. If on the Closing Date the Company fails
to tender to you the Notes to be issued to you on such date or if the conditions
specified in Section 4.1 have not been fulfilled, you may thereupon elect to be
relieved of all further obligations under this Agreement. Without limiting the
foregoing, if the conditions specified in Section 4.1 have not been fulfilled,
you may waive compliance by the Company with any such condition to such extent
as you may in your sole discretion determine. Nothing in this Section 4.2 shall
operate to relieve the Company of any of its obligations hereunder or to waive
any of your rights against the Company.
SECTION 5. COMPANY COVENANTS.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
Section 5.1. Corporate Existence, Etc. The Company will preserve and keep
in full force and effect, and will cause each Restricted Subsidiary to preserve
and keep in full force and effect, its corporate existence and all licenses and
permits necessary to the proper conduct of its business, provided that the
foregoing shall not prevent any transaction permitted by Section 5.13.
Section 5.2. Insurance. The Company will maintain, and will cause each
Restricted Subsidiary to maintain, insurance coverage by financially sound and
reputable insurers and in such forms and amounts and against such risks as are
customary for corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties.
Section 5.3. Taxes, Claims for Labor and Materials, Compliance with Laws.
(a) The Company will promptly pay and discharge, and will cause each Restricted
Subsidiary promptly to pay and discharge, all lawful taxes, assessments and
governmental charges or levies imposed upon the Company or such Restricted
Subsidiary, respectively, or upon or in respect of all or any part of the
property or business of the Company or such Restricted Subsidiary, all trade
accounts payable in accordance with usual and customary business terms, and all
claims for work, labor or materials, which if unpaid might become a Lien upon
any property of the Company or such Restricted Subsidiary; provided the Company
or such Restricted Subsidiary shall not be required to pay any such tax,
assessment, charge, levy, account payable or claim if (1) the validity,
applicability or amount thereof is being contested in good faith by appropriate
actions or proceedings which will prevent the forfeiture or sale of any property
of the Company or such Restricted Subsidiary or any material interference with
the use thereof by the Company or such Restricted Subsidiary, and (2) the
Company or such Restricted Subsidiary shall set aside on its books, reserves
deemed by it to be adequate with respect thereto.
(b) The Company will promptly comply and will cause each Restricted
Subsidiary to promptly comply with all laws, ordinances or governmental rules
and regulations to which it is subject, including, without limitation, the
Occupational Safety and Health Act of 1970, as amended, ERISA and all
Environmental Laws, the violation of which could materially and adversely affect
the properties, business, prospects, profits or conditions (financial otherwise)
of the Company and its Restricted Subsidiaries or would result in any Lien not
permitted under Section 5.10.
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Section 5.4. Maintenance, Etc. The Company will maintain, preserve and
keep, and will cause each Restricted Subsidiary to maintain, preserve and keep,
its properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order and from
time to time will make all necessary repairs, replacements, renewals and
additions so that at all times the efficiency thereof shall be maintained.
Section 5.5. Nature of Business. Neither the Company nor any Restricted
Subsidiary will engage in any business if, as a result, the general nature of
the business, taken on a consolidated basis, which would then be engaged in by
the Company and its Restricted Subsidiaries would be substantially changed from
the general nature of the business engaged in by the Company and its Restricted
Subsidiaries on the date of this Agreement.
Section 5.6. Current Ratio. The Company will at all times keep and maintain
the ratio of Consolidated Current Assets to Consolidated Current Liabilities at
not less than 1.5 to 1.0.
Section 5.7. Fixed Charges Coverage Ratio. The Company will keep and
maintain the ratio of Earnings Available for Fixed Charges to Fixed Charges as
of the end of each fiscal quarter for the immediately preceding period of four
consecutive fiscal quarters (taken as a single accounting period) at not less
than 1.75 to 1.00.
Section 5.8. Consolidated Net Worth. The Company will at all times keep and
maintain Consolidated Net Worth at an amount not less than the sum of (i)
$40,000,000 plus (ii) 50% of positive Consolidated Net Income earned by the
Company during each completed fiscal quarter on a cumulative basis (without
deduction for a net loss during a fiscal quarter) from September 30, 1994
through and including the date of determination.
Section 5.9. Limitation on Funded Debt and Current Debt. (a) The Company
will not create, assume, guarantee or otherwise incur or in any manner be or
become liable in respect of any Funded Debt, and the Company will not permit any
Restricted Subsidiary to create, assume, guarantee or otherwise incur or in any
manner be or become liable in respect of any Current Debt or Funded Debt,
except:
(1) Funded Debt evidenced by the Notes;
(2) Funded Debt of the Company and Current Debt and Funded Debt of its
Restricted Subsidiaries outstanding as of the date of this Agreement and
described on Schedule II hereto;
(3) other Funded Debt of the Company and other Current Debt and Funded
Debt of its Restricted Subsidiaries, provided that at the time of creation,
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issuance, assumption, guarantee or incurrence thereof and after giving
effect thereto and to the application of the proceeds thereof:
(i) Consolidated Funded Debt will not exceed 50% of the sum of
(A) Consolidated Funded Debt plus (B) Consolidated Net Worth, and
(ii) in the case of the issuance of any Current Debt or Funded
Debt of a Restricted Subsidiary other than Current Debt or Funded Debt
described in Section 5.9(a)(4), the aggregate amount of Current Debt
and Funded Debt of all Restricted Subsidiaries shall not exceed 10% of
Consolidated Net Worth; and
(4) Current Debt or Funded Debt of a Restricted Subsidiary to the
Company or to a Wholly-owned Restricted Subsidiary.
(b) The renewal, extension or refunding of any Funded Debt or Current Debt,
issued, incurred or outstanding pursuant to Section 5.9(a) shall constitute the
issuance of additional Funded Debt or Current Debt, as the case may be, which
is, in turn, subject to the limitations of the applicable provisions of Section
5.9(a).
(c) Any corporation which becomes a Restricted Subsidiary after the date
hereof shall for all purposes of this Section 5.9 be deemed to have created,
assumed or incurred at the time it becomes a Restricted Subsidiary all Funded
Debt and Current Debt of such corporation existing immediately after it becomes
a Restricted Subsidiary.
Section 5.10. Limitation on Liens. The Company will not, and will not
permit any Restricted Subsidiary to, create or incur, or suffer to be incurred
or to exist, any Lien on its or their property or assets, whether now owned or
hereafter acquired, or upon any income or profits therefrom, or transfer any
property for the purpose of subjecting the same to the payment of obligations in
priority to the payment of its or their general creditors, or acquire or agree
to acquire, or permit any Restricted Subsidiary to acquire, any property or
assets upon conditional sales agreements or other title retention devices,
except:
(a) Liens for property taxes and assessments or governmental charges
or levies and Liens securing claims or demands of mechanics and
materialmen, provided that payment thereof is not at the time required by
Section 5.3;
(b) Liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall not have expired, or in
respect of which the Company or a Restricted Subsidiary shall at any time
in good faith be prosecuting an appeal or proceeding for a review and in
respect of which a stay of execution pending such appeal or proceeding for
review shall have been secured;
(c) Liens incidental to the conduct of business or the ownership of
properties and assets (including warehousemen's and attorneys' liens and
statutory landlords' liens) and deposits, pledges or Liens to secure the
performance of bids, tenders or trade contracts, or to secure statutory
obligations, surety or appeal bonds or other Liens of like general nature,
in any such case incurred in the ordinary course of business and not in
connection with the borrowing of money, provided in each case, the
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obligation secured is not overdue or, if overdue, is being contested in
good faith by appropriate actions or proceedings;
(d) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other
similar purposes, or zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of the activities of the
Company and its Restricted Subsidiaries or which customarily exist on
properties of corporations engaged in similar activities and similarly
situated and which do not in any event materially impair their use in the
operation of the business of the Company and its Restricted Subsidiaries;
(e) Liens securing Indebtedness of a Restricted Subsidiary to the
Company or to a Wholly-owned Restricted Subsidiary;
(f) Liens securing Funded Debt of the Company or any Restricted
Subsidiary outstanding on the Closing Date and described on Schedule III
hereto;
(g) Liens created or incurred after the Closing Date given to secure
the payment of, or to secure Indebtedness incurred to provide funds for the
payment of, the purchase price incurred in connection with the acquisition
or purchase of fixed assets useful and intended to be used in carrying on
the business of the Company or a Restricted Subsidiary, including Liens
existing on such fixed assets at the time of acquisition thereof or at the
time of acquisition or purchase by the Company or a Restricted Subsidiary
of any business entity then owning such fixed assets, whether or not such
existing Liens were given to secure the payment of the purchase price of
the fixed assets to which they attach so long as they were not incurred,
extended or renewed in contemplation of such acquisition or purchase,
provided that (1) the Lien shall attach solely to the fixed assets acquired
or purchased, (2) such Lien shall have been created or incurred within six
months of the date of acquisition or purchase, (3) at the time of
acquisition or purchase of such fixed assets, the aggregate amount
remaining unpaid on all Indebtedness secured by Liens on such fixed assets,
whether or not assumed by the Company or a Restricted Subsidiary, shall not
exceed an amount equal to 100% of the lesser of the total purchase price or
fair market value at the time of acquisition or purchase of such fixed
assets (as determined in good faith by the Board of Directors of the
Company), and (4) all such Indebtedness shall have been incurred within the
applicable limitations provided in Section 5.6 and Section 5.9(a)(3); and
(h) Liens created or incurred after the Closing Date given to secure
Indebtedness of the Company or any Restricted Subsidiary in addition to the
Liens permitted by the preceding clauses (a) through (g) hereof, provided
that (1) all Indebtedness secured by Liens created or incurred pursuant to
this Section 5.10(h) shall not at any time exceed 10% of Consolidated Net
Worth, and (2) all such Indebtedness shall have been incurred within the
applicable limitations provided in Section 5.6 and Section 5.9(a)(3).
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Section 5.11. Investments. The Company will not, and will not permit any
Restricted Subsidiary to, make any Investments, other than:
(a) Investments by the Company and its Restricted Subsidiaries in and
to Restricted Subsidiaries, including any Investment in a corporation
which, after giving effect to such Investment, will become a Restricted
Subsidiary;
(b) Investments representing loans or advances in the usual and
ordinary course of business to officers, directors and employees for
expenses (including moving expenses related to a transfer) incidental to
carrying on the business of the Company or any Restricted Subsidiary;
(c) receivables arising from the sale of goods and services in the
ordinary course of business of the Company and its Restricted Subsidiaries;
(d) Investments in commercial paper maturing in 270 days or less from
the date of issuance which, at the time of acquisition by the Company or
any Subsidiary, is accorded the highest rating by Standard & Poor's
Corporation, Moody's Investors Service, Inc. or another nationally
recognized credit rating agency of similar standing;
(e) Investments in direct obligations of the United States of America
or any agency or instrumentality of the United States of America, the
payment or guarantee of which constitutes a full faith and credit
obligation of the United States of America, in either case, maturing within
twelve months from the date of acquisition thereof;
(f) Investments in certificates of deposit maturing within one year
from the date of issuance thereof issued by a bank or trust company
organized under the laws of the United States or any State thereof having
capital, surplus and undivided profits aggregating more than $250,000,000,
provided that at the time of acquisition thereof by the Company or a
Subsidiary, the senior unsecured long-term debt of such bank or trust
company or of the holding company of such bank or trust company is rated
"A" or better by Standard & Poor's Corporation or "A" or better by Moody's
Investors Service, Inc. or an equivalent rating by another nationally
recognized credit rating agency of similar standing;
(g) Investments in certificates of deposit maturing within one year
from the date of issuance thereof issued by a bank organized under the laws
of the United States or any State thereof, provided that the aggregate
amount of all Investments in certificates of deposit pursuant to the
provisions of this paragraph (g) shall not at any time exceed $1,000,000;
(h) Investments in marketable obligations of indebtedness maturing
within 270 days from the date of acquisition thereof of any State,
territory or possession of the United States or any political subdivision
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of any of the foregoing or the District of Columbia, which obligations at
the time of acquisition by the Company or any Subsidiary, are rated "A" or
better by Standard & Poor's Corporation or "A" or better by Moody's
Investors Service, Inc. or an equivalent rating by another nationally
recognized credit rating agency of similar standing;
(i) Investments in any money market fund organized and existing under
the laws of and doing business in any state of the United States which is
classified as a current asset in accordance with GAAP, which is managed by
a fund manager of recognized national standing and which invests
substantially all of its assets in obligations described in clauses (d),
(e), (f) and (h) of this Section 5.11; and
(j) Other Investments of the Company and its Restricted Subsidiaries
at any time owned not described in the foregoing clauses (a) through (i) of
this Section 5.11, provided, that the aggregate amount of all such other
Investments, including the Investment then proposed to be made, shall not
exceed an amount equal to 10% of Consolidated Net Worth.
In valuing any Investment for the purpose of applying the limitations set
forth in this Section 5.11, such Investment shall be taken at the original cost
thereof, without allowance for any subsequent write-offs or appreciation or
depreciation therein, but less (i) any amount repaid or recovered on account of
capital or principal and (ii) in the event any such Investment shall be either
sold or otherwise disposed of or completely written off in accordance with GAAP
and any resulting loss therefrom shall be required to be included in
Consolidated Net Income, the amount of such loss.
For purposes of this Section 5.11, at any time when a corporation becomes a
Restricted Subsidiary, all Investments of such corporation at such time shall be
deemed to have been made by such corporation, as a Restricted Subsidiary, at
such time.
Section 5.12. Restricted Payments. (a) The Company will not except as
hereinafter provided:
(1) Declare or pay any dividends, either in cash or property, on any
shares of its capital stock of any class (except dividends or other
distributions payable solely in shares of common stock of the Company);
(2) Directly or indirectly, or through any Subsidiary or through any
Affiliate of the Company, purchase, redeem or retire any shares of its
capital stock of any class or any warrants, rights or options to purchase
or acquire any shares of its capital stock (other than (i) in exchange for
or out of the net cash proceeds to the Company from the substantially
concurrent issue or sale of shares of common stock of the Company or
warrants, rights or options to purchase or acquire any shares of its common
stock, and (ii) payments to any officer of the Company in connection with
the exercise of such officer's stock appreciation rights granted pursuant
to stock purchase plans of the Company and/or its
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Restricted Subsidiaries, to the extent such payments are required to be
deducted in the calculation of Consolidated Net Income); or
(3) Make any other payment or distribution, either directly or
indirectly or through any Subsidiary, in respect of its capital stock;
(such declarations or payments of dividends, purchases, redemptions or
retirements of capital stock and warrants, rights or options and all such other
payments or distributions being herein collectively called "Restricted
Payments"), if after giving effect thereto the aggregate amount of Restricted
Payments made during the period from and after December 31, 1993 to and
including the date of the making of the Restricted Payment in question would
exceed the sum of (A) $3,000,000 plus (B) 50% of Consolidated Net Income for the
period from and after the Closing Date to and including the date of the making
of the Restricted Payment in question, computed on a cumulative basis for said
entire period (or if such Consolidated Net Income is a deficit figure, then
minus 100% of such deficit).
(b) The Company will not declare any dividend which constitutes a
Restricted Payment payable more than 60 days after the date of declaration
thereof.
(c) For the purposes of this Section 5.12, the amount of any Restricted
Payment declared, paid or distributed in property shall be deemed to be the
greater of the book value or fair market value (as determined in good faith by
the Board of Directors of the Company) of such property at the time of the
making of the Restricted Payment in question.
(d) The Company will not authorize or make a Restricted Payment if after
giving effect to the proposed Restricted Payment: (1) an Event of Default would
exist or (2) the Company could not incur at least $1.00 of additional Funded
Debt pursuant to Section 5.9(a)(3).
Section 5.13. Mergers, Consolidations and Sales of Assets. (a) The Company
will not, and will not permit any Restricted Subsidiary to (i) consolidate with
or be a party to a merger with any other Person or (ii) sell, lease or otherwise
dispose of all or any substantial part (as defined in paragraph (d) of this
Section 5.13) of the assets of the Company and its Restricted Subsidiaries
(other than sales of goods or services in the ordinary course of business),
provided, however, that:
(1) any Restricted Subsidiary may merge or consolidate with or into
the Company or any Wholly-owned Restricted Subsidiary so long as in any
merger or consolidation involving the Company, the Company shall be the
surviving or continuing corporation;
(2) the Company may consolidate or merge with any other corporation if
(i) the Company shall be the surviving or continuing corporation, and (ii)
at the time of any such consolidation or merger and after giving effect
thereto (x) no Default or Event of Default shall have occurred and be
continuing, and (y) the Company would be permitted to incur at least $1.00
of additional Funded Debt under the provisions of Section 5.9(a)(3); and
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(3) any Restricted Subsidiary may sell, lease or otherwise dispose of
all or any substantial part of its assets to the Company or to any
Wholly-owned Restricted Subsidiary.
(b) The Company will not permit any Restricted Subsidiary to issue or sell
any shares of stock of any class (including as "stock" for the purposes of this
Section 5.13, any warrants, rights or options to purchase or otherwise acquire
stock or other Securities exchangeable for or convertible into stock) of such
Restricted Subsidiary to any Person other than the Company or a Wholly-owned
Restricted Subsidiary, except (i) for the purpose of qualifying directors, or
(ii) in satisfaction of the validly pre-existing preemptive rights of minority
shareholders in connection with the simultaneous issuance of stock to the
Company and/or a Restricted Subsidiary whereby the Company and/or such
Restricted Subsidiary maintain their same proportionate interest in such
Restricted Subsidiary.
(c) The Company will not sell, transfer or otherwise dispose of any
shares of stock in any Restricted Subsidiary (except to qualify directors) or
any Indebtedness of any Restricted Subsidiary, and will not permit any
Restricted Subsidiary to sell, transfer or otherwise dispose of (except to the
Company or a Wholly-owned Restricted Subsidiary) any shares of stock or any
Indebtedness of any other Restricted Subsidiary, unless:
(1) simultaneously with such sale, transfer, or disposition, all
shares of stock and all Indebtedness of such Restricted Subsidiary at the
time owned by the Company and by every other Subsidiary shall be sold,
transferred or disposed of as an entirety;
(2) the Board of Directors of the Company shall have determined, as
evidenced by a resolution thereof, that the retention of such stock and
Indebtedness is no longer in the best interests of the Company;
(3) such stock and Indebtedness is sold, transferred or otherwise
disposed of to a Person, for a cash consideration or other value and on
terms reasonably deemed by the Board of Directors to be adequate and
satisfactory;
(4) the Restricted Subsidiary being disposed of shall not have any
continuing investment in the Company or any other Subsidiary not being
simultaneously disposed of; and
(5) such sale or other disposition does not involve a substantial part
(as hereinafter defined) of the assets of the Company and its Restricted
Subsidiaries.
(d) As used in this Section 5.13, a sale, lease or other disposition of
assets shall be deemed to be a "substantial part" of the assets of the Company
and its Restricted Subsidiaries only if the book value of such assets when added
to the book value of all other assets sold, leased or otherwise disposed of by
the Company and its Restricted Subsidiaries (other than sales of goods or
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services in the ordinary course of business) during the 12-month period ending
with the date of such sale, lease or other disposition, exceeds 15% of the
Consolidated Total Assets of the Company and its Restricted Subsidiaries
determined as of the end of the immediately preceding fiscal year.
Section 5.14. Repurchase of Notes. Neither the Company nor any Restricted
Subsidiary, directly or indirectly, may repurchase or make any offer to
repurchase any Notes unless an offer has been made to repurchase Notes, pro
rata, from all holders of the Notes at the same time and upon the same terms. In
case the Company or any Restricted Subsidiary repurchases or otherwise acquires
any Notes, such Notes shall immediately thereafter be cancelled and no Notes
shall be issued in substitution therefor. Without limiting the foregoing, upon
the purchase or other acquisition of any Notes by the Company, any Restricted
Subsidiary or any Affiliate, such Notes shall no longer be outstanding for
purposes of any section of this Agreement relating to the taking by the holders
of the Notes of any actions with respect hereto, including, without limitation,
Section 6.3, Section 6.4 and Section 7.1.
Section 5.15. Transaction with Affiliates. The Company will not, and will
not permit any Restricted Subsidiary to, enter into or be a party to any
transaction or arrangement with any Affiliate (including, without limitation,
the purchase from, sale to or exchange of property with, or the rendering of any
service by or for, any Affiliate), except (i) in the ordinary course of and
pursuant to the reasonable requirements of the Company's or such Restricted
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Restricted Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person other than an Affiliate, and
(ii) for arrangements which the Company shall enter into with the Gangelhoff
Enterprises Trust regarding environmental cleanup costs and expenses for the
Antrim, New Hampshire premises owned by Chicago Cutlery, Inc.
Section 5.16. Reports and Rights of Inspection. The Company will keep, and
will cause each Subsidiary to keep, proper books of record and account in which
full and correct entries will be made of all dealings or transactions of, or in
relation to, the business and affairs of the Company or such Subsidiary, in
accordance with GAAP consistently applied (except for changes disclosed in the
financial statements furnished to you pursuant to this Section 5.16 and
concurred in by the independent public accountants referred to in Section
5.16(b)), and will furnish to you so long as you are the holder of any Note and
to each other Institutional Holder of the then outstanding Notes (in duplicate
if so specified below or otherwise requested):
(a) Quarterly Statements. As soon as available and in any event within
60 days after the end of each quarterly fiscal period (except the last) of
each fiscal year, copies of:
(1) consolidated balance sheets of the Company and its Restricted
Subsidiaries as of the close of such quarterly fiscal period, setting
forth in comparative form the consolidated figures for the fiscal year
then most recently ended, and
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(2) consolidated statements of income, retained earnings and cash
flows of the Company and its Restricted Subsidiaries for such
quarterly fiscal period and for the portion of the fiscal year ending
with such quarterly fiscal period, in each case setting forth in
comparative form the consolidated figures for the corresponding
periods of the preceding fiscal year, all in reasonable detail and
certified as complete and correct, subject to changes resulting from
year-end adjustments, by an authorized financial officer of the
Company;
(b) Annual Statements. As soon as available and in any event within
120 days after the close of each fiscal year of the Company, copies of:
(1) consolidated balance sheets of the Company and its Restricted
Subsidiaries as of the close of such fiscal year, and
(2) consolidated statements of income, retained earnings and cash
flows of the Company and its Restricted Subsidiaries for such fiscal
year, in each case setting forth in comparative form the consolidated
figures for the preceding fiscal year, all in reasonable detail and
accompanied by a report thereon of a firm of independent public
accountants of recognized national standing selected by the Company to
the effect that the consolidated financial statements have been
prepared in accordance with GAAP consistently applied (except for
changes in application in which such accountants concur) and present
fairly the financial condition of the Company and its Restricted
Subsidiaries and that the examination of such accountants in
connection with such financial statements has been conducted in
accordance with generally accepted auditing standards;
(c) Audit Reports. Promptly upon receipt thereof, one copy of each
interim or special audit made by independent accountants of the books of
the Company or any Restricted Subsidiary, in either case taken as a whole,
including, however, any other interim or special audit if such audit
contains information which could materially and adversely affect the
properties, business, profits or condition (financial or otherwise) of the
Company and its Restricted Subsidiaries;
(d) SEC and Other Reports. Promptly upon their becoming available, one
copy of each financial statement, report, notice or proxy statement sent by
the Company to its stockholders generally and of each regular or periodic
report, and any registration statement or prospectus filed by the Company
or any Subsidiary with any securities exchange or the Securities and
Exchange Commission or any successor agency, and copies of any orders in
any proceedings to which the Company or any of its Subsidiaries is a party,
issued by any governmental agency, Federal or state, having jurisdiction
over the Company or any of its Subsidiaries;
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(e) Officer's Certificates. Within the periods provided in paragraphs
(a) and (b) above, a certificate of an authorized financial officer of the
Company stating that such officer has reviewed the provisions of this
Agreement and setting forth:
(1) the information and computations (in sufficient detail)
required in order to establish whether the Company was in compliance
with the requirements of Section 5.6 through 5.15, inclusive, at the
end of the period covered by the financial statements then being
furnished, and
(2) whether there existed as of the date of such financial
statements and whether, to the best of such officer's knowledge, there
exists on the date of the certificate or existed at any time during
the period covered by such financial statements any Default or Event
of Default and, if any such condition or event exists on the date of
the certificate, specifying the nature and period of existence thereof
and the action the Company is taking and proposes to take with respect
thereto;
(f) Accountant's Certificates. Within the period provided in paragraph
(b) above, a certificate of the accountants who are reporting upon such
financial statements, stating that they have reviewed this Agreement and
stating further whether, in making their audit, such accountants have
become aware of any Default or Event of Default under any of the terms or
provisions of this Agreement insofar as any such terms or provisions
pertain to or involve accounting matters or determinations, and if any such
condition or event then exists, specifying the nature and period of
existence thereof;
(g) Unresticted Subsidiaries. During any periods when there shall be
one or more Unrestricted Subsidiaries:
(1) if at the end of any fiscal quarter the book value of the
assets of the Unrestricted Subsidiaries constitutes 20% or more of the
total consolidated assets of the Company and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP, then
within the respective periods provided in paragraphs (a) and (b)
above, quarterly financial statements for such fiscal quarter and
annual financial statements for the year in which such fiscal quarter
occurs, in each case of the character and as otherwise in said
paragraphs (a) and (b) provided covering each Unrestricted Subsidiary
(or groups of Unrestricted Subsidiaries on a consolidated basis); and
(2) if the Company shall not be required to deliver financial
statements of Unrestricted Subsidiaries pursuant to clause (1) of this
paragraph (g) and if for any reason you and the other Institutional
Holders shall not be receiving the financial statements of the Company
and its consolidated Subsidiaries pursuant to paragraph (d) above,
then within the respective periods provided in paragraphs (a) and (b)
above, financial statements of the character and for the dates and
periods as in said paragraphs (a) and (b) provided covering the
Company and its consolidated Subsidiaries; and
(h) Requested Information. With reasonable promptness, such other data
and information as you or any such Institutional Holder may reasonably
request.
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Without limiting the foregoing, the Company will permit you, so long as you are
the holder of any Note, and each Institutional Holder of the then outstanding
Notes (or such Persons as either you or such Institutional Holder may
designate), to visit and inspect, under the Company's guidance, any of the
properties of the Company or any Subsidiary, to examine all of their books of
account, records, reports and other papers, to make copies and extracts
therefrom and to discuss their respective affairs, finances and accounts with
their respective officers, employees, and independent public accountants (and by
this provision the Company authorizes said accountants to discuss with you the
finances and affairs of the Company and its Restricted Subsidiaries), all at
such reasonable times and as often as may be reasonably requested. The Company
shall not be required to pay or reimburse you or any such holder for expenses
which you or any such holder may incur in connection with any such visitation or
inspection.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THERFOR.
Section 6.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note when
the same shall have become due and such default shall continue for more
than five days; or
(b) Default shall occur in the making of any required prepayment on
any of the Notes as provided in Section 2.1; or
(c) Default shall occur in the making of any other payment of the
principal of any Note or premium, if any, thereon at the expressed or any
accelerated maturity date or at any date fixed for prepayment; or
(d) Default shall occur in the observance or performance of any
covenant or agreement contained in Section 5.6 through Section 5.13 or
Section 6.2; or
(e) Default shall occur in the observance or performance of any other
provision of this Agreement which is not remedied within 30 days after the
earlier of (1) the day on which a Responsible Officer of the Company first
obtains knowledge of such default, or (2) the day on which written notice
thereof is given to the Company by the holder of any Note; or
(f) Default shall be made in the payment of the principal of or
interest on any Indebtedness of the Company (other than the Notes) or any
Restricted Subsidiary for borrowed money aggregating more than $2,000,000,
as and when the same shall become due and payable by the lapse of time, by
declaration, by call for redemption or otherwise, and such default shall
continue beyond the period of grace, if any, allowed with respect thereto;
or
(g) Default or the happening of any event shall occur under any
indenture, agreement, or other instrument under which any Indebtedness
(other
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than the Notes) of the Company or any Restricted Subsidiary for borrowed
money aggregating more than $1,000,000 may be issued and such default or
event shall continue for a period of time sufficient to permit the
acceleration of the maturity of any Indebtedness of the Company or any
Restricted Subsidiary outstanding thereunder; or
(h) Any representation or warranty made by the Company herein, or made
by the Company in any written statement or certificate furnished by the
Company in connection with the consummation of the issuance and delivery of
the Notes or furnished by the Company pursuant hereto, is untrue in any
material respect as of the date of the issuance or making thereof; or
(i) Final judgment or judgments for the payment of money aggregating
in excess of $1,000,000 is or are outstanding against the Company or any
Restricted Subsidiary or against any property or assets of either and any
one of such judgments has remained unpaid, unvacated, unbonded or unstayed
by appeal or otherwise for a period of 30 days from the date of its entry;
or
(j) A custodian, receiver, liquidator or trustee of the Company or any
Restricted Subsidiary, or of any of the property of either, is appointed or
takes possession and such appointment or possession remains uncontested or
in effect for more than 60 days; or the Company or any Restricted
Subsidiary generally fails to pay its debts as they become due or admits in
writing its inability to pay its debts as they mature; or the Company or
any Restricted Subsidiary is adjudicated bankrupt or insolvent; or an order
for relief is entered under the Federal Bankruptcy Code against the Company
or any Restricted Subsidiary; or any of the property of either is
sequestered by court order and the order remains in effect for more than 60
days; or bankruptcy, reorganization, arrangement, or insolvency proceedings
or other proceedings for relief under any bankruptcy or similar laws for
relief of debtors, are instituted against the Company or any Restricted
Subsidiary and are not stayed or dismissed within 60 days after filing; or
(k) The Company or any Restricted Subsidiary files a petition in
voluntary bankruptcy or seeking relief under any provision of any
bankruptcy, reorganization, arrangement, or insolvency law of any
jurisdiction or similar laws for relief of debtors, whether now or
subsequently in effect; or consents to the filing of any petition against
it under any such law; or consents to the appointment of or taking
possession by a custodian, receiver, trustee or liquidator of the Company
any Restricted Subsidiary, or any of the property of either.
Section 6.2. Notice to Holders. When any Default or Event of Default has
occurred, or if the holder of any Note or of any other evidence of Indebtedness
for borrowed money of the Company or any Subsidiary gives any notice or takes
any other action with respect to a claimed default, the Company agrees to give
written notice within three Business Days after the date on which a Responsible
Officer of the Company acquires knowledge of such event, to all holders of the
Notes then outstanding specifying the nature and period of existence thereof and
what action the Company is taking or proposes to take with respect thereto.
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Section 6.3. Acceleration of Maturities. When any Event of Default
described in paragraph (a), (b) or (c) of Section 6.1 has happened and is
continuing, any holder of any Note may, and when any Event of Default described
in paragraphs (d) through (i), inclusive, of said Section 6.1 has happened and
is continuing, the holder or holders of 51% or more of the principal amount of
the Notes at the time outstanding may, by notice in writing to the Company in
the manner provided in Section 9.6, declare the entire principal and all
interest accrued on all Notes to be, and all Notes shall thereupon become,
forthwith due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived. When any Event of
Default described in paragraph (j) or (k) of Section 6.1 has occurred, then all
outstanding Notes shall immediately become due and payable without presentment,
demand or notice of any kind. Upon the Notes becoming due and payable as a
result of any Event of Default as aforesaid, the Company will forthwith pay to
the holders of the Notes the entire principal and interest accrued on the Notes
and, to the extent not prohibited by applicable law, an amount as liquidated
damages for the loss of the bargain evidenced hereby (and not as a penalty)
equal to the Make-Whole Amount, determined as of the date of declaration of an
acceleration or, in the case of an Event of Default described in paragraph (j)
or (k) of Section 6.1, the date of acceleration. No course of dealing on the
part of the holder or holders of any Notes nor any delay or failure on the part
of any holder of Notes to exercise any right shall operate as a waiver of such
right or otherwise prejudice such holder's rights, powers and remedies. The
Company further agrees, to the extent permitted by law, to pay to the holder or
holders of the Notes all costs and expenses incurred by them in the collection
of any Notes upon any default hereunder or thereon, including reasonable
compensation to such holder's or holders' attorneys for all services rendered in
connection therewith.
Section 6.4. Rescission of Acceleration. The provisions of Section 6.3 are
subject to the condition that if the principal of and accrued interest on all or
any outstanding Notes have been declared immediately due and payable by reason
of the occurrence of any Event of Default described in paragraphs (a) through
(i), inclusive, of Section 6.1, the holders of 66-2/3% in aggregate principal
amount of the Notes then outstanding may, by written instrument filed with the
Company, rescind and annul such declaration and the consequences thereof,
provided that at the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any
principal, interest or premium on the Notes which has become due and
payable solely by reason of such declaration under Section 6.3) shall
have been duly paid; and
(c) each and every other Default and Event of Default shall have
been made good, cured or waived pursuant to Section 7.1;
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and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.
Section 7.1. Consent Required. Any term, covenant, agreement or condition
of this Agreement may, with the consent of the Company, be amended or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), if the Company shall have obtained the consent
in writing of the holders of at least 66-2/3% in aggregate principal amount of
outstanding Notes; provided that without the written consent of the holders of
all of the Notes then outstanding, no such amendment or waiver shall be
effective (a) which will change the time of payment (including any prepayment
required by Section 2.1) of the principal of or the interest on any Note or
change the principal amount thereof or change the rate of interest thereon, or
(b) which will change any of the provisions with respect to optional
prepayments, or (c) which will change the percentage of holders of the Notes
required to consent to any such amendment or waiver of any of the provisions of
this Section 7 or Section 6.
Section 7.2. Solicitation of Holders. So long as there are any Notes
outstanding, the Company will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement or the Notes unless each holder of Notes (irrespective of the amount
of Notes then owned by it) shall be informed thereof by the Company and shall be
afforded the opportunity of considering the same and shall be supplied by the
Company with sufficient information to enable it to make an informed decision
with respect thereto. The Company will not, directly or indirectly, pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any holder of Notes as consideration for or as an
inducement to entering into by any holder of Notes of any waiver or amendment of
any of the terms and provisions of this Agreement or the Notes unless such
remuneration is concurrently offered, on the same terms, ratably to the holders
of all Notes then outstanding. Promptly and in any event within 30 days of the
date of execution and delivery of any such waiver or amendment, the Company
shall provide a true, correct and complete copy thereof to each of the holders
of the Notes.
Section 7.3. Effect of Amendment or Waiver. Any such amendment or waiver
shall apply equally to all of the holders of the Notes and shall be binding upon
them, upon each future holder of any Note and upon the Company, whether or not
such Note shall have been marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.
Section 8.1. Definitions. Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings and the
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following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"Affiliate" shall mean any Person (other than a Restricted Subsidiary)
(a) which directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, the Company, (b) which
beneficially owns or holds 10% or more of any class of the Voting Stock of the
Company or (c) 10% or more of the Voting Stock (or in the case of a Person which
is not a corporation, 10% or more of the equity interest) of which is
beneficially owned or held by the Company or a Subsidiary. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks in Terre Haute, Indiana or Chicago, Illinois are required by
law to close or are customarily closed.
"Capitalized Lease" shall mean any lease the obligation for Rentals with
respect to which is required to be capitalized on a consolidated balance sheet
of the lessee and its subsidiaries in accordance with GAAP prepared in
accordance with GAAP.
"Capitalized Rentals" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations from time to time promulgated thereunder.
"Company" shall mean General Housewares Corp., a Delaware corporation,
and any Person who succeeds to all, or substantially all, of the assets and
business of General Housewares Corp.
"Consolidated Current Assets" shall mean as of the date of any
determination thereof such assets of the Company and its Restricted Subsidiaries
on a consolidated basis as shall be determined in accordance with GAAP to
constitute current assets.
"Consolidated Current Liabilities" shall mean as of the date of any
determination thereof such liabilities of the Company and its Restricted
Subsidiaries on a consolidated basis as shall be determined in accordance with
GAAP to constitute current liabilities, minus to the extent included therein,
any payments in respect of Funded Debt that are required to be made within one
year from the date of determination.
"Consolidated Funded Debt" shall mean all Funded Debt of the Company and
its Restricted Subsidiaries, determined on a consolidated basis eliminating
intercompany items.
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"Consolidated Net Income" for any period shall mean the net income of the
Company and its Restricted Subsidiaries determined on a consolidated basis in
accordance with GAAP, excluding unremitted earnings of Unrestricted
Subsidiaries.
"Consolidated Net Worth" shall mean, as of the date of any determination
thereof, the total stockholder's equity of the Company and its Restricted
Subsidiaries determined in accordance with GAAP.
"Consolidated Total Assets" shall mean, as of the date of determination
thereof, the total assets of the Company and its Restricted Subsidiaries
determined on a consolidated basis in accordance with GAAP.
"Current Debt" of any Person shall mean as of the date of any
determination thereof (a) all Indebtedness of such Person for borrowed money
other than Funded Debt of such Person and (b) Guaranties by such Person of
Current Debt of others.
"Default" shall mean any event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, constitute an Event of
Default.
"Earnings Available for Fixed Charges" for any period shall mean the sum
of (a) Consolidated Net Income during such period plus (to the extent deducted
in determining Consolidated Net Income), (b) all provisions for any Federal,
state or other income taxes made by the Company and its Restricted Subsidiaries
during such period and (c) Fixed Charges during such period.
"Environmental Law" shall mean any international, federal, state or local
statute, law, regulation, order, consent decree, judgment, permit, license,
code, covenant, deed restriction, common law, treaty, convention, ordinance or
other requirement relating to public health, safety or the environment,
including, without limitation, those relating to releases, discharges or
emissions to air, water, land or groundwater, to the withdrawal or use of
groundwater, to the use and handling of polychlorinated biphenyls or asbestos,
to the disposal, treatment, storage or management of hazardous or solid waste,
or Hazardous Substances or crude oil, or any fraction thereof, or to exposure to
toxic or hazardous materials, to the handling, transportation, discharge or
release of gaseous or liquid Hazardous Substances and any regulation, order,
notice or demand issued pursuant to such law, statute or ordinance, in each case
applicable to the property of the Company and its Subsidiaries or the operation,
construction or modification of any thereof, including without limitation, the
following: the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, the
Hazardous Materials Transportation Act, as amended, the Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1976, the Safe Drinking Water
Control Act, the Clean Air Act of 1966, as amended, the Toxic Substances Control
Act of 1976, the Occupational Safety and Health Act of 1977, as amended, the
Emergency Planning and Community Right-to-Know Act of 1986, the National
Environmental Policy Act of 1975, the Oil Pollution Act of 1990 and any similar
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or implementing state law, and any state statute and any further amendments to
these laws providing for financial responsibility for cleanup or other actions
with respect to the release or threatened release of Hazardous Substances or
crude oil, or any fraction thereof, and all rules, regulations, guidance
documents and publications promulgated thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" shall mean any corporation, trade or business that is,
along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA. "Event of Default"
shall have the meaning set forth in Section 6.1.
"Fixed Charges" for any period shall mean on a consolidated basis the sum
of (a) all Rentals (excluding all Capitalized Rentals) payable during such
period by the Company and its Restricted Subsidiaries, and (b) all Interest
Charges on all Indebtedness (including the interest component of all Capitalized
Rentals) of the Company and its Restricted Subsidiaries.
"Funded Debt" of any Person shall mean (a) all Indebtedness of such
Person for borrowed money or which has been incurred in connection with the
acquisition of assets in each case having a final maturity of one or more than
one year from the date of origin thereof (or which is renewable or extendible at
the option of the obligor for a period or periods more than one year from the
date of origin), including all payments in respect thereof that are required to
be made within one year from the date of any determination of Funded Debt,
whether or not the obligation to make such payments shall constitute a current
liability of the obligor under GAAP, (b) all Capitalized Rentals of such Person,
and (c) all Guaranties by such Person of Funded Debt of others.
"GAAP" shall mean generally accepted accounting principles at the time.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (a) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (b) to advance or supply
funds (1) for the purchase or payment of such Indebtedness or obligation, or (2)
to maintain working capital or any balance sheet or income statement condition
or otherwise to advance or make available funds for the purchase or payment of
such Indebtedness or obligation, (c) to lease property or to purchase Securities
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or other property or services primarily for the purpose of assuring the
owner of such Indebtedness or obligation of the ability of the primary obligor
to make payment of the Indebtedness or obligation, or (d) otherwise to assure
the owner of the Indebtedness or obligation of the primary obligor against loss
in respect thereof. For the purposes of all computations made under this
Agreement, a Guaranty in respect of any Indebtedness for borrowed money shall be
deemed to be Indebtedness equal to the principal amount of such Indebtedness for
borrowed money which has been guaranteed.
"Hazardous Substance" shall mean any hazardous or toxic material, substance
or waste, pollutant or contaminant which is regulated under any statute, law,
ordinance, rule or regulation of any local, state, regional or federal authority
having jurisdiction over the property of the Company and its Subsidiaries or its
use, including but not limited to any material, substance or waste which is: (a)
defined as a hazardous substance under Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. Section 1317), as amended; (b) regulated as a
hazardous waste under Section 1004 or Section 3001 of the Federal Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.), as amended; (c) defined as a hazardous substance
under Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 et seq.), as amended; or (d) defined or
regulated as a hazardous substance or hazardous waste under any rules or
regulations promulgated under any of the foregoing statutes.
"Indebtedness" of any Person shall mean and include all obligations of
such Person which in accordance with GAAP shall be classified upon a balance
sheet of such Person as liabilities of such Person, and in any event shall
include all (a) obligations of such Person for borrowed money or which have been
incurred in connection with the acquisition of property or assets, (b)
obligations secured by any Lien upon property or assets owned by such Person,
even though such Person has not assumed or become liable for the payment of such
obligations, (c) obligations created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person, notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement in the event of default are limited to
repossession or sale of property, (d) obligations to purchase any property or to
obtain the services of another Person if the contract requires that payment for
such property or services be made regardless of whether such property is
delivered or such services are performed, except that no obligation shall
constitute Indebtedness solely because the contract provides for commercially
reasonable liquidated charges or reimbursement of expenses following
cancellation, (e) Capitalized Rentals and (f) Guaranties of obligations of
others of the character referred to in this definition.
"Institutional Holder" shall mean any of the following Persons: (a) any
bank, savings and loan association, savings institution, trust company or
national banking association, acting for its own account or in a fiduciary
capacity, (b) any charitable foundation, (c) any insurance company, (d) any
fraternal benefit society, (e) any pension, retirement or profit-sharing trust
or fund within the meaning of Title I of ERISA or for which any bank, trust
company, national banking association or investment adviser registered under the
Investment Advisers Act of 1940, as amended, is acting as trustee or agent, (f)
any investment company or business development company, as defined in the
Investment Company Act of 1940, as amended, (g)any small business investment
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company licensed under the Small Business Investment Act of 1958, as amended,
(h) any broker or dealer registered under the Securities Exchange Act of 1934,
as amended, or any investment adviser registered under the Investment Adviser
Act of 1940, as amended, (i) any government, any public employees' pension or
retirement system, or any other government agency supervising the investment of
public funds, (j) any other entity all of the equity owners of which are
Institutional Holders or (k) any other Person which may be within the definition
of "qualified institutional buyer" as such term is used in Rule 144A, as from
time to time in effect, promulgated under the Securities Act of 1933, as
amended.
"Interest Charges" for any period shall mean all interest and all
amortization of debt discount and expense on any particular Indebtedness for
which such calculations are being made.
"Investments" shall mean all investments, in cash or by delivery of
property, made directly or indirectly in any Person, whether by acquisition of
shares of capital stock, Indebtedness or other obligations or Securities or by
loan, advance, capital contribution or otherwise; provided that "Investments"
shall not mean or include routine investments in property to be used or consumed
in the ordinary course of business.
"Lien" shall mean any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other similar title exceptions and encumbrances (including, with
respect to stock, stockholder agreements, voting trust agreements, buy-back
agreements and all similar arrangements) affecting property. For the purposes of
this Agreement, the Company or a Restricted Subsidiary shall be deemed to be the
owner of any property which it has acquired or holds subject to a conditional
sale agreement, Capitalized Lease or other arrangement pursuant to which title
to the property has been retained by or vested in some other Person for security
purposes and such retention or vesting shall constitute a Lien.
"Long-Term Lease" shall mean any lease of real or personal property
(other than a Capitalized Lease) having an original term, including any period
for which the lease may be renewed or extended at the option of the lessor, of
more than three years.
"Make-Whole Amount" shall mean in connection with any prepayment or
acceleration of the Notes the excess, if any, of (i) the aggregate present value
as of the date of such prepayment of each dollar of principal being prepaid or
paid (taking into account the application of such prepayment required by the
last sentence of Section 2.1) and the amount of interest (exclusive of interest
accrued to the date of prepayment) that would have been payable in respect of
such dollar if such prepayment or payment had not been made, determined by
discounting such amounts at the Reinvestment Rate from the respective dates on
which they would have been payable, over (ii) 100% of the principal amount of
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the outstanding Notes being prepaid or paid. If the Reinvestment Rate is equal
to or higher than the interest rate on the Notes then applicable, the Make-Whole
Amount shall be zero. For purposes of any determination of the Make-Whole
Amount:
"Reinvestment Rate" shall mean (1) 0.50%, plus the yield to maturity
of the United States Treasury obligations with a maturity (as compiled by
and published on Telerate Page 5 or its successor not more than five
Business Days immediately preceding the payment date) equal to the
remaining Weighted Average Life to Maturity (rounded to the nearest month)
of the principal being prepaid or paid (taking into account the application
of each prepayment or payment required by the last sentence of Section 2.1)
or (2) if such yield shall not have been so published, the Reinvestment
Rate in respect of such payment date shall mean 0.50%, plus the mean of the
yields to maturity of United States Treasury obligations (as compiled by
and published in the United States Federal Reserve Bulletin or its
successor publication for each of the two weeks immediately preceding the
fifth Business Day prior to the payment date) with a constant maturity
equal to the Weighted Average Life to Maturity of the principal being
prepaid or paid (taking into account the application of each prepayment or
payment required by the last sentence of Section 2.1). If no maturity
determined pursuant to the preceding sentence exactly equals the Weighted
Average Life to Maturity, yields for the next longer and the next shorter
published maturities shall be calculated pursuant to the foregoing sentence
and the Reinvestment Rate shall be interpolated from such yields on a
straight-line basis (rounding to the nearest month). If such yields shall
not have been so published, the Reinvestment Rate in respect of such
determination date shall be calculated on the basis of the arithmetic mean
of the arithmetic means of the secondary market ask rates, as of
approximately 3:30 P.M., New York City time, on the last business days of
each of the two weeks preceding the payment date, for the actively traded
U.S. Treasury security or securities with a maturity most closely
corresponding to the remaining Weighted Average Life to Maturity, as
reported by three primary United States Government securities dealers in
New York City of national standing selected in good faith by the Company.
"Weighted Average Life to Maturity" of the principal amount of the
Notes being prepaid or paid shall mean, as of the time of any determination
thereof, the number of years obtained by dividing the then Remaining
Dollar-Years of such principal by the aggregate amount of such principal.
The term "Remaining Dollar-Years" of such principal shall mean the amount
obtained by (i) multiplying (x) the remainder of (1) the amount of
principal that would have become due on each scheduled payment date if such
prepayment or payment had not been made, less (2) the amount of principal
on the Notes scheduled to become due on such date after giving effect to
such prepayment or payment and the application thereof in accordance with
the last sentence of Section 2.1, by (y) the number of years (calculated to
the nearest one-twelfth) which will elapse between the date of such
prepayment or payment, as the case may be, and such scheduled payment date,
and (ii) totalling the products obtained in (i).
"Minority Interests" shall mean any shares of stock of any class of a
Restricted Subsidiary (other than directors' qualifying shares as required
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by law) that are not owned by the Company and/or one or more of its Restricted
Subsidiaries. Minority Interests shall be valued by valuing Minority Interests
constituting preferred stock at the voluntary or involuntary liquidating value
of such preferred stock, whichever is greater, and by valuing Minority Interests
constituting common stock at the book value of capital and surplus applicable
thereto adjusted, if necessary, to reflect any changes from the book value of
such common stock required by the foregoing method of valuing Minority Interests
in preferred stock.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, partnership, limited liability company,
corporation, trust or unincorporated organization, and a government or agency or
political subdivision thereof.
"Plan" shall mean a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
"Purchasers" shall have the meaning set forth in Section 1.1.
"Rentals" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of the
property) payable by the Company or a Restricted Subsidiary, as lessee or
sublessee under a lease of real or personal property, but shall be exclusive of
any amounts required to be paid by the Company or a Restricted Subsidiary
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges. Fixed rents under
any so-called "percentage leases" shall be computed solely on the basis of the
minimum rents, if any, required to be paid by the lessee regardless of sales
volume or gross revenues.
"Reportable Event" shall have the same meaning as in ERISA.
"Responsible Officer" shall mean the chief executive officer, the chief
operating officer or the chief financial officer.
"Restricted Subsidiary" shall mean (i) any Subsidiary which is listed on
Schedule II hereto as a Restricted Subsidiary, and (ii) any other Subsidiary (A)
which is organized under the laws of the United States or any State thereof or
of Canada or any Province thereof, (B) which conducts substantially all of its
business and has substantially all of its assets within the United States or
Canada, (C) of which more than 80% (by number of votes) of the Voting Stock is
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owned by the Company and/or one or more Wholly-owned Restricted Subsidiaries,
and (D) which is designated as a Restricted Subsidiary by written notice of the
President or any Vice President of the Company to the holders of the Notes;
provided, however, that no such designation shall be effective unless (x) such
Subsidiary shall never theretofore have been a Restricted Subsidiary, (y)
immediately after such designation, the Company could incur at least $1.00 of
additional Funded Debt under the limitation of Section 5.9(a)(3) and (z) no
Default or Event of Default shall then exist and be continuing.
"Security" shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
The term "subsidiary" shall mean as to any particular parent corporation
any corporation of which more than 50% (by number of votes) of the Voting Stock
shall be beneficially owned, directly or indirectly, by such parent corporation.
The term "Subsidiary" shall mean a subsidiary of the Company.
"Unrestricted Subsidiary" shall mean any Subsidiary which is not a
Restricted Subsidiary.
"Voting Stock" shall mean Securities of any class or classes, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
"Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) and all Indebtedness for
borrowed money shall be owned by the Company and/or one or more of its
Wholly-owned Subsidiaries.
Section 8.2. Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
Section 8.3. Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether the action in question
is taken directly or indirectly by such Person.
SECTION 9. MISCELLANEOUS.
Section 9.1. Registered Notes. The Company shall cause to be kept at its
principal office a register for the registration and transfer of the Notes, and
the Company will register or transfer or cause to be registered or transferred,
as hereinafter provided, any Note issued pursuant to this Agreement.
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At any time and from time to time the holder of any Note which has been
duly registered as hereinabove provided may transfer such Note upon surrender
thereof at the principal office of the Company duly endorsed or accompanied by a
written instrument of transfer duly executed by the holder of such Note or its
attorney duly authorized in writing.
The Person in whose name any Note shall be registered shall be deemed and
treated as the owner and holder thereof for all purposes of this Agreement.
Payment of or on account of the principal, premium, if any, and interest on any
Note shall be made to or upon the written order of such holder.
Section 9.2. Exchange of Notes. At any time and from time to time, upon not
less than five days' notice to that effect given by the holder of any Note
initially delivered or of any Note substituted therefor pursuant to Section 9.1,
this Section 9.2 or Section 9.3, and, upon surrender of such Note at its office,
the Company will deliver in exchange therefor, without expense to such holder,
except as set forth below, a Note for the same aggregate principal amount as the
then unpaid principal amount of the Note so surrendered, or Notes in the
denomination of $200,000 (or such lesser amount as shall constitute 100% of the
Notes of such holder) or any amount in excess thereof as such holder shall
specify, dated as of the date to which interest has been paid on the Note so
surrendered or, if such surrender is prior to the payment of any interest
thereon, then dated as of the date of issue, registered in the name of such
Person or Persons as may be designated by such holder, and otherwise of the same
form and tenor as the Notes so surrendered for exchange. The Company may require
the payment of a sum sufficient to cover any stamp tax or governmental charge
imposed upon such exchange or transfer.
Section 9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If the Purchaser or any subsequent Institutional Holder is the
owner of any such lost, stolen or destroyed Note, then the affidavit of an
authorized officer of such owner, setting forth the fact of loss, theft or
destruction and of its ownership of such Note at the time of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof and no further
indemnity shall be required as a condition to the execution and delivery of a
new Note other than the written agreement of such owner to indemnify the
Company.
Section 9.4. Expenses, Stamp Tax Indemnity. Whether or not the transactions
herein contemplated shall be consummated, the Company agrees to pay directly all
of your out-of-pocket expenses in connection with the preparation, execution and
delivery of this Agreement and the transactions contemplated hereby, including
but not limited to all investment banking and similar fees, the reasonable
charges and disbursements of Chapman and Cutler, your special counsel,
duplicating and printing costs and charges for shipping the Notes, adequately
insured to you at your home office or at such other place as you may designate,
and all such expenses relating to any amendments, waivers or consents pursuant
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to the provisions hereof (whether or not the same are actually executed and
delivered), including, without limitation, any amendments, waivers, or consents
resulting from any work-out, renegotiation or restructuring relating to the
performance by the Company of its obligations under this Agreement and the
Notes. The Company further agrees that it will pay and save you harmless against
any and all liability with respect to stamp and other taxes, if any, which may
be payable or which may be determined to be payable in connection with the
execution and delivery of this Agreement or the Notes, whether or not any Notes
are then outstanding. The Company agrees to protect and indemnify you against
any liability for any and all brokerage fees and commissions payable or claimed
to be payable to any Person in connection with the transactions contemplated by
this Agreement. Without limiting the foregoing, the Company agrees to pay the
cost of obtaining the private placement number for the Notes and authorizes the
submission of such information as may be required by Standard & Poor's CUSIP
Service Bureau for the purpose of obtaining such number. .
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative. No delay or
failure on the part of the holder of any Note in the exercise of any power or
right shall operate as a waiver thereof; nor shall any single or partial
exercise of the same preclude any other or further exercise thereof, or the
exercise of any other power or right, and the rights and remedies of the holder
of any Note are cumulative to, and are not exclusive of, any rights or remedies
any such holder would otherwise have.
Section 9.6. Notices. All communications provided for hereunder shall be in
writing and, if to you, delivered or mailed prepaid by registered or certified
mail or overnight air courier, or by facsimile communication, in each case
addressed to you at your address appearing on Schedule I to this Agreement or
such other address as you or the subsequent holder of any Note initially issued
to you may designate to the Company in writing, and if to the Company, delivered
or mailed by registered or certified mail or overnight air courier, or by
facsimile communication, to the Company at 1536 Beech Street, Terre Haute,
Indiana 47804, Attention: Robert L. Gray, or to such other address as the
Company may in writing designate to you or to a subsequent holder of the Note
initially issued to you; provided, however, that a notice to you by overnight
air courier shall only be effective if delivered to you at a street address
designated for such purpose in Schedule I, and a notice to you by facsimile
communication shall only be effective if confirmed by transmission of a copy
thereof by prepaid overnight air courier, or, in either case, as you or a
subsequent holder of any Note initially issued to you may designate to the
Company in writing.
Section 9.7. Successors and Assigns. This Agreement shall be binding upon
the Company and its successors and assigns and shall inure to your benefit and
to the benefit of your successors and assigns, including each successive holder
or holders of any Notes.
Section 9.8. Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall survive the closing and the delivery of this Agreement and
the Notes.
-30-
<PAGE>
Section 9.9. Severability. Should any part of this Agreement for any reason
be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the
invalid or unenforceable portion thereof eliminated and it is hereby declared
the intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid or
unenforceable.
Section 9.10. Governing Law. This Agreement and the Notes issued and sold
hereunder shall be governed by and construed in accordance with Illinois law,
including all matters of construction, validity and performance.
Section 9.11. Captions. The descriptive headings of the various Sections or
parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
-31-
<PAGE>
The execution hereof by you shall constitute a contract between us for the
uses and purposes hereinabove set forth, and this Agreement may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together only one agreement.
GENERAL HOUSEWARES CORP.
By Robert L. Gray
-----------------------
Its Vice President, Finance and
Treasurer
Accepted as of November 15, 1994.
FIRST COLONY LIFE INSURANCE COMPANY
BY James J. Wishan
----------------
Its Chief Investment Officer
First Colony Corporation
-32-
<PAGE>
NAMES AND ADDRESSES PRINCIPAL AMOUNT
OF PURCHASERS OF NOTES TO BE
PURCHASED
FIRST COLONY LIFE INSURANCE COMPANY $8,000,000
700 Main Street
P.O. Box 1280
Lynchburg, Virginia 24505
Attention: Mr. George D. Vermilya, Jr.
Telecopier Number: (804) 948-5749
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"General Housewares Corp., 8.41% Senior Notes due 2004, PPN 370073 A@ 7,
principal, premium or interest") to:
Crestar Bank (ABA #05-10-0002-0)
Richmond, Virginia
Credit - #2111
Attention: Income Processing Unit Number 27955
for credit to: First Colony Life Insurance Company
Account Number 10765400
Notices
All notices and communications, including notices with respect to payments
and written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D.
Number: 54-0596414
SCHEDULE I
(to Note Agreement)
<PAGE>
NAMES AND ADDRESSES PRINCIPAL AMOUNT
OF PURCHASERS OF NOTES TO BE
PURCHASED
AMERICAN MAYFLOWER LIFE $2,000,000
INSURANCE COMPANY
700 Main Street
P.O. Box 1280
Lynchburg, Virginia 24504
Attention: Mr. George D. Vermilya, Jr.
Telecopier Number: (804) 948-5484
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"General Housewares Corp., 8.41% Senior Notes due 2004, PPN 370073 A@ 7,
principal, premium or interest") to:
Chemical Bank
New York, New York (ABA #0210-0012-8)
Attention: Rich Boxer
for credit to: American Mayflower Life Insurance Company
Custodian Account Number N-92585-25
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 13-5660550
(I-2)
<PAGE>
NAMES AND ADDRESSES PRINCIPAL AMOUNT
OF PURCHASERS OF NOTES TO BE
PURCHASED
THE NORTH ATLANTIC LIFE INSURANCE COMPANY $2,000,000
OF AMERICA
c/o Washington Square Capital
100 Washington Square, Suite 800
Minneapolis, Minnesota 55401-2147
Attention: Securities Department
Telecopier Number: (612) 372-5368
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"General Housewares Corp., 8.41% Senior Notes due 2004, PPN 370073 A@ 7,
principal, premium or interest") to:
First National Bank N.A./Mpls. (ABA #091000022)
601 2nd Avenue South
Minneapolis, Minnesota
Attention: Securities Accounting
for credit to: Northern Life Insurance Company
Account Number 1602-3237-6105
Notices
All notices and communications, including notices with respect to payments
and written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 41-1295933
(I-3)
<PAGE>
NAMES AND ADDRESSES PRINCIPAL AMOUNT
OF PURCHASERS OF NOTES TO BE
PURCHASED
THE NORTH ATLANTIC LIFE INSURANCE COMPANY $2,000,000
OF AMERICA
c/o Washington Square Capital
100 Washington Square, Suite 800
Minneapolis, Minnesota 55401-2147
Attention: Securities Department
Telecopier Number: (612) 372-5368
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"General Housewares Corp., 8.41% Senior Notes due 2004, PPN 370073 A@ 7,
principal, premium or interest") to:
Northern Trust Company (ABA #071-000-152)
for credit to: The North Atlantic Life Insurance Company of America
Account Number 5186041000
Further Credit to 26-67303
North Atlantic Life
Attention: MBS Processing
Notices
All notices and communications to be addressed as first provided above, except
notices of payments on or in respect of the Notes and written confirmation of
each such payment to be addressed: Attention: Securities Operations.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 11-1983132
(I-4)
<PAGE>
NAMES AND ADDRESSES PRINCIPAL AMOUNT
OF PURCHASERS OF NOTES TO BE
PURCHASED
BERKSHIRE LIFE INSURANCE COMPANY $2,000,000
700 South Street
Pittsfield, Massachusetts 01201
Attention: Securities Department
Telecopier Number: (413) 443-9397
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"General Housewares Corp., 8.41% Senior Notes due 2004, PPN 370073 A@ 7,
principal, premium or interest") not later than 11:00 A.M. Chicago, Illinois
time to:
The Chase Manhattan Bank, N.A. (ABA #021000021)
One Chase Manhattan Plaza
New York, New York 10081
for credit to:
Berkshire Life Insurance Company's
Account Number 002-4-020877
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-1083480
(I-5)
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION OF DEBT AND LEASES
<S> <C>
Current Debt of the Company and its Restricted Subsidiaries outstanding 2,403,000
on September 30, 1994 is as follows:
2,403,000
Funded Debt (other than Capitalized rentals) of the Company and its
Restricted Subsidiaries outstanding on September 30, 1994 is as follows
Long-term Notes Payable to Harris Bank (lines of credit) 18,500,000
Defferred Purchase Payment Due to Normandy 1,363,408
$5M Subordinated Note Due Stockholders 5,000,000
----------
Total Funded Debt 24,863,408
==========
</TABLE>
Long-term Leases of the Company and its Restricted Subsidiaries
outstanding on September 30, 1994 are as follows:
<TABLE>
<CAPTION>
ANNUAL
BASE RENT
LESSOR/LOCATION DESCRIPTION LEASE TERM EXPIRES PAYMENTS
<S> <C> <C> <C> <C>
B&B Warehousing, Sidney, OH Warehouse 41 mos 08/30/1995 38,400
Factory Merchants, Pigeon Forge, TN Retail Outlet 60 mos 04/30/1996 37,866
Store
MG Burlington, Burlington, WA Retail Outlet 72 mos 06/27/1997 42,884
Store
MG Chelsea, Lake Elsinore, CA Retail Outlet 60 mos 11/18/1997 53,288
Store
MG Hillsboro II Ltd., Hillsboro, TX Retail Outlet 60 mos 04/03/1997 42,328
Store
Southpoint Outlet Cntr, Gilroy,CA Retail Outlet 84 mos 10/31/1999 55,000
Store
Calhoun Outlet Cntr, Calhoun, GA Retail Outlet 60 mos 11/30/1997 45,744
Store
Tanger Factory Outlet, Casa Grande, AZ Retail Outlet 60 mos 01/31/1998 37,500
Store
Las Vegas Outlet, Las Vegas, NV Retail Outlet 84 mos 03/31/2000 44,800
Store
Ohio Factory Shops, Jeffersonville, OH Retail Outlet 72 mos 07/31/1998 43,408
Store
Gulf Coast Factory, Ellenton, FL Retail Outlet 60 mos 08/31/1998 40,170
Store
Castle Rock Factory Stores, Castle Rock, Co Retail Outlet 60 mos 08/28/1998 53,436
Store
Tanger Properties, Stroud, OK Retail Outlet 60 mos 07/31/1998 37,500
Store
Gainesville Factory Stores, Gainesville, TX Retail Outlet 84 mos 08/31/2000 36,160
Store
Stanley K. Tanger, Gonzales, LA Retail Outlet 60 mos 09/30/1998 37,500
Store
Queenstown Properties, Queentown, MD Retail Outlet 60 mos 10/16/1998 41,252
Store
MaxArthur Glenn Group, Algodones, NM Retail Outlet 60 mos 10/15/1998 43,200
Store
Stanley K. Tanger, McMinnville, OR Retail Outlet 60 mos 12/11/1998 40,000
Store
MCG Outlet Cntr., Conroe, TX Retail Outlet 60 mos 05/25/1999 44,550
Store
Horizon Outlet Centers LTD PSH, Birch Run, MI Retail Outlet 84 mos 07/15/2001 45,000
Store
R.R. Laconia, Inc., Tilton, NH Retail Outlet 84 mos 07/15/2001 40,238
Store
R.R. Foley, Inc., Foley, AL Retail Outlet 84 mos 07/29/2001 41,850
Store
Terre Haute First National Bank Company Car 48 mos 01/28/1995 8,832
IBM Corp. IBM Hardware/ 60 mos 12/15/94 116,448
Software
---------
1,085,974
</TABLE>
<PAGE>
Total Annual Base Rents on Leases
Capitalized Leases of the Company and its Restricted Subsidiaries outstanding on
September 30, 1994 are as follows:
None
II-2
<PAGE>
<TABLE>
SUBSIDIARIES OF THE COMPANY
<CAPTION>
RESTRICTED SUBSIDIARIES:
PERCENTAGE OF VOTING STOCK
NAME OF JURISDICTION OF OWNED BY COMPANY AND
SUBSIDIARY INCORPORATION EACH OTHER SUBSIDIARY
<S> <C> <C>
Chicago Cutlery, Inc. Florida 100%
Chicago Cutlery etc., Inc. Indiana 100%
General Housewares U.S. Virgin Islands 100%
Export Corporation
General Housewares Province of Quebec, 100%
of Canada Inc. Canada
<CAPTION>
SUBSIDIARIES (OTHER THAN RESTRICTED SUBSIDIARIES):
JURISDICTION PERCENTAGE OF VOTING STOCK
NAME OF OF OWNED BY COMPANY AND
SUBSIDIARY CORPORATION EACH OTHER SUBSIDIARY
<S> <C> <C>
None None None
</TABLE>
II-3
<PAGE>
LIENS EXISTING AS OF THE CLOSING DATE
SECURING FUNDED DEBT OF THE COMPANY
AND ITS RESTRICTED SUBSIDIARIES
None
SCHEDULE III
(to Note Agreement)
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). ANY SALE, TRANSFER OR OTHER DISPOSITION OF THIS NOTE
(OTHER THAN TO THE ISSUER HEREOF) MAY BE MADE ONLY IF MADE (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (B) PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
GENERAL HOUSEWARES CORP.
8.41% Senior Note
Due November 15, 2004
No.
------------, ----
$
GENERAL HOUSEWARES CORP., a Delaware Corporation (the COMPANY), for value
received, herby promises to pay to
or registered assigns
on the fifteenth day of November 2004
the principal amount of
DOLLARS ($ )
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
monthes) on the principal amount from time to time remaining unpaid hereon at
the rate of 8.41% per annum from the date hereof until maturity, payable
semiannually on the fifteenth of May and November in each year (commencing on
May 15, 1995) and at maturity. The Company agrees to pay interest on overdue
principal (including any overdue required or optional prepayment of Principal)
and premium, if any, and (to the extent legally enforceable) on any overdue
installment of interest, at the rate of 9.41% per annum after the due date,
whether by acceleration or otherwise, until paid.
Both the principal hereof and interest hereon are payable at the principal
office of the Company in Terre Haute, Indiana in coin or currency of the United
States of America which at the time of payment shall be legal tender for the
payment of public and private debts. If any amount of principal, premium, if
any, or interest on or in respect of this Note becomes due and payable on any
date which is not a Business Day, such amount shall be payable on the
immediately preceding Business Day. "Business Day" means any day other than a
Saturday, Sunday or other day on which banks in Terre Haute, Indiana or Chicago,
Illinois are required by law to close or are customarily closed.
EXHIBIT A
(to Note Agreement)
<PAGE>
This Note is one of the 8.41% Senior Notes due November 15, 2004 (the
Notes) of the Company in the aggregate principal amount of $20,000,000 issued or
to be issued under and pursuant to the terms and provisions of the separate Note
Agreements, each dated as of November 15, 1994 (the Note Agreements), entered
into by the Company with the original Purchasers therein referred to and this
Note and the holder hereof are entitled equally and ratably with the holders of
all other Notes outstanding under the Note Agreements to all the benefits
provided for thereby or referred to therein. Reference is hereby made to the
Note Agreements for a statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreements may be
declared due prior to their expressed maturity dates and certain prepayments are
required to be made thereon, all in the events, on the terms and in the manner
and amounts as provided in the Note Agreements.
The Notes are not subject to prepayment or redemption at the option of the
Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in Section
2 of the Note Agreements.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
GENERAL HOUSEWARES CORP.
By
----------------------
Its
A-2
<PAGE>
REPRESENTATION AND WARRANTIES
The Company represents and warrants to you as follows:
1. Subsidiaries. Schedule II attached to the Agreements states the name of
each of the Company's Subsidiaries, its jurisdiction of incorporation and the
percentage of its Voting Stock owned by the company and/or its Subsidiaries.
Those Subsidiaries listed in Section 1 of said Schedule II constitute Restricted
Subsidiaries. The Company and each Subsidiary has good and marketable title to
all of the shares it pruports to own of the stock of each Subsidiary, free and
clear in each case of any Lien. All such shares have been duly issued and are
fully paid and non-assessable.
2. Corporate Organization and Authority. The Company, and each Restricted
Subsidiary,
(a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all necessary licenses
and permits to won and operate its properties and to carry on its business as
now conducted and as presently proposed to be conducted; and
(c) is duly licensed or qualified and is in good standing as a foreign
corporation in each jurisdiction wherein the nature of the business transacted
by it or the nature of the property owned or leased by it makes such licensing
or qualification necessary, except where the failure to be so licensed or
qualified and in good standing would not have a material adverse effect on the
financial condition or propertied or operations of the Company and its
Restricted Subsidiaries taken as a whole.
3. Business and Property. You have hertofore been furnished with a copy of
the Confidential Offering Memorandum dated October 12, 1994 (the "Memorandum")
prepared by First Chicago which generally sets forht the business conduc5ed and
proposed to be conducted by the Company and its Subsidiaries and the principal
properties of the Company and its Subsidiaries.
4. Financial Statements. (a)The consolidated balance sheets of the Company
and its consolidated Subsidiaries as of December 31 in each of the years 1989 to
1993, both inclusive, and the statements of income and retained earnings and
changes in financial position or cash flows for the fiscal years ended on said
dates, each accompanied by a report theron containing an opinion unqualified as
to scope limitations imposed by the Company and otherwise without qualification
except as therein noted, by Price Waterhouse, have been prepared in accordance
with GAAP consistently applied except as therinnoted, are correct and complete
and present fairly the financial postition of the company and its consolidated
Subsidiaries as of such dates and the results of their operations and changes in
their financial position or cash flows for such periods. the unaudited
consolidated balance sheets of the
EXHIBIT B
(to Note Agreement)
<PAGE>
Company and its consolidated Subsidiaries as of September 30, 1994, and the
unaudited statements of income and retained earnings and cash flows for the
nine-month period ended on said date prepared by the Company have been prepared
in accordance with GAAP consistently applied, are correct and complete and
present fairly the financial position of the Company and its consolidated
Subsidiaries as of said date and the results of their operations and changes in
their financial posititon or cash flows for such period.
(b) Since December 31, 1993 there has been no change in the condition,
financial or otherwise, of the Company and its consolidated Subsidiaries as
shown on the consolidate balance sheet as of such date except changes in the
ordinary course of business, none of which individually or in the aggregate has
been materially adverse.
5. Indebtedness. Schedule II attached to the Agreements correctly describes
all Current Debt, Funded Debt, Capitalized Leases and Long-Term Leases of the
Company and its Restricted Subsidiaries outstanding on September 30, 1994.
6. Full Disclosure. Neither the financial statements referred to in
paragraph 4 hereof nor the Agreements, the Memorandum or any other written
statement furnished by the Company to you in connection with the negotiation of
the sale of the Notes, contains any untrue statement of a material fact or omits
a material fact necessary to make the statements contained therein or herein not
misleading. There is no fact peculiar to the Company or its Subsidiaries which
the company has not disclosed to your in writing whcih materially affects
adversely nor, so far as the Company can now foresee, will materially affect
adversely the properties, business, prospects profits or condition (financial or
otherwise) of the Company and its Restricted Subsidiaries, taken as a whole.
7. Pending Litigation. There are no proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
Restricted Subsidiary in any court or before any governmental authority or
arbitration board or tribunal whcih involve a reasonable likelihood of
materially and adversely affecting the properties, business, prospects, profits
or condition (financial or otherwise) of the company and its Restricted
Subsidiaries. Except as discolsed by the Company in its annual report on Form
10K for the fiscal year ended December 31, 1993 and its quarterly reports on
Form 10Q for the quarterly periods ending March 31, 1994, June 30, 1994 and
September 30, 1994, respectively, neither the Company nor any Restricted
Subsidiary is in default with respect to any order of any court or governmental
authority or arbitration board or tribunal.
8. Title to Properties. The Company and each Restricted Subsidiary has good
and marketable title in fee simple (or its equivalent under applicable law) to
all material parcels of real property and has good title to all the other
material items of property it purports to own, including that reflected in the
most recent balance sheet referred to in paragraph 4 hereof, except as sold or
otherwise disposed of in the ordinary course of business and except for Liens
permitted by the Agreements. Schedule III attached to the Agreement correctly
describes all Liens securing Funded Debt of the company and its Restricted
Subsidiaries as of the Closing Date.
B-2
<PAGE>
9. Patents and Trademarks. The Company and each Restricted Subsidiary owns
or possesses all the patents, trademarks, trade names, service marks,
copyrights, licenses and rights with respect to the foregoing necessary for the
present and planned future conduct of its business, without any known conflict
with the rights of others.
10. Sale is Legal and Authorized. (a) the sale of the Notes and compliance
by the Company with all of the provisions of the Agreements and the Notes --
(i) are within the corporate powers of the Company; and
(ii) will not violate any provisions of any law or any order of any
court or governmental authority or agency and will not conflict with or
result in any breach of any of the terms, conditions or provisions of, or
constitute a default under, the Articles of Incorporation or By-laws of the
Company or any indenture or other agreement or instrument to which the
Company is a party or by which it may be bound or result in the imposition
of any Liens or encumbrances on any property of the Company.
(b) The sale of the Notes and the execution and delivery of the Agreements
and the Notes have been duly authorized by proper corporated action on the part
of the Company (no action by the stockholders of the Company being required by
law, by the Articles of Incorporation or By-laws of the Company or otherwise)
and the Agreements and the Notes have been executed and delivered by the Company
and constitute the legal, valid and binding obligations, contracts and
agreements of the Company enforceable in accordance with their respective terms.
11. No Defaults. No Default or Event of Default has occurred and is
continuing. The company is not in default in the payment of principal or
interest on any Indebtedness for borrowed money and is not in default under any
instrument or instruments or agreements under and subject to which any
Indebtedness for borrowed money has been issued and no event has occurred and is
continuing under the provisions of any such instrument or agreement which with
the lapse of time or the giving of notice, or both, would constitute an event of
default thereunder.
12. Governmental Consent. No approval, consent or withholding of objection
on the part of any regulatory body, state, Federal or local, is necessary in
connection with the execution and delivery by the Company of the Agreements or
the issuance, sale or delivery of the Notes or compliance by the Company with
any of the provisions of the Agreements or the Notes.
13. Taxes. All tax returns required to be filed by the Company or any
Restricted Subsidiary in any jurisdiction have, in fact, been filed, and all
taxes, assessments, fees and other governmental charges upon the Company or any
Restricted Subsidiary or upon any of their respective properties, income or
franchises, which are shown to be due and payable in such returns have been
paid. For all taxable years ending on or before December 31, 1990, the Federal
income tax liablility of the Company and its Restricted Subsidiaries has been
B-3
<PAGE>
satisfied and either the period of limitations on assessment of additional
Federal income tax has expired or the Company and its Restricted Subsidiaries
have entered into an agreement with the Internal Revenue Service closing
conclusively the total tax liability for the taxable year. Although the Company
is currently being audited by the Internal Revenue Service for the taxable year
ending December 31, 1991 and although the Company has been informed by the
Internal Revenue Service in connection with such audit that certain deductions
may be disallowed, the company does not know of any proposed additional tax
assessment against it for which adequate provision has not be en made on its
accounts, and no material controversy in respect of additional Federal or state
income taxes due since said date is pending or to the knowledge of the Company
threatened. The provisions for taxes on the books of the Company and each
Restricted Subsidiary are adequate for all open years, and for its current
fiscal period.
14. Use of Proceeds. The net proceeds from the sale of the Notes will be
used to pay down existing indebtedness under the Company's bank-provided credit
lines and for other corporate purposes. None of the transactions contemplated in
the Agreements (including, without limitation thereof, the use of proceeds from
the issuance of the Notes) will violate or result in a violation of Section 7 of
the Securities Exchange Act of 1934, as amended, or any regulation issued
pursuant thereto, including, without limitation, Regulations G,T, U and X of the
Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. Neither
the Company nor any Subsidiary owns or intends to carry or purchase any "margin
stock" within the meaning of said Regulation G. None of the proceeds from the
sale of the Notes will be used to purchase, or refinance any borrowing the
proceeds of which were used to purchase, any "security" within the meaning of
the Securities Exchange Act of 1934, as amended.
15. Private Offering. Neither the Company, directly or indirectly, nor any
agent on its behalf has offered or will offer the Notes or any similar Security
to or has solicited or will solicit an offer to acquire the Notes or any similar
Security from or has otherwise approached or negotiated or will approach or
negotiate in respect of the Notes or any similar Security with any Person other
that the Purchasers and not more than 48 other institutional investors, each of
whom was offered a portion of the Notes at private sale for investment. Neither
the company, directly or indirectly, nor any agent on its behalf has offered or
will offer the Notes or any similar Security to or has solicited or will solicit
an offer to acquire the Notes or any similar Security from any Person so as to
bring the issuance and sale of the Notes within the provisions of Section 5 of
the Securities Act of 1933, as amended.
16. ERISA. the consummation of the transaction provided for in the
Agreements and compliance by the Company with the provisions thereof and the
Notes issued thereunder will not involve any prohibited transaction within the
meaning of ERISA or Section 4975 of the Internal Revenue Code or 1986, as
amended. Each Plan complies in all material repects with all applicable statutes
and governmental rules and regulations, and (a) no Reportable Event has occurred
and is continuing with respect to any Plan, (b) neither the Company nor any
ERISA Affiliate has withdrawn from any Plan or Multiemployer Plan or instituted
steps to do so, (c) no steps have been instituted to terminate any Plan. No
condition exists or event or transaction has occurred in connection with any
B-4
<PAGE>
Plan which could result in the incurrence by the Company or any ERISA Affiliate
of any material liability, fine or penalty. No Plan maintained by the Company or
any ERISA Affiliate, nor any trust created thereunder, has incurred any
"accumulated funding deficiency" as defined in Section 302 of ERISA nor does the
present value of all benefits vested under all Plans exceed, as of the last
annual valuation date, the value of the assets of the Plans allocable to such
vested benefits by an amount greater that $99,000 in the aggregate. Neither the
Company nor any ERISA Affiliate has any contingent liability with respect to any
prot-retirement "welfare benefit plan" (as such term is defined in ERISA except
as has been disclosed to the Purchasers.
17. Compliance with Law. (a) Neither the Company nor any Restricted
Subsidiary (1) is in violation of any law, ordinance, franchise, governmental
rule or regulation to which it is subject; or (2) has failed to obtain any
license, permit, franchise or other governmental authorization necessary to the
ownership of its property or to the conduct of its business, which violation or
failure to obtain would materially affect adversely the business, prospects,
profits, properties or condition (financial or otherwise) of the Company and its
Restricted Subsidiaries, taken as a whole, or impair the ability of the Company
to perform its obligations contained in the Agreements or the Notes. Neither the
Company nor any Restricted Subsidiary is in default with respect to any order of
any court or governmental authority or arbitration board or tribunal.
(b) Without limiting the provisions of clause (a) of this paragraph 17, the
Company is in compliance with all applicable Environmental Laws, the failure to
comply with which would materially affect adversely the properties, business,
prospects, profits or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole or the ability of the Company to perform its
obligations under the Agreements or the Notes.
18. Investment Company Act. The Company is not, and is not directly or
indirectly controlled by or acting on behalf of any Person which is, required to
register as an "investment company" under the Investment Company Act of 1940, as
amended.
19. Foreign Assets Control Regulations, etc. None of the Company, any
Restricted Subsidiary or any Affiliate of the Company is, by reason of being a
"national" of "designated foreign country" or a "specially designated national"
within the meaning of the Regulations of the Office of Foreign Assets Control,
United States Treasury Department (31 C.F.R., Subtitle B, Chapter V), or for any
other reason, subject to any restriction or prohibition under, or is in
violation of, any Federal statute or Presidential Executive Order, or any rules
or regulations of any department, agency or administrative body promulgated
under any such statute or order, concerning trade or other relations with any
foreign country or any citizen or national thereof or the ownerhip or operation
of any property.
B-5
<PAGE>
DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION
The closing opinion of Chapman and Cutler, special counsel to the
purchasers, called for by Section 4.1 of the Agreements, shall be dated the
Closing Date and addressed to the Purchasers, shall be satisfactory in form and
substance to the Purchasers and shall be to the effect that:
1. The Company is a corporation, validly existing and in good standing
under the laws of the State of Delaware and has the corporate power and the
corporate authority to execute and deliver the Agreements and to issue the
Notes.
2. The Agreements have been duly authorized by all necessary corporate
action on the part of the Company, have been duly executed and delivered by
the Company and constitute the legal, valid and binding contracts of the
Company enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors'
rights generally, and general principles of equity (regardless of whether
the application of such principles is considered in a proceeding in equity
or at law).
3. The Notes have been duly authorized by all necessary corporate
action on the part of the Company, have been duly executed and delivered by
the Company and constitute the legal, valid and binding obligations of the
Company enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors'
rights generally, and general principles of equity (regardless of whether
the application of such principles is considered in a proceeding in equity
or at law).
4. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Agreements does not, under existing law,
require the registration of the Notes under the Securities Act of 1933, as
amended, or the qualification of an indenture under the Trust Indenture Act
of 1939, as amended.
The opinion of Chapman and Cutler shall also state that the opinion of
Gordon R. Erickson, Esq., is satisfactory in scope and form to Chapman and
Cutler and that, in their opinion, the Purchasers are justified in relying
thereon.
In rendering the opinion set forth in paragraph 1 above, Chapman and Cutler
may rely solely upon an examination of the Certificate of Incorporation
certified by, and a certificate of good standing of the Company from, the
Secretary of State of the State of Delaware, the By-laws of the Company and the
general business corporation law of the State of Delaware. The opinion of
Chapman and Cutler is limited to the laws of the State of Illinois, the general
business corporation law of the State of Delaware and the Federal laws of the
United States.
EXHIBIT C
(to Note Agreement)
<PAGE>
With respect to matters of fact upon which such opinion is based, Chapman
and Cutler may rely on appropriate certificates of public officials and officers
of the Company.
C-2
<PAGE>
DESCRIPTION OF CLOSING OPINION OF COUNSEL TO THE COMPANY
The closing opinion of Gordon R. Erickson, Esq., General Counsel for the
Company, which is called for by Section 4.1 of the Agreements, shall be dated
the Closing Date and addressed to the Purchasers, shall be satisfactory in scope
and form to the Purchasers and shall be to the effect that:
1. The Company is a corporation, duly organized, validly existing and
in good standing under the laws of the State of Delaware, has the corporate
power and the corporate authority to execute and perform the Agreements and
to issue the Notes and has the full corporate power to carry on its present
business and is duly licensed or qualified in all states and jurisdictions
wherein the nature of the business carried on by it or the assets and
properties owned or leased by it requires such qualification or licensing,
except where the failure to be so licensed or qualified would not have a
material adverse effect on the financial condition or properties or
operations of the Company and its Restricted Subsidiaries taken as a whole.
2. Each Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation
and is duly licensed or qualified and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it
or the nature of the business transacted by it makes such licensing or
qualification necessary and all of the issued and outstanding shares of
capital stock of each such Subsidiary have been duly issued, are fully paid
and non-assessable and are owned by the Company.
3. The Agreements have been duly authorized by all necessary corporate
action on the part of the Company, have been duly executed and delivered by
the Company and constitute the legal, valid and binding contracts of the
Company enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors'
rights generally, and general principles of equity (regardless of whether
the application of such principles is considered in a proceeding in equity
or at law).
4. The Notes have been duly authorized by all necessary corporate
action on the part of the Company, have been duly executed and delivered by
the Company and constitute the legal, valid and binding obligations of the
Company enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors'
rights generally, and general principles of equity (regardless of whether
the application of such principles is considered in a proceeding in equity
or at law).
5. No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any governmental body, Federal,
state or local, is necessary in connection with the execution, delivery and
performance of the Agreements or the Notes.
EXHIBIT D
(to Note Agreement)
<PAGE>
6. The issuance and sale of the Notes and the execution, delivery and
performance by the Company of the Agreements do not conflict with or result
in any breach of any of the provisions of or constitute a default under or
result in the creation or imposition of any Lien upon any of the property
of the Company pursuant to the provisions of the Certificate of
Incorporation or By-laws of the Company or any agreement or other
instrument known to such counsel to which the Company is a party or by
which the Company may be bound.
7. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Agreements does not, under existing law,
require the registration of the Notes under the Securities Act of 1933, as
amended, or the qualification of an indenture under the Trust Indenture Act
of 1939, as amended.
8. The issuance of the Notes and the use of the proceeds of the sale
of the Notes in accordance with the provisions of and contemplated by the
Agreements do not violate or conflict with Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System.
9. There is no litigation pending or, to the best knowledge of such
counsel, threatened which in such counsel's opinion could reasonably be
expected to have a materially adverse effect on the Company's business or
assets or which would impair the ability of the Company to issue and
deliver the Notes or to comply with the provisions of the Agreements.
The opinion of Gordon R. Erickson, Esq., shall cover such other matters
relating to the sale of the Notes as the Purchasers may reasonably request and
may rely upon an opinion of Canadian counsel with respect to the opinion
required in paragraph 2 regarding the Company's Canadian Subsidiary. With
respect to matters of fact on which such opinion is based, such counsel shall be
entitled to rely on appropriate certificates of public officials and officers of
the Company.
D-2
$30,000,000
Credit Agreement
Dated as of
November 30, 1994
Among
General Housewares Corp.,
The Banks Signatory Hereto,
And
Harris Trust And Savings Bank
as Agent
<PAGE>
TABLE OF CONTENTS
Section Page
Section 1. The Credit Facility...................................1
Section 1.1. The Revolving Credit..............................1
Section 2. General Provisions Applicable To All Loans............4
Section 2.1. Applicable Interest Rates.........................4
Section 2.2. Minimum Borrowing Amounts.........................7
Section 2.3. Borrowing Procedures..............................7
Section 2.4. Interest Periods..................................8
Section 2.5. Maturity of Loans.................................9
Section 2.6. Prepayments.......................................9
Section 2.7. Default Rate......................................10
Section 2.8. The Notes.........................................10
Section 2.9. Commitment Terminations...........................11
Section 2.10. Funding Indemnity.................................11
Section 2.11. Margin Adjustments................................12
Section 3. Fees..................................................12
Section 3.1. Commitment Fee....................................12
Section 3.2. Closing Fee.......................................13
Section 3.3. Agent's Fees......................................13
Section 3.4. Letter of Credit Fees.............................13
Section 3.5. Transaction Charges...............................13
Section 4. Place And Application Of Payments; Extension of
Termination Date......................................13
Section 4.1. Place and Application of Payments.................13
Section 5. Definitions; Interpretation...........................15
Section 5.1. Definitions.......................................15
Section 5.2. Interpretation....................................24
<PAGE>
Section 6. Representations And Warranties........................24
Section 6.1. Organization and Qualification....................24
Section 6.2. Subsidiaries......................................25
Section 6.3. Corporate Authority and Validity of Obligations...25
Section 6.4. Not an Investment Company.........................25
Section 6.5. Margin Stock......................................25
Section 6.6. Financial Reports.................................26
Section 6.7. No Material Adverse Change........................26
Section 6.8. Litigation........................................26
Section 6.9. Tax Returns.......................................26
Section 6.10. Approvals.........................................26
Section 6.11. Liens.............................................27
Section 6.12. ERISA.............................................27
Section 6.13. Material Agreements...............................27
Section 6.14. Compliance with Environmental Laws................27
Section 7. Conditions Precedent..................................28
Section 7.1. Initial Borrowing.................................28
Section 7.2. All Loans and Letters of Credit...................28
Section 7.3. Additional Conditions to Loans (other than Refunding
Borrowings), Letters of Credit....................29
Section 7.4. Letters of Credit.................................29
Section 7.5. Termination of The 1993 Credit Agreement..........29
Section 8. Covenants.............................................30
Section 8.1. Corporate Existence...............................30
Section 8.2. Maintenance.......................................30
Section 8.3. Taxes.............................................30
Section 8.4. Insurance.........................................30
Section 8.5. Financial Reports and Other Information...........30
Section 8.6. Consolidated Net Worth............................32
Section 8.7. Leverage Ratio....................................32
Section 8.8. Fixed Charge Coverage Ratio.......................32
Section 8.9. Minimum Current Ratio.............................32
Section 8.10. Distributions.....................................33
Section 8.11. Indebtedness for Borrowed Money...................33
Section 8.12. Sale and Leaseback................................34
Section 8.13. Investments.......................................34
Section 8.14. Capital Expenditures..............................34
Section 8.15. Mergers, Consolidations, Leases, and Sales........34
Section 8.16. ERISA.............................................35
Section 8.17. Conduct of Business...............................35
Section 8.18. Liens.............................................35
Section 8.19. Use of Proceeds; Margin Stock.....................36
Section 8.20. Compliance with Laws..............................36
<PAGE>
Section 9. Events Of Default And Remedies........................36
Section 9.1. Events of Default.................................36
Section 9.2. Non-Bankruptcy Defaults...........................38
Section 9.3. Bankruptcy Defaults...............................38
Section 9.4. Letters of Credit.................................38
Section 9.5. Expenses..........................................39
Section 10. Change In Circumstances...............................39
Section 10.1. Change of Law.....................................39
Section 10.2. Unavailability of Deposits or Inability to Ascertain,
or Inadequacy of, LIBOR...........................39
Section 10.3. Increased Cost and Reduced Return.................40
Section 10.4. Lending Offices...................................41
Section 10.5. Discretion of Bank as to Manner of Funding........41
Section 11. The Agent.............................................41
Section 11.1. Appointment and Authorization.....................41
Section 11.2. Agent and Affiliates..............................42
Section 11.3. Action by Agent...................................42
Section 11.4. Consultation with Experts.........................42
Section 11.5. Liability of Agent................................42
Section 11.6. Indemnification...................................43
Section 11.7. Credit Decision...................................43
Section 11.8. Resignation of the Agent..........................43
Section 11.9. Payments..........................................43
Section 12. Miscellaneous.........................................44
Section 12.1. Withholding Taxes.................................44
Section 12.2. No Waiver of Rights...............................45
Section 12.3. Non-Business Day..................................45
Section 12.4. Documentary Taxes.................................45
Section 12.5. Survival of Representations.......................45
Section 12.6. Survival of Indemnities...........................45
Section 12.7. Sharing of Set-Off................................45
Section 12.8. Notices...........................................46
Section 12.9. Counterparts......................................47
Section 12.10. Successors and Assigns............................47
Section 12.11. Participants and Note Assignees...................47
Section 12.12. Assignment of Commitments by Banks................47
Section 12.13. Amendments........................................48
Section 12.14. Non-Reliance on Margin Stock......................48
Section 12.15. Legal Fees and Indemnification....................48
Section 12.18. Governing Law.....................................49
Section 12.19. Headings..........................................49
Section 12.20. Entire Agreement..................................49
<PAGE>
Exhibit A Revolving Credit Note
Exhibit B Subsidiaries of General Housewares Corp.
Exhibit C Opinion of Counsel
Exhibit D Compliance Certificate
Exhibit E Funded Debt of Subsidiaries and Existing Short Term
Indebtedness of Borrower
Exhibit F Liens
Exhibit G Guaranties
<PAGE>
CREDIT AGREEMENT
To each of the Banks signatory hereto
Ladies and Gentlemen:
The undersigned, General Housewares Corp., a Delaware corporation (the
"Borrower"), applies to you for your several commitments, subject to all the
terms and conditions hereof and on the basis of the representations and
warranties hereinafter set forth, to make a revolving credit facility (the
"Revolving Credit") and a letter of credit facility (the "Letter of Credit
Facility") available in the form of loans or letters of credit, all as more
fully hereinafter set forth. Each of you is hereinafter referred to as a "Bank",
all of you are hereinafter referred to collectively as the "Banks" and Harris
Trust and Savings Bank in its capacity as agent hereunder is hereinafter
referred to as the "Agent".
SECTION 1. THE CREDIT FACILITY.
Section 1.1. The Revolving Credit. (a) General. Subject to the terms and
conditions hereof, the Banks agree to extend the Revolving Credit to the
Borrower which may be availed of by the Borrower in its discretion from time to
time to and including the Termination Date. The Revolving Credit, subject to all
of the terms and conditions hereof, may be utilized by the Borrower in the form
of loans ("Loans"), letters of credit (such letters of credit, together with all
letters of credit issued and outstanding under The 1993 Credit Agreement which
shall be deemed issued and outstanding hereunder, the "Letters of Credit"), all
as more fully hereinafter set forth. The maximum amount of the Revolving Credit
which each Bank agrees to extend to the Borrower (which in the case of
Eurocurrency Loans denominated in an Alternative Currency means the Original
Dollar Amount thereof) shall be as set forth opposite its name under the heading
"Revolving Credit Loan Commitment" on the applicable signature page hereof (its
"Revolving Credit Loan Commitment" and cumulatively for all the Banks the
"Revolving Credit Loan Commitments") (subject to any reductions thereof pursuant
to the terms hereof). The obligations of the Banks hereunder are several and not
joint and no Bank shall under any circumstances be obligated to extend credit
hereunder in excess of its Revolving Credit Loan Commitment.
(b) Loans. Each Borrowing of Loans shall be made ratably from the Banks in
proportion to their respective Commitments. The Borrower may elect that each
Borrowing of Loans be made available by means of Domestic Rate Loans denominated
in U.S. Dollars or Eurocurrency Loans denominated either in U.S. Dollars or an
Alternative Currency.
(c) Letters of Credit. (i) General Terms. Subject to all of the terms and
conditions hereof, the Banks agree to extend the Letter of Credit Facility
through the Termination Date to the Borrower which may be availed of in the form
of Letters of Credit, provided that the maximum amount of the Letter of Credit
Facility (which in the case of Letters of Credit payable in an Alternative
Currency means the U.S. Dollar Equivalent thereof as determined pursuant to
Section 1.1(c)(vi) hereof which each Bank agrees to extend to the Borrower shall
-1-
<PAGE>
be as set forth opposite its name under the headings "Letter of Credit
Commitment" on the applicable signature page hereof (its "Letter of Credit
Commitment" and cumulative for all the Banks, the "Letter of Credit
Commitments") (subject to any reductions thereof pursuant to the terms thereof).
The obligations of the Banks hereunder are several and not joint and no Bank
shall under any circumstances be obligated to extend credit hereunder in excess
of its Letter of Credit Commitment except as contemplated in Section 1.1(d)
hereof. The aggregate outstanding amount of Letter of Credit Utilization by the
Borrower hereunder shall in no event exceed the Letter of Credit Commitments.
The Letters of Credit shall be issued by the Agent, but each Bank shall be
obligated to reimburse the Agent for a pro rata share of the amount of each
draft drawn thereunder and, accordingly, each Letter of Credit shall be deemed
to utilize the Commitments of all Banks pro rata in accord with the respective
amounts thereof.
(ii) Term. Each Letter of Credit issued hereunder shall expire not
later than the earlier of (i) one year from the date issued (or be
cancelable not later than one year from the date issued) or (ii) the
Termination Date.
(iii) General Characteristics. Each Letter of Credit issued hereunder
shall be payable in U.S. dollars or an Alternative Currency, shall conform
to the general requirements of the Agent for the issuance of commercial or
standby letters of credit (as appropriate) as to form and substance and
shall be a letter of credit which the Agent may lawfully issue.
(iv) Applications. At the time the Borrower requests each Letter of
Credit to be issued (or prior to the first issuance of a Letter of Credit,
in the case of a continuing application), it shall execute and deliver to
the Agent an application for such Letter of Credit in the form customarily
prescribed by the Agent for a Letter of Credit of the type requested (the
"Applications"). In the event that the Agent is not promptly reimbursed for
the amount of any draft drawn under a Letter of Credit issued hereunder,
the obligation of the Borrower to reimburse it for the amount of such draft
so paid by the Agent shall bear interest (which the Borrower hereby
promises to pay) from and after the date such draft is paid until payment
in full thereof (a) in the case of a draft payable in U.S. Dollars, at the
rate per annum determined by adding 2% per annum to the Domestic Rate as
from time to time in effect and (b) in the case of a draft payable in an
Alternative Currency, at the rate per annum determined by adding 2% to the
sum of the Overnight Eurocurrency Rate as from time to time in effect and
the Applicable Margin for Eurocurrency Loans under the Revolving Credit.
Subject to the provisions hereof, the Borrower may request a Loan in
payment of any such reimbursement obligation, such Loans to be evidenced by
the Notes and, further, in the event the conditions precedent to making any
such Loan are not satisfied, the Borrower hereby irrevocably authorizes the
Banks
-2-
<PAGE>
to make a Domestic Rate Loan for payment of any such reimbursement
obligations, any such Loan may be made without regard to the provisions of
Section 5 hereof and the Borrower acknowledges and agrees, however, that
the Banks shall be under no obligation to make any such Loan and the Banks
shall incur no liability to the Borrower or any other Person for failing or
refusing to make a Loan under this Section 1.1(c). This Agreement
supersedes any terms of the Applications which are irreconcilably
inconsistent with the terms hereof. Anything contained in the Applications
to the contrary notwithstanding the Borrower shall pay fees in connection
with Letters of Credit as set forth in Sections 3.4 and 3.5 hereof.
(v) Change in Law. If the Agent or any Bank shall determine in good
faith that any change in any applicable law, regulation or guideline
(including, without limitation, Regulation D of the Board of Governors of
the Federal Reserve System) or any new law, regulation or guideline, or any
interpretation of any of the foregoing by any governmental authority
charged with the administration thereof or any central bank or other
fiscal, monetary or other authority having jurisdiction over such Bank
(whether or not having the force of law) shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirements against the Letters of Credit, or the
Agent's or such Bank's or the Borrower's liability with respect
thereto; or
(ii) impose on the Agent or such Bank any penalty with respect to
the foregoing or any other condition regarding this Agreement, the
Applications or the Letters of Credit;
and the Agent or such Bank shall determine in good faith that the result of
any of the foregoing is to increase the cost (whether by incurring a cost
or adding to a cost) to the Agent or such Bank of issuing, maintaining or
participating in the Letters of Credit hereunder (without benefit of, or
credit for, any prorations, exemptions, credits or other offsets available
under any such laws, regulations, guidelines or interpretations thereof),
then the Agent or such Bank shall use its best efforts to give the Borrower
prompt notice thereof and the Borrower shall pay on demand to the Agent or
such Bank from time to time as specified by the Agent or such Bank such
additional amounts as the Agent or such Bank shall reasonably determine are
sufficient to compensate and indemnify it (computed commencing on the
effective date of any event mentioned herein) for such increased cost. If
the Agent or a Bank makes such a claim for compensation, it shall provide
to the Borrower a certificate setting forth such increased costs as a
result of any event mentioned herein and such certificate shall be Prima
Facie evidence as to the amount thereof.
(vi) Foreign Currency Equivalency. For all purposes of determining the
amount of Letters of Credit hereunder, Letters of Credit payable in an
Alternative Currency shall be converted into their U.S. Dollar Equivalent
as of the time issued and shall be reconverted into their U.S. Dollar
Equivalent as of the first day of each calendar quarter (and as of any
other time the Required Banks deem appropriate), with each such
redetermination to apply until the next determination.
-3-
<PAGE>
(d) Participation in Letters of Credit. Each Bank shall participate on a
pro rata basis in the Letters of Credit issued by the Agent, which participation
shall automatically arise upon the issuance of each Letter of Credit. Each Bank
unconditionally agrees that in the event the Agent is not immediately reimbursed
by the Borrower for the amount paid by it on any draft presented under a Letter
of Credit, then in that event such Bank shall pay to the Agent that portion of
the amount of each draft so paid by the Agent which is equal to the same
percentage of the amount so paid as the percentage which its Commitment bears to
the aggregate of the Commitments and in return such Bank shall automatically
receive an equivalent percentage participation in the rights of the Agent to
obtain reimbursement from the Borrower for the amount of such draft, together
with interest thereon as provided for herein. In the event that any Bank fails
to honor its obligation to reimburse the Agent for its pro rata share of the
amount of any such draft then in that event (i) each other Bank shall pay to the
Agent its pro rata share of the payment due the Agent from the defaulting Bank,
(ii) the defaulting Bank shall have no right to participate in any recoveries
from the Borrower in respect of such draft and (iii) all amounts to which the
defaulting Bank would otherwise be entitled under the terms of this Agreement
shall first be applied to reimbursing the Banks for their respective pro rata
shares of the defaulting Bank's portion of the draft together with interest
thereon at the rate provided for in Section 1.1(c)(iv) hereof. Upon
reimbursement to other Banks pursuant to clause (iii) above of the amounts
advanced by them to the Agent in respect of the defaulting Bank's share of the
draft, together with interest thereon, the defaulting Bank shall thereupon be
entitled to its participation in the Agent's rights of recovery against the
Borrower in respect of the draft paid by the Agent.
SECTION 2. GENERAL PROVISIONS APPLICABLE TO ALL LOANS.
Section 2.1. Applicable Interest Rates. (a) Domestic Rate Loans. Each
Domestic Rate Loan made by a Bank (including Loans made pursuant to Section
1.1(c) hereof) shall bear interest (computed on the basis of a year of 360 days
and actual days elapsed) on the unpaid principal amount thereof from the date
such Loan is made until maturity (whether by acceleration or otherwise) at a
rate per annum equal to the Domestic Rate from time to time in effect, payable
on the last day of the applicable Interest Period and at maturity (whether by
acceleration or otherwise).
"Domestic rate" means for any day the greater of:
(i) The rate of interest announced by the agent from time as its prime
commercial rate, or equivalent, with any change in the domestic rate resulting
from a change in said prime commercial rate to be effective as of the date of
the relevant change in said prime commercial rate; and
(ii) the sum of the (x) the rate for that day set forth opposite the
caption "Federal Fund (effective)" in the daily statistical release designated
as "Composite 3:30 P.M. Quotations for U.S. Government Securities", or any
successor publication, published by the Federal Reserve Bank of New York or, if
such publication shall be suspended or terminated, the arithmetic average of the
rates quoted to the Agent as the prevailing rates per annum (rounded upward, if
necessary, to the next higher 1/100 of 1%) bid at approximately 10:00 A.M.
-4-
<PAGE>
(Chicago time) (or as soon thereafter as is practicable) on such day by two or
more New York or Chicago Federal funds dealers of recognized standing selected
by the Agent for the purchase at face value of Federal funds in the secondary
market in an amount comparable to the principal amount owed to the Banks for
which such rate is being determined, plus (y) 1/2 of 1% (0.50%).
(b) Eurocurrency Loans. (i) General. Each Eurocurrency Loan made by a Bank
(including Loans made pursuant to Section 1.1(c) hereof) shall bear interest
(computed on the basis of a year of 360 days and actual days elapsed) on the
unpaid principal amount thereof from the date such Loan is made until maturity
(whether by acceleration or otherwise) at a rate per annum equal to the sum of
the applicable Eurocurrency Margin plus the Adjusted LIBOR, payable on the last
day of the applicable Interest Period and at maturity (whether by acceleration
or otherwise), and, if the applicable Interest Period is longer than three
months, on each day occurring every three months after the date such Loan is
made.
"Adjusted LIBOR" means, for any Borrowing of Eurocurrency Loans, a rate
per annum determined in accordance with the following formula:
Adjusted LIBOR = LIBOR
--------------------------------------
100% - Eurocurrency Reserve Percentage
"LIBOR" means, with respect to an Interest Period for a Borrowing of
Eurocurrency Loans, (a) the LIBOR Index Rate for such Interest Period, if such
rate is available, and (b) if the LIBOR Index Rate cannot be determined, the
arithmetic average of the rate of interest per annum, as determined by the Agent
(rounded upwards, if necessary, to the nearest whole multiple of 1/16 of 1%), at
which deposits of U.S. Dollars or the relevant Alternative Currency in
immediately available and freely transferable funds are offered to the Agent at
11:00 a.m. (London, England time) two Business Days prior to the commencement of
such Interest Period by major banks in the interbank market for a period equal
to such Interest Period and in an amount approximately equal to the principal
amount of the Eurocurrency Loan scheduled to be made by the Agent as part of
such Borrowing.
"Libor Index Rate" means, for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the next higher one hundred-thousandth of a
percentage point) for deposits in U.S. Dollars or the relevant Alternative
Currency for a period equal to such Interest Period, which appears on the
Telerate Page 3750 as of 11:00 a.m. (London, England time) on the day two
Business Days before the commencement of such Interest Period.
"Telerate Page 3750" means the display designated as "Page 3750" on the
Telerate Service (or such other page as may replace Page 3750 on that service or
such other service as may be nominated by the British Bankers' Association as
the information vendor for the purpose of displaying British Bankers'
Association Interest Settlement Rates for deposits in U.S. Dollars or the
relevant Alternative Currency).
-5-
<PAGE>
"Eurocurrency Reserve Percentage" means, for any Borrowing of Eurocurrency
Loans, the daily average for the applicable Interest Period of the maximum rate
at which reserves (including, without limitation, any supplemental, marginal and
emergency reserves) are imposed during such Interest Period by the Board of
Governors of the Federal Reserve System (or any successor) under Regulation D on
"Eurocurrency Liabilities", as defined in such Board's Regulation D, (or in
respect of any other category of liabilities that includes deposits by reference
to which the interest rate on Eurocurrency Loans is determined or any category
of extension of credit or other assets that include loans by non-United States
offices of any Bank to United States residents) subject to any amendments of
such reserve requirement by such Board or its successor, taking into account any
transitional adjustments thereto. For purposes of this definition, the
Eurocurrency Loans shall be deemed to be "Eurocurrency Liabilities" as defined
in Regulation D without benefit or credit for any prorations, exemptions or
offsets under Regulation D.
"Eurocurrency Margin" means 1.00% subject to adjustment as provided in
Section 2.11 hereof.
(ii) Borrowings of Alternative Currencies. On the date the Borrower
requests a Borrowing of Eurocurrency Loans from the Banks in an Alternative
Currency, as provided in Section 2.3(a) below, the Agent shall promptly notify
each Bank of the currency in which such Borrowing is requested. If a Bank
determines that such Alternative Currency is not available to it in sufficient
amount and for a sufficient term to enable it to make the Loan requested of it
as part of such Eurocurrency Borrowing and so notifies the Agent no later than
2:00 p.m. (Chicago time) on the same day it receives notice from the Agent of
such requested Loan, the Agent shall promptly so notify the Borrower. If the
Borrower nevertheless desires such Borrowing, it must notify the Agent by no
later than 3:00 p.m. (Chicago time) on such day. If the Agent does not receive
such notice from the Borrower by 3:00 p.m. (Chicago time), the Borrower shall
automatically be deemed to have revoked its request of the Eurocurrency
Borrowing and the Agent will promptly notify the Banks of such revocation. If
the Borrower does give such notice by 3:00 p.m. (Chicago time), each Bank that
did not notify the Agent by 2:00 p.m. (Chicago time) that the requested
Alternative Currency is unavailable to it to fund the requested Loan shall,
subject to Section 7 hereof, make its Loan in the Alternative Currency requested
in accordance with Section 2.3(d) hereof. Each Bank that did so notify the Agent
by 2:00 p.m. (Chicago time) that it would not be able to make the Loan requested
from it shall, subject to Section 7 hereof, make a Eurocurrency Loan denominated
in U.S. Dollars in the amount of the Original Dollar Amount of, and with the
same Interest Period as, the Eurocurrency Loan such Bank was originally
requested to make. Such Eurocurrency Loan denominated in U.S. Dollars shall be
made by the affected Bank on the same day as the other Banks make their
Eurocurrency Loans denominated in the applicable Alternative Currency as part of
the relevant Borrowing of Eurocurrency Loans, but shall bear interest with
reference to the Adjusted LIBOR applicable to U.S. Dollars rather than the
relevant Alternative Currency for the applicable Interest Period and shall be
made available in accordance with the procedures for disbursing U.S. Dollar
Loans under Section 2.3(d) hereof. Any Loan made in an Alternative Currency
shall be advanced in such currency, and all payments of principal and interest
thereon shall be made in such Alternative Currency.
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<PAGE>
(c) Rate Determinations. The Agent shall determine each interest rate
applicable to the Loans and reimbursement obligations hereunder, and its
determination thereof shall be conclusive and binding except in the case of
manifest error.
Section 2.2. Minimum Borrowing Amounts. Each Borrowing of Domestic Rate
Loans shall be in an amount not less than $1,000,000, or any larger amount that
is an integral multiple of $500,000. Each Borrowing of Eurocurrency Loans
denominated in U.S. Dollars shall be in an amount not less than $3,000,000, or
any larger amount that is an integral multiple of $1,000,000. Each Borrowing of
Eurocurrency Loans denominated in an Alternative Currency shall be in an amount
for which the U.S. Dollar Equivalent is not less than $3,000,000 or any larger
amount that is an integral multiple of the U.S. Dollar equivalent of $1,000,000
or, solely in the case of Refunding Borrowing for a Borrowing in an Alternative
Currency, if less, the same amount of the Alternative Currency as the maturing
Borrowing.
Section 2.3. Borrowing Procedures. (a) Notice to the Agent. The Borrower
shall give telephonic or telecopy notice to the Agent (which notice shall be
irrevocable once given and, if by telephone, shall be promptly confirmed in
writing) by no later than 10:00 A.M. (Chicago time) (i) on the date at least
three (3) Business Days prior to the date of each requested Borrowing of
Eurocurrency Loans and (ii) on the date of any requested Borrowing of Domestic
Rate Loans. Each such notice shall specify the date of the requested Borrowing
(which shall be a Business Day), the amount of the requested Borrowing, the type
of Loans to comprise such Borrowing and, if such Borrowing is to be comprised of
Eurocurrency Loans, the Interest Period applicable thereto and if such Borrowing
is of a Eurocurrency Loan denominated in an Alternative Currency, the
Alternative Currency in which such Loan is to be denominated. The Borrower
agrees that the Agent may rely on any such telephonic or telecopy notice given
by any person it in good faith believes is an Authorized Representative without
the necessity of independent investigation and in the event any notice by such
means conflicts with the written confirmation, such notice shall govern if the
Agent has acted in reliance thereon.
(b) Notice to the Banks. The Agent shall give prompt telephonic, telex or
telecopy notice to each of the Banks of any borrowing request received pursuant
to Section 2.3(a) above and, if such notice requests the Banks to make
Eurocurrency Loans, the Agent shall give notice to the Borrower and each of the
Banks by like means of the interest rate applicable thereto (but, if such notice
is given by telephone, the Agent shall confirm such rate in writing) promptly
after the Agent has made such determination.
(c) Borrower's Failure to Notify. In the event Borrower fails to give
notice pursuant to Section 2.3(a) above of the reborrowing of the principal
amount of any maturing Borrowing of Loans denominated in U.S. Dollars and has
not notified the Agent by 10:00 A.M. (Chicago time) on the day such Borrowing
matures that it intends to repay such Borrowing, the Borrower shall be deemed to
have requested a Borrowing of Domestic Rate Loans on such day in the amount of
the maturing Borrowing of Loans, subject to Section 7.2 hereof. In the event the
Borrower fails to give notice pursuant to Section 2.3(a) above of the
reborrowing of the principal amount of any maturing Borrowing of Loans
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denominated in an Alternative Currency and has not notified the Agent by 10:00
A.M. (Chicago time) on the day such Borrowing matures that it intends to repay
such Borrowing, the Borrower shall be deemed to have required a Borrowing of
Eurocurrency Loans denominated in the same currency as the maturing Borrowing on
such day in the amount of the maturing Borrowing of Loans with an Interest
Period of one (1) month, subject to Section 7.2 hereof.
(d) Disbursement of Loans. Not later than 11:00 A.M. (Chicago time) on the
date of any Borrowing of Loans denominated in U.S. Dollars other than Domestic
Rate Loans, and not later than 12 Noon (Chicago time) on the date of any
Borrowing of Domestic Rate Loans, each Bank shall make available its Loan in
funds immediately available in Chicago, Illinois at the principal office of the
Agent, except to the extent such Borrowing is either a reborrowing, in whole or
in part, of the principal amount of a maturing Borrowing of Loans (a "Refunding
Borrowing") or a refinancing of a reimbursement obligation with respect to a
letter of credit issued (a "Refinancing Borrowing"), in which case each Bank
shall record the Loan made by it as a part of such Refunding Borrowing or
Refinancing Borrowing, as the case may be, on its books or records or on a
schedule to the appropriate Note, as provided in Section 2.8 hereof, and shall
effect the repayment, in whole or in part, as appropriate, of its maturing Loan
or reimbursement obligation through the proceeds of such new Loan. Subject to
Section 7 hereof, the Agent shall make the proceeds of each Borrowing available
to the Borrower at the Agent's principal office in Chicago, Illinois. If a
Borrowing is to be denominated in an Alternative Currency, subject to Sections
2.1(b)(ii) and 7 hereof, each Bank shall make available its Loan in the
Alternative Currency at such office as the Agent has previously notified to each
Bank, for delivery to the Borrower at the Agent's direction, in funds then
customary for the settlement of international transactions in such currency and
no later than such local time as is necessary for such funds to be received and
transferred to the Borrower for same day value, except to the extent such
Borrowing is a Refunding Borrowing or a Refinancing Borrowing, in which case
each Bank shall record the Loan made by it as part of such Refunding Borrowing
or Refinancing on its books and records or on a schedule to the appropriate Note
as provided in Section 2.8 hereof, and shall effect the repayment, in whole or
in part, as appropriate, of its maturing Loan or reimbursement obligation
through the proceeds of such new Loan.
Section 2.4. Interest Periods. As provided in Section 2.3 hereof, at the
time of each request for the Borrowing of Loans hereunder the Borrower shall
select an Interest Period applicable to such Loans from among the available
options. The term "Interest Period" means the period commencing on the date a
Borrowing of Loans is made and ending, (a) in the case of Domestic Rate Loans,
on the last day of the calendar quarter in which such Loan is made (i.e. the
first to occur of March 31, June 30, September 30, and December 31 following the
date such Borrowing is made) and (b) in the case of Eurocurrency Loans, the
date, as the Borrower may select, 1, 2, 3 or 6 months thereafter; Provided,
However, that:
(a) any Interest Period for a Borrowing of Domestic Rate Loans
commencing less than 90 days before the Termination Date shall end on the
Termination Date;
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(b) with respect to any Borrowing of Eurocurrency Loans, the Borrower
may not select an Interest Period that extends beyond the Termination Date;
(c) whenever the last day of any Interest Period would otherwise be a
day that is not a Business Day, the last day of such Interest Period shall
be extended to the next succeeding Business Day, provided that, in the case
of an Interest Period for a Borrowing of Eurocurrency Loans, if such
extension would cause the last day of such Interest Period to occur in the
following calendar month, the last day of such Interest Period shall be the
immediately preceding Business Day; and
(d) for purposes of determining the Interest Period for a Borrowing of
Eurocurrency Loans, a month means a period starting on one day in a
calendar month and ending on the numerically corresponding day in the next
calendar month; Provided, However, that if there is no numerically
corresponding day in the month in which such an Interest Period is to end
or if such an Interest Period begins on the last Business Day of a calendar
month, then such Interest Period shall end on the last Business Day of the
calendar month in which such Interest Period is to end.
Section 2.5. Maturity of Loans. Each Loan shall mature and become due and
payable by the Borrower on the last day of the Interest Period applicable
thereto.
Section 2.6. Prepayments. (a) Voluntary. (i) Domestic Loans. The Borrower
shall have the privilege of prepaying without premium or penalty and in whole or
in part (but, if in part, then: (i) in an amount not less than $1,000,000 and in
integral multiples of $500,000 in the case of Domestic Rate Loans and (ii) in an
amount such that the minimum amount required for a Borrowing pursuant to Section
2.2 hereof remains outstanding) on any Business Day upon prior notice to the
Agent which must be received by the Agent (which shall advise each Bank thereof
promptly thereafter) by no later than 11:00 a.m. on the prepayment date, such
prepayment to be made by the payment of the principal amount to be prepaid.
(ii) Eurocurrency Loans. The Borrower may not prepay any Eurocurrency
Loan before its maturity.
(iii) Reborrowings. Any amount paid or prepaid on the Loans before the
Termination Date may, subject to the terms and conditions of this
Agreement, be borrowed, repaid and borrowed again.
(b) Mandatory. Concurrently with each reduction of the Commitments (whether
voluntarily or required) the Borrower shall prepay the Notes by the amount, if
any, necessary so that the aggregate outstanding principal balance of the Notes,
when taken together with the aggregate outstanding amounts of Letter of Credit
Utilization shall not exceed the Commitments as so reduced, each such prepayment
to be made by the payment of the principal amount to be prepaid and accrued
interest thereon to the date fixed for prepayment, and in the case of
Eurocurrency Loans, any compensation required by Section 2.10 hereof.
Additionally, in the event that outstanding Letter of Credit Utilization (which
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in the case of Letters of Credit payable in an Alternative Currency shall mean
the U.S. Dollar Equivalent thereof as determined pursuant to Section 1.1(c)(vi)
hereof) shall at any time exceed the Letter of Credit Commitments, the Borrower
shall pay the amount of such excess to the Agent, which each such payment first
to be applied to outstanding reimbursement obligations with respect to Letters
of Credit until payment in full thereof with any remaining balance to be held by
the Agent as collateral security for the obligations owing with respect to the
Letters of Credit.
Section 2.7. Default Rate. If any payment of principal on any Loan is not
made when due (whether by acceleration or otherwise), such Loan shall bear
interest (computed on the basis of a year of 360 days and actual days elapsed)
from the date such payment was due until paid in full, payable on demand, at a
rate per annum equal to:
(a) with respect to any Domestic Rate Loan, the sum of two percent
(2%) plus the Domestic Rate from time to time in effect;
(b) with respect to any Eurocurrency Loan denominated in U.S. Dollars
the sum of two percent (2%) plus the rate of interest in effect thereon at
the time of such default until the end of the Interest Period applicable
thereto and, thereafter, at a rate per annum equal to the sum of two
percent (2%) plus the Domestic Rate from time to time in effect; and
(c) with respect to any Eurocurrency Loan denominated in an
Alternative Currency, the sum of two percent (2%) plus the rate of interest
in effect thereon at the time of such default until the end of the Interest
Period applicable thereto and, thereafter, at a rate per annum equal to the
sum of the Applicable Eurocurrency Margin, plus two percent (2%) plus the
Overnight Eurocurrency Rate.
Section 2.8. The Notes. (a) Each Loan made to the Borrower by a Bank
(including Loans made pursuant to Section 1.1(c)(iv) hereof) shall be evidenced
by a promissory note of the Borrower in the form of Exhibit A hereto
(individually, a "Note" and collectively, the "Notes"). Such Notes shall be
dated the date hereof, payable to the order of each Bank and shall otherwise be
in the form of the relevant Exhibits hereto.
(b) Each Bank shall record on its books or records or on a schedule to the
appropriate Note the amount of each Loan made by it to the Borrower, the
Interest Period thereof, all payments of principal and interest and the
principal balance from time to time outstanding thereon, in respect of any
Eurocurrency Loan, the interest rate applicable thereto and the currency in
which such Loan is made, and, in respect of any Loan, the type of such Loan;
provided that prior to the transfer of any Note all such amounts shall be
recorded on a schedule to such Note. The record thereof, whether shown on such
books or records of a Bank or on a schedule to any Note, shall be Prima Facie
evidence as to all such amounts; Provided, However, that the failure of any Bank
to record any of the foregoing or any error in any such record shall not limit
or otherwise affect the obligation of the Borrower to repay all Loans made to it
hereunder together with accrued interest thereon. At the request of any Bank and
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upon such Bank tendering to the Borrower the Note to be replaced, the Borrower
shall furnish a new Note to such Bank to replace any outstanding Note and at
such time the first notation appearing on a schedule on the reverse side of, or
attached to, such Note shall set forth the aggregate unpaid principal amount of
all Loans, if any, then outstanding thereon.
Section 2.9. Commitment Terminations. The Borrower shall have the right at
any time and from time to time, upon five (5) Business Days' prior written
notice to the Agent, to terminate without premium or penalty, in whole or in
part, the Commitments, any partial termination to be in an amount not less than
$5,000,000 or any larger amount that is an integral multiple of $1,000,000, and
to reduce ratably the respective Commitments of each Bank; provided that (x) the
Revolving Credit Loan Commitments may not be reduced to an amount less than the
aggregate principal amount of Loans (which, in the case of Eurocurrency Loans
denominated in an Alternative Currency, shall mean the Original Dollar Amount
thereof) and (y) the Letter of Credit Commitments may not be reduced to an
amount less than Letter of Credit Utilization then outstanding (which in the
case of Letters of Credit payable in an Alternative Currency shall mean the U.S.
Dollar Equivalent thereof as determined pursuant to Section 1.1(c)(vi) hereof)
and further provided that the Borrower shall not be entitled to reduce the
Revolving Credit Loan Commitments in whole without a termination in whole of the
Letter of Credit Commitments and vice versa. Any termination of Commitments
pursuant to this Section 2.9 may not be reinstated.
Section 2.10. Funding Indemnity. In the event any Bank shall incur any
loss, cost or expense (including, without limitation, any loss of profit, and
any loss, cost or expense incurred by reason of the liquidation or re-employment
of deposits or other funds acquired by such Bank to fund or maintain any
Eurocurrency Loan or the relending or reinvesting of such deposits or amounts
paid or prepaid to such Bank) as a result of:
(a) any payment or prepayment of a Eurocurrency Loan on a date other
than the last day of its Interest Period,
(b) any failure (because of a failure to meet the conditions of
Section 7 or otherwise) by the Borrower to borrow a Eurocurrency Loan on
the date specified in a notice given pursuant to Section 2.3 hereof (unless
such notice was revoked in accordance with Section 2.1(b)(ii) in the event
a Bank determined that the requested Alternative Currency in which such
Eurocurrency Loan was to be made was unavailable to it),
(c) any failure by the Borrower to make any payment of principal on
any Eurocurrency Loan when due (whether by acceleration or otherwise), or
(d) any acceleration of the maturity of a Eurocurrency Loan as a
result of the occurrence of any Event of Default hereunder,
then, upon the demand of such Bank, the Borrower shall pay to such Bank such
amount as will reimburse such Bank for such loss, cost or expense. If any Bank
makes such a claim for compensation, it shall provide to the Borrower, with a
copy to the Agent, a certificate executed by an officer of such Bank setting
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forth the amount of such loss, cost or expense in reasonable detail (including
an explanation of the basis for and the computation of such loss, cost or
expense) and the amounts shown on such certificate shall be conclusive.
Section 2.11. Margin Adjustments. The applicable Eurocurrency Margin
specified in Section 2.1(b) hereof shall be subject to quarterly adjustment
(commencing with the fiscal quarter ending December 31, 1994) based upon the
ratio of (a) average monthly Consolidated Funded Debt for the immediately
preceding four fiscal quarters ended on each such fiscal quarter end to (b)
Consolidated Income Before Interest, Taxes and Depreciation for the immediately
preceding four fiscal quarters ended on each such fiscal quarter end (the "Case
Flow Ratio") as follows (the margins from time to time applicable to the
Eurocurrency Loans being hereinafter referred to as the " Applicable
Eurocurrency Margin"):
<TABLE>
<CAPTION>
Applicable Eurocurrency
If as of the last day of any fiscal quarter Margin Shall Each Be:
<S> <C>
LEVEL I: .625%
Cash Flow Ratio is less than 1.75 to 1.00
LEVEL II: .75%
Cash Flow Ratio is greater than or equal to 1.75 to 1.00
but less than or equal to 2.50 to 1
LEVEL III: 1.00%
Cash Flow Ratio is greater than 2.50 to 1.00
</TABLE>
Not later than five Business Days after receipt by the Agent of the
financial statements and the compliance certificate called for by Section 8.5
hereof for the applicable quarter, the Agent shall determine the Cash Flow Ratio
for the applicable period based on the information contained in such financial
statements and compliance certificate and shall promptly notify the Borrower and
the Banks of such determination and of any change in the Applicable Eurocurrency
Margin resulting therefrom, any such change in the Applicable Eurocurrency
Margin to be effective as of the date the Agent so notifies the Borrower, with
such new Applicable Eurocurrency Margin to continue in effect until the
effective date of the next quarterly redetermination in accordance with the
foregoing. Each determination of the Cash Flow Ratio and Applicable Eurocurrency
Margin by the Agent in accordance with this Section shall be conclusive and
binding on the Borrower and the Banks absent manifest error. The foregoing to
the contrary notwithstanding, in the event the Borrower shall have failed to
deliver the financial statements for the applicable quarter within the times
provided by Section 8.5 hereof, the highest applicable margins shall apply until
delivery of such financial statements.
SECTION 3. FEES.
Section 3.1. Commitment Fee. The Borrower shall pay to the Agent for the
ratable account of the Banks a commitment fee at the rate of one-fourth of one
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percent (0.25%) per annum (computed on the basis of a year of 360 days and the
actual number of days elapsed) on the average daily Unused Amount of the
Revolving Credit Loan Commitments hereunder. Such commitment fee is payable in
arrears on the last day of each March, June, September and December occurring
after the date hereof (commencing December 31, 1994) and on the Termination
Date, unless the Revolving Credit Loan Commitments are terminated in whole on an
earlier date, in which event the fees for the period to the date of such
termination in whole shall be paid on the date of such termination.
Section 3.2. Closing Fee. The Borrower shall pay to the Agent for the
ratable account of the Banks, a nonrefundable closing fee equal to $39,000, such
fee to be payable on the earlier of (a) January 3, 1995 or (b) the date upon
which the Commitments are terminated in while pursuant to Section 2.9 hereof.
Section 3.3. Agent's Fees. The Borrower shall from time to time pay the
Agent for its own use and benefit such fees as the Borrower and the Agent have
mutually agreed upon.
Section 3.4. Letter of Credit Fees. (a) Standby Letters of Credit. The
Borrower shall pay to the Agent for the ratable account of the Banks a
nonrefundable fee for each special purpose standby Letter of Credit issued
hereunder equal to one percent (1%) per annum (computed on the basis of a year
of 360 days and actual days elapsed) (or such other rate as may be agreed upon
by the Borrower and the Banks) of the initial face amount of each standby Letter
of Credit, such fee to be payable in U. S. Dollars in advance on the date of
issuance of the relevant Letter of Credit and, in the event the term of any
Letter of Credit expires or is extendible for more than one year from the
issuance date thereof, on the date(s) occurring each year thereafter and such
fee to be nonrefundable in the event any Letter of Credit is terminated or
canceled prior to its expressed maturity date.
(b) Commercial Letters of Credit. The Borrower shall pay to the Agent in U.
S. Dollars, for the ratable account of the Banks, a nonrefundable negotiation
fee for each documentary commercial letter of credit issued hereunder in an
amount equal to 1/4 of 1% of the initial face amount of such Letter of Credit,
such fee to be payable upon issuance of such letter of credit.
Section 3.5. Transaction Charges. The Borrower shall pay to the Agent for
its own account such issuing and processing fees and charges as the Agent from
time to time customarily imposes in connection with the issuance, negotiation
and payment of letters of credit and drafts drawn thereunder, such fees to be
paid in accord with the standard and customary practices of the Agent.
SECTION 4. PLACE AND APPLICATION OF PAYMENTS; EXTENSION OF TERMINATION DATE.
Section 4.1. Place and Application of Payments. All payments of principal
of and interest on the Loans, reimbursement obligations with respect to Letters
of Credit and all payments of fees and all other amounts payable under this
Agreement shall be made to the Agent by no later than 12:00 noon (Chicago time)
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(a) at the principal office of the Agent in Chicago, Illinois (or such other
location in the State of Illinois as the Agent may designate to the Borrower) or
(b) if such payment is to be made in an Alternative Currency, no later than
12:00 noon local time at the place of payment to such office as the Agent has
previously notified the Borrower, in each case for the benefit of the Banks. Any
payments received after such time shall be deemed to have been received by the
Agent on the next Business Day. All such payments shall be made (i) in the case
of obligations payable in U.S. Dollars, in immediately available funds at the
place of payment or (ii) in the case of obligations payable in an Alternative
Currency, in such Alternative Currency in funds then customary for the
settlement of international transactions in such currency, in all cases, without
setoff or counterclaim and without reduction for, and free from, any and all
present or future taxes, levies, imposts, duties, fees, charges, deductions,
withholdings, restrictions or conditions of any nature imposed by any government
or any political subdivision or taxing authority thereof. The Agent will
promptly thereafter cause to be distributed like funds relating to the payment
of principal or interest on Loans, reimbursement obligations with respect to
Letters of Credit or fees ratably to the Banks and like funds relating to the
payment of any other amount payable to any Bank to such Bank, in each case to be
applied in accordance with the terms of this Agreement.
Anything contained herein to the contrary notwithstanding, all payments and
collections received in respect of the indebtedness evidenced by the Notes, this
Credit Agreement and the other Loan Documents received, in each instance, by the
Agent or any of the Banks after the occurrence of an Event of Default shall be
remitted to the Agent and distributed as follows:
(a) first, to the payment of any outstanding costs and expenses
incurred by the Agent in monitoring, verifying, protecting, preserving or
enforcing rights under the Credit Agreement or the Notes or the other Loan
Documents and in any event including all costs and expenses of a character
which the Borrower has agreed to pay under Sections 9.5 and 12.15 hereof
(such funds to be retained by the Agent for its own account unless it has
previously been reimbursed for such costs and expenses by the Banks, in
which event such amounts shall be remitted to the Banks to reimburse them
for payments theretofore made to the Agent);
(b) second, to the payment of any outstanding interest or other fees
or amounts due under the Notes, the Credit Agreement and the other Loan
Documents other than for principal, ratably as among the Banks in accord
with the amount of such interest and other fees or amounts owing each Bank;
(c) third, to the payment of the principal of the Notes and principal
amounts owing in respect of other Obligations hereunder, ratably as among
the Banks in accord with the amount of such principal owing each Bank;
(d) fourth, to the Agent to be held as collateral security for all
undrawn outstanding Letters of Credit hereunder unless and until all such
indebtedness, obligations and liabilities have been fully paid and
satisfied or such Letters of Credit have been terminated or expired; and
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(e) fifth, to the Borrower or whoever may be lawfully entitled
thereto.
Section 4.2. Extension of the Revolving Credit Termination Date. No sooner
than 60 days prior to the second anniversary date of the Closing Date and no
later than the second anniversary of the Closing Date (and, if the same shall
have been extended pursuant to this Section 4.2, the third anniversary of the
Closing Date) the Borrower may request in a written notice to the Agent that the
scheduled Termination Date then in effect be extended for one (1) year. The
Agent will promptly inform the Banks of such request and each Bank shall notify
the Agent in writing within 30 days of receipt of such notice whether it agrees
to such extension. In the event that any Bank shall fail to so notify the Agent
whether it agrees to such extension, such Bank shall be deemed to have refused
to grant the requested extension. Upon receipt by the Agent of the consent of
all the Banks, the Borrower and the Banks shall enter into such documents as the
Agent may deem necessary or appropriate to reflect such extension. In no event
shall the Termination Date be extended beyond November 30, 1999.
SECTION 5. DEFINITIONS; INTERPERTATION.
Section 5.1. Definitions. The following terms when used herein have the
following meanings:
"Adjusted LIBOR" is defined in Section 2.1(b) hereof.
"Agent" means Harris Trust and Savings Bank and any successor pursuant to
Section 11.8 hereof.
"Agreement Accounting Principles" shall mean generally accepted principles
of accounting in effect at the time of the preparation of the financial
statements referred to in Section 6.6 hereof, applied in a manner consistent
with that used in preparing such statements.
"Alternative Currency" means each of Canadian Dollars, British Pounds
Sterling, Japanese Yen or German Deutschmarks, so long as such currency is
freely transferable and freely convertible into U.S. Dollars.
"Applicable Eurocurrency Margin" is defined in Section 2.11 hereof.
"Authorized Representative" means any of the persons shown on the list of
officers provided by the Borrower pursuant to Section 7.1(c) hereof, or any
other person shown on any updated such list provided by the Borrower to the
Agent, or any further or different officer(s) or employee(s) of the Borrower so
named by any Authorized Representative of the Borrower in a written notice to
the Agent.
"Bank" means each bank signatory hereto.
"Borrower" means General Housewares Corp., a Delaware corporation.
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"Borrowing" means the total of Loans of a single type made by one or more
Banks to the Borrower on a single date and for a single Interest Period and if
such Loans are Eurocurrency Loans, denominated in the same currency. Borrowings
of Loans are made ratably from each of the Banks according to their Commitments.
"Business Day" means any day other than a Saturday or Sunday on which Banks
are not authorized or required to close in Chicago, Illinois or New York, New
York and, if the applicable Business Day relates to the borrowing or payment of
a Eurocurrency Loan, on which banks are dealing in United States Dollar deposits
or the relevant Alternative Currency in the interbank market in London, England
and Nassau, Bahamas and, if the applicable Business Day relates to a borrowing
or payment of a Eurocurrency Loan denominated in an Alternative Currency, on
which banks and foreign exchange markets are open for business in the city where
disbursements of or payments on such Loans are to be made.
"Capital Lease" of a Person means at any date any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person, prepared in accordance with
Agreement Accounting Principles.
"Cash Flow Ration" is defined in Section 2.11 hereof.
"Closing Date" shall mean November 30, 1994.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitments" shall mean and include the Revolving Credit Loan Commitments
and the Letter of Credit Commitments, unless the context in which such term is
used shall otherwise require.
"Consolidated Current Assets" means the consolidated current assets of the
Borrower and its Consolidated Subsidiaries determined in accordance with
Agreement Accounting Principles.
"Consolidated Current Liabilities" means the consolidated current
liabilities of the Borrower and its Consolidated Subsidiaries determined in
accordance with Agreement Accounting Principles.
"Consolidated Funded Debt" means Funded Debt of the Borrower and its
Subsidiaries on a consolidated basis without duplication.
"Conslidated Income before Interest, Taxes and Depreciation" means, for any
fiscal quarter, Consolidated Income Before Interest, Taxes, Depreciation and
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Rentals less all payments during such fiscal quarter pursuant to all operating
leases, determined on a consolidated basis for the Borrower and the Consolidated
Subsidiaries in accordance with Agreement Accounting Principles.
"Consolidated Income Before Interest, Taxes, Depreciation and Rentals"
means, for any fiscal quarter, the sum of (i) earnings before income taxes for
such fiscal quarter, plus (ii) Interest Expense for such fiscal quarter plus
(iii) all charges for depreciation of fixed assets and amortization of
Intangible Assets for such fiscal quarter plus (iv) payments during such fiscal
quarter pursuant to all operating leases determined on a consolidated basis for
the Borrower and the Consolidated Subsidiaries in accordance with Agreement
Accounting Principles.
"Consolidated Net Earnings" for any period means the consolidated net
income of the Borrower and its Consolidated Subsidiaries accrued during such
period as computed on a consolidated basis in accordance with Agreement
Accounting Principles, and, without limiting the foregoing, after deduction from
gross income of all charges and reserves, including charges and reserves for all
taxes on or measured by income, but excluding any profits or losses on the sale
or other disposition not in the ordinary course of business of fixed or capital
assets or on the acquisition, retirement, sale or other disposition of stock or
securities of the Borrower and its Consolidated Subsidiaries, and also excluding
taxes on such profits and any tax deductions or credits on account of any such
losses.
"Consolidated Subsidiary" means any Subsidiary or other entity whose
accounts are required to be consolidated with those of the Borrower in
accordance with Agreement Accounting Principles.
"Consolidated Net Worth" means, as of the date of any determination
thereof, the total stockholders equity of the Borrower and its Consolidated
Subsidiaries, determined in accordance with Agreement Accounting Principles.
"Controlled Group" has the same meaning as in Section 414(b) of the Code.
"Current Assets" shall mean current assets as defined in accordance with
Agreement Accounting Principles.
"Current Debt" means any obligation for borrowed money payable one year or
less from the date of the creation of such obligation.
"Current Liabilities" shall mean current liabilities as defined in
accordance with Agreement Accounting Principles.
"Default" means any event or condition the occurrence of which would, with
the passage of time or the giving of notice, or both, constitute an Event of
Default.
"Domestic Rate" is defined in Section 2.1(a) hereof.
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"Domestic Rate Loan" means a Loan bearing interest at the rate specified in
Section 2.1(a) hereof.
"Earnings Available for Fixed Charges" for any period shall mean the sum of
(a) Consolidated Net Earnings for such period plus (to the extent deducted in
determining such Consolidated Net Earnings), (b) all provisions for any Federal,
state or other income taxes made by the Company and its Consolidated
Subsidiaries during such period and (c) Fixed Charges during such period.
"ERISA" is defined in Section 6.12 hereof.
"Eurocurrency Loan" means a Loan bearing interest at the rate specified in
Section 2.1(b) hereof and shall also include eurodollar loans outstanding as of
the date hereof and made pursuant to The 1993 Credit Agreement.
"Eurocurrency Margin" is defined in Section 2.1(b) hereof.
"Eurocurrency Reserve Percentage" is defined in Section 2.1(b) hereof.
"Event of Default" means any of the events or circumstances specified in
Section 9.1 hereof.
"Federal Funds Rate" is defined in Section 11.9 hereof.
"Fixed Charge Coverage Ratio" is defined in Section 8.8 hereof.
"Fixed Charges" for any period shall mean on a consolidated basis the sum
of (a) All Rentals (excluding Capitalized Lease Obligations) payable by the
Borrower and its Consolidated Subsidiaries plus (b) all Consolidated Interest
Expense (including the interest component of all Capitalized Lease Obligations)
of the Borrower and its Consolidated Subsidiaries.
"Fixed Rate Loans" means the Eurocurrency Loans.
"Funded Debt" of any Person shall mean (a) all Indebtedness of such Person
for borrowed money (including, without limitation, the Obligations hereunder) or
which has been incurred in connection with the acquisition of assets in each
case having a final maturity of one or more than one year from the date of
origin thereof (or which is renewable or extendible at the option of the obligor
for a period or periods more than one year from the date of origin), including
all payments in respect thereof that are required to be made within one year
from the date of any determination of Funded Debt, whether or not the obligation
to make such payments shall constitute a current liability of the obligor under
Agreement Accounting Principles, (b) all Capitalized Lease Obligations of such
Person, and (c) all Guaranties by such Person of Funded Debt of others.
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"Gangelhoff Note" means the 12% Subordinated Note, due 2000 dated December
29, 1988 of General Housewares Corp. payable to Ronald J. Gangelhoff in the face
principal amount of $5,000,000.
"Guaranties" of a Person means any agreement by which such Person assumes,
guarantees, endorses, contingently agrees to purchase or provide funds for the
payment of, or otherwise becomes liable upon, the obligation of any other
Person, or agrees to maintain the net worth or working capital or other
financial condition of any other Person or otherwise assures any creditor of
such other Person against loss, including, without limitation, any comfort
letter, operating agreement, take-or-pay contract or letter of credit but
excluding customary indemnities by any Persons with respect to products sold by
it in the ordinary course of business.
"Indebtedness" of any Person shall mean and include all obligations of such
Person which in accordance with Agreement Accounting Principles shall be
classified upon a balance sheet of such Person as liabilities of such Person,
and in any event shall include all (a) obligations of such Person for borrowed
money or which have been incurred in connection with the acquisition of property
or assets, (b) obligations secured by any Lien upon property or assets owned by
such Person, even though such Person has not assumed or become liable for the
payment of such obligations, (c) obligations created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the event of default are
limited to repossession or sale of property, (d) obligations to purchase any
property or to obtain the services of another Person if the contract requires
that payment for such property or services be made regardless of whether such
property is delivered or such services are performed, except that no obligation
shall constitute Indebtedness solely because the contract provides for
commercially reasonable liquidated charges or reimbursement of expenses
following cancellation, (e) Capitalized Lease Obligations, (f) obligations with
respect to letters of credit and bankers acceptances and (g) Guaranties of
obligations of others of the character referred to in this definition.
"Interest Period" is defined in Section 2.4 hereof.
"Investments" shall mean all investments, in cash or by delivery of
property, made directly or indirectly in any Person, whether by acquisition of
shares of capital stock, Indebtedness or other obligations or Securities or by
loan, advance, capital contribution or otherwise; PROVIDED that "INVESTMENTS"
shall not mean or include routine investments in property to be used or consumed
in the ordinary course of business.
"Lending Office" is defined in Section 10.4 hereof.
"Letter of Credit" is defined in Section 1.1(a) hereof.
"Letter of Credit Commitment" is defined in Section 1.1(c) hereof.
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"Letter of Credit Facility" is defined in the introductory paragraph
hereof.
"Letter of Credit Utilization" means, as of any date of determination, the
sum of (i) the maximum aggregate amount which is or at any time thereafter may
be available for drawing under all Letters of Credit then outstanding (which in
the case of Letters of Credit payable in an Alternative Currency shall mean the
U.S. Dollar Equivalent thereof as determined pursuant to Section 1.1(c)(vi)
hereof) plus (ii) the aggregate amount of all drawings under Letters of Credit
honored by the Agent and not theretofore reimbursed by the Borrower.
"Leverage Ratio" is defined in Section 8.7 hereof.
"LIBOR" is defined in Section 2.1(b) hereof.
"Lien" means any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on the common law, statute or contract, including, but not limited to,
the security interest lien arising from a mortgage, encumbrance, pledge,
conditional sale, security agreement or trust receipt, or a lease, consignment
or bailment for security purposes. The term "Lien" shall also include
reservations, exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property. For the purposes of this definition, a Person shall be
deemed to be the owner of any Property which it has acquired or holds subject to
a conditional sale agreement, Capital Lease or other arrangement pursuant to
which title to the Property has been retained by or vested in some other Person
for security purposes, and such retention of title shall constitute a "Lien."
"Loan" is defined in Section 1.1(a) hereof, and the term "type" of Loan
refers to its status as a Domestic Rate Loan or Eurocurrency Loan.
"Loan Documents" means this Agreement, the Notes and the Applications.
"Margin Stock" means "Margin Stock" as defined in Regulation U of the Board
of Governors of the Federal Reserve System.
"Material Plan" is defined in Section 9.1(f) hereof.
"Note" is defined in Section 2.8 hereof.
"Obligations" means all unpaid principal of and accrued and unpaid interest
on the Notes and the reimbursement obligation of the Borrower with respect to
the Letters of Credit, all accrued and unpaid fees and all other obligations of
the Borrower to the Banks or any Bank or the Agent arising under the Loan
Documents.
"Original Dollar Amount" means in relation to any Loan denominated in an
Alternative Currency, the U.S. Dollar Equivalent of such Loan on the day it is
made.
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"Overnight Eurocurrency Rate" shall mean for a Eurocurrency Loan
denominated in an Alternative Currency, or any Letter of Credit payable in an
Alternative Currency, the rate of interest per annum as determined by the Agent
(rounded upwards, if necessary, to the nearest whole multiple of one-sixteenth
of one percent (1/16 of 1%)) at which overnight or weekend deposits of the
appropriate currency for delivery in immediately available and freely
transferable funds would be offered by the Agent to major banks in the interbank
market upon request of such major banks for the applicable period as determined
above and in an amount comparable to the unpaid principal amount of such
Eurocurrency Loan or reimbursement obligation with respect to such Letter of
Credit (or, if the Agent is not placing deposits in such currency in the
interbank market, then the Agent's cost of funds in such currency for such
period).
"PBGC" is defined in Section 6.12 hereof.
"Permitted Investments" means the following:
(1) Existing Investments in foreign Consolidated Subsidiaries, other
Investments existing as of December 31, 1993 and disclosed on the audited
financial statements herefore delivered to the Banks, Investments in
domestic Consolidated Subsidiaries and Investments in any corporation which
concurrently with such investment becomes a Consolidated Subsidiary;
(2) Property to be used by the Borrower or a Subsidiary in the
ordinary course of its business;
(3) Current assets arising from the sale of goods and services in the
ordinary course of business of the Borrower and its Subsidiaries;
(4) Investments in direct obligations of the United States of America,
or any agency thereof, or obligations guaranteed by the United States of
America, maturing not more than one year from the date of acquisition
thereof;
(5) Investments in certificates of deposits maturing not more than one
year from the date of acquisition thereof, issued by any of the Banks or
any commercial banks or trust companies organized under the laws of the
United States or any state thereof, each having capital, surplus and
undivided profits aggregating at least $500,000,000;
(6) Investments in commercial paper given the highest rating by both
Moody's Investors Service, Inc. and Standard and Poors Corporation and
maturing not more than 270 days from the date of creation thereof;
(7) Investments in direct obligations of a state of the United States,
or a municipality thereof, given the highest rating by both Moody's
Investors Services, Inc. and Standard and Poors Corporation and maturing
not more than one year from the date of acquisition thereof; and
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(8) the Borrower's own stock option plans and savings or stock
purchase plans.
Investments shall be valued at cost less any net return of capital through the
sale, liquidation or repayment (by credit or otherwise) thereof or other return
of capital thereon.
"Person" means an individual, partnership, corporation, associate, trust,
unincorporated organization or any other entity or organization, including a
government or agency or political subdivision thereof.
"Plan" means with respect to the Borrower and each Subsidiary at any time
an employee pension benefit plan which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code and
either (i) is maintained by a member of the Controlled Group for employees of a
member of the Controlled Group of which the Borrower or such Subsidiary is a
part, (ii) is maintained pursuant to a collective bargaining agreement or any
other arrangement under which more than one employer makes contributions and to
which a member of the Controlled Group of which the Borrower or such Subsidiary
is a part is then making or accruing an obligation to make contributions or has
within the preceding five plan years made contributions, or (iii) under which a
member of the Controlled Group of which the Borrower or such Subsidiary is a
part has any liability, including any liability by reason of having been a
substantial employer within the meaning of Section 4063 of ERISA at any time
during the preceding five years or by reason of being deemed a contributing
sponsor under Section 4069 of ERISA.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, whether now owned or
hereafter acquired.
"Refinancing Borrowing" is defined in Section 2.3(d) hereof.
"Refunding Borrowing" is defined in Section 2.3(d) hereof.
"Rentals" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of the
property) payable by the Borrower or a Consolidated Subsidiary, as lessee or
sublessee under a lease of real or personal property, but shall be exclusive of
any amounts required to be paid by the Borrower or a Consolidated Subsidiary
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges. Fixed rents under
any so-called "percentage leases" shall be computed solely on the basis of the
minimum rents, if any, required to be paid by the lessee regardless of sales
volume or gross revenues.
"Required Banks" means as of the date of determination thereof, those Banks
holding at least 66-2/3% of the Commitments or, in the event that no Commitments
are outstanding hereunder, those Banks holding at least 66-2/3% in aggregate
principal amount of the Loans and Letter of Credit Utilization outstanding
hereunder.
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"Revolving Credit" is defined in the introductory paragraph hereof.
"Revolving Credit Loan Commitment" is defined in Section 1.1(a) hereof.
"Security" has the same meaning as in Section 2(l) of the Securities Act
of 1933, as amended.
"SEC" means the Securities and Exchange Commission.
"Set-Off" is defined in Section 12.7 hereof.
"Subordinated Indebtedness" means the Indebtedness for Borrowed Money of
the Borrower evidenced by the Gangelhoff Note and any other Indebtedness for
Borrowed Money of the Borrower for money borrowed the terms of which are
acceptable to the Required Banks and which is subordinated in right of payment
to the prior payment of the Obligations pursuant to subordination provisions
approved in writing by the Required Banks.
"Subsidiary" means any corporation of which more than fifty percent (50%)
of the outstanding Voting Stock is at the time directly or indirectly owned by
the Borrower, by one or more of its Subsidiaries, or by the Borrower and one or
more of its Subsidiaries.
"Tangible Assets" of any Person means, as of the date of any determination
thereof, the total amount of all assets of such Person (less depreciation,
depletion and other properly deductible valuation reserves) after deducting the
following: good will, patents, trade names, trade marks, copyrights, franchises,
experimental expense, organization expense, unamortized debt discount and
expense, deferred assets, the excess of cost of shares acquired over book value
of related assets, any write-ups in the book value of any asset resulting from a
revaluation thereof, and such other assets as are properly classified as
"Intangible Assets" in accordance with Agreement Account Principles.
"Termination Date" means November 30, 1997, as the same may be extended
pursuant to Section 4.2 hereof.
"The 1993 Credit Agreement" means that certain Credit Agreement dated as of
April 20, 1993 as amended among the Borrower, the Agent and the Banks.
"Total Liabilities" means the total of the liabilities of the Borrower and
its Consolidated Subsidiaries on a consolidated basis determined in accordance
with Agreement Accounting Principles.
"Unfunded Vested Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the present value of all vested nonforfeitable
accrued benefits under such Plan exceeds (ii) the fair market value of all Plan
assets allocable to such benefits, all determined as of the then most recent
valuation date for such Plan, but only to the extent that such excess represents
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a potential liability of a member of the Controlled Group to the PBGC or the
Plan under Title IV of ERISA.
"Unrestricted Subsidiary" shall mean any Subsidiary designated as such on
Exhibit B hereto.
"U.S. Dollars" means lawful currency of the United States of America.
"U.S. Dollar Equivalent" means the amount of U.S. Dollars which would be
realized by converting an Alternative Currency into U.S. Dollars in the spot
market at the exchange rate quoted by the Agent at approximately 11:00 a.m.
(London, England time) two Business Days prior to the date on which a
computation thereof is required to be made, to major banks in the interbank
exchange market for the purchase of U.S. Dollars for such Alternative Currency.
"Voting Stock" of any Person means capital stock of any class or classes
(however designated) having ordinary voting power for the election of directors
of such Person, other than stock having such power only by reason of the
happening of a contingency.
"Welfare Plan" means a "Welfare Plan," as said term is defined in Section
3(1) of ERISA.
"Wholly-Owned" means a Subsidiary of which all of the issued and
outstanding shares of stock (other than directors' qualifying shares as required
by law) shall be owned by the Borrower and/or one or more of its Wholly-Owned
Subsidiaries.
Section 5.2. Interpretation. The foregoing definitions shall be equally
applicable to both the singular and plural forms of the terms defined. All
references to times of day herein shall be references to Chicago, Illinois time
unless otherwise specifically provided. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with Agreement
Accounting Principles as in effect from time to time, to the extent applicable,
except where such principles are inconsistent with the specific provisions of
this Agreement.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Banks as follows:
Section 6.1. Organization and Qualification. The Borrower is duly organized
and validly existing in good standing under the laws of the State of Delaware,
has full and adequate corporate power to carry on its business as now conducted,
is duly licensed or qualified and in good standing in each jurisdiction in which
the nature of the business transacted by it or the nature of the Property owned
or leased by it makes such licensing or qualification necessary, except where
the failure to be so licensed or qualified and in goodstanding would not have a
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material adverse effect on the financial condition or Property, business or
operations of the Borrower and the Consolidated Subsidiaries taken as a whole.
Section 6.2. Subsidiaries. As of the date hereof, the only Subsidiaries of
the Borrower are designated in Exhibit B hereto; each Subsidiary is a
corporation duly organized and validly existing in good standing under the laws
of the jurisdiction in which it was incorporated, has full and adequate
corporate power to carry on its business as now conducted, and is duly licensed
or qualified and in good standing in each jurisdiction in which the nature of
the business transacted by it or the nature of the Property owned or leased by
it makes such licensing or qualification necessary, except where the failure to
be so licensed or qualified and in good standing would not have a material
adverse effect on the financial condition or Property, business or operations of
the Borrower and the Consolidated Subsidiaries taken as a whole. Exhibit B
hereto correctly sets forth, as to each Subsidiary, whether or not it is a
Consolidated Subsidiary, the jurisdiction of its incorporation, the percentage
of issued and outstanding shares of each class of its capital stock owned by the
Borrower and the Subsidiaries and, if such percentage is not 100% (excluding
directors' qualifying shares as required by law), a description of each class of
its authorized capital stock and the number of shares of each class issued and
outstanding. All of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and outstanding and fully paid and nonassessable
and all such shares indicated in Exhibit B as owned by the Borrower or a
Subsidiary are owned, beneficially and of record, by the Borrower or such
Subsidiary, free of any Lien.
Section 6.3. Corporate Authority and Validity of Obligations. The Borrower
has full right and authority to enter into this Agreement, to make the
borrowings herein provided for, to request that the Letters of Credit be issued
hereunder, to issue its Notes and execute and deliver the Applications in
evidence thereof and to perform all of its obligations hereunder and under the
Notes and Applications; this Agreement, each Note and each Application delivered
by the Borrower have been duly authorized, executed and delivered by the
Borrower and constitute valid and binding obligations of the Borrower
enforceable in accordance with their terms; and this Agreement, the Notes and
the Applications do not, nor does the performance or observance by the Borrower
or any Subsidiary of any of the matters or things therein provided for,
contravene any provision of law or any charter or by-law provision of the
Borrower or any Subsidiary or any material covenant, indenture or agreement of
or affecting the Borrower or any Subsidiary or a substantial portion of their
respective Properties.
Section 6.4. Not an Investment Company. The Borrower is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
Section 6.5. Margin Stock. Neither the Borrower nor any of its Subsidiaries
is engaged principally, or as one of its primary activities, in the business of
extending credit for the purpose of purchasing or carrying Margin Stock, and
neither the Borrower nor any of its Subsidiaries will use the proceeds of any
Loan or Letter of Credit in a manner that violates any provision of Regulation
U, G or X of the Board of Governors of the Federal Reserve System.
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Section 6.6. Financial Reports. The consolidated statement of financial
condition of the Borrower and the Consolidated Subsidiaries as at December 31,
1993 and the related statements of consolidated income and consolidated cash
flows of the Borrower and the Consolidated Subsidiaries for the year then ended
and accompanying notes thereto, which financial statements are accompanied by
the report of Price Waterhouse, independent public accountants, and the
unaudited statement of consolidated financial condition of the Borrower and the
Consolidated Subsidiaries as at September 30, 1994 and the related statements of
consolidated income and consolidated cash flows of the Borrower and the
Consolidated Subsidiaries for the nine months then ended and accompanying notes,
heretofore furnished to the Banks, fairly present the consolidated financial
conditions of the Borrower and the Consolidated Subsidiaries as at such dates
and the consolidated results of their operations and their consolidated cash
flows for the periods then ended in conformity with generally accepted
accounting principles applied on a consistent basis.
Section 6.7. No Material Adverse Change. Since December 31, 1993, there has
been no material adverse change in the condition, financial or otherwise, or
business prospects of the Borrower and the Consolidated Subsidiaries taken as a
whole.
Section 6.8. Litigation. There is no litigation or governmental proceeding
pending, nor to the knowledge of the Borrower threatened, against the Borrower
or any Consolidated Subsidiary which if adversely determined would (a) impair
the validity or enforceability of, or materially impair the ability of the
Borrower to perform its obligations under, this Agreement, the Notes or the
Applications or (b) result in any material adverse change in the financial
condition or Property, business or operations of the Borrower and the
Consolidated Subsidiaries taken as a whole.
Section 6.9. Tax Returns. The consolidated United States federal income tax
returns of the Borrower for the taxable year ended December 31, 1989 and for all
taxable years ended prior to said date have been examined by the Internal
Revenue Service and have been approved as filed, and any additional assessments
in connection with any of such years have been paid or the applicable statute of
limitations therefor has expired. There are no assessments in respect of the
consolidated United States federal income tax returns of the Borrower and the
Consolidated Subsidiaries of a material nature for any taxable year ended after
December 31, 1990 pending, nor to the knowledge of the Borrower is any such
assessment threatened, other than for those which are either (i) provided for by
reserves which in the opinion of the Borrower are adequate therefor or (ii) are
related to the deductibility of approximately $2,400,000 of noncompete payments
made by the Borrower to Ronald J. Gangelhoff during 1991, 1992 and 1993.
Section 6.10. Approvals. No authorization, consent, license, exemption or
filing or registration with any court or governmental department, agency or
instrumentality, or any approval or consent of the stockholders of the Borrower
or from any other Person, is necessary to the valid execution, delivery or
performance by the Borrower of this Agreement, the Notes or the Applications.
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Section 6.11. Liens. There are no Liens on any of the Property of the
Borrower or any Subsidiary, except those which are permitted by Section 8.18
hereof.
Section 6.12. ERISA. The Borrower and each Subsidiary are in compliance in
all material respects with the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), to the extent applicable to them and have received no
notice to the contrary from the Pension Benefit Guaranty Corporation ("PBGC") or
any other governmental entity or agency. As of December 31, 1993 the liability
of the Borrower and its Subsidiaries to PBGC in respect of Unfunded Vested
Liabilities would not have been in excess of $99,000 if all employee pension
benefit plans maintained by the Borrower and its Subsidiaries had been
terminated as of such date. No condition exists or event or transaction has
occurred with respect to any Plan which could reasonably be expected to result
in the incurrence by the Borrower or any Subsidiary of any material liability,
fine or penalty. Except as disclosed to the Banks in writing, neither the
Borrower nor any Subsidiary has any contingent liability with respect to any
post-retirement benefits under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA and liability for
post-retirement life insurance benefits.
Section 6.13. Material Agreements. Neither the Borrower nor any Subsidiary
is a party to any agreement or instrument or subject to any charter or other
corporate restriction materially and adversely affecting its business,
properties or assets, operations or condition (financial or otherwise). Neither
the Borrower nor any Subsidiary is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in (i)
any agreement to which it is a party, which default might have a material
adverse effect on the business, properties or assets, operations, or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a whole
or (ii) any agreement or instrument evidencing or governing Indebtedness.
Section 6.14. Compliance with Environmental Laws. (a) The business and
operation of the Borrower and its Subsidiaries comply in all respects with all
applicable federal, state, regional, county and local laws, statutes, rules,
regulations and ordinances relating to public health, safety or the environment,
including, without limitation, relating to releases, discharges, emissions or
disposals to air, water, land or groundwater, to the withdrawal or use of
groundwater, to the use, handling or disposal of polychlorinated biphenyls
(PCB's), asbestos or urea formaldehyde, to the treatment, storage, disposal or
management of hazardous substances (including, without limitation, petroleum,
its derivatives, by-products or other hydrocarbons), to exposure to toxic,
hazardous or other controlled, prohibited or regulated substances, to the
transportations, storage, disposal management or release or gaseous or liquid
substances, and any regulation, order, injunction, judgment, declaration, notice
or demand issued thereunder, except to the extent that such noncompliance would
not have a material adverse effect on the business, operations, properties,
assets or condition (financial or otherwise) of the Borrower and its
Subsidiaries taken as a whole.
(b) The Borrower has not given, nor should it give, nor has it received,
any notice, letter, citation, order, warning, complaint, inquiry, claim or
demand that: (i) the Borrower has violated, or is about to violate, any federal,
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state, regional, county or local environmental, health or safety statute, law,
rule, regulation, ordinance, judgment or order; (ii) there has been a release,
or there is a threat of release, of hazardous substances (including, without
limitation, petroleum, its by-products or derivatives, or other hydrocarbons)
from the Borrower's property, facilities, equipment or vehicles; (iii) the
Borrower may be or is liable, in whole or in part, for the costs or cleaning up,
remediating or responding to a release of hazardous substances (including,
without limitation, petroleum, its by-products or derivatives, or other
hydrocarbons); (iv) any of the Borrower's property or assets are subject to a
Lien in favor of any governmental entity for any liability, costs or damages,
under any federal, state or local environmental law, rule or regulation arising
from, or costs incurred by such governmental entity in response to, a release of
a hazardous substance (including, without limitation, petroleum, its by-products
or derivatives, or other hydrocarbons), except to the extent that such
violation, release, liability or Lien could not have a material adverse effect
on the business, operations, properties, assets or condition (financial or
otherwise) of the Borrower and its Subsidiaries taken as a whole.
SECTION 7. CONDITIONS PRECEDENT.
The obligation of each Bank to make any Loan or any other financial
accommodation hereunder shall be subject to the following conditions precedent:
Section 7.1. Initial Borrowing. Prior to the initial Borrowing and Letter
of Credit hereunder:
(a) The Agent shall have received for each Bank the favorable written
opinion of Gordon R. Erickson, Secretary and General Counsel of the
Borrower, in substantially the form of Exhibit C hereto, and otherwise in
and substance satisfactory to the Required Banks;
(b) The Agent shall have received for each Bank (i) certified copies
of resolutions of the Board of Directors of the Borrower authorizing the
execution and delivery of this Agreement, the Notes and the Applications,
indicating the authorized signers of this Agreement, the Notes and the
Applications and all other documents relating thereto and the specimen
signatures of such signers, (ii) copies of the Borrower's Articles of
Incorporation and by-laws certified by the Secretary or other appropriate
officer of the Borrower together with a certificate of good standing
certified by the appropriate governmental officer in the jurisdiction of
the Borrower's incorporation; and
(c) The Agent shall have received from the Borrower a list of its
Authorized Representatives.
Section 7.2. All Loans and Letters of Credit. As of the time of the making
of each Borrowing, the issuance of each Letter of Credit (including the initial
Borrowing and Letter of Credit):
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(a) The Agent shall have received for each Bank the Notes of the
Borrower and the notice required by Section 2.3 hereof;
(b) Each of the representations and warranties of the Borrower set
forth in Section 6 hereof (except for Section 6.7) shall be true and
correct as of said time, except to the extent that any such representation
or warranty relates solely to an earlier date;
(c) The Borrower shall be in full compliance with all of the terms and
conditions hereof, and no Default or Event of Default shall have occurred
and be continuing or would occur as a result of making such Borrowing or
issuing such Letter of Credit;
(d) After giving effect to the Borrowing or Letter of Credit the
aggregate principal amount of all Loans and Letter of Credit Utilization
outstanding hereunder shall not exceed the Commitments; and
(e) Such Borrowing or Letter of Credit shall not violate any order,
judgment or decree of any court or other authority or any provision of law
or regulation applicable to any Bank (including, without limitation,
Regulation U of the Board of Governors of the Federal Reserve System) as
then in effect, provided that if any such circumstances affects fewer than
all the Banks then the unaffected Banks shall not be relieved of their
obligations to make a Loan as part of a Refunding Borrowing. Each request
for a Borrowing or Letter of Credit shall be deemed to be a representation
and warranty by the Borrower on the date of such Borrowing as to the facts
specified in paragraphs (b) and (c) of this Section 7.2.
Section 7.3. Additional Conditions to Loans (other than Refunding
Borrowings), Letters of Credit. In addition to the conditions set forth in
Sections 7.1 and 7.2 hereof, as of the time of each Borrowing (other than a
Refunding Borrowing), the issuance of each Letter of Credit, the representations
and warranties set forth in Section 6.7 hereof shall be true as of said time,
and the request for such Borrowing, as mentioned in Section 7.2., shall be and
constitute a representation and warranty as to such matters specified in Section
6.7 hereof.
Section 7.4. Letters of Credit. As a further condition to the issuance of
each Letter of Credit, the Agent shall have received an Application therefor.
Section 7.5. Termination of the 1993 Credit Agreement. The initial Loans
hereunder shall be in an amount sufficient to repay all indebtedness of the
Borrower owing to the Banks and Agent under The 1993 Credit Agreement (other
than with respect to (a) letters of credit which shall constitute Letters of
Credit issued and outstanding hereunder and (b) eurodollar loans outstanding
thereunder which shall constitute Eurocurrency Loans for all purposes hereof,
including without limitation, Section 2.10 hereof) and the Borrower hereby
directs the Agent to such extent to so apply the proceeds of such Loans at which
time The 1993 Credit Agreement shall terminate.
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SECTION 8. COVENANTS.
The Borrower agrees that, so long as any Note is outstanding hereunder or
any credit is available to or in use by the Borrower hereunder except to the
extent compliance in any case or cases is waived in writing by the Required
Banks:
Section 8.1. Corporate Existence. The Borrower shall, and shall cause each
Subsidiary (other than an Unrestricted Subsidiary) to, preserve and maintain its
corporate existence, subject to the provisions of Section 8.15 hereof.
Section 8.2. Maintenance. The Borrower will maintain, preserve and keep its
plants, properties and equipment deemed necessary to the proper conduct of its
business in reasonably good repair, working order and condition and will from
time to time make all reasonably necessary repairs, renewals, replacements,
additions and betterments thereto so that at all times such plants, properties
and equipment shall be reasonably preserved and maintained, and will cause each
Subsidiary so to do in respect of Property owned or used by it; Provided,
However, that nothing in this Section shall prevent the Borrower or a Subsidiary
from discontinuing the operation or maintenance of any such properties if such
discontinuance is, in the judgment of the Borrower, desirable in the conduct of
its business or the business of the Subsidiary and not disadvantageous in any
material respect to the Banks or the holders of the Notes.
Section 8.3. Taxes. The Borrower will duly pay and discharge, and will
cause each Subsidiary to pay and discharge, all taxes, rates, assessments, fees
and governmental charges upon or against the Borrower or such Subsidiary or
against their respective Properties, in each case before the same becomes
delinquent and before penalties accrue thereon, unless and to the extent that
the same is being contested in good faith and by appropriate proceedings and
reserves are provided therefor that in the opinion of the Borrower are adequate.
Section 8.4. Insurance. The Borrower will insure, and keep insured, and
will cause each Subsidiary to insure, and keep insured, in good and responsible
insurance companies, all insurable Property owned by it which is of a character
usually insured by companies similarly situated and operating like Property; and
to the extent usually insured (subject to self-insured retentions) by companies
similarly situated and conducting similar businesses, the Borrower will also
insure, and cause each Subsidiary to insure, employers' and public and product
liability risks in good and responsible insurance companies. The Borrower will
upon request of the Agent furnish a summary setting forth the nature and extent
of the insurance maintained pursuant to this Section 8.4.
Section 8.5. Financial Reports and Other Information. The Borrower will,
and will cause each Subsidiary to, maintain a standard system of accounting in
accordance with generally accepted accounting principles and will furnish to the
Banks and their respective duly authorized representatives such information
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respecting the business and financial condition of the Borrower and the
Subsidiaries as may be reasonably requested; and without any request will
furnish to each Bank:
(a) Within 90 days after the close of each fiscal year of the
Borrower, an audit report of the Borrower and its Consolidated Subsidiaries
for such year and accompanying financial statements certified by
independent certified public accountants of recognized national standing,
prepared in accordance with generally accepted accounting principles on a
consolidated basis, including a balance sheet as of the end of such period,
related profit and loss and reconciliation of surplus statement, and a
statement of changes in financial position, accompanied by any management
letter prepared by said accountants and by a certificate of said
accountants that, in the course of their examination necessary for their
certification of the foregoing, they have obtained no knowledge of any
Default or Event of Default, or if, in the opinion of such accountants, any
Default or Event of Default shall exist, stating the nature and status
thereof.
(b) Within 60 days after the close of the first three quarterly
periods of each fiscal year of the Borrower, a consolidated unaudited
balance sheet as at the close of each such period and a consolidated profit
and loss and reconciliation of surplus statement and a statement of changes
in financial position for the period from the beginning of such fiscal year
to the end of such quarter, all certified by a responsible financial
officer.
(c) Together with the financial statements required hereunder, a
compliance certificate in substantially the form of Exhibit D hereto signed
by a responsible financial officer of the Borrower showing the calculations
necessary to determine compliance with this Agreement and stating that no
Default or Event of Default exists, or if any Default or Event of Default
exists, stating the nature and status thereof.
(d) Within 270 days after the close of each fiscal year, if any
Unfunded Vested Liabilities exist a statement of the Unfunded Vested
Liabilities of each Plan, certified as correct by an actuary enrolled under
ERISA.
(e) As soon as possible and in any event within 30 days after the
Borrower knows that any reportable event (as defined in ERISA) has occurred
with respect to any Plan, a statement, signed by a responsible financial
officer of the Borrower, describing said reportable event and the action
which the Borrower proposes to take with respect thereto.
(f) As soon as possible and in any event within 10 days after receipt
by a corporate officer of the Borrower, a copy of (i) any notice or claim
to the effect that the Borrower or any Subsidiary is or may be liable to
any Person as a result of the release by the Borrower, any of its
Subsidiaries or any other Person of any toxic or hazardous waste or
substance into the environment, which liability could have a material
adverse effect on the business, operation, properties, assets or conditions
(financial or otherwise) of the
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Borrower and the Subsidiaries taken as a whole and (ii) any notice alleging
any violation of any federal, state or local environmental, health or
safety law or regulation by the Borrower or any Subsidiary which violation
could have a material adverse effect on the business, operation,
properties, assets or conditions (financial or otherwise) of the Borrower
and the Subsidiaries taken as a whole.
(g) Promptly upon the furnishing thereof to the shareholders of the
Borrower, copies of all financial statements, reports and proxy statements
so furnished.
(h) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports which
the Borrower or any Subsidiary files with the SEC.
(i) Promptly upon discovery thereof, notice of the occurrence of any
Default and of any other development, financial or otherwise, which might
materially adversely affect its ability to repay the Obligations.
(j) Promptly after incurrence thereof, notice of any Funded Debt
incurred by the Borrower after the date hereof.
(k) Such other information (including non-financial information) as
the Agent or any Bank may from time to time reasonably request.
Section 8.6. Consolidated Net Worth. The Borrower will at all times keep
and maintain Consolidated Net Worth at an amount not less than the sum of (i)
$45,000,000 plus (ii) 50% of positive Consolidated Net Earnings earned by the
Borrower during each completed fiscal quarter on a cumulative basis (without
deduction for a net loss during a fiscal quarter) from January 1, 1995 through
and including the date of determination.
Section 8.7. Leverage Ratio. The Borrower will maintain at all times a
ratio of (a) the difference between (i) Consolidated Funded Debt less (ii)
Indebtedness with respect to commercial letters of credit ("Consolidated
Adjusted Funded Debt") to (b) the sum of (i) Consolidated Net Worth plus (ii)
Consolidated Adjusted Funded Debt (the "Leverage Ratio") of not more than .45 to
1.0.
Section 8.8. Fixed Charge Coverage Ratio. As of the end of each fiscal
quarter, the Borrower will maintain a ratio of Earnings Available for Fixed
Charges to Fixed Charges, in each case for the previous four fiscal quarters
ending on the last day of such quarter (taken as a single accounting period)
(the "Fixed Charge Coverage Ratio") for the previous four fiscal quarters ending
on the last day of such quarter of not less than 2.0 to 1.0.
Section 8.9. Minimum Current Ratio. The Borrower will maintain at all times
a ratio of Consolidated Current Assets to Consolidated Current Liabilities of
not less than 1.5:1.0.
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Section 8.10. Distribution. The Borrower will not, except as hereinafter
provided:
(a) declare or pay any dividends, either in cash or property on any
class of its stock (except dividends payable solely in common stock of the
Borrower); or
(b) directly or indirectly, or through any Subsidiary, purchase,
redeem or retire any of its stock or any warrants, rights or options to
purchase or otherwise acquire any shares of its stock (other than payments
to any officer of the Borrower in connection with the exercise of such
officer's stock appreciation rights granted pursuant to stock purchase
plans of the Borrower to the extent such payments are required to be
deducted in the calculation of Consolidated Net Earnings and so long as a
Default or Event of Default shall not have occurred and be continuing at
the time of any such payment or would occur as a result thereof, the
Borrower acknowledging and agreeing that all agreements relating to any
such payments shall provide that the Borrower's obligation to make such
payments shall be subject to satisfaction of the foregoing conditions); or
(c) make any other distribution, either directly or indirectly or
through any Subsidiary, in respect of its stock;
(such declarations and payments of dividends (computed without duplication),
purchases, redemptions or retirements of stock, warrants, rights or options and
all such other distributions being herein collectively called "Distributions"),
if after giving effect to any such Distribution, the aggregate amount of
Distributions declared or made outstanding during the period from and after
December 31, 1993 to and including the date of the declaration or making of the
Distribution would exceed the sum of (i) $3,000,000 plus (ii) 50% of
Consolidated Net Earnings (or, if such Consolidated Net Earnings is a deficit
figure, then minus 100% of such deficit) for such period computed on a
cumulative basis for said entire period.
The Borrower will not declare any dividend payable more than 90 days after
the date of the declaration thereof and will not declare or make any
Distribution if a Default has occurred and is continuing or if, on the date
thereof and after giving effect thereto the payment would create a Default or
Event of Default.
For the purposes of this Section 8.10 the amount of any Distribution
declared or paid or distributed in property shall be deemed to be the greater of
book or fair market value as determined in good faith by the board of directors
of the Borrower (in each case after deducting any liabilities relating thereto,
which are, concurrently with the receipt of such Distribution, assumed by the
recipient thereof), of such property at the time of the making of the
Distribution in question.
Section 8.11. Indebtedness for Borrowed Money. The Borrower will not nor
will it permit any Subsidiary to, issue, incur, assume, create or have
outstanding any Indebtedness for Borrowed Money; Provided, However, that the
foregoing provisions shall not restrict nor operate to prevent:
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(a) the indebtedness of the Borrower on the Notes and with respect to
the Letters of Credit;
(b) Funded Debt of the Borrower's Subsidiaries existing as of the date
hereof and disclosed on Exhibit E hereto and Funded Debt of the Borrower;
(c) purchase money indebtedness permitted by Section 8.18(f) hereof;
(d) other existing short term indebtedness of the Borrower disclosed on
Exhibit E hereto;
(e) Subordinated Indebtedness; and
(f) indebtedness not otherwise permitted by this Section aggregating
not more than $1,000,000 at any one time outstanding.
Section 8.12. Sale and Leaseback. The Borrower will not, nor will it permit
any Subsidiary to, sell or transfer any property in order to concurrently or
subsequently lease as lessee such or similar property.
Section 8.13. Investments. The Borrower will not, nor will it permit any
Subsidiary to, make or suffer to exist any Investments except Permitted
Investments.
Section 8.14. Capital Expenditures. The Borrower will not, and will not
permit its Consolidated Subsidiaries to, expend or become obligated for capital
expenditures (as defined and classified in accordance with Agreement Accounting
Principles consistently applied) during any fiscal year in excess of (a) the
amount of all charges for depreciation of fixed assets and amortization of
Intangible Assets for the previous fiscal year computed on a consolidated basis
for the Borrower and the Consolidated Subsidiaries in accordance with Agreement
Accounting Principles plus (b) Consolidated Net Earnings for the previous fiscal
year less (c) dividends paid during the previous fiscal year in the aggregate
for the Borrower and its Consolidated Subsidiaries, provided, that, the Borrower
will not, nor will it permit its Consolidated Subsidiaries to, make any capital
expenditure if a Default or Event of Default has occurred and is continuing, or
if on the date thereof and after giving effect thereto such expenditure would
create a Default or Event of Default.
Section 8.15. Mergers, Consolidations, Leases, and Sales. The Borrower:
(a) will not be a party to any merger or consolidation except that a
Subsidiary may merge into the Borrower or into any one or more
Subsidiaries; and
(b) will not, and will not permit any Consolidated Subsidiary to,
sell, assign, lease or otherwise transfer to any Person other than the Borrower
or one or more Consolidated Subsidiaries any Properties (including, without
limitation, any capital stock of any Consolidated Subsidiary), unless such sale,
assignment, lease or transfer is for a consideration not less than the fair
market value thereof and unless, after giving effect to such sale,assignment,
lease or transfer (i) the aggregate
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proceeds to the Borrower and the Consolidated Subsidiaries of all such sales,
assignments, leases and transfers (other than sales of inventory in the ordinary
course of its business as conducted on the date hereof) during the calendar year
in which such sale, assignment, lease or transfer shall occur shall not exceed
10% of Tangible Assets, (ii) no Default or Event of Default shall have occurred
and be continuing or would occur as a result thereof and (iii) the Borrower
shall have furnished to the Banks a certificate and historic pro forma
calculations reasonably satisfactory to the Required Banks showing that after
giving effect to such sale Consolidated Net Earnings for the immediately
preceding twelve month period ending on or about the date of such sale would not
have been less than 10% of actual Consolidated Net Earnings for such period.
Section 8.16. ERISA. The Borrower will promptly pay and discharge all
obligations and liabilities arising under ERISA of a character which if unpaid
or unperformed might result in the imposition of a Lien against any of its
properties or assets and will promptly notify the Agent of (i) the occurrence of
any reportable event (as defined in ERISA) with respect to a Plan, other than
any such event of which the PBGC has waived notice by regulation, (ii) receipt
of any notice from PBGC of its intention to seek termination of any Plan or
appointment of a trustee therefor, (iii) its or any Subsidiary's intention to
terminate or withdraw from any Plan, and (iv) the occurrence of any event with
respect to any Plan which could result in the incurrence by the Borrower or any
Subsidiary of any material liability, fine or penalty, or any material increase
in the contingent liability of the Borrower or any Subsidiary with respect to
any post-retirement Welfare Plan benefit.
Section 8.17. Conduct of Business. The Borrower will not engage in any
business if, as a result, the general nature of the business which would then be
engaged in by the Borrower would be substantially changed from the general
nature of the business engaged in by the Borrower on the date of this Agreement.
Section 8.18. Liens. The Borrower will not nor will it permit any
Subsidiary to create, incur, permit to exist or to be incurred any Lien of any
kind on any Property owned by the Borrower or any Subsidiary; Provided, However.
that this Section 8.18 shall not apply to nor operate to prevent:
(a) Liens for taxes, assessments or governmental charges or levies on
its property if the same shall not at the time be delinquent or thereafter
can be paid without penalty or are being contested in good faith and by
appropriate proceedings.
(b) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past
due.
(c) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation.
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(d) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not
in any material way affect the marketability of the same or interfere with
the use thereof in the business of the Borrower or the Subsidiaries.
(e) Liens existing on the date hereof and described in Exhibit F
hereto.
(f) Liens incurred to sellers in connection with purchase money
financing up to an aggregate amount outstanding at any time of $3,000,000.
Section 8.19. Use of Proceeds; Margin Stock. The Borrower shall only use
the proceeds of the Loans for general corporate purposes, and the Borrower shall
not directly or indirectly use the proceeds of any of the Loans to purchase or
carry any Margin Stock, and at no time will Margin Stock constitute 25% or more
of the assets of the Borrower or of the consolidated assets of the Borrower and
the Subsidiaries.
Section 8.20. Compliance with Laws. Without limiting any of the other
covenants of the Borrower in this Section 8, the Borrower will, and will cause
each of its Subsidiaries to, conduct its business, and otherwise be, in
compliance with all applicable laws, regulations, ordinances and orders of any
governmental or judicial authorities (including, without limitation, those of
the type mentioned in Section 6.14 hereof), non-compliance with which would (a)
impair the validity or enforceability or the ability of the Borrower to perform
its obligations under the Loan Documents or (b) result in any material adverse
change in the financial condition or properties, business or operations of the
Borrower and the Consolidated Subsidiaries taken as a whole; PROVIDED, HOWEVER,
that the Borrower or any Subsidiary shall not be required to comply with any
such law, regulation, ordinance or order if it shall be contesting such law,
regulation, ordinance or order in good faith by appropriate proceedings and
reserves, if appropriate, shall have been established therefor that are adequate
in the Borrower's opinion.
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.
Section 9.1. Events of Default. Any one or more of the following shall
constitute an Event of Default:
(a) (i) default in the payment when due of any principal on any Note
or any Loan evidenced thereby, or of any reimbursement obligation with
respect to any Letter of Credit, whether at the stated maturity thereof or
at any other time provided in this Agreement; or (ii) default for a period
of five days in the payment when due of interest on any Note or any Loan
evidenced thereby or of any other sums required to be paid pursuant to this
Agreement;
(b) default by the Borrower in the observance or performance of any
covenant set forth in Sections 8.6 through 8.15 and Section 8.17 hereof;
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(c) default by the Borrower in the observance or performance of any
other provision hereof not mentioned in (a) or (b) above, which is not
remedied within 30 days after notice thereof to the Borrower by the Agent
or any Bank;
(d) any representation or warranty made herein by the Borrower, or in
any statement or certificate furnished pursuant hereto by the Borrower, or
in any Application or in connection with any Loan or other extension of
credit made hereunder, proves untrue in any material respect as of the date
of the issuance or making thereof;
(e) the Borrower or any Subsidiary shall fail within thirty (30) days
to pay, bond or otherwise discharge any judgment or order for the payment
of money in excess of $500,000, which is not stayed on appeal or otherwise
being appropriately contested in good faith;
(f) the Borrower or any other member of its Controlled Group shall
fail to pay when due an amount or amounts aggregating in excess of $500,000
which it shall have become liable to pay to the PBGC or to a Plan under
Title IV of ERISA; or notice of intent to terminate a Plan or Plans having
aggregate Unfunded Vested Liabilities in excess of $500,000 (collectively,
a "Material Plan") shall be filed under Title IV of ERISA by the Borrower
or any other member of its Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any Material Plan or a proceeding shall be instituted by a
fiduciary of any Material Plan against the Borrower or any member of its
Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within thirty (30) days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan must be
terminated;
(g) (A) default shall occur in the payment when due of any
indebtedness for borrowed money issued, assumed or guaranteed by the
Borrower or any Subsidiary aggregating in excess of $250,000, or (B)
default shall occur under any indenture, agreement or other instrument
under which any indebtedness for borrowed money of the Borrower or any
Subsidiary may be issued, assumed or guaranteed, and such default shall
continue for a period of time sufficient to permit the acceleration of the
maturity of any such indebtedness for borrowed money of the Borrower or any
Subsidiary aggregating in excess of $250,000 (whether or not such maturity
is in fact accelerated);
(h) the Borrower or any of its Subsidiaries shall (i) have entered
involuntarily against it an order for relief under the United States
Bankruptcy Code, as amended, (ii) not pay, or admit in writing its
inability to pay, its debts generally as they become due, (iii) make an
assignment for the benefit of creditors, (iv) apply for, seek, consent to,
or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any substantial part of
its property, (v) institute any proceeding seeking to have entered against
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it an order for relief under the United States Bankruptcy Code, as amended,
to adjudicate it insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it
or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed
against it, or (vi) fail to contest in good faith any appointment or
proceeding described in Section 9.1.(i) hereof; or
(i) a custodian, receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Borrower or any of its Subsidiaries or
any substantial part of any of their Property, or a proceeding described in
Section 9.1(h)(v) shall be instituted against the Borrower, and such
appointment continues undischarged or such proceeding continues undismissed
or unstayed for a period of sixty (60) days.
Section 9.2. Non-Bankruptcy Defaults. When any Event of Default other than
those described in Sections 9.1.(h) or (i) has occurred and is continuing, the
Agent shall, if so directed by the Required Banks by notice to the Borrower,
take either or both of the following actions:
(a) terminate the remaining Commitments of the Banks hereunder on the
date stated in such notice (which may be the date thereof); and
(b) declare the principal of and the accrued interest on all
outstanding Notes and other outstanding Obligations of the Borrower to be
forthwith due and payable and thereupon all of said Notes and other
outstanding Obligations, including both principal and interest, shall be
and become immediately due and payable together with all other amounts
payable under this Agreement without further demand, presentment, protest
or notice of any kind.
The Agent, after giving notice to the Borrower pursuant to Section 9.1 or this
Section 9.2, shall also promptly send a copy of such notice to the other Banks,
but the failure to do so shall not impair or annul the effect of such notice.
Section 9.3. Bankruptcy Defaults. When any Event of Default described in
subsections (h) or (i) of Section 9.1. hereof has occurred and is continuing,
then all outstanding Notes and other Obligations shall immediately become due
and payable together with all other amounts payable under this Agreement without
presentment, demand, protest or notice of any kind, and the obligation of the
Banks to extend further credit pursuant to any of the terms hereof shall
immediately terminate.
Section 9.4. Letters of Credit. When any Event of Default, other than an
Event of Default described in subsections (h) or (i) of Section 9.1 hereof has
occurred and is continuing, the Borrower shall, upon demand of the Agent, and
when any Event of Default described in subsections (h) or (i) of Section 9.1 has
occurred, the Borrower shall, without notice or demand from the Agent,
immediately pay to the Agent the full amount of each Letter of Credit, Provided,
However, that with respect to the undrawn face amount of Letters of Credit, such
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amount shall be held by the Agent as collateral security for such Obligations of
the Borrower with respect to such Letters of Credit, the Borrower hereby
agreeing to immediately make each such payment and acknowledging and agreeing
the Agent would not have an adequate remedy at law for failure of the Borrower
to honor any such demand and that the Agent shall have the right to require the
Borrower to specifically perform such undertaking whether or not any draws had
been made under the Letters of Credit.
Section 9.5. Expenses. The Borrower agrees to pay to the Agent and each
Bank, or any other holder of any Note outstanding hereunder, all costs and
expenses incurred or paid by the Agent and such Bank or any such holder,
including reasonable attorneys' fees and court costs, in connection with any
Default or Event of Default by the Borrower hereunder or in connection with the
enforcement of any of the terms hereof or of the other Loan Documents.
SECTION 10. CHANGE IN CIRCUMSTANCES.
Section 10.1. Change of Law. Notwithstanding any other provisions of this
Agreement or any Note, if at any time after the date hereof any change in
applicable law or regulation or in the interpretation thereof makes it unlawful
for any Bank to make or continue to maintain Eurocurrency Loans or to give
effect to its obligations as contemplated hereby, such Bank shall promptly give
notice thereof to the Borrower, with a copy to the Agent, and such Bank's
obligations to make or maintain Eurocurrency Loans under this Agreement shall
terminate until it is no longer unlawful for such Bank to make or maintain
Eurocurrency Loans. The Borrower shall prepay on demand the outstanding
principal amount of any such affected Eurocurrency Loans, together with all
interest accrued thereon and all other amounts then due and payable to such Bank
under this Agreement; Provided, However, subject to all of the terms and
conditions of this Agreement, if denominated in U.S. Dollars, the Borrower may
then elect to borrow the principal amount of the affected Eurocurrency Loan from
such Bank by means of a Domestic Rate Loan from such Bank that shall not be made
ratably by the Banks but only from such affected Bank and payments thereon shall
be made contemporaneously with payments on the relevant Borrowing of
Eurocurrency Loans.
Section 10.2. Unavailability of Deposits or Inability to Ascertain, or
Inadequacy of, LIBOR. If on or prior to the first day of any Interest Period for
any Borrowing of Eurocurrency Loans:
(a) the Agent advises the Borrower that deposits in the relevant
currency (in the applicable amounts) are not being offered to it in the
eurocurrency interbank market for such Interest Period, or
(b) Banks having 50% or more of the aggregate amount of the
Commitments advise the Agent that LIBOR as determined by the Agent will not
adequately and fairly reflect the cost to such Banks of funding their
Eurocurrency Loans for such Interest Period, then the Agent shall forthwith
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give notice thereof to the Borrower and the Banks, whereupon until the Agent
notifies the Borrower that the circumstances giving rise to such suspension no
longer exist, the obligations of the Banks to make Eurocurrency Loans in the
affected currency shall be suspended.
Section 10.3. Increased Cost and Reduced Return. (a) If on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Lending Office) with any request or directive (whether or not having the force
of law) of any such authority, central bank or comparable agency:
(i) shall subject any Bank (or its Lending Office) to any tax,
duty or other charge with respect to its Eurocurrency Loans, its Notes
or its obligation to make Eurocurrency Loans, or shall change the
basis of taxation of payments to any Bank (or its Lending Office) of
the principal of or interest on its Eurocurrency Loans or any other
amounts due under this Agreement in respect of its Eurocurrency Loans
or its obligation to make Eurocurrency Loans (except for changes in
the rate of tax on the overall net income of such Bank or its Lending
Office imposed by the jurisdiction in which such Bank's principal
executive office or Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any
such requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding with respect to any Eurocurrency Loans
any such requirement included in an applicable Eurocurrency Reserve
Percentage) against assets of, deposits with or for the account of, or
credit extended by, any Bank (or its Lending Office) or shall impose
on any Bank (or its Lending Office) or on the interbank market any
other condition affecting its Eurocurrency Loans, its Notes or its
obligation to make Eurocurrency Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Eurocurrency Loan, or to reduce
the amount of any sum received or receivable by such Bank (or its Lending
Office) under this Agreement or under its Notes with respect thereto, by an
amount deemed by such Bank to be material, then, within fifteen (15) days after
demand by such Bank (with a copy to the Agent), the Borrower shall be obligated
to pay to such Bank such additional amount or amounts as will compensate such
Bank for such increased cost or reduction (computed commencing on the effective
date of any event mentioned herein). Each Bank agrees to use its best efforts to
give the Borrower notice of the occurrence of any event mentioned herein.
(b) The parties recognize that as of the date hereof the Banks are
subject to guidelines published by various banking regulators in the United
States and elsewhere with jurisdiction over the Banks, issued pursuant to
the risk-based capital framework developed by the Basle Committee of
Banking Regulation and Supervisory Practices, that call for the Banks to
maintain capital against, among other things, unfunded loan commitments
with a maturity of more than one year. The parties agree that each Bank
shall have the right to require a renegotiation of the fees payable to it
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under Section 3.1 hereof at any time by giving notice to the Borrower and the
Agent of its desire to so renegotiate such fees if such Bank determines it or
any corporation controlling it is required to maintain capital to support such
Bank's unused Commitment hereunder. Upon the Borrower receiving such notice from
a Bank, for a period of 30 days the Borrower and such Bank shall attempt to
renegotiate the fees payable to such Bank so that such fees shall be acceptable
to both parties in their discretion, which renegotiated fees, if any, shall
become effective on the date specified by the Borrower and Bank in a written
notice to the Agent setting forth such fee. If after such 30 day period the
Borrower and such Bank have been unable to reach such an agreement, either such
party shall have the right to terminate the relevant Bank's Commitments
hereunder by giving the other party and the Agent notice thereof, whereupon the
Commitment of such Bank shall terminate; provided that if any Loans from such
Bank are then outstanding hereunder the Borrower shall have the right to require
that the Commitment of such Bank remain in effect in the amount of such
outstanding Loans and thereafter continue to remain in effect in the aggregate
amount of all Loans of such Bank outstanding hereunder; Provided, However, that
any repayment of such Bank's outstanding Loans (other than through a Refunding
Borrowing) shall automatically reduce the amount of the Commitment of such Bank
by the amount of such repayment. Without limiting the effect of any other
provision hereof, it is specifically understood that each Bank may require the
renegotiation of the fees payable to such Bank at any time hereunder, and no
failure or delay on the part of a Bank in requiring such renegotiation shall be
deemed a waiver of, or otherwise limited or affect, the Bank's right to require
such renegotiation.
Section 10.4. Lending Offices. Each Bank may, at its option, elect to make
its Loans hereunder at the branch, office or affiliate specified on the
appropriate signature page hereof (each a "Lending Office") for each type of
Loan available hereunder or at such other of its branches, offices or affiliates
as it may from time to time elect and designate in a notice to the Borrower and
the Agent.
Section 10.5. Discretion of Bank as to Manner of Funding. Notwithstanding
any other provision of this Agreement, each Bank shall be entitled to fund and
maintain its funding of all or any part of its Loans in any manner it sees fit,
it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if each Bank had actually funded and
maintained each Eurocurrency Loan through the purchase of deposits in the
relevant market having a maturity corresponding to such Loan's Interest Period
and bearing an interest rate equal to LIBOR for such Interest Period.
SECTION 11. THE AGENT.
Section 11.1. Appointment and Authorization. Each Bank hereby irrevocably
appoints Harris Trust and Savings Bank its Agent under this Agreement and the
other Loan Documents and hereby authorizes the Agent to take such action as
Agent and on its behalf and to exercise such powers under this Agreement and the
other Loan Documents as are delegated to the Agent by the terms hereof, together
with such powers as are reasonably incidental thereto.
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Section 11.2. Agent and Affiliates. The Agent shall have the same rights
and powers under this Agreement and the other Loan Documents as any other Bank
and may exercise or refrain from exercising the same as though it were not an
Agent, and the Agent and its affiliates may accept deposits from, lend money to,
and generally engage in any kind of business with the Borrower or any Subsidiary
or affiliate of the Borrower as if it were not an Agent hereunder and
thereunder.
Section 11.3. Action by Agent. Except for action expressly required of the
Agent hereunder, the Agent shall in all cases be fully justified in failing or
refusing to act hereunder and under the other Loan Documents unless the Agent
shall be indemnified to its reasonable satisfaction by the Banks against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. In all cases in which this Agreement does
not require the Agent to take certain actions, the Agent shall be fully
justified in using its discretion in failing to take or in taking any action
hereunder or under the other Loan Documents. Without limiting the generality of
the foregoing, the Agent shall not be required to take any action with respect
to any Event of Default, except as expressly provided in Section 9.2. The Agent
shall be acting as an independent contractor hereunder and nothing herein shall
be deemed to impose on the Agent any fiduciary obligations to the Banks or the
Borrower.
Section 11.4. Consultation with Experts. The Agent 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 by it in good
faith in accordance with the advice of such counsel, accountants or experts.
Section 11.5. Liability of Agent. No Agent nor any of its directors,
officers, agents or employees shall be liable for any action taken or not taken
by it in connection herewith (i) with the consent or at the request of the
Required Banks or (ii) in the absence of its own gross negligence or willful
misconduct. The Agent nor any of its directors, officers, agents or employees
shall not be responsible for or have any duty to ascertain, inquire into or
verify (i) any statement, warranty or representation made in connection with
this Agreement or any borrowing or other extension of credit hereunder or any
other Loan Document; (ii) the performance or observance of any of the covenants
or agreements of the Borrower in any Loan Document; (iii) the satisfaction of
any condition specified in Section 7, except receipt of items required to be
delivered to the Agent; or (iv) the validity, effectiveness or genuineness of
this Agreement, the Notes, the Letters of Credit, any other Loan Document or any
other instrument or writing furnished in connection herewith. The Agent shall
not incur any liability by acting in reliance upon any notice, consent,
certificate, request or statement, (whether written or oral) or other documents
believed by it to be genuine or to be signed by the proper party or parties and,
in the case of legal matters, in relying on the advice of counsel (including
counsel for the Borrower). The Agent may treat the Banks that are named herein
as the holders of the Notes and the indebtedness contemplated herein unless and
until the Agent receives notice of the assignment of the Note and the
indebtedness held by a Bank hereunder pursuant to an assignment contemplated by
Section 12.11 hereof.
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Section 11.6. Indemnification. Each Bank shall, ratably in accordance with
its Commitments (or, if the Commitments have been terminated in whole, ratably
in accordance with its outstanding Loans and Letter of Credit Utilization),
indemnify the Agent (to the extent not reimbursed by the Borrower) against any
cost, expense (including counsels' fees and disbursements), claim, demand,
action, loss, obligation, damages, penalties, judgments, suits or liability
(except such as result from the Agent's gross negligence or willful misconduct)
that the Agent may suffer or incur in connection with this Agreement or any
other Loan Document or any action taken or omitted by the Agent hereunder or
thereunder.
Section 11.7. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, 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 any action under this Agreement or any other Loan Document.
Section 11.8. Resignation of the Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving written notice thereof to the Banks and the Borrower. Upon any
such resignation of the Agent, the Required Banks shall have the right to
appoint, with the consent of the Borrower, a successor Agent. If no successor
Agent shall have been so appointed by the Required Banks, and shall have
accepted such appointment, within thirty (30) days after the retiring Agent's
giving of notice of resignation, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $200,000,000. Upon the
acceptance of its appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the rights
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder and under the other Loan Documents.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 11 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent.
Section 11.9. Payments. Unless the Agent shall have been notified by a Bank
prior to the date on which such Bank is scheduled to make payment to the Agent
of the proceeds of a Loan (which notice shall be effective upon receipt) that
such Bank does not intend to make such payment, the Agent may assume that such
Bank has made such payment when due and the Agent may in reliance upon such
assumption (but shall not be required to) make available to the Borrower the
proceeds of the Loan to be made by such Bank and, if any Bank has not in fact
made such payment to the Agent, such Bank shall, on demand, pay to the Agent the
amount made available to the Borrower attributable to such Bank together with
interest thereon in respect of each day during the period commencing on the date
such amount was made available to the Borrower and ending on (but excluding) the
date such Bank pays such amount to the Agent at a rate per annum equal to the
Federal Funds Rate (as hereinafter defined). If such amount is not received from
such Bank by the Agent immediately upon demand, the Borrower will, on demand,
repay to the Agent the proceeds of the Loan attributable to such Bank with
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interest thereon at a rate per annum equal to the interest rate applicable to
the relevant Loan, but without such payment being considered a payment or
prepayment of a Loan, so that the Borrower will have no liability under Section
2.10 hereof with respect to such payment. "Federal Funds Rate" shall mean the
"Federal Funds (Effective)" rate described in Section 2.1(a)(ii) hereof.
SECTION 12. MISCELLANEOUS.
Section 12.1. Witholding Taxes. (a) Except as otherwise required by law and
subject to Section 12.1(b) hereof, each payment by the Borrower under this
Agreement or the Notes or in respect of the Letters of Credit shall be made
without setoff or counterclaim and without withholding for or on account of any
present or future taxes imposed by or within the jurisdiction in which the
Borrower is domiciled, any jurisdiction from which the Borrower makes any
payment hereunder, or (in each case) any political subdivision or taxing
authority thereof or therein. If any such withholding is so required, the
Borrower shall make the withholding, pay the amount withheld to the appropriate
governmental authority before penalties attach thereto or interest accrues
thereon and forthwith pay such additional amount as may be necessary to ensure
that the net amount actually received by each Bank and the Agent free and clear
of such taxes (including such taxes on such additional amount) is equal to the
amount which that Bank or the Agent (as the case may be) would have received had
such withholding not been made. If the Agent or any Bank pays any amount in
respect of any such taxes, penalties or interest, the Borrower shall reimburse
the Agent or that Bank for that payment on demand in the currency in which such
payment was made. If the Borrower pays any such taxes, penalties or interest, it
shall deliver official tax receipts evidencing that payment or certified copies
thereof to the Agent on or before the thirtieth day after payment.
(b) U.S. Witholding Tax Exemptions. Each Bank that is not a
United States person (as such term is defined in Section 7701(a)(30)
of the Code) shall submit to the Borrower on or before the date the
initial Borrowing is made hereunder, duly completed and signed copies
of either Form 1001 (relating to such Bank and entitling it to a
complete exemption from withholding on all amounts to be received by
such Bank, including fees, pursuant to this Agreement and the Loans)
or Form 4224 (relating to all amounts to be received by such Bank,
including fees, pursuant to this Agreement and the Loans) of the
United States Internal Revenue Service. Thereafter and from time to
time, each such Bank shall submit to the Borrower such additional duly
completed and signed copies of one or the other of such Forms (or such
successor forms as shall be adopted from time to time by the relevant
United States taxing authorities) as may be (i) notified by the
Borrower to such Bank and (ii) required under then-current United
States law or regulations to avoid or reduce United States withholding
taxes on payments in respect of all amounts to be received by such
Bank, including fees, pursuant to this Agreement or the Loans or the
Letters of Credit. Upon the request of the Borrower, each Bank that is
a United States person (as such term is defined in Section 7701(a)(30)
of the Code) shall submit to the Borrower a certificate to the effect
that it is such a United States person.
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(c) Inability of Bank to Submit Forms. If any Bank determines, as
a result of any change in applicable law, regulation or treaty, or in
any official application or interpretation thereof, that it is unable
to submit to the Borrower any form or certificate that such Bank is
obligated to submit pursuant to subsection (b) of this Section 12.1,
or that such Bank is required to withdraw or cancel any such form or
certificate previously submitted or any such form or certificate
otherwise becomes ineffective or inaccurate, such Bank shall promptly
notify the Borrower of such fact and the Bank shall to that extent not
be obligated to provide any such form or certificate and will be
entitled to withdraw or cancel any affected form or certificate, as
applicable.
Section 12.2. No Waiver of Rights. No delay or failure on the part of any
Bank or on the part of the holder or holders of any Note in the exercise of any
power or right shall operate as a waiver thereof, nor as an acquiescence in any
default, nor shall any single or partial exercise thereof preclude any other or
further exercise of any other power or right, and the rights and remedies
hereunder of the Banks and of the holder or holders of any Notes are cumulative
to, and not exclusive of, any rights or remedies which any of them would
otherwise have.
Section 12.3. Non-Business Day. If any payment of principal or interest on
any Loan or of any fee hereunder shall fall due on a day which is not a Business
Day, interest at the rate such Loan bears for the period prior to maturity or at
the rate such fee accrues shall continue to accrue from the stated due date
thereof to and including the next succeeding Business Day, on which the same
shall be payable.
Section 12.4. Documentary Taxes. The Borrower agrees that it will pay any
documentary, stamp or similar taxes payable in respect to this Agreement, the
Applications or any Note, including interest and penalties, in the event any
such taxes are assessed irrespective of when such assessment is made and whether
or not any credit is then in use or available hereunder.
Section 12.5. Survival of Representations. All representations and
warranties made herein or in certificates given pursuant hereto shall survive
the execution and delivery of this Agreement, the Applications and of the Notes,
and shall continue in full force and effect with respect to the date as of which
they were made as long as any credit is in use or available hereunder.
Section 12.6. Survival of Indemnities. All indemnities and all other
provisions relative to reimbursement to the Banks of amounts sufficient to
protect the yield of the Banks with respect to the Loans, including, but not
limited to, Section 2.10 and Section 10.3 hereof, shall survive the termination
of this Agreement and the payment of the Loans, the Notes and obligations in
respect of the Letters of Credit.
Section 12.7. Sharing of Set-off. Each Bank agrees with each other Bank a
party hereto that if on or after the date of the occurrence of an Event of
Default and the acceleration of the maturity of the Notes pursuant to Section
9.2 or 9.3 hereof such Bank shall receive and retain any payment, whether by
set-off or application of deposit balances or otherwise ("Set-Off"), on any of
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the Obligations outstanding under this Agreement in excess of its ratable share
of payments on all Obligations then outstanding to the Banks, then such Bank
shall purchase for cash at face value, but without recourse, ratably from each
of the other Banks such amount of the Obligations held by each such other Bank
(or interest therein) as shall be necessary to cause such Bank to share such
excess payment ratably with all the other Banks; Provided, However, that if any
such purchase is made by any Bank, and if such excess payment or part thereof is
thereafter recovered from such purchasing Bank, the related purchases from the
other Banks shall be rescinded ratably and the purchase price restored as to the
portion of such excess payment so recovered, but without interest. Each Bank's
ratable share of any such Set-off shall be determined by the proportion that the
aggregate amount of Loans and Obligations with respect to outstanding Letters of
Credit then due and payable to such Bank bears to the total aggregate amount of
the Loans and Obligations with respect to outstanding Letters of Credit then due
and payable to all the Banks.
Section 12.8. Notices. Except as otherwise specified herein, all notices
hereunder shall be in writing (including cable, telecopy or telex) and shall be
given to the relevant party at its address, telecopier number or telex number
set forth below, in the case of the Borrower, or on the appropriate signature
page hereof, in the case of the Banks and the Agent, or such other address,
telecopier number or telex number as such party may hereafter specify by notice
to the Agent and the Borrower, given by United States certified or registered
mail, by telecopy or by other telecommunication device capable of creating a
written record of such notice and its receipt. Notices hereunder to the Borrower
shall be addressed to:
General Housewares Corp.
1536 Beech Street
Terre Haute, Indiana 47804-4066
Attention: Robert L. Gray
Telephone: (812)232-1000, Ext. 288
Telecopy: (812)232-7016
with a copy to:
General Housewares Corp.
Six Suburban Avenue
P.O. Box 10265
Stamford, Connecticut 06904-2265
Attention: Gordon R. Erickson
Telephone: (203)325-4141
Telecopy: (203)348-5247
Each such notice, request or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section and a confirmation of such telecopy has been received
by the sender, (ii) if given by telex, when such telex is transmitted to the
telex number specified in this Section and the answerback is received by sender,
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(iii) if given by mail, five (5) days after such communication is deposited in
the mail, certified or registered with return receipt requested, addressed as
aforesaid or (iv) if given by any other means, when delivered at the addresses
specified in this Section; provided that any notice given pursuant to Section 1
hereof shall be effective only upon receipt.
Section 12.9. Counterparts. This Agreement may be executed in any number of
counterparts, and by the different parties on different counterparts, each of
which when executed shall be deemed an original but all such counterparts taken
together shall constitute one and the same instrument.
Section 12.10. Successors and Assigns. This Agreement shall be binding upon
the Borrower and its successors and assigns, and shall inure to the benefit of
each of the Banks and the benefit of their respective successors and assigns,
including any subsequent holder of any Note. The Borrower may not assign any of
its rights or obligations hereunder without the written consent of all of the
Banks.
Section 12.11. Participants and Note Assignees. Each Bank shall have the
right at its own cost to grant participations (to be evidenced by one or more
agreements or certificates of participation) in the Loans made, Commitments
and/or Letters of Credit, by such Bank at any time and from time to time, and to
assign its rights under such Loans or the Notes evidencing such Loans to a
federal reserve bank; provided that no such participation or assignment of a
Note shall relieve any Bank of any of its obligations under this Agreement, and
provided further that no such assignee or participant shall have any rights
under this Agreement except as provided in this Section 12.11, and the Agent
shall have no obligation or responsibility to such participant or assignee,
except that nothing herein provided is intended to affect the rights of an
assignee of a Note to enforce the Note assigned. Any party to which such a
participation or assignment has been granted shall have the benefits of Section
2.10 and Section 10.3 hereof but shall not be entitled to receive any greater
payment under either such Section than the Bank granting such participation or
assignment would have been entitled to receive with respect to the rights
transferred.
Section 12.12. Assignment of Commitments By Banks. Each Bank shall have the
right at any time, with the prior consent of Borrower (which consent shall not
be unreasonably withheld or delayed), to sell, assign, transfer or negotiate all
or any part of its Loans, Commitments and/or Letters of Credit to one or more
commercial banks or other financial institutions; provided that such assignment
is in an amount of at least $5,000,000 and provided further that without the
consent of the Borrower or the Agent, any Bank may so assign all or part of its
Commitment to any affiliate of the assigning Bank (provided that such affiliate
complies with Section 12.1 hereof at the time of such assignment). Upon any such
assignment, and its notification to the Agent, the assignee shall become a Bank
hereunder, all Loans and the Commitment it thereby holds shall be governed by
all the terms and conditions hereof, and the Bank granting such assignment shall
have its Commitment and its obligations and rights in connection therewith,
reduced by the amount of such assignment.
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Section 12.13. Amendments. Any provision of this Agreement, the
Applications or the Notes may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by (a) the Borrower, (b) the
Required Banks, and (c) if the rights or duties of the Agent are affected
thereby, the Agent, as applicable; provided that:
(i) no amendment or waiver pursuant to this Section shall (A) increase
any Commitment of any Bank without the consent of such Bank or (B) reduce
the amount of or postpone the date for payment of any principal of or
interest on any Loan or of any fee payable hereunder without the consent of
the Bank to which such payment is owing or which has committed to make such
Loan or other credit hereunder; and
(ii) no amendment or waiver pursuant to this Section shall, unless
signed by each Bank, change the provisions of this Section, the definition
of Required Banks or Termination Date, or any condition precedent set forth
in Section 7 hereof or the provisions of Sections 9.1.(h), 9.1.(i) or 9.3.,
or affect the number of Banks required to take any action hereunder.
Section 12.14. Non-Reliance on Margin Stock. Each of the Banks represents
to the Agent and to each of the other Banks that it in good faith is not relying
upon any Margin Stock as collateral in the extension or maintenance of the
credit provided for in this Agreement.
Section 12.15. Legal Fees and Indemnification. The Borrower agrees to pay
the reasonable fees and disbursements of Messrs. Chapman and Cutler, counsel to
the Agent, in connection with the preparation and execution of this Agreement
and the other Loan Documents, and any amendment, waiver or consent related
hereto, whether or not the transactions contemplated herein are consummated. The
Borrower further agrees to indemnify each Bank, its directors, officers and
employees against all losses, claims, damages, penalties, judgments, liabilities
and expenses (including, without limitations, all expenses of litigation or
preparation therefor whether or not any Bank is a party thereto) which any of
them may pay or incur arising out of or relating to this Agreement, any other
Loan Document, the transactions contemplated hereby or thereby or the direct or
indirect application or proposed application of the proceeds of any Loan or
Letter of Credit hereunder, other than those which arise from the gross
negligence or willful misconduct of the party claiming indemnification. The
obligations of the Borrower under this Section shall survive the termination of
this Agreement.
Section 12.16. Currency. Each reference in this Agreement to U.S. Dollars
or to an Alternative Currency (the "relevant currency") is of the essence. To
the fullest extent permitted by law, the obligation of the Borrower in respect
of any amount due in the relevant currency under this Agreement shall,
notwithstanding any payment in any other currency (whether pursuant to a
judgment or otherwise), be discharged only to the extent of the amount in the
relevant currency that the Bank entitled to receive such payment may, in
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accordance with normal banking procedures, purchase with the sum paid in such
other currency (after any premium and costs of exchange) on the Business Day
immediately following the day on which such party receives such payment. If the
amount in the relevant currency that may be so purchased for any reason falls
short of the amount originally due, the Borrower shall pay such additional
amounts, in the relevant currency, as may be necessary to compensate for the
shortfall. Any obligations of the Borrower not discharged by such payment shall,
to the fullest extent permitted by applicable law, be due as a separate and
independent obligation and, until discharged as provided herein, shall continue
in full force and effect.
Section 12.17. Currency Equivalence. If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due from the Borrower
hereunder or under the Notes in the currency expressed to be payable herein or
under the Notes (the "specified currency") into another currency, the parties
agree that the rate of exchange used shall be that at which in accordance with
normal banking procedures the Agent could purchase the specified currency with
such other currency on the Business Day preceding that on which final judgment
is given. The obligation of the Borrower in respect of any such sum due to any
Bank or the Agent hereunder or under any Note shall, notwithstanding any
judgment in a currency other than the specified currency, be discharged only to
the extent that on the Business Day following receipt by such Bank or the Agent,
as the case may be, of any sum adjudged to be so due in such other currency,
such Bank or the Agent, as applicable, may in accordance with normal banking
procedures purchase the specified currency with such other currency. If the
amount of the specified currency so purchased is less than the sum originally
due to such Bank or the Agent in the specified currency, the Borrower agrees, as
a separate obligation and notwithstanding any such judgment, to indemnify such
Bank and the Agent against such loss, and if the amount of the specified
currency so purchased exceeds the sum of (a) the amount originally due to the
applicable Bank or the Agent in the specified currency plus (b) any amounts
shared with other Banks as a result of allocations of such excess as a
disproportionate payment to such Bank under Section 12.7 hereof, such Bank or
the Agent, as the case may be, agrees to remit such excess to the Borrower.
Section 12.18. Governing Law. This Agreement, the Applications and the
Notes, and the rights and duties of the parties hereto and thereto, shall be
construed and determined in accordance with the laws of the State of Illinois,
without regard to the internal laws thereof with respect to conflicts of law.
Section 12.19. Headings. Section headings used in this Agreement are for
reference only and shall not affect the construction of this Agreement.
Section 12.20. Entire Agreement. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof
and any prior or contemporaneous agreements, whether written or oral, with
respect thereto are superseded hereby.
-49-
<PAGE>
Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall be a contract between us for the purposes hereinabove set forth.
Dated as of November 30, 1994.
General Housewares Corp.
(Seal)
By Robert L. Gray
-------------------------------
Its Vice President-Finance and
Treasurer
Attest:
Gordon R. Erickson
--------------------
Secretary
-50-
<PAGE>
Accepted and Agreed to as of the day and year last above written.
Address and Amount of Commitment:
111 West Monroe Street HARRIS TRUST AND SAVINGS BANK,
Chicago, Illinois 60690 in its individual capacity as a
Attention: Mr. Peter Krawchuk Bank, as Agent
Emerging Majors East
Telecopy: (312) 461-2591
Telephone: (312) 461-2783
Revolving Credit
Loan Commitment: $16,666,667 By Peter Krawchuk
-------------------
Letter of Credit Its Vice President
Commitment: $ 3,333,333
-----------
Aggregate Commitments: $20,000,000
Lending Offices:
Domestic Rate Loans: 111 West Monroe Street
Chicago, Illinois 60690
Nassau Branch
Eurocurrency Loans: c/o 111 West Monroe Street
Chicago, Illinois 60690
One First National Plaza THE FIRST NATIONAL BANK OF
Chicago, Illinois 60670 CHICAGO
Attention: Ms. Kelly H. Gilroy
Mail Suite 0088
Telecopy: (312) 732-5161 By Kelly H. Gilroy
Telephone: (312) 732-7485 -----------------
Revolving Credit Its
Loan Commitment: $ 8,333,333 -------------------
Letter of Credit
Commitment: $ 1,666,667
-----------
Aggregate Commitments: $10,000,000
Lending Offices:
Domestic Rate Loans: One First National Plaza
Chicago, Illinois 60670
Eurocurrency Loans: One First National Plaza
Chicago, Illinois 60670
-51-
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
November 30, 1994
FOR VALUE RECEIVED, the undersigned, General Housewares Corp., a Delaware
corporation (the "Borrower"), promises to pay to the order of
________________________ (the "Bank") on the Termination Date of the hereinafter
defined Credit Agreement, at the principal office of Harris Trust and Savings
Bank in Chicago, Illinois (or, in the case of Eurocurrency Loans denominated in
an Alternative Currency, at such office as the Agent has previously notified the
Borrower), in immediately available funds in the currency in which the
applicable Loan was made, the aggregate unpaid principal amount of all Loans
made by the Bank to the Borrower under its Commitments pursuant to the Credit
Agreement and with each Loan to mature and become payable on the last day of the
Interest Period applicable thereto, but in no event later than the Termination
Date, together with interest on the principal amount of each Loan from time to
time outstanding hereunder at the rates, and payable in the manner and on the
dates, specified in the Credit Agreement.
The Bank shall record on its books or records or on a schedule attached to
this Note, which is a part hereof, each Loan made by it pursuant to its
Commitment, together with all payments of principal and interest and the
principal balances from time to time outstanding hereon, whether the Loan is a
Domestic Rate Loan or a Eurocurrency Loan and the interest rate and Interest
Period applicable thereto and, in the case of any Eurocurrency Loan, the
currency thereof, provided that prior to the transfer of this Note all such
amounts shall be recorded on the schedule attached to this Note. The record
thereof, whether shown on such books or records or on the schedule to this Note,
shall be Prima Facie evidence of the same, Provided, However, that the failure
of the Bank to record any of the foregoing or any error in any such record shall
not limit or otherwise affect the obligation of the Borrower to repay all Loans
made to it pursuant to the Credit Agreement together with accrued interest
thereon.
This Note is one of the Notes referred to in the Credit Agreement dated as
of November 30, 1994, among the Borrower, Harris Trust and Savings Bank, as
Agent, and others (the "Credit Agreement"), and this Note and the holder hereof
are entitled to all the benefits provided for thereby or referred to therein, to
which Credit Agreement reference is hereby made for a statement thereof. All
defined terms used in this Note, except terms otherwise defined herein, shall
have the same meaning as in the Credit Agreement. This Note shall be governed by
and construed in accordance with the laws of the State of Illinois.
-52-
<PAGE>
Prepayments may be made hereon and this Note may be declared due prior to
the expressed maturity hereof, all in the events, on the terms and in the manner
as provided for in the Credit Agreement.
The Borrower hereby waives demand, presentment, protest or notice of any
kind hereunder.
General Housewares Corp.
By
---------------------------
Its-------------------------
-53-
<PAGE>
<TABLE>
EXHIBIT B
<CAPTION>
SUBSIDIARIES OF GENERAL HOUSEWARES CORP.
I. CONSOLIDATED SUBSIDIARIES
JURISDICTION OF PERCENTAGE
NAME INCORPORATION OF OWNERSHIP
<S> <C> <C>
Chicago Cutlery, Inc. Florida 100%
Chicago Cutlery etc., Inc. Indiana 100%
General Housewares Export U.S. Virgin Islands 100%
Corporation
General Housewares of Canada Inc. Province of Quebec, Canada 100%
II. Subsidiaries Which Are Not Consolidated
None
</TABLE>
-54-
<PAGE>
EXHIBIT C
To each of the Banks named in the
hereinafter defined Credit Agreement
c/o Harris Trust and Savings Bank,
as Agent under the Credit Agreement
Gentlemen:
I am Secretary and General Counsel of General Housewares Corp., a Delaware
corporation (the "Borrower"), in connection with the authorization of and the
execution and delivery of the Credit Agreement dated as of November 30, 1994,
among the Borrower and you and the banks named therein (the "Credit Agreement").
All terms used and not defined herein shall have the meanings assigned to them
in the Credit Agreement.
In rendering this opinion, I have made such investigations of fact and have
considered such questions of law as I have deemed necessary for the purposes of
this opinion, which is delivered to you pursuant to Section 7.1(a) of the Credit
Agreement. Based on the foregoing, it is my opinion that:
(i) The Borrower is duly organized and validly existing in good
standing under the laws of the State of Delaware; has the corporate power
to carry on its present business; is duly licensed or qualified in all
states and jurisdictions wherein the nature of the business carried on by
it or the assets and properties owned or leased by it requires such
qualification or licensing, except where the failure to be so licensed or
qualified would not have a material adverse effect on the financial
condition or properties, business or operations of the Borrower and the
Consolidated Subsidiaries taken as a whole; and has the corporate power and
authority to enter into the Credit Agreement and the Applications, to make
the borrowings and request letters of credit therein provided for, to issue
its Notes and Applications and to perform each and all of the matters and
things therein provided for.
(ii) Each Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation
and is duly licensed or qualified and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it
or the nature of the business transacted by it makes such licensing or
qualification necessary and all of the issued and outstanding shares of
capital stock of each such Subsidiary have been duly issued, are fully paid
and non-assessable and are owned by the Borrower, by one or more
Subsidiaries, or by the Borrower and one or more Subsidiaries.
-55-
<PAGE>
(iii) The Credit Agreement, Applications and the Notes delivered on
the date hereof have been duly authorized, executed, and delivered by and
on behalf of the Borrower and constitute legal, valid, and enforceable
obligations of the Borrower, except to the extent affected by bankruptcy,
insolvency or other similar laws relating to or affecting the enforcement
of creditors' rights and remedies generally and general principles of
equity.
(iv) The Loan Documents do not, nor will the performance or observance
by the Borrower of any of the matters and things therein provided for,
contravene any provision of law applicable to the Borrower, or, to our
knowledge, any judgment or decree applicable to the Borrower, the
Certificate of Incorporation, as amended, or By-laws of the Borrower, or
any indenture or material agreement to which the Borrower is a party or by
which it or any of its properties is bound.
(v) All authorizations, consents, approvals, filings, registrations,
exemptions and regulatory approvals necessary to permit borrowings and
requests for letters of credit by the Borrower under the Credit Agreement
and the Applications have been obtained and remain in full force and
effect.
(vi) The making of the Loans and the application by the Borrower of
the proceeds thereof do not violate Regulation U or Regulation X of the
Board of Governors of the Federal Reserve System.
(vii) The Borrower is not an "Investment Company" or a company
"Controlled" by an "Investment Company" as such terms are defined in the
Investment Company Act of 1940, as amended.
(viii) There is no litigation or governmental proceeding pending, or
to the best of my knowledge threatened, against the Borrower or any
Subsidiary which could reasonably be expected to (i) materially adversely
affect the business and properties of the Borrower and its Subsidiaries on
a consolidated basis or (ii) impair the validity or enforceability of any
of the Loan Documents or materially impair the ability of the Borrower to
perform its obligations under any of the Loan Documents.
The opinion of Gordon R. Erickson, Esq., shall cover such other matters
relating to the Credit Agreement as the Banks may reasonably request and may
rely upon an opinion of Canadian counsel with respect to the opinion required in
paragraph (ii) regarding the Borrower's Canadian Subsidiary. With respect to
matters of fact on which such opinion is based, such counsel shall be entitled
to rely on appropriate certificates of public officials and officers of the
Borrower.
Respectfully submitted,
-56-
<PAGE>
EXHIBIT D
GENERAL HOUSEWARES CORP.
COMPLIANCE CERTIFICATE
This Compliance Certificate is furnished to the Agent and the Banks
pursuant to that certain Credit Agreement dated as of November 30, 1994, by and
among the Borrower, the Agent and the Banks (the "Agreement"). Unless otherwise
defined herein, the terms used in this Compliance Certificate have the meanings
ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected ________________________ of the Borrower;
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of the Borrower and its Subsidiaries during the accounting period
covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or event which constitutes a
Default or Event of Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and computations
evidencing the Borrower's compliance with certain covenants of the Agreement,
all of which data and computations are true, complete and correct.
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:
----------------------------------------------------
----------------------------------------------------
The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this day of , 19___.
-------------------------------
-57-
<PAGE>
SCHEDULE I
GENERAL HOUSEWARES CORP.
<TABLE>
Compliance Calculations for Credit Agreement
Dated as of November 30, 1994
Calculations as of _________________, 19___
<CAPTION>
A. Leverage Ratio (Section 8.7)
<S> <C>
1. Obligations for Borrowed Money $
---------------
2. Conditional Sale Obligations
---------------
3. Guaranties
---------------
4. Take or pay (and similar) contract obligations
---------------
5. Debt (to the extent not otherwise included
above) secured by liens or security interests
---------------
6. Capitalized Lease Obligations (to the extent
not otherwise included above)
---------------
7. Add Lines 1 through 6 (Total Indebtedness)
8. Short term Indebtedness (other than current
maturities of long term Indebtedness)
---------------
9. Line 7 minus Line 8 (Consolidated Funded Debt)
===============
10. Total Stockholders Equity (Consolidated
Net Worth) $
---------------
11. Consolidated Funded Debt (Line 9 above)
---------------
12. Add Line 10 and Line 11 (or subtract Line 10
from Line 11 if Line 11 is a negative
number)
---------------
13. Ratio of Line 9 to Line 12
-----------:1.0
-58-
<PAGE>
14. Line 13 ratio must not be in an amount greater
than: .45:1.0
B. Consolidated Net Worth (Section 8.6).
1. Consolidated Net Worth
(Line A.10. above) $
---------------
2. Line 1 must not be less than $45,000,000 (to be
increased as provided in Section 8.6)
C. Current Ratio (Section 8.9).
1. Consolidated current assets $
---------------
2. Consolidated current liabilities $
---------------
3. Ratio of Line 1 to Line 2
----------: 1.0
4. Line 3 ratio must not be in an
amount less than 1.5 : 1.0
D. Fixed Charge Coverage Ratio to it(Section 8.8).
1. Consolidated Net Earnings (including non-
operating losses to the extent cash is reduced
and excluding non-operating gains) $
---------------
2. Consolidated Interest Expense $
---------------
3. Federal, state and local income taxes $
---------------
4. Payments due under operating leases (Rentals) $
---------------
5. Sum of Lines 1 through 4 (Earnings Available
for Fixed Charges) $
===============
6. Consolidated Interest Expense
(including capitalized leases) $
---------------
7. Payments due under operating leases
(Line D.4. above) $
---------------
8. Sum of Lines 6 and 7 $
===============
9. Ratio of Line 5 to Line 8
-------- to 1.0
10. Line 12 ratio must be equal to or greater than:
2.0 to 1.0
</TABLE>
-59-
<PAGE>
EXHIBIT E
FUNDED DEBT OF SUBSIDIARIES AND EXISTING SHORT TERM
INDEBTEDNESS OF BORROWER
1. Borrower's indebtedness to Merchant's Bank under $1,000,000 line of credit.
<PAGE>
EXHIBIT F
LIENS
1. Lien on Borrower's copier-duplicator and copier and related accessories
in favor of Eastman Kodak Credit Corporation in respect of the lease
thereof.
-60-
<PAGE>
EXHIBIT G
GUARANTIES
None
EXHIBIT 11a
<TABLE>
<CAPTION>
COMPUTATION OF PRIMARY EARNINGS PER SHARE
1994 1993 1992
<S> <C> <C> <C>
Income from continuing operations $2,750,000 $3,036,000 $4,424,000
Cumulative effect of change in
accounting for:
Income taxes in accordance with FAS #109 - - 218,000
Net income $2,750,000 $3,036,000 $4,642,000
Shares:
Weighted average number of shares of
common stock outstanding 3,406,115 3,265,896 3,223,583
Shares assumed issued (less shares
assumed purchased for treasury)
on stock options 34,156 74,442 71,151
Outstanding shares for primary earnings
per share calculation 3,440,271 3,340,338 3,294,734
Earnings per common share:
Income from continuing operations $0.80 $0.91 $1.34
Cumulative effect of change in
accounting for:
Income taxes in accordance with
FAS #109 - - 0.06
Net income $0.80 $0.91 $1.40
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Subsidiary State or Province Incorporated
General Housewares Export Corporation U.S. Virgin Islands
Chicago Cutlery, Inc. Florida
Chicago Cutlery etc., Inc. Indiana
General Housewares of Canada Inc. Quebec, Canada
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Registration Statement on Form S-8 (No.
33-33328, 2-77798, 33-48336 and 33-82136) of General Housewares Corp., of our
report dated January 30, 1995, appearing on pages 9-10 of this Annual Report on
Form 10-K. We also consent to the application of such report to the Financial
Statement Schedule for the three years ended December 31, 1994, listed under
Item 8 of this Annual Report on Form 10-K for the year ended December 31, 1994,
when such schedule is read in conjunction with the financial statements referred
to in our report. The audits referred to in such report also included the
Financial Statement Schedule.
PRICE WATERHOUSE LLP
Indianapolis, Indiana
March 27, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> 0
</LEGEND>
<CIK> 0000040643
<NAME> 0
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-START> Jan-01-1992
<PERIOD-END> Dec-31-1994
<EXCHANGE-RATE> 1
<CASH> 2,993
<SECURITIES> 0
<RECEIVABLES> 22,166
<ALLOWANCES> 5,312
<INVENTORY> 20,841
<CURRENT-ASSETS> 3,089
<PP&E> 33,048
<DEPRECIATION> 20,047
<TOTAL-ASSETS> 98,358
<CURRENT-LIABILITIES> 13,443
<BONDS> 0
<COMMON> 1,324
0
0
<OTHER-SE> 48,931
<TOTAL-LIABILITY-AND-EQUITY> 98,358
<SALES> 96,515
<TOTAL-REVENUES> 96,515
<CGS> 61,505
<TOTAL-COSTS> 61,505
<OTHER-EXPENSES> 28,373
<LOSS-PROVISION> 354
<INTEREST-EXPENSE> 1,699
<INCOME-PRETAX> 4,938
<INCOME-TAX> 2,188
<INCOME-CONTINUING> 2,750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,750
<EPS-PRIMARY> 0.800
<EPS-DILUTED> 0.800
</TABLE>
EXHIBIT 99
Employee Stock Purchase Plan
Financial Statements
December 31, 1994 and 1993
Price Waterhouse LLP
REPORT OF INDEPENDENT ACCOUNTANTS
February 15, 1995
To the Participants and Administrative Committee of General Housewares Corp.
Employee Stock Purchase Plan
In our opinion, the accompanying statements of financial condition and of income
and changes in plan equity present fairly, in all material respects, the
financial condition of General Housewares Corp. Employee Stock Purchase Plan at
December 31, 1994 and 1993, and the changes in its financial condition for the
years then ended, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the plan's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL CONDITION
December 31,
1994 1993
<S> <C> <C>
PLAN ASSETS
Investments in employer's securities
(cost, 1994 - $159,750; 1993 - $113,973) $ 183,016 $ 113,100
LIABILITIES AND PLAN EQUITY
Liabilities - -
Plan Equity $ 183,016 $ 113,100
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY
<CAPTION>
Year Year
Ended Ended
December 31, December 31,
1994 1993
<S> <C> <C>
Dividend income $ 3,213 $ 1,532
Administrative expenses (149) (72)
Net dividend income 3,064 1,460
Unrealized appreciation (depreciation)
in investments 23,573 (5,297)
Participant contributions 68,905 90,758
Participant distributions (25,626) (26,600)
Net increase in plan equity 69,916 60,321
Plan equity at beginning of period 113,100 52,779
--------- ---------
Plan equity at end of period $ 183,016 $ 113,100
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN
The following description of the General Housewares Corp. (Company)
Employee Stock Purchase Plan (Plan) provides only general
information. Participants should refer to the Plan agreement for a
more complete description of the Plan's provisions.
ELIGIBILITY
All full time employees who have completed three months of service
will be eligible to participate and be a participant in the Plan at
the beginning of the next calendar quarter subsequent to their
completion of three months of service.
STOCK PURCHASES
First Chicago Trust Company of New York, the Custodian for the
Plan, will purchase common stock either (1) in the open market, (2)
from an employee desiring to dispose of his/her shares pursuant to
the Plan or (3) from the Company. The Company will pay all
brokerage fees on all purchases of common stock under the Plan.
The price at which shares of common stock will be purchased will be
the lesser of:
<PAGE>
(a) 90% of the market value of the common stock on the
first business day of the applicable calendar quarter, or
(b) 90% of the market value of the common stock on the last
business day of such calendar quarter.
The number of shares of common stock that will generally be
purchased in each calendar quarter will be equal to the amount of
payroll deductions made during such quarter plus any accumulated
dividends divided by the purchase price of the common stock.
Dividend reinvestments are subject to a 5% administration fee paid
by the Plan.
WITHDRAWALS
An employee may withdraw part or all of his/her account balance at
any time by giving written notice to the Company. The Company will
refund part or all of the balance in the employee's account.
PARTICIPANT ACCOUNTS
A stock purchase account shall be maintained by the Custodian in
the name of each participant. Authorized payroll deductions shall
be held by the Company and credited to the participant's stock
purchase account at the end of each calendar quarter. Interest will
not accrue or be paid on available funds or any other cash held in
a participant's stock purchase account. All dividends paid on
Company stock held in a participant's stock purchase account shall
be used to purchase additional Company stock.
2. SUMMARY OF ACCOUNTING POLICIES
Quoted market prices are used to value investments.
3. INVESTMENTS
At December 31, 1994 and 1993 investments were comprised of 13,073
and 8,700 shares, respectively, of General Housewares Corp. Common
Stock. The closing market price on December 31, 1994 and 1993 was
$14/share and $13/share, respectively. Net unrealized appreciation
(depreciation) of investments was $23,573 and ($5,297) in 1994 and
1993, respectively.
<PAGE>
4. FEDERAL INCOME TAXES
The Plan is intended to qualify as an "employee stock purchase
plan" within the meaning of Section 423 of the Internal Revenue
Code. As a result, participants are not subject to any tax at the
time of the purchase of stock at a discount. A favorable letter of
determination has not been requested or obtained from the Internal
Revenue Service.
