<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995
........................................................
Commission file number 1-6687
....................................................
JOHNSTON INDUSTRIES, INC.
..........................................................................
(Exact name of registrant as specified in its charter)
Delaware 11-1749980
..........................................................................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 Thirteenth Street, Columbus, Georgia 31901
..........................................................................
(Address of principal executive offices) (Zip Code)
(706) 641-3140
..........................................................................
(Registrant's telephone number, including area code)
..........................................................................
(Former name, former address and former fiscal year if changed since last
report.)
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 XX No
...... ......
At March 31, 1995, the number of outstanding shares of $.10 par
value common stock was 10,559,879.
<PAGE> 2
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
INDEX
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
2
<PAGE> 3
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In Thousands of Dollars)
<TABLE>
<CAPTION>
March 31,1995 June 30, 1994 (a)
------------- -----------------
<S> <C> <C>
Assets
- -------
Current Assets
Cash and Cash Equivalents $ 8,955 $ 3,914
Marketing Securities 9,097
Accounts and Notes Receivable
(Less Allowance for Doubtful Accounts
of $1,433 and $368) 41,799 18,152
Inventories 53,898 25,438
Prepaid Expenses and Other 1,891 1,330
------- -------
Total Current Assets 115,640 48,834
Investments - At Equity 20,237 20,956
Property, Plant and Equipment - Net 113,041 65,354
Intangible Asset - Pension 2,573 2,874
Other Assets 2,808 2,096
-------- -------
Total Assets $ 254,299 $ 140,114
======== ========
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities
Short-Term Borrowings $ 5,100 $ 2,500
Current Maturities of Long-Term Debt 5,280 5,087
Accounts Payable 16,335 6,410
Accrued Expenses 14,373 7,372
Deferred Income Taxes 3,913 1,164
Income Taxes Payable 695 806
-------- --------
Total Current Liabilities 45,696 23,339
Long-Term Debt 102,573 36,216
Other Liabilities 24,228 20,800
-------- --------
Total Liabilities 172,497 80,355
--------- --------
Minority Interest in Consolidated Subsidiaries 19,318
Stockholders' Equity:
Preferred Stock, par value $.01 share;
Authorized 3,000,000 shares; none-issued
Common Stock, par value $.10 share;
Authorized 20,000,000 shares; issued
12,411,891 shares 1,241 1,241
Additional Paid-In Capital 17,212 17,107
Retained Earnings 54,678 51,016
-------- --------
Total 73,131 69,364
Less Treasury Stock; 1,852,012 shares and
1,682,112 shares, at cost (8,009) (6,407)
Less Minimum Pension Liability, Net of Tax Benefit (2,638) (3,198)
-------- --------
Stockholders' Equity 62,484 59,759
-------- --------
Total Liabilities and Stockholders' Equity $ 254,299 $ 140,114
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
(a) The June 30, 1994 balances have been restated to reflect Jupiter
National, Inc. on an operating company basis as discussed in Note 2.
3
<PAGE> 4
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In Thousands of Dollars, Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
March 31 March 31
------------- -------------
1995 (b) 1994 (a) (c) 1995 (b) 1994 (a)(c)
-------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Net Sales $ 91,002 $ 42,595 $ 175,972 $ 116,585
------- ------- -------- --------
Costs and Expenses:
Cost of Sales, excluding
Depreciation and Amortization 72,808 31,993 137,926 89,416
Selling, General and Administrative 7,275 3,171 14,041 9,727
Depreciation and Amortization 4,180 2,678 9,825 7,628
------- ------- -------- -------
Total Costs and Expenses 84,263 37,842 161,792 106,771
------- ------- -------- --------
Income from Operations 6,739 4,753 14,180 9,814
Other Expenses (Income)
Interest Expense - Net 2,128 713 3,906 2,074
Other - Net 86 164 28 422
------- ------- -------- -------
Total Other Expenses (Income) 2,214 877 3,934 2,496
Equity in Earnings(Loss) of
Equity Investments (117) (47) 923 1,472
Realized and Unrealized Investment
Portfolio Gain 985 985
------- ------- -------- -------
Income Before Provision
for Income Taxes 5,393 3,829 12,154 8,790
Provision for Income Taxes 2,246 1,400 4,811 3,191
Minority Interest in Income of
Consolidated Subsidiaries 514 514
------- ------- -------- -------
Net Income $ 2,633 $ 2,429 $ 6,829 $ 5,599
======= ======= ======= =======
Earnings Per Share $ .25 $ .22 $ .64 $ .52
======= ======= ======= =======
Dividends Per Share $ .10 $ .083 $ .29 $ .25
======= ======= ======= =======
Weighted Average Number of Common
and Common Equivalent Shares
Outstanding 10,682 10,863 10,712 10,856
======= ======= ======= =======
</TABLE>
See notes to condensed consolidated financial statements.
(a) Per share data and weighted average number of common and common equivalent
shares outstanding have been retroactively adjusted to reflect the
three-for-two stock split of January 4, 1994.
(b) The operations of Jupiter National, Inc., a majority-owned subsidiary, for
the three months ended March 31, 1995, are included in the three months
and nine months ended March 31, 1995.
(c) Income for the three months and nine months ended March 31, 1994, have
been restated to reflect the equity in earnings of Jupiter National, Inc.
on an on an operating company basis as discussed in Note 2.
4
<PAGE> 5
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Thousands of Dollars)
<TABLE>
<CAPTION>
For the Nine
Months Ended
March 31
------------
1995 1994
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 6,829 $ 5,599
------ ------
Adjustment to Reconcile Net Income to
Net Cash Provided by Operating
Activities:
Depreciation and Amortization 9,825 7,628
Provision for Bad Debts 230 111
Net Realized and Unrealized Gain on Portfolio Investment (985)
Undistributed (Income) Losses in Investments (923) (1,472)
Majority Interest in Income of Consolidated Subsidiaries 514
Changes in Assets and Liabilities:
Accounts Receivable (7,526) (1,612)
Inventories 23 (3,382)
Deferred Income Taxes 1,508 (66)
Other Assets 500 (484)
Accounts Payable (2,985) (2,802)
Accrued Expenses 1,102 458
Income Taxes Payable (1,075) 342
Other Liabilities 1,136 1,917
Other - Net 77 92
------ ------
Total Adjustments 1,421 730
------ ------
Net Cash Provided by Operating Activities 8,250 6,329
------ ------
Cash Flows From Investing Activities:
Additions to Property, Plant and Equipment (16,659) (9,044)
Unpaid Capital Expenditures 5,322
Additions to Investments (5,125) (2,549)
Repayment of Loans by Stockholders 5,383
------ ------
Net Cash Used in Investing Activities (16,462) (6,210)
------- ------
Cash Flows From Financing Activities:
Net Borrowings Under Lines of Credit 600 (7,000)
Proceeds From Long-Term Debt 17,261 13,227
Principal Payments of Long-Term Debt (6,041) (3,500)
Purchase of Treasury Stock (1,602) (202)
Proceeds From Issuance of Common Stock 52 332
Dividends Paid (3,075) (2,675)
------ -------
Net Cash Provided by Financing Activities 7,195 182
------ -------
Net Increase (Decrease) in Cash and Cash Equivalents (1,017) 301
Cash and Cash Equivalents at Beginning of Period 9,972 4,102
------ -------
Cash and Cash Equivalents at End of Period $ 8,955 $ 4,403
====== ======
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period For:
Interest $ 3,807 $ 2,047
Income Taxes $ 2,752 $ 1,766
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements for the
nine months ended March 31, 1995 and 1994 are unaudited. These
statements include the accounts of Johnston Industries, Inc., its
wholly owned subsidiaries and its majority owned subsidiaries,
Jupiter National, Inc. and Wellington Sears Company. Wellington
Sears Company is a wholly owned subsidiary of Jupiter National, Inc.
In the opinion of management, the information reflects all
adjustments, consisting only of normal recurring accruals, necessary
for a fair presentation of the results of the unaudited interim
periods. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full
fiscal year. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year
ended June 30, 1994.
2. JUPITER NATIONAL
In January 1995, the Company purchased an additional 89,300 shares of
Jupiter National, Inc. ("Jupiter") for approximately $2,300,000 which
increased the Company's ownership interest in the outstanding shares
of Jupiter from 49.6% at December 31, 1994, to 54%. As a result,
Jupiter is now a majority-owned subsidiary of the Company which is
consolidated as of January 1995, with the operations of the Company.
Minority interest is recorded for the minority shareholders
proportionate share of the equity and earnings of Jupiter.
For the six months ended December 31, 1994, the Company accounted
for its investment in Jupiter under the equity method and has
recorded equity in the changes in net assets of Jupiter of $1,368,000.
For the three months ended March 31, 1995, the operations of Jupiter
are consolidated with those of the Company, and the Company's net
income for this period includes $468,000 for the Company's
proportionate share in the earnings of Jupiter.
Through November 30, 1994, Jupiter was considered a closed-end
venture capital investment company that used specialized accounting
policies required for investment companies to determine the net asset
value of its portfolio of investments. Under these policies,
securities with readily available market quotations were valued at the
current market price, and all other investments were valued at fair
value as determined in good faith by Jupiter's Board of Directors
using a formal portfolio valuation procedure. Effective December 1,
1994, Jupiter received approval from the Securities and Exchange
Commission to withdraw its election as a business development company
under the Investment Act of 1940. As a result, majority-owned
operating companies are no longer required to be valued at fair value
as determined by Jupiter's Board of Directors. Instead, such
operating companies are recorded by Jupiter on a historical cost basis
through a retroactive change in accounting method that has resulted in
a restatement of Johnston's and Jupiter's prior financial statements
through December 31, 1994. Effective January 1995, the Company's
proportionate share of the unrealized appreciation/depreciation of
Jupiter's portfolio companies will be included as a separate line item
in the Company's income statement. For the nine months ended March
31, 1995, $977,000 of the Company's net income, which is exclusive of
the results of such operating companies referred to above, was derived
from net unrealized appreciation of investments whose values have been
estimated by Jupiter's Board of Directors.
6
<PAGE> 7
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following represents the unaudited results of operations on a
pro forma basis assuming the Company had owned approximately 54% of
Jupiter as of July 1, 1993. This pro forma information is provided
for informational purposes only. Such pro forma information is
based on historical information and is not necessarily indicative of
the actual results that would have been achieved had the Company
purchased the additional 89,300 shares of Jupiter on July 1, 1993,
nor is it necessarily indicative of future results of operations.
<TABLE>
<CAPTION>
For the Nine
Months Ended
March 31
-------------
1995 1994
---- ----
<S> <C> <C>
Net Sales $247,413,000 $210,042,000
Net Income $ 7,050,000 $ 5,524,000
Earnings Per Share $ .66 $ .52
</TABLE>
3. EQUITY INVESTMENT
Tech Textiles, USA
During 1992, the Company entered into a 50%/50% partnership with an
English company to establish "Tech Textiles, USA" for the joint
manufacture and sale of certain specialized textile products. The
Company's investment in this equity was $2,995,000 at March 31, 1995,
and it has recorded a loss of $445,000 for the nine months ended
March 31, 1995.
4. INVENTORIES
Inventories consist of the following at March 31, 1995, and June 30,
1994:
<TABLE>
<CAPTION>
March 31, 1995 June 30, 1994
-------------- -------------
<S> <C> <C>
Finished Goods $ 20,003,000 $11,585,000
Work-In Process 16,606,000 6,897,000
Raw Materials and Supplies 17,289,000 6,956,000
----------- -----------
Total $ 53,898,000 $ 25,438,000
=========== ===========
</TABLE>
7
<PAGE> 8
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. LONG-TERM FINANCING AND SHORT-TERM BORROWINGS
Long-term debt consists of the following at March 31, 1995 and
June 30, 1994:
<TABLE>
<CAPTION>
March 31, 1995 June 30, 1994
-------------- -------------
<S> <C> <C>
Johnston Industries, Inc.
Revolving Credit Loans $ 45,000,000 $ 35,000,000
Term Notes Payable 5,000,000
Purchase Money Mortgage Debt 1,239,000 1,303,000
----------- -----------
46,239,000 41,303,000
Jupiter National, Inc.
Subordinated Debentures 14,500,000
Securities Loans 1,321,000
Other Debt 733,000
-----------
16,554,000
Wellington Sears Company
Revolving Credit Loan 22,198,000
Term Loan 20,344,000
Equipment Loans 1,158,000
Amounts Due Former Affiliates
of Polylok 1,228,000
Other Debt 132,000
-----------
45,060,000
----------- -----------
Total 107,853,000 41,303,000
Less Current Maturities (5,280,000) (5,087,000)
----------- -----------
$102,573,000 $ 36,216,000
=========== ===========
</TABLE>
Johnston Industries, Inc.
Amended Credit Agreement
The Company has amended its Credit and Security Agreement, dated as
of January 31, 1995, to increase amounts available under its
revolving credit loans to $45,000,000 and to provide $10,000,000 in
annually renewable lines of credit. Borrowings under the revolving
credit loans are payable January 14, 1997, bear interest at a
variable rate of the higher of the federal funds rate plus 1/2 of 1%
or the prime rate. Under the agreement, the interest rate for Euro
dollar loans is based on the LIBOR rate plus a margin. The average
interest rate at March 31, 1995 was 7.63%.
Borrowings under the lines of credit bear interest at the higher of
the federal funds rate plus 1/2 of 1% or the prime rate. At
March 31, 1995, there were borrowings of $5,100,000 under the lines
of credit.
8
<PAGE> 9
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Purchase Money Mortgage Agreement
The Company has a purchase money mortgage agreement with a bank
for a maximum loan of $1,325,000 for an office building. The loan
is payable ratably to December 31, 2008. At March 31, 1995, the
Company had borrowed $1,239,000 under this agreement and
currently pays interest at a rate of 8 3/4%.
Jupiter National, Inc.
Subordinated Debentures
The subordinated debentures are payable to the Small Business
Administration (SBA) and bear an effective weighted average
interest rate of 7.8% at March 31, 1995. Principle payments are
due as follows:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
1998 $ 2,500,000
2001 7,000,000
2003 5,000,000
----------
$14,500,000
==========
</TABLE>
The subordinated debentures contain restrictions on prepayment,
distributions to shareholders and the operations of Jupiter
National.
Securities Loans
At March 31, 1995, Jupiter had borrowed $1,321,000 under a
brokerage margin account with average interest rates of 10%.
Wellington Sears Company
Revolving Credit Loan
In January 1995, Wellington amended its revolving credit and
term loan agreement with a bank. The agreement provides that
Wellington may obtain revolving credit loans up to an aggregate
amount of the lessor of $24,000,000 or certain percentages of
accounts receivable and inventories. Borrowings under the
agreement are collateralized by substantially all machinery,
inventory and receivables of Wellington. Repayment is made daily
from cash receipts (as defined) and the loan is due November 20,
1998, with an automatic renewal for one year.
The unused available line of credit at March 31, 1995 was
approximately $970,000. Interest is payable at the current prime
rate plus 1% and the interest rate at March 31, 1995 was 10%.
9
<PAGE> 10
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Term Loan
The agreement provides for a term loan of $21,000,000 payable in
monthly installments of $218,735 through November 20, 1998, at
which time the remaining unpaid balance is due. At March 31, 1995,
there were borrowings of $20,344,000 under the term loan. The
term loan bears interest at the current prime rate plus 1% and the
interest rate at March 31, 1995 was 10%.
Equipment Loans
Through July 1, 1995, Wellington may borrow up to $5,000,000 to
finance the purchase of equipment. The principal amount is payable
in monthly installments of 1/84th of the loan balance through
November 20, 1998, when the remaining balance is due. At March 31,
1995, there were borrowings of $1,158,000 under the equipment loans.
The equipment loans bear interest at the current prime rate plus 1%
and the interest rate at March 31, 1995 was 10%.
Amounts Due Former Affiliates of Polylok
Amounts due former affiliates is primarily comprised of $1,228,000
due under a note payable agreement and deferred compensation
agreement with the former owner of Polylok Corporation. Amounts are
payable in equal quarterly installments of $269,108 plus interest,
accruing at the prime interest rate (9% at March 31, 1995), with the
final payment due March 31, 1996.
6. COMMON STOCK
On November 1, 1993, the Board of Directors approved a three-for-two
stock split, whereby shareholders of record on January 4, 1994, were
entitled to one additional share of common stock for every two shares
held, payable on January 24, 1994. Stock options, treasury stock,
outstanding common stock and per share data included herein have been
retroactively adjusted to reflect the split.
7. STOCK OPTION PLANS
The Company has a Stock Incentive Plan for key employees under which
the Company may grant incentive stock options, non-qualified stock
options, stock appreciation rights and restricted stock. The Company
also has a non-qualified option agreement with a director to purchase
a maximum of 22,500 shares of the Company's common stock exercisable
at $3.22 per share.
Jupiter also has stock option plans for employees and directors under
which options are granted at fair market value for a period of ten
years and are fully exercisable within eighteen months of grant.
10
<PAGE> 11
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A summary of outstanding stock options is as follows:
<TABLE>
<CAPTION>
Johnston Jupiter
-------- -------
Exercise Exercise
Options Price Options Price
------- -------- ------- ---------
<S> <C> <C> <C> <C>
Balance at June 30, 1994 431,250 $2.37-$10.17 321,500 $3.63-$28.75
Exercised (19,500) $3.63-$8.75
------ -------
Balance at March 31, 1995 431,250 $2.37-$10.17 302,000 $3.63-$28.75
Options Available for Grant 855,000 326,250
======= =======
</TABLE>
8. STOCK PURCHASE PLAN
On October 15, 1990, the Company adopted an Employee Stock Purchase
Plan under which selected eligible employees and directors of the
Company were granted the opportunity to purchase shares of the
Company's common stock. Through March 31, 1995, 834,959 shares of
the Company's stock have been purchased at market prices by
employees and directors under the plan.
At March 31, 1995, the Company has guaranteed plan participants'
bank borrowings totaling approximately $6,709,000.
9. EARNINGS PER SHARE
Earnings per share for the nine month periods ended March 31,
1995 and 1994 have been calculated based on the weighted average
number of shares of common and common equivalent shares outstanding
during each respective period. The calculation assumes the
conversion of all outstanding options with the proceeds therefrom
used to repurchase the Company's common stock at market price.
10. INCOME TAXES
The Company has adopted Financial Accounting Standards Board
Standard No. 109, "Accounting for Income Taxes" and determines
income taxes for financial reporting purposes using the asset
and liability method. Under this method, deferred tax assets
and liabilities are computed for differences between financial
statement and tax bases of the Company's assets and liabilities
at currently enacted tax rates.
The provision for income taxes as computed under SFAS 109 is
11
<PAGE> 12
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
comprised of the following for the nine months ended March 31,
1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Federal:
Current $ 2,617,000 $ 1,796,000
Deferred 1,497,000 1,128,000
------------ -------------
4,114,000 2,924,000
------------ ------------
State:
Current 664,000 545,000
Deferred 33,000 (278,000)
------------ ------------
697,000 267,000
------------ ------------
Provision for income taxes $ 4,811,000 $ 3,191,000
============ ============
</TABLE>
The reconciliation of the Company's effective income tax rate to the
Federal statutory rate of 34% for the nine months ended March 31,
1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Federal income taxes
at statutory rate $ 4,132,000 $ 2,989,000
State income taxes,
net of Federal tax 459,000 176,000
Equity in Income of Subsidiary 159,000
Other - Net 61,000 26,000
---------- ----------
$ 4,811,000 $ 3,191,000
---------- ----------
Effective rate 39.6% 36.3%
========== ==========
</TABLE>
11. CONTINGENCIES
In February 1994, the operators of a steel fabricating facility
filed a complaint against a previous operator of the facility and
a former subsidiary of Johnston Industries, Inc., which had operated
the facility earlier before its close in 1981. The complaint seeks
to have the earlier operators bear the response costs incurred in
remediation at the plant site. Such costs are alleged to be in
excess of $1,500,000 to date. The Company is presently in the
process of obtaining sufficient information to fully evaluate the
claim. The Company has established a reserve in the amount of
$180,000 as an estimate of potential costs to be incurred in
connection with this matter. While the ultimate resolution of any
lawsuit involves uncertainty, management believes settlement of this
issue will not have a material effect on the Company's financial
condition or results of operations.
12. SUBSEQUENT EVENTS
Dividend Declaration
On April 26, 1995, the Company declared a quarterly dividend of .10
per share payable May 24, 1995, to shareholders of record of May 10,
1995.
12
<PAGE> 13
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
In January 1995, the Company ("Johnston") increased its ownership
interest in Jupiter National, Inc. ("Jupiter") to 54%, resulting in the
consolidation of Jupiter operations with Johnston effective January 1, 1995.
Net sales for the third quarter of fiscal 1995 were $91,002,000
compared to $42,595,000 for the same period in the prior year. For the
nine-month period of fiscal 1995, net sales increased to $175,972,000 compared
to $116,585,000 for fiscal 1994, of which $41,984,000 were attributable to
operations of Jupiter since January 1, 1995. The remaining increases of
$6,423,000 for the third quarter and $17,403,000 for the nine-month period,
represent approximately a 15% increase in the Company's sales in each period
compared to the same period in fiscal 1994. These increases were primarily the
result of higher unit sales and product mix changes. Sales in the upholstery,
furniture and home products markets were up $3,893,000 in the third quarter,
an increase of 17%, and $14,417,000 for the nine months, for an increase of
25%. The remainder of the sales increase was mainly in the industrial and
automotive segments of Johnston's business. At March 31, 1995, the sales
backlog for the Company and Jupiter operations on a combined basis was
$65,636,000 compared to $58,411,000 in the prior year for a 12.4% increase. The
Company believes this level of sales backlog will enable it to sustain the
present operations and sales level for the remainder of fiscal 1995.
Cost of sales increased $40,815,000 for the third quarter of fiscal
1995 and $48,510,000 for the nine-months period as compared to the same periods
for fiscal 1994, $35,247,000 of which is attributable to the operations of
Jupiter for the third quarter of 1995. The remaining increases of $5,568,000
and $13,363,000 for the quarter and the nine-month period, respectively, are due
largely to increased raw material costs for the quarter and the nine-month
period as well as costs associated with the increase in units sold for each
respective period.
The increased sales volume has allowed the Company to maintain an
increased level
13
<PAGE> 14
of productivity through higher utilization of plant and equipment. The
increased volume, coupled with certain price increases, has enabled the Company
to maintain its gross margin for the quarter and nine-month period in spite of
the increases in raw material costs.
Selling, general and administrative expenses increased $4,104,000 and
$4,314,000, respectively, for the third quarter and nine-month period for
fiscal 1995 as compared to the same periods in fiscal 1994. Part of the
increases, $3,838,000, for the quarter and nine-month period are from the
operations of Jupiter. The remaining increases of $266,000 and $476,000 for
the quarter and the nine-month period, respectively, are due primarily to costs
associated with a new line of decorative and home furnishing products at the
Southern Phenix facility.
Depreciation and amortization expense for the quarter and the
nine-month period in fiscal 1995 increased $1,502,000 and $2,197,000,
respectively, as compared to the same periods in fiscal 1994, with $1,236,000,
for the quarter and nine-month period related to Jupiter. The remaining
increase of $266,000 and $961,000 for the quarter and nine-month period,
respectively, reflect depreciation on increased capital expenditures.
The increases in income from operations of $1,986,000 and $4,366,000
for the three-month and nine-month periods ended March 31, 1995, includes
$1,663,000 from the consolidation of the operations of Jupiter. The remaining
increases of $323,000 and $2,703,000 for the three-month and nine-month
periods, respectively, reflect the higher level of sales.
Net interest expense increased $1,415,000 and $1,832,000,
respectively, for the third quarter and nine-month period of fiscal 1995
compared to fiscal 1994, with $1,144,000, for the quarter and nine-month period
attributable to Jupiter. The remaining increases of $271,000 and $688,000 for
the quarter and nine-month period, respectively, are due to a restructuring of
the revolving debt agreements and increased borrowings.
The consolidation of Jupiter also results in the separate reporting
of income or loss activity of the investment portfolio. Hence, beginning
January 1, 1995, the Company's equity in earnings/loss of equity investments
for the quarter will primarily
14
<PAGE> 15
include only the Company's 50% interest in Tech Textiles. The equity loss in
Tech Textiles was $54,000 for the quarter ended March 31, 1995 as compared to
$202,000 the prior year period, and the loss was $445,000 for the nine-month
period ended March 31, 1995 as compared to a loss of $702,000 for the prior
year period. In 1992, the Company entered into a 50%/50% partnership with an
English company for the purpose of joint manufacture and sale of certain
specialized textile products. The Company estimated Tech Textiles to have a
three-year start-up phase and at March 31, 1995 it is performing at the
Company's expectations.
For comparison purposes, the equity in earnings/loss and realized and
unrealized investment portfolio gain are combined and reflect increases of
approximately $915,000 and $436,000, respectively, for the three and
nine-months periods ended March 31, 1995. These increases are the primary
result of increases in the market price of Jupiter's investment in Zoll Medical
of $767,000 and $179,000 for the respective three and nine months ended March
31, 1995 versus declines in the market price of such investment for the same
respective prior year periods, and the reporting of Jupiter's three months
ended March 31, 1995 portfolio income on a pre-minority interest basis (gross).
In addition, Tech Textiles' equity losses compared to the same respective
periods decreased $148,000 and $257,000. Jupiter carries its portfolio
investments at market or fair value. Minority interest is recorded for the
minority shareholders' proportionate share of the equity and earnings of
Jupiter.
Liquidity and Capital Resources
Working capital at March 31, 1995 was $69,944,000 representing a
current ratio of 2.53 to 1.
Johnston has a $45,000,000 revolving credit agreement and a
$10,000,000 line of credit. At March 31, 1995, current borrowings aggregated
$50,100,000, $45,000,000 of which was attributable to the revolving credit
agreement and $5,100,000 to the lines of credit. Borrowings under the
revolving credit loans bear an interest rate of the federal funds rate plus 1/2
of 1% or the prime rate whichever is higher or the interest rate for Eurodollar
loans based on the LIBOR rate plus a margin. At March 31, 1995 the average
15
<PAGE> 16
interest rate of 7.63%. The interest rate for the line of credit is the higher
of the federal funds rate plus 1/2 of 1% or the prime rate.
Jupiter had available to it the following sources of funds:
A. A brokerage margin account for 50% of the value of 245,000
restricted shares of Zoll Medical Corporation held as collateral.
At March 31, 1995, the value was $3,675,000, with borrowings of
$1,321,000 at March 31, 1995 bearing an interest rate of 10% as
determined by the broker called money rate plus 2 1/4%.
B. A revolving credit loan for an aggregate amount of the
lessor of $24,000,000 or certain percentages of accounts
receivable and inventories, with borrowings at March 31, 1995 of
$22,198,000 bearing an interest rate of prime plus 1% (10%).
C. An available equipment loan of up to $5,000,000 expiring on
June 30, 1995, which will be replaced on July 1, 1995 by a new
equipment loan for $4,000,000. At March 31, 1995, $1,158,000 was
outstanding bearing an interest rate of prime plus 1% (10%).
Management believes that funds generated from operations and funds
available under the various borrowing arrangements of the combined companies
are sufficient for the current operations of the companies.
16
<PAGE> 17
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10. Third Amended and Restated Credit and Security Agreement
dated as of January 31, 1995.
11. Statements of Computation of Per Share Earnings.
27. Financial Data Schedule (for SEC purposes only).
(b) There were no reports filed on Form 8-K for the quarter
ended March 31, 1995.
17
<PAGE> 18
Item 1. LEGAL PROCEEDINGS
In 1981, a subsidiary of the Company closed a steel fabricating
facility in Pennsylvania which it had operated before its closing. The
facility was purchased from the Company and again operated as a steel
fabricating facility by the new owner for approximately two years and
thereafter was purchased by the present owner who also operated it as a steel
fabricating facility for about three years. Since that time, it has been
closed.
In February 1994, the present owners of the property filed a
complaint against the Company and the previous owner alleging responsibility of
those parties for the cost of remediation of the plant site. The complaint
alleges that such costs to date are in excess of $1,500,000.
The case is presently scheduled to be heard on June 5, 1995, and
the Company has established a reserve in the amount of $180,000, which is the
present estimate of potential costs to be incurred. Once the initial trial of
this matter has been concluded, the Company will be in a position to further
evaluate this claim with much more certainty and increase or decrease its
reserve pursuant thereto. However, the Company is of the present opinion that
this issue will not have a material effect on the Company's future financial
condition and results of operations.
18
<PAGE> 19
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the undersigned has duly caused this report to be filed on its behalf by
the undersigned hereto duly authorized.
JOHNSTON INDUSTRIES, INC.
DATED: May 15, 1995 BY /s/ John W. Johnson
-----------------------
John W. Johnson
Vice President
Chief Financial Officer
19
<PAGE> 20
EXHIBIT INDEX
Item 6(a)
Exhibit No.
- -----------
10 -- Third Amended and Restated Credit and Security
Agreement dated as of January 31, 1995.
11 -- Statement of Computation of Per Share Earnings.
27 -- Financial Data Schedule (for SEC purposes only).
20
<PAGE> 1
Item 6(a)
EXHIBIT 10
THIRD AMENDED AND RESTATED
CREDIT AND SECURITY AGREEMENT
among
THE CHASE MANHATTAN BANK, N.A.,
NATIONSBANK, N.A. (CAROLINAS), (Formerly,
NationsBank of North Carolina, N.A.),
COMERICA BANK
as Lenders
-and-
JOHNSTON INDUSTRIES, INC.,
SOUTHERN PHENIX TEXTILES, INC.
OPP AND MICOLAS MILLS, INC.
as Borrowers
-and-
THE CHASE MANHATTAN BANK, N.A.
as Agent
As of January 31, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE I
CERTAIN DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . 13
SECTION 1.03. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 1.04. Payments on a Day Other Than a Business Day . . . . . . . . . . . . . 14
ARTICLE II
THE REVOLVING CREDIT LOANS
SECTION 2.01. The Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.02. Making the Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.03. The Amended Revolving Credit Notes,
Maturity Date and Interest Rate . . . . . . . . . . . . . . . . . . 15
SECTION 2.04. Revolving Credit Commitment Fee . . . . . . . . . . . . . . . . . . . 19
SECTION 2.05. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.06. Mandatory Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.07. Changes of Commitments . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.08. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.09. Late Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.10. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.11. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.12. Application of Payments . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.13. Reserves; Additional Costs; Taxes . . . . . . . . . . . . . . . . . . 21
ARTICLE III
SECURITY
SECTION 3.01. Security Agreements; Collateral
Assignment; Mortgages . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.01. Conditions Precedent to the Loans . . . . . . . . . . . . . . . . . . 23
SECTION 4.02. Conditions Precedent to Each Loan . . . . . . . . . . . . . . . . . . 26
SECTION 4.03. Deemed Representations . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.04. Refusal by the Banks to Make a Loan . . . . . . . . . . . . . . . . . 27
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BORROWER
SECTION 5.01. Representations and Warranties
of Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VI
COVENANTS OF THE BORROWERS
SECTION 6.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 7.02. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VIII
REMEDIES AFTER DEFAULT
SECTION 8.01. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 8.02. No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.03. Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.04. Attorneys-in-Fact . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE IX
THE AGENT
SECTION 9.01. Appointment, Powers and Immunities . . . . . . . . . . . . . . . . . 52
SECTION 9.02. Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.03. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.04. Rights as a Bank . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.05. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.06. Non-Reliance on Agent and Other Banks . . . . . . . . . . . . . . . . 55
SECTION 9.07. Failure to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.08. Resignation or Removal of Agent . . . . . . . . . . . . . . . . . . . 55
ARTICLE X
RELATIONS AMONG THE BANKS AND THE BORROWERS
SECTION 10.01. Obligations and Rights of Banks . . . . . . . . . . . . . . . . . . . 56
SECTION 10.02. Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.03. Sharing of Recoveries . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments, Waivers, Etc. . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 11.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 11.03. No Waiver, Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 11.04. Costs, Expenses, Taxes, Investments . . . . . . . . . . . . . . . . . 59
SECTION 11.05. Limitation on Interest . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 11.06. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 11.07. Binding Effect; Governing Law;
Consent to Jurisdiction; Waiver
of Jury Trial; Construction . . . . . . . . . . . . . . . . . . . . 59
SECTION 11.08. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 11.09. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
EXHIBITS
Exhibit A - Amended and Restated Revolving Credit Notes
Exhibit B - Opinion of Borrowers' Counsel
Schedule I Existing Liens, Security Interests, Mortgages and
Encumbrances on Borrowers' Assets; Outstanding Contracts of
Guaranty and Surety; Secured Guaranties; List of Unfunded
Vested Liabilities, Credit and Purchase Agreements,
Indentures, Capital Leases, L/Cs and other Agreements,
Permitted Debt
Schedule II List and Description of Real Property Mortgaged
Schedule III List of Subsidiaries, Corporations, Partnerships and
Ventures in which Borrowers have interest
-iii-
<PAGE> 5
THIRD AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT dated
as of January 31, 1995 among THE CHASE MANHATTAN BANK, N.A. ("Chase"),
NATIONSBANK, N.A. (CAROLINAS) (formerly, NationsBank of North Carolina, N.A.)
("NationsBank"), successor to NCNB NATIONAL BANK OF NORTH CAROLINA ("NCNB"),
COMERICA BANK ("Comerica") (Chase, NationsBank and Comerica hereinafter
individually referred to as a "Bank" and collectively as the "Banks"), JOHNSTON
INDUSTRIES, INC., a Delaware corporation with principal offices located at 105
Thirteenth Street, Columbus, Georgia 31901 ("Johnston"), SOUTHERN PHENIX
TEXTILES, INC., an Alabama corporation with principal offices located at
General Colin L. Powell Parkway, P.O. Box 1108, Phenix City, Alabama 36868
("Phenix"), OPP AND MICOLAS MILLS, INC., an Alabama corporation with principal
offices located at 1800 Cummings Avenue, Drawer 70, Opp, Alabama 36467 ("Opp")
(Johnston, Phenix and Opp hereinafter individually referred to as the
"Borrower" and collectively as the "Borrowers"), and Chase, as agent for the
Banks ("Agent").
W I T N E S S E T H:
WHEREAS, Chase, NationsBank and the Borrowers entered into an
Amended and Restated Credit and Security Agreement dated as of March 12, 1992
("Credit Agreement"), as amended, modified or supplemented by that certain
letter agreement dated as of September 25, 1992 ("First Amendment"), that
certain Amendment to Amended and Restated Credit and Security Agreement dated
as of March 22, 1993 ("Second Amendment"), that certain Amendment to Amended
and Restated Credit and Security Agreement dated as of June 28, 1993 ("Third
Amendment"), that certain Fourth Amendment to Amended and Restated Credit and
Security Agreement dated as of September 30, 1993 (the "Fourth Amendment"),
that certain Second Amended and Restated Credit and Security Agreement dated as
of January 14, 1994 (the "Fifth Amendment") and that certain Amendment to
Second Amended and Restated Credit and Security Agreement dated as of October
31, 1994 (the "Sixth Amendment" and collectively with the Credit Agreement, the
First Amendment, Second Amendment, the Third Amendment, the Fourth Amendment
and the Fifth Amendment, hereinafter referred to as the "Original Credit
Agreement"), which makes available to Borrowers, on a joint and several basis,
subject to the terms and conditions set forth therein, a revolving credit
facility in the aggregate principal amount of $35,000,000 ("Original Revolving
Credit Facility") and a line of credit in the aggregate principal amount of
$10,000,000 ("Original Line of Credit"); and
WHEREAS, the Original Revolving Credit Facility is evidenced
by a Third Amended and Restated Revolving Credit Note dated March 12, 1992 in
the principal amount of $15,000,000 issued by the Borrowers to Chase, (the
"Original Chase Note") a Third Amended and Restated Revolving Credit Note dated
as of March 12, 1992 in the principal amount of $10,000,000 issued by
<PAGE> 6
Revolving Credit Note dated as of January 14, 1994 in the principal amount of
$10,000,000 issued by the Borrowers to Comerica (the "Comerica Note"); and
WHEREAS, as of the date hereof, the Term Loan (as defined in
the Original Credit Agreement) in the remaining aggregate principal amount of
$4,000,000 plus accrued interest is outstanding; and
WHEREAS, the parties hereto desire to increase the aggregate
amount of the Commitment (as hereinafter defined) from $35,000,000 to
$45,000,000 and to otherwise amend, modify and restate the Original Credit
Agreement and supplement, confirm and reaffirm the obligations of each party
thereunder as so amended hereby;
NOW, THEREFORE, the Banks and each Borrower hereby jointly and
severally agree that, subject to the terms and conditions hereinafter set
forth, the Original Credit Agreement is hereby amended and restated in its
entirety as of the Closing Date (as defined in ARTICLE I), to read as follows:
ARTICLE I
CERTAIN DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement
and unless otherwise expressly indicated, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Acceptable Acquisition" shall mean (x) any Acquisition (a)
which has been either approved by the Board of Directors of the corporation
which is the subject of such Acquisition or recommended by such Board to the
shareholders of such corporation, and (b) the acquired entity of which is in
the textile or textile-related business, and (c) which, after giving effect to
such Acquisition, the Borrowers are in compliance with all the covenants in
SECTIONS 6.01, 6.02 and 6.03 hereunder; or (y) any investment by a Borrower or
any Subsidiary in any partnership or joint venture which is or is intended to
be engaged in the textile or textile related business, provided that after such
investment, the Borrowers are in compliance with the covenants in SECTIONS 6.02
and 6.03 hereunder.
"Acquisition" shall mean any transaction pursuant to which the
Borrowers or any of their respective Subsidiaries (a) acquire equity securities
(or warrants, options or other rights to acquire such securities) of any
corporation (other than equity securities of any of the Borrowers or any
corporation which is then a Subsidiary of any of the Borrowers), pursuant to a
solicitation of tenders therefor, or in one or more negotiated blocks or
substantial market or other transactions not involving
-2-
<PAGE> 7
a tender offer, or a combination of any of the foregoing, or (b) make any
corporation a Subsidiary of any of the Borrowers, or cause any such corporation
to be merged into any of the Borrowers or any of their respective Subsidiaries,
in any case pursuant to a merger, purchase of assets or any reorganization
providing for the delivery or issuance to the holders of such corporation's
then outstanding securities, in exchange for such securities, of cash or
securities of any of the Borrowers or any of their respective Subsidiaries, or
a combination thereof, or (c) purchase all or substantially all of the business
or assets of any corporation.
"Adjusted Tangible Net Worth" shall mean, as of any date of
determination thereof, the amount by which (a) total tangible assets of the
Borrowers and their respective Consolidated Subsidiaries, on a consolidated
basis, less Intangible Assets and less investments in Jupiter National, Inc. or
equity investments in any other Unrestricted Subsidiary, exceeds (b) total
liabilities of the Borrowers and their respective Consolidated Subsidiaries, on
a consolidated basis, in accordance with GAAP.
"Agent" shall mean Chase, as agent and representative for the
Banks under the Loan Documents, pursuant to ARTICLE IX.
"Affiliate" means any Person: (a) which directly or indirectly
controls, or is controlled by, or is under common control with, any of the
Borrowers or any of their respective Subsidiaries; (b) which directly or
indirectly beneficially owns or holds 5% or more of any class of voting stock
of any of the Borrowers or any such Subsidiaries; or (c) 5% or more of the
voting stock of which is directly or indirectly beneficially owned or held by
any of the Borrowers or such Subsidiaries. The term "control" means the direct
or indirect ability to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise, alone or as part of a group.
"Agreement" means this Third Amended and Restated Revolving
Credit Agreement, as it may be amended, supplemented, restated or otherwise
modified from time to time.
"Amended Revolving Credit Note" has the meaning assigned to
that term in SECTION 2.03.
"Applicable Margin" shall mean, (a) with respect to a
Eurodollar Loan made at any time after the Closing Date and before the first
Repricing Date after the Closing Date, 1.50%, and (b) with respect to a
Eurodollar Loan made at any time after the first and any subsequent Repricing
Date: (i) one hundred twenty-five (125) basis points (1.25%) if the Interest
Coverage Ratio for the 12-month period ending on the Measurement Date to which
such Repricing Date relates was 5.00:1 or greater and the Leverage Ratio as at
such Measurement Date was 1.25:1 or less; or (ii) one hundred fifty (150) basis
points (1.50%) if the Interest
-3-
<PAGE> 8
Coverage Ratio for the 12-month period ending on the Measurement Date to which
such Repricing Date relates is less than 5.00:1 (unless clause (iii) below is
applicable) or if the Leverage Ratio as at such Measurement Date was greater
than 1.25:1 but less than 1.50:1; or (iii) one hundred seventy-five (175) basis
points (1.75%) if the Leverage Ratio as at any Measurement Date was 1.50:1 or
greater.
"Authority" means any nation or government, any state or other
political subdivision thereof and any entity, including, without limitation,
the Board of Governors of the Federal Reserve System, exercising executive,
legislative, regulatory or administrative functions of or pertaining to a
government having jurisdiction with respect to loans hereunder.
"Base Rate" shall mean the greater of (i) the Federal Funds
Rate from time to time in effect plus 1/2 of 1% for all applicable Interest
Payment Dates, or (ii) the Prime Rate from time to time in effect.
"Base Rate Loan" shall mean any Loan at such time as interest
thereon accrues at a rate of interest based upon the Base Rate.
"Business Day" means any day of the year on which commercial
banks are not required or authorized to be closed in New York City.
"Capital Lease" means any lease which has been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Closing Date" means the date this Agreement has been executed
by each of the Borrowers, the Banks and the Agent.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall mean all property and assets with respect
to which a lien is or may be granted pursuant to the Collateral Security
Documents.
"Collateral Assignment" has the meaning assigned to that term
in SECTION 3.01.
"Collateral Security Documents" has the meaning assigned to
that term in SECTION 3.01.
-4-
<PAGE> 9
"Commitment" of any Bank shall mean, at any time, the
obligation of such Bank under this Agreement to make Loans in an aggregate
amount not exceeding such amount as set forth below:
Chase: $20,000,000
NationsBank: $15,000,000
Comerica: $10,000,000
------------------------------------
Total = $45,000,000
"Consolidated Current Assets" shall mean, as at any date at
which the amount thereof is to be determined, all assets of the Borrowers and
their respective Consolidated Subsidiaries, on a consolidated basis, which are
or should be classified as current assets in accordance with GAAP.
"Consolidated Current Liabilities" shall mean, as at any date
at which the amount thereof is to be determined, all Debt and any other
liabilities or obligations of Borrowers and their respective Consolidated
Subsidiaries, on a consolidated basis, which are or should be classified as
current liabilities in accordance with GAAP, including without limitation (a)
all obligations payable on demand or within one year after the date on which
the determination is made, and (b) installment and sinking fund payments
required to be made within one year after the date on which the determination
is made, but excluding all such liabilities or obligations which are renewable
or extendable at the sole option of any of the Borrowers to a date more than
one year from the date of determination.
"Consolidated Interest Expense" means, for any period, all
amounts deducted for interest expense (including payments with respect to
Capital Leases and Operating Leases to the extent properly classifiable as
interest) of the Borrowers and their respective Consolidated Subsidiaries for
such period, on a consolidated basis determined in accordance with GAAP.
"Consolidated Net Income" for any period, shall mean the
amount of net income (or loss) of the Borrowers and their respective
Consolidated Subsidiaries for such period on a consolidated basis, determined
in accordance with GAAP.
"Consolidated Subsidiary" shall mean, with respect to any
Person at any time, any Subsidiary of such Person or any other entity, the
accounts of which would be consolidated with those of such first Person in its
consolidated financial statements as of such time.
"Consolidated Tangible Net Worth" shall mean, as of any date
of determination thereof, the amount by which (a) total tangible assets of the
Borrowers and their respective Consolidated Subsidiaries, on a consolidated
basis, less the book amount of Intangible Assets, exceeds (b) total liabilities
of the Borrowers and their respective Consolidated Subsidiaries, on a
consolidated basis in accordance with GAAP.
-5-
<PAGE> 10
"Current Ratio" shall mean, for any period, the ratio of (a)
Consolidated Current Assets for such period to (b) Consolidated Current
Liabilities for such period.
"Debt" of any Person shall mean at any time, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable that arise in the ordinary
course of business but only if and so long as the same are payable on customary
trade terms, (iv) all obligations of such Person as lessee under Capital
Leases, (v) all obligations of such Person to reimburse any other Person in
respect of the face amounts under outstanding letters of credit or similar
instruments, (vi) all obligations with respect to Unfunded Vested Liabilities
of such Person, (vii) all Debt secured by (or for which the holder of such Debt
has an existing right, contingent or otherwise, to be secured by) a Lien on any
asset of such Person, whether or not such Debt is assumed by such Person, and
(viii) all Debt of others guaranteed or endorsed by such Person (other than for
collection in the ordinary course of business) and other contingent obligations
not in the ordinary course of business to purchase, provide funds for payment,
supply funds to invest in any Person, or otherwise to assure a Person against
loss.
"Default" shall mean any Event of Default and any event or
circumstance which, with the lapse of time or the giving of notice, or both,
could become an Event of Default.
"Default Rate" means a floating rate of interest equal to the
Interest Rate from time to time in effect plus two (2%) percent per annum.
"Dollars" and the sign "$" shall mean lawful money of the
United States of America.
"Environmental Indemnity" shall mean the Environmental
Indemnity dated March 12, 1992 executed by the Borrowers in favor of Chase and
NationsBank, as amended by a First Amendment to Environmental Indemnity dated
as of January 14, 1994, as amended, supplemented or modified from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, including any rules and regulations
promulgated thereunder.
"ERISA Affiliate" shall mean any corporation or trade or
business which is a member of the same controlled group of corporations (within
the meaning of Section 414(b) of the Code) as the Borrowers or is under common
control (within the meaning of Section 414(c) of the Code) with the Borrowers.
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"Eurodollar Loan" means a Loan at such time as interest
thereon accrues at a fixed rate of interest based upon the LIBO Rate and to
which a single Interest Period applies.
"Events of Default" has the meaning assigned to that term in
SECTION 7.01.
"Federal Funds Rate" shall mean the rate per annum equal to
the weighted average of the rates on overnight federal funds transactions as
published by the Federal Reserve Bank of New York for any day of determination
thereof.
"Financial Statements" has the meaning assigned to that term
in SECTION 4.01(k).
"FUNB" shall mean First Union National Bank of Georgia.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect on the date hereof, applied on a
basis consistent with those used in the preparation of Financial Statements
(except for changes concurred in by the Borrowers' independent public
accountants).
"Intangible Assets" shall mean the book amount of all
intangible assets of the Borrowers and their respective Consolidated
Subsidiaries, on a consolidated basis, which are or should be classified as
intangibles in accordance with GAAP, including, without limitation, goodwill,
trademarks, trade names, copyrights, patents, licenses, treasury stock,
customer lists, non-compete contracts, any excess of costs over book carrying
value of any assets, organizational or research and development expenses;
provided, however, that Intangible Assets shall not include any assets,
recorded as intangible assets in accordance with GAAP, that are associated with
any Plan.
"Intercreditor" shall mean that certain Intercreditor
Agreement among Chase, NationsBank, Comerica and FUNB dated as of January 14,
1994, as amended, supplemented or modified from time to time.
"Interest Coverage Ratio" shall mean the ratio of (a) earnings
before interest expense, taxes and interest income of the Borrowers and their
respective Subsidiaries, on a consolidated basis, to (b) the aggregate
Consolidated Interest Expense of the Borrowers and their respective
Consolidated Subsidiaries, calculated for the 12-month period ended September
30, 1994 and for each 3-month period thereafter, on a cumulative 12-month
basis.
"Interest Payment Date" shall mean (i) with respect to each
Eurodollar Loan, the last day of the Interest Period for such Eurodollar Loan;
provided, however, that in the case of Interest Periods in excess of three
months, interest shall be payable on the last day of the third month of such
Interest Period, on each integral multiple thereof during such Interest
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<PAGE> 12
Period and on the last day of such Interest Period, and (ii) with respect to
each Base Rate Loan, March 31, 1995 and the last day of each consecutive
calendar quarter thereafter.
"Interest Period" means with respect to any Eurodollar Loan
and subject to availability:
(1) initially, the period commencing on, as the case
may be, the borrowing or conversion date with respect to a Eurodollar Loan and
ending one month, two months, three months or six months thereafter as selected
by the Borrowers; and
(2) thereafter, each period commencing on the last
day of the next preceding Interest Period applicable to such Eurodollar Loan
and ending one month, two months, three months or six months as selected by the
Borrowers by irrevocable notice to the Agent not less than three (3) Working
Days prior to the last day of the then current Interest Period with respect to
such Eurodollar Loan if the Borrowers elect that the Eurodollar Loan is to be
maintained as such; provided, however, that all of the foregoing provisions
relating to Interest Periods are subject to the following:
(A) if any Interest Period in respect of a Eurodollar
Loan would otherwise end on a day which is not a Working Day, that Interest
Period shall be extended to the next succeeding Working Day unless the result
of such extension would be to carry such Interest Period into another calendar
month in which event such Interest Period shall end on the immediately
preceding Working Day;
(B) no Interest Period which would extend beyond the
Termination Date for any portion of the Eurodollar Loan shall be available;
(C) any Interest Period pertaining to a Eurodollar
Loan that begins on the last Working Day of a calendar month (or on a day for
which there is no numerically corresponding day in any calendar month any part
of which commences during such Interest Period) shall end on the last Working
Day of a calendar month;
(D) if the Borrowers shall fail to give notice as to
the Interest Rate desired prior to the end of the Interest Period with respect
to any Eurodollar Loan as provided in this Agreement, the Borrowers shall be
deemed to have elected to convert the affected Eurodollar Loan to a Base Rate
Loan; and
(E) for purposes of determining the availability of
Interest Periods in respect of a Eurodollar Loan, such Interest Periods shall
be deemed available if the applicable Bank is offered a rate as provided in the
definition of LIBO Rate. If a requested Interest Period shall be unavailable in
accordance with the foregoing sentence, the Bank may, at its sole option,
either select an alternative Interest Period, or, if no
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alternative Interest Period is chosen by the Bank, the Borrowers shall be
deemed to have requested a Base Rate Loan.
"Interest Rate" means (a) for all Base Rate Loans, the Base
Rate or (b) for all Eurodollar Loans, the LIBO Rate for the applicable Interest
Period plus the Applicable Margin.
"Inventory" shall mean all inventory (as determined in
accordance with GAAP) of the Borrowers and their respective Consolidated
Subsidiaries including, without limitation, all goods intended for sale, raw
materials, work in process and finished goods, together with all materials and
supplies of any kind, nature or description with respect to such goods and all
documents of title or documents representing the same and any other assets
which are or should be classified as inventory in accordance with GAAP.
"LIBO Rate" means with respect to each Interest Period, the
rate per annum equal to the quotient of (a) the rate at which the principal
London branch of the Reference Bank's Lending Office is offered Dollar deposits
three (3) Working Days prior to the beginning of such Interest Period in the
interbank eurodollar market where the foreign currency and exchange operations
of the Lending Office are customarily conducted at or about 10:00 a.m., New
York City time, for delivery on the first day of such Interest Period for the
number of days therein and in an amount comparable to the amount of the
Eurodollar Loan to be outstanding during such Interest Period divided by (b) a
number equal to 1.00 minus the aggregate (without duplication) of the rates
(expressed as a decimal) of reserve requirements current on the date three (3)
Working Days prior to the beginning of such Interest Period (including, without
limitation, basic, supplemental, marginal and emergency reserves under any
regulations of any and all Authorities as now and from time to time hereafter
in effect, dealing with reserve requirements prescribed for eurocurrency
funding (currently referred to as "Eurocurrency liabilities" in Regulation D of
the Board of Governors of the Federal Reserve System ("System")) maintained by
a member bank of such System (such LIBO Rate to be adjusted to the next higher
1/100 of one percent). The foregoing shall not in any way limit or affect any
indemnification by the Borrower contained in this Agreement.
"Lending Office" shall mean (i) with respect to Base Rate
Loans, the lending office of the Agent and each Bank designated as such for
each type of Base Rate Loan on the signature page hereof, or such other office
of the Agent and each Bank as the Agent and each Bank may from time to time
specify to the Borrowers as the office by which its Base Rate Loans of each
type are to be made and maintained and (ii) with respect to Eurodollar Loans,
the lending office of the Reference Bank which shall be making or maintaining
Eurodollar Loans.
"Leverage Ratio" shall mean, as of any date of determination
thereof, the ratio of (a) consolidated total liabilities to (b) Consolidated
Tangible Net Worth of the
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Borrowers and their respective Consolidated Subsidiaries, on a consolidated
basis determined in accordance with GAAP.
"Lien" shall mean, with respect to any asset, (a) any
mortgage, lien, pledge, charge, security interest, encumbrance or preference,
priority or other security arrangement of any kind or nature in respect of such
asset, (b) the interest of a vendor or lessor under any conditional sale
agreement, financing lease or other title retention agreement relating to such
asset or (c) the filing of any financing statement under the UCC or comparable
law with respect to such asset.
"Line of Credit" shall mean the lines of credit made available
to the Borrowers by Chase and NationsBank on an annually renewable basis,
pursuant to the terms and conditions of the letter agreement(s) dated as of the
date thereof among the Borrowers and such Banks, in an aggregate amount not
exceeding the following amounts set forth opposite such Banks below:
Chase: $ 5,000,000
NationsBank: $ 5,000,000
------------------------------------
Total = $10,000,000
"Loan" means any Loan made by a Bank pursuant to SECTION 2.01.
"Loan Documents" shall mean, collectively, this Agreement, the
Notes, the Collateral Security Documents, the Environmental Indemnity, and all
other documents required to be delivered or delivered hereunder.
"Long Term Debt" shall mean, as at any date which the amount
thereof is determined, the aggregate Debt of the Borrowers and their respective
Subsidiaries, determined on a consolidated basis, which is not included within
the definition of Consolidated Current Liabilities.
"Measurement Date" shall mean the last day of each fiscal
quarter or fiscal year, as the case may be, of Johnston beginning with the
fiscal quarter ending December 31, 1994.
"Mortgages" means collectively, the Mortgage, Assignment of
Leases and Security Agreement dated as of January 14, 1994 from Phenix to the
Banks and the Amended and Restated Mortgage, Assignment of Leases and Security
Agreement dated as of January 14, 1994 from Opp to the Banks with respect to
the Real Property, as either may be amended, supplemented, restated or
otherwise modified from time to time.
"Multiemployer Plan" shall mean a Plan defined as such in
Section 3(37) of ERISA to which contributions have been made by any of the
Borrowers or any ERISA Affiliate and which is covered by Title IV of ERISA.
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<PAGE> 15
"Net Cash Flow Coverage Ratio" shall mean, for any fiscal
year, the ratio of (a) (i) earnings before interest expense, taxes and interest
income of the Borrowers and their respective Consolidated Subsidiaries, on a
consolidated basis, exclusive of any non-operating income and any non-operating
expense, plus consolidated depreciation and payments made in connection with
Capital Leases and Operating Leases, less capital expenditures of the Borrowers
and their Consolidated Subsidiaries, for such fiscal year to (b) the sum of the
following for such fiscal year: (i) Consolidated Interest Expense, (ii)
payments made in connection with Capital Leases and Operating Leases, (iii)
135% of Debt amortization paid or due (exclusive of outstanding principal
amounts due and payable upon maturity of the Term Loan) and (iii) 135% of
dividends paid or declared during such fiscal year on any common or preferred
equity securities, calculated as at the end of each fiscal year of the
Borrowers and their respective Consolidated Subsidiaries, on a consolidated
basis in accordance with GAAP.
"Notes" has the meaning assigned to that term in SECTION 2.03.
"Operating Lease" shall mean any lease of real or personal
property other than a Capital Lease.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Permitted Debt" shall mean the Debt described in Schedule I
attached hereto.
"Person" shall mean an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or political subdivision or agency thereof or
other entity of whatever nature.
"Plan" shall mean any employee benefit or other plan
established or maintained, or to which contributions have been made, by any
Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA or to
which Section 412 of the Code applies.
"Prime Rate" shall mean the fluctuating rate of interest from
time to time announced by Chase at its principal office presently located at 1
Chase Manhattan Plaza, New York, New York 10081 as its prime commercial lending
rate.
"Prohibited Transaction" means any transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
"Real Property" shall mean all real property listed and
described on Schedule II attached hereto.
"Reference Bank" shall mean Chase.
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<PAGE> 16
"Reportable Event" shall mean any of the events set forth in
Section 4043(b) of ERISA as to which events the PBGC, by regulation, has not
waived the requirement of Section 4043(a) of ERISA that it be notified within
30 days of the occurrence of such event, provided that a failure to meet the
minimum funding standard of Section 412 of the Code or Section 302 of ERISA
shall be a Reportable Event regardless of any waivers given under Section
412(d) of the Code.
"Repricing Date" shall mean, with respect to a Measurement
Date, (a) the Business Day closest to 60 days after such Measurement Date if
such Measurement Date is the last day of a fiscal quarter of Johnston, or (b)
the Business Day closest to 120 days after such Measurement Date if such
Measurement Date is the last day of a fiscal year of Johnston.
"Required Banks" shall mean, at any time, the Banks, the sum
of whose Commitment and Term Loan represents at least 66 2/3 of the sum of all
such Commitments and the aggregate outstanding principal amount of the Term
Loan.
"Restricted Investments" shall have the meaning assigned to
that term in SECTION 6.02(f).
"Revolving Credit Borrowing Date" has the meaning assigned to
that term in SECTION 2.02.
"Revolving Credit Commitment Fee" has the meaning assigned to
that term in SECTION 2.04.
"Revolving Credit Facility" shall mean the Loans made
available to the Borrowers hereunder in an aggregate principal amount not to
exceed at any one time outstanding $45,000,000.
"Secured Guaranties" shall mean the guaranties from time to
time issued by Johnston in favor of FUNB ("FUNB Guaranties"), or such other
banks as the Agent may approve from time to time, to secure certain loans made
by FUNB or such other banks to certain employees, officers and directors of the
Borrowers, which guaranties, in the case of FUNB, are secured as further
described in (and subject to the provisions of) the Intercreditor, and in the
case of any other banks, may be so secured subject to appropriate intercreditor
agreements or other arrangements that the Agent deems necessary and appropriate
in its sole discretion, on a pari passu basis with the Revolving Credit
Facility, Line of Credit and Term Loan hereunder, up to an amount not to exceed
at any one time in the aggregate $8,500,000.
"Senior Facilities" shall mean the collective reference to the
Line of Credit, the Term Loan and the Revolving Credit Facility.
"Subsidiaries" shall mean the collective reference to any
corporation, association or business entity, the majority of the voting control
of which is owned or controlled, directly or
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<PAGE> 17
indirectly, by any of the Borrowers; and "Subsidiary" shall mean any one of
them.
"Term Loan" shall mean the loan extended pursuant to the Term
Loan Agreement under which there is outstanding, as of the date hereof, the
aggregate principal amount of $4,000,000.
"Term Loan Agreement" shall mean that certain Credit Agreement
among Chase, NationsBank, the Borrowers and the other parties named therein,
dated as of March 5, 1987, as amended by the Amendment to the Credit Agreement
dated March 12, 1992 and the Second Amendment to the Credit Agreement dated as
of September 30, 1993, as amended, supplemented or modified from time to time.
"Termination Date" means January 14, 1997, or earlier upon a
termination of the Commitment as provided herein.
"Total Costs" has the meaning assigned to that term in SECTION
11.04.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of New York or in such other State in which the Collateral is
located, as same may be amended or modified from time to time.
"Unfunded Vested Liabilities" shall mean, with respect to any
Plan, the amount (if any) by which the present value of all vested benefits
under the Plan exceeds the fair market value of all Plan assets allocable to
such benefits, as determined on the most recent valuation date of the Plan.
"Unrestricted Subsidiary" shall mean any Subsidiary of the
Borrowers that is (i) not incorporated in nor has its principal place of
business and substantially all of its owned operating property located in the
United States, Canada or Puerto Rico, (ii) not in the textile business, (iii)
not a Consolidated Subsidiary, or (iv) a Consolidated Subsidiary and that is
designated by the Borrowers or the Banks as an Unrestricted Subsidiary;
provided, however, that Tech Textiles, USA shall not be included as an
Unrestricted Subsidiary.
"Working Capital" shall mean, at any time, the excess of
Consolidated Current Assets over Consolidated Current Liabilities.
"Working Day" shall mean any day on which dealings in foreign
currencies and exchange are carried on in London, England and in New York, New
York.
SECTION 1.02. Computation of Time Periods. Unless otherwise
provided, in the computation of periods of time from a specified date to a
later specified date herein, the word "from" means "from and including" and the
words "to" and "until" each means "to but excluding."
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SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. In
connection therewith, any references to, or terms, provisions or conditions in
connection with, "the Borrowers and their respective Consolidated
Subsidiaries", hereunder or under any of the Loan Documents, unless the context
otherwise requires, shall be deemed to refer to each of the Borrowers hereunder
and their respective Consolidated Subsidiaries taken as a cumulative whole, on
a fully consolidated basis.
SECTION 1.04. Payments on a Day Other Than a Business Day.
Whenever any payment or other obligation hereunder or under the Loan Documents
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day (or, if such next succeeding Business Day
falls in the next calendar month, the preceding Business Day in the appropriate
calendar month).
ARTICLE II
THE REVOLVING CREDIT LOANS
SECTION 2.01. The Loans. On the terms and conditions contained
in this Agreement, each of the Banks severally agrees to make loans
(collectively, the "Loans" and individually a "Loan") to the Borrowers at such
times and in such principal amounts as a Borrower shall request during the
period beginning on the Closing Date and ending on the Termination Date, up to
an aggregate principal outstanding amount not to exceed the Commitment at any
one time. Prior to the Termination Date, Borrowers may use the Commitment by
borrowing, prepaying in whole or in part, and reborrowing the Loans, all in
accordance with the terms and conditions of this Agreement. Each Loan made by
each Bank hereunder shall be made and maintained at such Bank's Lending Office
for such type of Loan.
SECTION 2.02. Making the Loans. (a) Each Borrower agrees to
give to the Agent at least one (1) Business Day's prior, irrevocable written
notice (a "Notice of Borrowing") for a Base Rate Loan and at least three (3)
Working Days' prior, irrevocable written notice, by a duly completed Notice of
Borrowing, for a Eurodollar Loan of its intention to borrow under this ARTICLE
II specifying: (i) the proposed revolving credit borrowing date ("Revolving
Credit Borrowing Date"), (ii) the principal amount of the Loan to be made on
such date, which shall be in an amount of not less than $500,000 or an integral
multiple of $50,000 in excess thereof for Base Rate Loans or in an amount of
not less than $1,000,000 or an integral multiple of $250,000 in excess thereof
for Eurodollar Loans, and (iii) whether the Loan is to be a Base Rate Loan or a
Eurodollar Loan and, if the Loan is a Eurodollar Loan, the Interest Period. The
Agent shall promptly deliver to each Bank by telefax any such Notice of
Borrowing received from a Borrower. If any borrowing under this SECTION 2.02
occurs upon the execution and delivery of this
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<PAGE> 19
Agreement, the Notice of Borrowing may be delivered to the Agent by no later
than 12:00 noon on such date, and each Bank shall, through the Lending Office
of the Agent and subject to the conditions of this Agreement, make the amount
of the Loan to be made by it available to the Borrower by 1:00 p.m. on such day
in immediately available funds, provided, however, that no Loan shall be made
unless the Notice of Borrowing shall have been received by the Agent by 12:00
noon on such day. Each Notice of Borrowing shall be made by written
instructions signed by a person authorized by the Borrower to execute and
deliver such Notice of Borrowing (an "Authorized Signatory").
(b) Subject to the terms of this Agreement, funding
of any Loan by the Banks shall be made by crediting an account of such Borrower
maintained with the Agent, in accordance with the instructions set forth in the
Notice of Borrowing.
(c) The obligations of the Borrowers hereunder shall
be joint and several and each Loan made to any one of the Borrowers shall be
deemed to be a Loan made to all of the Borrowers hereunder.
SECTION 2.03. The Amended Revolving Credit Notes, Maturity
Date and Interest Rate. (a) On or prior to the Closing Date, each Borrower
shall duly issue and deliver to each Bank a promissory note in the forms of
Exhibits A-1, A-2 and A-3 annexed hereto (such notes individually, an "Amended
Revolving Credit Note" and collectively, the "Notes"), payable to the order of
each Bank, dated such date, in the principal amount of each Bank's Commitment.
Each Bank is hereby authorized by the Borrowers to enter on the schedule
attached to its Amended Revolving Credit Note the amount of each Loan made by
such Bank hereunder, each payment thereon, and the other information provided
for on such schedule; provided, however, that the failure to make any such
entry or any error in making any such entry with respect to any Loan shall not
limit or otherwise affect the joint and several obligations of the Borrowers
hereunder or under any Amended Revolving Credit Note, and, in all events, the
principal amount jointly and severally owing by the Borrowers in respect of the
Notes shall be the aggregate of all Loans made by the Banks less all payments
of principal thereon made by the Borrowers. In the event that such schedule
shall be filled, each Bank may attach an additional schedule or schedules
thereto. Each Amended Revolving Credit Note shall mature on the Termination
Date.
(b) (i) Each Amended Revolving Credit Note shall
bear interest (computed on the basis of a 360-day year for the actual number of
days elapsed), payable in arrears, on the unpaid principal balance thereof from
time to time outstanding, at a rate per annum equal to the Interest Rate. Each
change in the rate of interest payable on the Notes due to a change in the
Federal Funds Rate or the Prime Rate shall be effective as of the effective
date of such change in the applicable rate.
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(ii) Interest on a Loan shall be payable on
the first Interest Payment Date following the date hereof and each Interest
Payment Date thereafter, and at maturity, until and including the date the
principal amount of each Amended Revolving Credit Note is paid in full.
(iii) The Borrowers may elect from time to
time to convert a Loan from a Eurodollar Loan to a Base Rate Loan by giving the
Agent irrevocable written notice at least three (3) Working Days prior to the
last day of the Interest Period for such Eurodollar Loan. If the Borrowers
shall fail to give such notice as provided above, the Borrowers shall be deemed
to have elected to convert the affected Eurodollar Loan to a Base Rate Loan.
(iv) The Borrowers may elect from time to
time to (A) convert a Loan from a Base Rate Loan to a Eurodollar Loan and (B)
may elect to continue a Loan as a Eurodollar Loan as such upon the expiration
of the then current Interest Period with respect to such Eurodollar Loan, in
each case by giving the Agent irrevocable written notice at least three (3)
Working Days prior to, in the case of conversion, the conversion date, or, in
the case of a continuation, the last day of the then current Interest Period
with respect to such Eurodollar Loan. With respect to any of the foregoing,
such notice shall specify the amount to be converted to or continued as a
Eurodollar Loan and the selected Interest Period. If any default in payment
under this Agreement or any of the Notes shall have occurred and be continuing,
then no Eurodollar Loan may be continued as such, but shall be automatically
converted to a Base Rate Loan on the last day of the last Interest Period for
which a LIBO Rate was determined by the Reference Bank on or prior to such
Bank's obtaining knowledge of such default; in addition no Base Rate Loan may
be converted to a Eurodollar Loan when any such default has occurred and is
continuing.
(v) A Eurodollar Loan shall have only one (1)
Interest Period. A Eurodollar Loan may have an Interest Period of one month,
two months, three months or six months, but no combination thereof.
(vi) In the event that the Reference Bank
shall have determined (which determination shall be conclusive and binding upon
the Borrowers) that (A) by reason of circumstances affecting the interbank
eurodollar market, adequate and reasonable means do not exist for ascertaining
the LIBO Rate for any requested Interest Period or (B) the interest rate
determined pursuant to this SECTION 2.03 for such Interest Period does not
accurately reflect the cost to such Bank of making or maintaining a LIBO Rate
Loan during such Interest Period, with respect to (1) a proposed loan that the
Borrowers have requested be made as a Eurodollar Loan, (2) a Eurodollar Loan
that will result from the requested conversion of a Base Rate Loan to a
Eurodollar Loan or (3) the continuation of a Eurodollar Loan beyond the
expiration of the then current Interest Period with
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respect thereto, in each case the Bank shall forthwith give notice by telephone
of such determination, confirmed in writing, to the Borrowers at least one day
prior to, as the case may be, the requested date for the Loan for such
Eurodollar Loan, the conversion date of such Base Rate Loan or the last day of
such Interest Period. If such notice is given (x) any requested Eurodollar Loan
shall be made as a Base Rate Loan, (y) any Base Rate Loan that was to have been
converted to a Eurodollar Loan shall be continued as a Base Rate Loan and (z)
any outstanding Eurodollar Loan shall be converted, on the last day of the then
current Interest Period with respect thereto, to a Base Rate Loan. Until such
notice has been withdrawn by such Bank, no further Eurodollar Loans shall be
made nor shall the Borrowers have the right to convert a Base Rate Loan to a
Eurodollar Loan.
(vii) With respect to Eurodollar Loans, all
payments made by the Borrowers hereunder shall be made free and clear of, and
without reduction for or on account of future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions, reserves or withholdings
hereafter imposed, levied, collected, withheld or assessed by any Authority
(collectively, "Foreign Taxes"), excluding income and franchise taxes of the
United States of America or any political subdivision or taxing authority
thereof or therein (including Puerto Rico), and the county in which the
applicable Bank's Lending Office may be located or any political subdivision or
taxing authority thereof or therein. If any Foreign Taxes are required to be
withheld from any amounts payable to a Bank hereunder, the amounts so payable
to such Bank shall be increased to the extent necessary to yield to such Bank
(after payment of all Foreign Taxes) interest or any such other amounts payable
hereunder at the rate or in the amounts specified hereunder. Whenever any
Foreign Tax is payable, pursuant to applicable law, by the Borrowers, as
promptly as possible thereafter, such Borrower shall send to the applicable
Bank an original official receipt, if available, or certified copy thereof
showing payment of such Foreign Tax. The Borrowers hereby jointly and severally
indemnify the Banks for any incremental taxes, interest or penalties that may
become payable by any of the Banks which may result from any failure by the
Borrowers to pay any such Foreign Tax when due to the appropriate taxing
authority or failure to remit to the Banks the required receipts or other
required documentary evidence.
(viii) Notwithstanding any other provisions
herein, if any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject ("Requirement of Law") or any change therein or in the
interpretation or application thereof, shall hereafter make it unlawful for any
of the Banks to make or maintain a Eurodollar Loan as contemplated hereunder,
(A) the commitment of the Banks hereunder to convert Base Rate Loans to
Eurodollar Loans shall be cancelled forthwith and (B) any outstanding
Eurodollar Loan shall
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<PAGE> 22
be converted automatically to a Base Rate Loan on the next succeeding Interest
Payment Date or within such earlier period as required by any such law. The
Borrowers hereby agree promptly to pay the Banks, upon demand, any additional
amounts necessary to compensate the Banks for any costs incurred by the Banks
in making any such conversion in accordance with this Agreement, including, but
not limited to, any interest or fees payable by the Banks to lenders of funds
obtained by it in order to make or maintain its Eurodollar Loans hereunder. A
Bank's notice of such costs, as certified to the Borrowers, shall be conclusive
absent manifest error.
(ix) In the event that any Requirement of Law
or any change therein or in the interpretation or application thereof or
compliance by the Banks with any request or directive (whether or not having
the force of law) from any central bank or other Authority:
(A) does or shall hereafter subject the
Banks to any tax of any kind whatsoever with respect to this Agreement,
the Notes or any loans made by the Banks, or change the basis of
taxation of payments to the Banks of principal, commitment fee, interest
or any other amount payable hereunder (except for changes in the rate of
tax on the overall net income of a Bank);
(B) does or shall hereafter impose,
modify or hold applicable any reserve, special deposit, compulsory loan
or similar requirement against assets held by, or deposits or other
liabilities in or for the account of, advances or loans by, or other
credit extended by, or any other acquisition of funds by, any office of
a Bank which is not otherwise included in the determination of the
LIBO Rate hereunder;
(C) does or shall hereafter have the
effect of reducing the rate of return on a Bank's capital as a
consequence of its obligations hereunder to a level below that which
such Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's policies with respect
to capital adequacy) by any amount deemed by such Bank to be material;
or
(D) does or shall hereafter impose on a
Bank any other condition; and the result of any of the foregoing is to
increase the cost to such Bank of making, renewing or maintaining
advances or extensions of credit or to reduce any amount receivable
hereunder,
then, absent manifest error by any such Bank, in any such case, the Borrowers
shall promptly pay such Bank, upon its demand, any additional amounts necessary
to compensate such Bank for such additional cost or reduced amount receivable
which such Bank deems to be material as determined by such Bank. If a Bank
becomes entitled to claim any additional amounts pursuant to this
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paragraph, it shall notify the Borrowers promptly of the event by reason of
which it has become so entitled. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by such Bank to the
Borrowers shall be conclusive in the absence of manifest error. This provision
shall survive payment of the Note and payment of all obligations under this
Agreement.
(x) The Borrowers agree to jointly and severally
indemnify the Banks and to hold the Banks harmless from any loss or expense
which any of the Banks may sustain or incur as a consequence of (A) default by
the Borrowers in payment of the principal of or interest on any Eurodollar
Loans, including, but not limited to, any such loss or expense arising from
interest or fees payable by any Bank to lenders of funds obtained by it in
order to maintain its Eurodollar Loans hereunder, (B) default by the Borrowers
in making a borrowing or conversion after the Borrowers have given a notice in
accordance with this Agreement, including, but not limited to, any such loss or
expense arising from interest or fees payable by any Bank to lenders of funds
obtained by it in order to make or maintain its Eurodollar Loans hereunder, and
(C) any prepayment of Eurodollar Loans on a day that is not the last day of an
Interest Period with respect thereto, including, but not limited to, any such
loss or expense arising from interest or fees payable by any Bank to lenders of
funds obtained by it in order to maintain its Eurodollar Loans hereunder. This
provision shall survive payment of the Notes in full and the satisfaction of
all obligations of the Borrowers under this Agreement and the Loan Documents.
SECTION 2.04. Revolving Credit Commitment Fee. In order to
induce the Banks to enter into this Agreement and to increase the Commitment,
the Borrowers shall pay to the Agent, in arrears, a commitment fee (the
"Revolving Credit Commitment Fee") on the daily average unborrowed amount of
the Commitment then available for the period commencing on the date hereof, to
and including the earlier of the date the Commitment is terminated or the
Termination Date, at the rate of 1/4 of 1% per annum (computed on the basis of
a 360-day year for the actual number of days elapsed). The Revolving Credit
Commitment Fee shall be payable upon any reduction or termination of the
Commitment and quarterly, in arrears, commencing on the first Interest Payment
Date after the date hereof.
SECTION 2.05. Prepayments. Upon at least three (3) Business
Days or Working Days', as the case may be, prior written notice to the Agent
specifying the amount and the date of prepayment, the Borrowers shall have the
right to prepay the principal amount of the Notes in whole or in part from time
to time, in principal amounts equal to at least $500,000, or in any larger
amount provided said amount is an integral multiple of $50,000, or the
remaining balance, if less, in all cases without premium or penalty, subject,
however to Section 2.13 hereof.
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SECTION 2.06. Mandatory Prepayment. If, at any time, the
Borrowers or any of their respective Subsidiaries (i) sell or otherwise dispose
of all or substantially all of their assets (other than in the ordinary course
of business) ("Sale"), (ii) issue Debt or equity ("Debt Issuance"), or
(iii) recover insurance proceeds which are not applied, within a reasonable
time after receipt thereof, toward repair, replacement or substitution of
damaged or lost property for which such proceeds were recovered ("Insurance"),
then 100% of the net proceeds of such Sale, 100% of the net proceeds of such
Debt Issuance (excluding proceeds received from the exercise of director or
employee stock options), or 100% of the Insurance, as the case may be, shall be
immediately due and payable by the Borrowers to the Agent and the Borrowers
shall immediately make a mandatory prepayment in such amounts within five (5)
days after the occurrence thereof. Any and all such mandatory prepayments shall
be applied to the aggregate outstanding amount of the Term Loan in inverse
order of maturity thereof (as provided in the Term Loan Agreement). The balance
of the proceeds, if any, of such mandatory prepayments remaining after payment
in full of the Term Loan shall, so long as no Default has occurred and is
continuing, be applied in accordance with the Borrowers' instructions in their
sole discretion.
SECTION 2.07. Changes of Commitments. The Borrowers shall have
the right to reduce or terminate the pro rata amount of unused Commitments at
any time or from time to time, computed on the basis of each Bank's Commitment,
provided that the Borrowers shall have given three (3) Business Days' prior,
irrevocable, written notice of each such reduction or termination to the Agent
specifying the amount of the Commitment to be reduced or terminated. Each
partial reduction shall be in an aggregate amount at least equal to $500,000.
The Commitments, once reduced or terminated, may not be reinstated.
SECTION 2.08. Use of Proceeds. The proceeds of all borrowings
made by Borrower (a) under the Line of Credit, shall be used by the Borrowers
solely to finance their working capital requirements, and (b) under the
Revolving Credit Facility, shall be used by the Borrowers solely (i) for
general corporate purposes in connection with the Borrowers' ordinary business
affairs as currently conducted; and (ii) to finance capital expenditures of the
Borrowers.
SECTION 2.09. Late Payments. If any payment is not made when
due hereunder or under the Notes, whether at maturity, by acceleration or
otherwise, and with respect to late payments of interest, after notice of
default has been given and the expiration of the applicable grace period
pursuant to SECTION 7.01(a) hereof, interest on the total of the unpaid
principal amount then due and on all other amounts due thereunder shall accrue
at a rate per annum equal to the Default Rate from the due date thereof until
paid in full and the unpaid principal amount of the Notes, plus interest and
all amounts due thereunder shall immediately be due and payable.
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SECTION 2.10. Payments and Computations. (a) The Borrowers
shall make each payment due hereunder and under the Notes not later than 1:00
P.M. (New York City time) on the date when due, in same day funds to the
account of the Agent at its Lending Office or as otherwise directed by the
Agent.
(b) The Borrowers hereby authorize the Agent, if and
to the extent payment owed to the Banks is not made when due hereunder or under
the Notes, to apply any amount available under the Commitment or any credit
balance to which Borrowers are entitled on any account of Borrowers with the
Agent in satisfaction of any sums due and payable from Borrowers hereunder but
unpaid. The Agent shall not be obligated to exercise any right given to it by
this SECTION 2.10. The failure or delay of the Agent in exercising any such
right shall not be deemed a waiver thereof and the rights available to the
Agent under this SECTION 2.10 are in addition to any other right available to
the Agent hereunder, at law or in equity.
(c) All computations of interest hereunder shall be
made by each Bank on the basis of a year of 360 days, in each case for the
actual number of days elapsed (including the first day but excluding the last
day) occurring in the period for which such interest is payable. Each
determination by the Agent of the Interest Rate hereunder shall be conclusive
and binding for all purposes.
SECTION 2.11. Fees. To induce the Banks and the Agent to enter
into this Agreement and to increase the Commitment, simultaneously with the
execution and delivery hereof, Borrowers shall pay to the Agent such fees as
shall be set forth and agreed to among the parties hereto pursuant to fee
letters executed by the Borrowers.
SECTION 2.12. Application of Payments. The Agent shall have
the absolute right to determine the order in which payments received under this
Agreement and the Notes shall be applied to the amounts which are then due and
payable hereunder, regardless of any application designated by the Borrowers;
provided, however, that unless and until the occurrence of an Event of Default
hereunder, all payments, including all prepayments, shall be applied first
against any fees or expenses due and payable under this Agreement and the Notes
or any other Loan Document, second against interest due under the Notes and
then against the principal amount of the Notes, pro rata to each Bank's
Commitment.
SECTION 2.13. Reserves; Additional Costs; Taxes. In the event
that any applicable law, regulation or guideline or any interpretation thereof
by any governmental authority charged with administration thereof, or any
change therein, subjects the Banks to any tax of any kind whatsoever with
respect to any Loan hereunder, or changes the basis of taxation of payments
to the Banks of principal or interest payable on such Loans (except for the
changes in the rate of tax based solely on the overall net income
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of the Banks) or imposes, modifies or deems applicable any reserve, special
deposit or similar requirement against assets held by or deposits or other
liabilities in or for the account of, or Loans made by, the Banks or imposes on
the Banks, directly or indirectly, any of the conditions affecting such Loans
or the cost of U.S. dollar deposits obtained by the Banks in the inter-bank
market, and the result of any of the foregoing is to increase the cost to the
Banks of making or maintaining such Loans by an amount which the Banks deem to
be material, then Borrowers will pay to the Agent upon its demand the
additional amount necessary to compensate the Banks for such additional cost.
Absent manifest error, the Agent's statement shall be conclusive as to any
additional amount to be paid. Borrowers shall pay to the Agent all principal of
and interest on any such Loans free and clear of any and all present and future
taxes, levies, imposts, duties, deductions, withholdings, fees, liabilities and
similar charges. In the event Borrowers are or may become required to pay any
such costs, Borrowers may elect to prepay any outstanding Loans, together with
any such costs and any additional costs associated with such prepayment
including, without limitation, any losses associated with redeployment of
prepaid amounts at rates different from that borne by such prepaid Loans.
ARTICLE III
SECURITY
SECTION 3.01. Security Agreements; Collateral Assignment;
Mortgages. (a) To secure the payment to the Banks of all sums due or to become
due under this Agreement and under each Amended Revolving Credit Note, and the
fulfillment of all other obligations of the Borrowers to the Banks and the
Agent hereunder and under each Amended Revolving Credit Note and the Loan
Documents, the Agent has previously received the following documents
(collectively, the "Collateral Security Documents"):
(i) a Second Amended and Restated Security
Agreement, dated as of January 14, 1994, executed by each of the
Borrowers (the "Security Agreement"), granting to the Banks a first
priority lien and security interest in all assets, real and personal,
and fixtures owned by the Borrowers accompanied by evidence
satisfactory to the Bank that all UCC-1 financing statements or other
recordable instruments have been filed and all other steps required to
perfect the lien of the Banks thereunder have been taken; provided,
however, that the Banks reserve their right to file UCC-1 financing
statements, mortgages, deeds or other recordable instruments, or
otherwise record their interest in any of the Borrowers' real property
or fixtures at any time after the Closing Date hereof;
(ii) an Amended and Restated Collateral
Assignment Agreement, dated as of January 14, 1994, executed
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by each Borrower, (the "Collateral Assignment"), assigning to the
Banks all of the Borrowers' respective rights and interest in all
contracts, leases, licenses and agreements, accompanied by evidence
satisfactory to the Banks that all UCC-1 financing statements have
been filed and all other steps required to perfect the lien of the
Banks thereunder have been taken; and
(iii) the Mortgages and related documents
granting to the Banks a first mortgage lien on and security interest
in the Real Property including, without limitation, title insurance,
opinions regarding title, a survey and UCC financing statements.
(b) The Borrowers shall each maintain, at their
expense, books and records pertaining to the Collateral in such detail, form
and scope as the Agent shall, from time to time, reasonably require. Borrowers
shall mark their respective records with appropriate notations satisfactory to
the Agent disclosing that the Banks have been granted a security interest in
the Collateral. Borrowers shall permit the Agent, and its respective employees,
agents and representatives, reasonable access to the books and records of each
Borrower and, further, to make copies thereof during business hours as may be
necessary for the Agent to monitor compliance with the terms of this Agreement.
(c) The liens, security interests, encumbrances and
assignments granted, created or conveyed pursuant to any of the Collateral
Security Documents or any other document shall be security for the payment and
performance of any and all obligations, joint and several, of each of the
Borrowers to the Banks and to the Agent.
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.01. Conditions Precedent to the Loans. The
obligation of the Banks to make the Loans is subject to the fulfillment of the
following conditions precedent on or prior to the date of the initial borrowing
of such Loans:
(a) The Agent shall have received Amended Revolving
Credit Notes substantially in the form of Exhibits A-1 and A-2
annexed hereto, each duly executed by each of the Borrowers;
(b) Each of the Collateral Security Documents, the
Comerica Note, the Environmental Indemnity and the Term Loan
Agreement shall be in full force and effect;
(c) The Agent shall have received from counsel to the
Borrowers its opinion dated the Closing Date, substantially in
the form of Exhibit B hereto annexed;
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(d) The Agent shall have received such consents or
acknowledgments, with respect to such of the transactions
hereunder, from such Persons as the Agent or its counsel may
determine to be necessary or appropriate;
(e) The Agent shall have received certified copies of
resolutions of the Board of Directors or from the executive
committee of the Board of Directors of each of the Borrowers
authorizing the execution, delivery and performance by each
Borrower of this Agreement, the borrowings hereunder and the
execution, delivery and performance by each Borrower of the
Loan Documents as are to be executed by it hereunder;
(f) The Agent shall have received (i) the
certificates of the Secretary of State of the jurisdiction of
each Borrower's incorporation as to the due organization,
valid corporate existence, good standing and charter documents
on file of each Borrower, as of a recent date; and (ii)
certificates of the Secretary or Assistant Secretary of each
Borrower, dated the date of such borrowing, certifying (A)
that the by-laws and the certificate of incorporation of such
Borrower, as in effect on the date of delivery thereof to the
Agent pursuant to the Original Credit Agreement, have not been
amended, modified or supplemented since such date and remains
in full force and effect on the date of such certification, or
if amended, that attached is a true copy of any and all
amendments to the by-laws or the certificate of incorporation,
as the case may be, certified as of a recent date by the
appropriate Secretary of State, and that such by-laws or
certificate of incorporation, as the case may be, have not
been further amended since the date of the amendment(s)
furnished hereunder, and (B) the incumbency and signatures of
the officers of each Borrower, executing this Agreement, the
Notes and the Loan Documents being executed by it;
(g) The Agent shall have received a certificate of
the chief executive officer or president and another executive
officer of each Borrower, dated the date of such Loan, to the
effect that: (i) such Borrower has complied and is then in
compliance with all of the terms, conditions and covenants of
this Agreement, the Notes and the Loan Documents executed by
it; (ii) no Default or Event of Default has occurred hereunder
or thereunder, either before or after giving effect to the
Loan requested; (iii) the representations and warranties of
such Borrower contained in this Agreement, the Loan Documents
or the Collateral Security Documents executed by it are true
in all respects as if such representations and warranties had
been made on such date, and (iv) such Borrower has no
subsidiaries other than those that are listed on Schedule III
attached hereto, and (v) such Borrower, on an unconsolidated
basis, is solvent and can generally pay its Debts as they
become due;
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(h) The Agent shall have received payment with
respect to all fees;
(i) The Agent shall have received payment with
respect to all of the Total Costs;
(j) The Agent shall have received, in form and
substance satisfactory to each Bank, audited consolidated
financial statements as at June 30, 1994 and for the periods
then ended; unaudited consolidating financial statements as at
September 30, 1994 and for the periods then ended; and
unaudited consolidated and consolidating financial statements
as at September 30, 1994 and for the periods then ended, in
each case including notes, comments, schedules and
supplemental data thereto (collectively, the "Financial
Statements"), all of which shall have been prepared from the
books and records of the Borrowers and their respective
Consolidated Subsidiaries, on a consolidated basis, in
accordance with GAAP consistently applied and maintained
throughout the periods indicated and which shall fairly
present the financial condition of each Borrower on a
consolidating basis and of the Borrowers and their respective
Consolidated Subsidiaries, taken as a whole on a consolidated
basis, as at their respective dates and the results of their
respective operations for the periods covered thereby;
(k) The Agent shall have received evidence
satisfactory to it that each Borrower and its Subsidiaries is
insured against loss or damage under such policies of
insurance, with such insurance companies and covering such
risks as the Required Banks shall deem necessary or advisable,
including, without limitation, casualty, public liability,
business interruption and workers' compensation insurance,
together with evidence that the Agent shall have been named as
loss payee under such policies (other than policies for
workers' compensation insurance);
(l) The Agent shall have received from each Borrower
a detailed aged receivable schedule with respect to the
accounts receivable of such Borrower, which schedule shall be
in form and substance satisfactory to the Required Banks
updated to a date no more than seven (7) Business Days prior
to the date hereof;
(m) The Agent shall have received a detailed aged
schedule of the Borrowers' Inventory, in form and substance
satisfactory to the Required Banks and prepared by a Person
acceptable to the Required Banks;
(n) Each Bank shall have completed a due diligence
review with respect to the Borrowers' financial condition and
business operations, which review shall have been deemed
satisfactory to the Banks;
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(o) The Agent, at its option, shall have received a
timely Notice of Borrowing;
(p) There shall have been no material adverse change,
determined by the Agent in its reasonable discretion, in the
financial condition or business condition or outlook of each
Borrower and their respective Subsidiaries or in the
Collateral;
(q) No suit, action, investigation, inquiry or other
proceeding (including, without limitation, the enactment or
promulgation of a statute or rule) by or before any arbitrator
or any government, state or political subdivision thereof or
any entity or agency shall be pending and no preliminary or
permanent injunction or order by a state or federal court
shall have been entered (i) in connection with this Agreement,
the Notes or any Loan Document or any of the transactions
contemplated hereby or thereby or (ii) which, in any such
case, in the judgment of the Required Banks, could have a
material adverse effect on (A) the transactions contemplated
by this Agreement, the Notes or any Loan Document; or (B) the
business, operations, condition (financial or otherwise) or
prospects of any of the Borrowers or their respective
Subsidiaries or the Collateral;
(r) The Agent shall have received the Intercreditor
in form and substance satisfactory to each Bank and its
respective counsel; and
(s) The Agent or its counsel shall have received such
other and further approvals, opinions and documents as it or
its counsel may have requested and all legal matters incident
to this Agreement and the making of the Loans shall be
satisfactory to the Agent's counsel.
SECTION 4.02. Conditions Precedent to Each Loan. The
obligation of the Banks to make any Loans on or after the initial borrowing
hereunder shall be subject to the Agent having received from each Borrower not
less than one (1) Business Day's prior written notice of such borrowing, and to
the fulfillment of the following conditions precedent:
(a) The Agent shall have timely received a Notice of
Borrowing with respect to such Loan;
(b) The representations and warranties contained in
this Agreement and the Loan Documents shall be true in all
material respects on and as of the date of such Loan as though
made on and as of such date (except as may otherwise be
permitted in this Agreement), no Default or Event of Default
hereunder or thereunder shall have occurred and be continuing,
and Borrowers shall have complied and shall then be in
compliance in all respects with all of the terms,
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<PAGE> 31
covenants and conditions of this Agreement, the Notes and any
Loan Document which is binding on them;
(c) If the Agent shall have so requested by notice to
the Borrowers, the Agent shall have received from Borrowers'
counsel an opinion dated the date of such Loan, addressed to
the Agent to the effect that there has been no material change
in the opinion rendered to the Agent pursuant to SECTION
4.01(c) of this Agreement;
(d) The Agent shall have received payment of all of
the Total Costs; and
(e) The Agent shall have received such other and
further approvals, opinions and documents as may be reasonably
requested by the Agent or its counsel and all legal matters
incident to this Agreement and the making of such Loan shall
be satisfactory to the Agent's counsel.
SECTION 4.03. Deemed Representations. Each and every Notice of
Borrowing with respect to a Loan hereunder and/or any acceptance by a Borrower
of the proceeds of any Loan made hereunder shall constitute a representation
and warranty that the statements made in SECTIONS 4.01(p) and (q) and 4.02(b)
are true and correct in all material respects both on and as of the date of
such Notice of Borrowing or such advance, as though made on and as of such date
(except as may be otherwise permitted in this Agreement).
SECTION 4.04. Refusal by the Banks to Make a Loan.
Notwithstanding anything to the contrary contained herein, if, at any time,
Borrowers seek or request disbursement of a Loan hereunder, and (a) any of the
Banks shall reasonably deem itself materially dissatisfied with the
creditworthiness of any of the Borrowers at that time, or (b) the Collateral,
pursuant to an audited or internal review by the Borrowers' accountants or
appraisals, has depreciated in market value from the date hereof, then the
Banks shall not be obligated to make such Loan.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BORROWER
SECTION 5.01. Representations and Warranties of Borrowers.
Further in order to induce the Banks to enter into this Agreement and to extend
the Commitment, Borrowers hereby each represent and warrant to the Banks and to
the Agent as of the date hereof as follows:
(a) Borrowers do not hold any equity securities (or
warrants, options or other rights to acquire such securities)
or other equity interests in any corporation, partnership or
business venture other than those which are listed on Schedule
III attached hereto, which contains,
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among other things, a complete and accurate list of the
Subsidiaries of each Borrower, their jurisdiction of
incorporation and percentage of such Borrower's ownership of
the outstanding stock (or other interest) of each such
Subsidiary. Borrowers are each corporations duly organized and
validly existing in good standing under the laws of the
jurisdiction of their incorporation. Opp and Phenix are each
wholly-owned Subsidiaries of Johnston.
(b) Each Borrower has or at the time of the Closing
Date will have the corporate power, and the right and legal
authority to execute, deliver and perform their respective
obligations under this Agreement, the Notes and the Loan
Documents, and each has, or at the time of the Closing Date
will have, taken all corporate or other action necessary to
authorize (a) the execution and delivery of, and the
performance of their respective obligations under, this
Agreement, the Notes, the Loan Documents and the making of
borrowings under this Agreement. This Agreement, the Notes and
the Loan Documents each constitutes, or at the time of
delivery thereof will constitute a legal, valid and binding
obligation of each Borrower, enforceable against it in
accordance with its respective terms, and the Collateral
Security Documents, when executed and delivered in accordance
with this Agreement will create in favor of the Banks valid,
continuing first liens on substantially all of the assets,
real and personal, and the fixtures owned by each Borrower
("Collateral"); and when financing statements, mortgages or
other recordable documents have been filed and recorded and
other steps required to perfect the Banks' liens thereunder
have been taken, they will create in favor of the Banks valid,
fully perfected liens on the Collateral, except in each case
as enforceability may be limited by equitable principles and
by bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting creditors' rights generally. No
consent of any person, and no consent, license, approval,
authorization of, or registration of or declaration with, any
governmental authority, bureau or agency is required in
connection with the execution, delivery or performance by any
Borrower, or the validity, of this Agreement, any Loan
Document or the Notes or the borrowings by Borrowers under
this Agreement.
(c) Neither the execution, delivery or performance by
the Borrowers of this Agreement, any Loan Document or the
Notes will violate or contravene any provisions of any
existing law or regulation, or of the certificate of
incorporation or By-Laws of any of the Borrowers. Neither the
execution, delivery or performance by the Borrowers of this
Agreement, any Loan Document or the Notes will violate or
contravene any provisions of any order or decree of any court,
governmental authority, bureau or agency, or any mortgage,
indenture, security agreement, contract, undertaking or other
agreement or instrument to which any Borrower or their
respective Subsidiaries is a
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<PAGE> 33
party or which purports to be binding upon any of them or any
of their property or assets; and the execution, delivery and
performance by the Borrowers of this Agreement, the Loan
Documents and the Notes will not result in the creation or
imposition of any lien, charge or encumbrance on, or security
interest in, any of the properties of the Borrowers or their
respective Subsidiaries pursuant to the provisions of any such
mortgage, indenture, security agreement, contract, undertaking
or other agreement or instrument.
(d) No litigation or administrative proceeding of or
before any court or governmental body or agency is now
pending, nor, to the knowledge of any of the Borrowers, is any
such litigation or proceeding now threatened against any
Borrower or their respective Subsidiaries or any of their
properties, which, if adversely determined, would have a
material adverse effect on the financial condition, business
or operations of the Borrowers or their respective
Subsidiaries, nor, to the best of any of their knowledge, is
there a valid basis for the initiation of any such litigation
or proceeding.
(e) Except as otherwise disclosed in Schedule I
attached hereto or in the Financial Statements, the Borrowers
and their respective Consolidated Subsidiaries have good and
marketable title to all their respective properties and
assets, real and personal, subject to no mortgage, security
interest, pledge, Lien, charge, encumbrance or title retention
or other security agreement or arrangement of any nature
whatsoever, except for bill and hold arrangements made in the
ordinary course of business.
(f) To the best of their knowledge based upon a good
faith investigation, none of the Borrowers nor any of their
respective Subsidiaries is in default in the payment or
performance of any of their obligations for the payment of
money or under any lease, franchise, indenture, mortgage, deed
of trust, material agreement or other instrument to which they
are a party or by which any of them or any of their properties
may be bound.
(g) Except as otherwise disclosed in the Financial
Statements and on Schedule I attached hereto, there are no
outstanding contracts of guaranty or suretyship made by any of
the Borrowers or their respective Subsidiaries nor are any of
the Borrowers or their respective Consolidated Subsidiaries
subject to any other material contingent liability or
obligation, except for the Secured Guaranties, the endorsement
of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
(h) To the best of their knowledge based upon a good
faith investigation, Borrowers and their respective
Subsidiaries have filed all federal and state and local and
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foreign tax returns which are required to be filed and have
paid, or made adequate provision for the payment of, all taxes
which have or may become due pursuant to said returns or to
assessments received by the Borrowers or their respective
Subsidiaries and the Borrowers and their respective
Subsidiaries have made adequate provision for all current
taxes.
(i) Each of the Borrowers and their respective
Subsidiaries possess all licenses, permits, franchises,
patents, copyrights, trademarks and trade names, or rights
thereto, to conduct their business substantially as now
conducted and as presently proposed to be conducted, and none
of the Borrowers nor any of their respective Subsidiaries is
in violation of any valid rights of others with respect to any
of the foregoing.
(j) Each of the Borrowers and their respective
Subsidiaries is in compliance in all material respects with
all applicable provisions of ERISA. Neither a Reportable Event
nor a Prohibited Transaction has occurred with respect to any
Plan; no notice of intent to terminate a Plan has been filed
nor has any Plan been terminated; no circumstance exists which
constitutes grounds under Section 4042 of ERISA entitling the
PBGC to institute proceedings to terminate, or appoint a
trustee to administer, a Plan, nor has the PBGC instituted any
such proceedings; none of the Borrowers nor any ERISA
Affiliate has completely or partially withdrawn under Sections
4201 or 4204 of ERISA from a Multiemployer Plan; each of the
Borrowers and each of their ERISA Affiliates has met its
minimum funding requirements under ERISA with respect to all
of its Plans; and none of the Borrowers nor any ERISA
Affiliate has incurred any liability to the PBGC under ERISA.
(k) The Financial Statements of the Borrowers which
have been delivered to the Agent on or prior to the date
hereof present fairly the financial condition of each Borrower
and its Consolidated Subsidiaries, and of all the Borrowers
and their respective Consolidated Subsidiaries, taken as a
cumulative whole, on a consolidated basis, as of the dates and
for the periods set forth therein. As of the Closing Date,
none of the Borrowers nor any of their respective Consolidated
Subsidiaries have had contingent or fixed liabilities other
than as indicated in such Financial Statements which may be
material to the ability of the Borrowers or their respective
Consolidated Subsidiaries to perform any of their obligations
under the Loan Documents. All of such Financial Statements,
including the notes relating thereto, have been prepared in
accordance with GAAP consistently applied through the period
involved. Such Financial Statements and related notes are
correct and complete in all material respects and fairly
present the consolidated financial position and results of
operations and changes in financial position of the Borrowers
and their
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respective Consolidated Subsidiaries as of the respective
dates thereof and for the periods indicated and disclose all
material liabilities of the Borrowers and their respective
Consolidated Subsidiaries as of the respective dates thereof.
Since September 30, 1994 there has been no material adverse
change in the business or financial condition of any of the
Borrowers or their respective Consolidated Subsidiaries.
(l) None of the Borrowers nor any of their respective
Consolidated Subsidiaries is engaged in the business of
extending credit for the purpose of purchasing or carrying any
margin stock or margin securities (within the meaning of
Regulations G, T, U and X issued by the Board of Governors of
the Federal Reserve System), and no proceeds of any of the
Loans will be used, directly or indirectly, to purchase or
carry any margin stock or margin securities or to extend
credit to others for the purpose of purchasing or carrying any
margin stock or margin securities. None of the transactions
contemplated by this Agreement will violate or result in a
violation of Section 7 of the Securities Exchange Act of 1934,
as amended.
(m) The representations and warranties of Borrowers
in this Agreement and in each of the Loan Documents are true,
complete and correct in all material respects, and each
Borrower hereby confirms each such representation and warranty
as being true, complete and correct in all material respects
with the same effect as if set forth in its entirety herein.
(n) None of the Borrowers or any of their respective
Consolidated Subsidiaries is an "investment company" within
the meaning of the Investment Company Act of 1940, or a
company "controlled by an investment company" that is required
to register under such Act as amended. None of the Borrowers
or their respective Consolidated Subsidiaries is subject to
regulation under any federal or state statute or regulation
which limits their respective ability to incur Debt.
(o) The original or duplicate policies of insurance
or certificates of insurers furnished by Borrowers to the
Agent concurrently with or prior to the execution and delivery
of this Agreement evidence (i) the general public liability
insurance in force against claims for bodily injury, death or
property damage occurring on, in or about Borrowers'
properties in connection with the respective businesses of the
Borrowers and (ii) insurance with respect to the assets of
each Borrower, including, without limitation, any Real
Property, against loss or damage by fire, lightning, flood and
other risks from time to time included under "extended
coverage" policies in amounts as are customary for companies
engaged in similar businesses
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and owning and operating similar properties similarly situated.
(p) Schedule I is a complete and correct list of all
Unfunded Vested Liabilities, all Secured Guaranties issued or
to be issued as of the date hereof, and all credit agreements,
indentures, purchase agreements, guaranties, Capital Leases
and other investments, agreements and arrangements presently
in effect providing for or relating to extensions of credit
(including agreements and arrangements for the issuance of
letters of credit or for acceptance financing) in respect of
which any Borrower or any of their respective Subsidiaries is
in any manner directly or contingently obligated; and the
maximum principal or face amounts of the credit in question,
outstanding and which can be outstanding, are correctly
stated, and all Liens of any nature given or agreed to be
given as security therefor which are material to the business,
properties or condition, financial or otherwise of the
Borrowers or any Subsidiary, or which have an aggregate fair
market value greater than $250,000, are correctly described or
indicated in such Schedule.
(q) To the best of the Borrowers' knowledge, after
due inquiry and investigation, no toxic substances, hazardous
substances or hazardous waste (as the terms are defined in the
Comprehensive Environmental Response, Comprehensive Liability
Act, 42 U.S.C. Sec. 6901, et seq., the Resource Conservation
and Recovery Act of 1976, 42 U.S.C. Section 9601 et seq., or
any other applicable federal, state or municipal law,
regulation, ordinance or requirement, all as amended or
hereinafter amended) and no asbestos or asbestos-containing
materials, and no oils, petroleum-derived compounds or
pesticides (hereinafter referred to as "Hazardous Materials")
are located on or about the Real Property or on any other
property used by any of the Borrowers or any of their
respective Subsidiaries in connection with their respective
businesses in such a manner as may require remediation under
any applicable law, and the Real Property and such other
properties do not contain any underground tanks for the
storage or disposal of Hazardous Materials, except that
Phenix has two (2) underground storage tanks on its Real
Property. Further, (i) the Real Property and such other
properties have not previously been used by any of the
Borrowers or any of their respective Subsidiaries, or to the
best of their knowledge, by others for the storage,
manufacture or disposal of Hazardous Materials, (ii) no
complaint, order, citation or notice with regard to air
emissions, water discharges, noise emissions, or Hazardous
Materials, if any, or any other environmental, health, or
safety matters affecting the Real Property, or any portion
thereof, from any Person has been issued to any of the
Borrowers or any of their respective Subsidiaries which has
not been remedied or cured, and (iii) the Borrowers and their
respective Subsidiaries have complied in
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all material respects with all federal, state and local
environmental laws and regulations affecting their real
property and such other properties.
(r) All statements contained in this Agreement and
all information, reports and other papers and data furnished
to the Banks by or on behalf of the Borrowers in connection
with this Agreement are accurate, correct and complete in all
material respects.
ARTICLE VI
COVENANTS OF THE BORROWERS
SECTION 6.01. Affirmative Covenants. Each Borrower covenants
and agrees that from and after the date of execution hereof and so long as any
amount may be borrowed hereunder or remains unpaid on account of any Amended
Revolving Credit Note, or the Borrowers shall have any obligation to the Banks
or to the Agent hereunder or pursuant hereto, Borrowers shall comply, and cause
each of their respective Consolidated Subsidiaries to comply, with each of the
following obligations:
(a) The Borrowers shall duly and punctually pay the
principal and interest on each Amended Revolving Credit Note,
the Revolving Credit Commitment Fee and any other fees and
amounts due under this Agreement, each Amended Revolving
Credit Note, any fee letter(s) or any other Loan Document.
(b) Borrowers shall furnish to each Bank:
(i) within 120 days after the end of each
fiscal year of the Borrowers, a consolidated balance
sheet and income statement and consolidated statement
of cash flow of all of the Borrowers and their
respective Consolidated Subsidiaries on a fully
consolidated basis, and a consolidating balance sheet
and income statement and consolidating statement of
cash flow of each of the Borrowers, for such fiscal
year setting forth the corresponding figures of the
previous annual audit in comparative form, all in
reasonable detail and all prepared in accordance with
GAAP, audited and certified by Deloitte & Touche or
other independent accountants of national standing
selected by the Borrowers and acceptable to the
Required Banks, each of which shall be accompanied by
a certificate of the chief financial officer of
Johnston calculating the Consolidated Tangible Net
Worth, Adjusted Tangible Net Worth, Net Cash Flow
Coverage Ratio, Current Ratio, Leverage Ratio,
Interest Coverage Ratio, capital expenditures and
Working Capital of the Borrowers and their respective
Consolidated Subsidiaries, on a fully consolidated
basis as of the end of the fiscal year of the
Borrowers;
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(ii) within 60 days after the end of each of
the first three quarters of each fiscal year of the
Borrowers, a consolidated balance sheet as of the end
of such quarter and consolidated year-to-date income
statement and consolidated year-to-date statement of
cash flow of all of the Borrowers and their
respective Consolidated Subsidiaries, on a fully
consolidated basis, and consolidating balance sheet
as of the end of such quarter and consolidating
year-to-date income statement and consolidating
year-to-date statement of cash flow of each of the
Borrowers and their respective Consolidated
Subsidiaries, all in reasonable detail and setting
forth in comparative form the corresponding figures
of the previous fiscal year, prepared in accordance
with GAAP and certified by the chief financial
officer of each Borrower, and a certificate of the
chief financial officer of Johnston calculating the
Consolidated Tangible Net Worth, Adjusted Tangible
Net Worth, Current Ratio, Leverage Ratio, Interest
Coverage Ratio, capital expenditures and Working
Capital of the Borrowers and their respective
Consolidated Subsidiaries for the preceding fiscal
quarter then ended, on a fully consolidated basis;
(iii) within 30 days after the end of each
calendar month, a certificate of the chief financial
officer of Johnston setting forth with respect to
each Borrower (i) the changes in capital expenditure
proposals and/or projections of each Borrower, and of
all the Borrowers and their respective Consolidated
Subsidiaries on a fully consolidated basis, (ii) a
statement of backlog position of each of the
Borrowers, and of all the Borrowers and their
respective Consolidated Subsidiaries on a fully
consolidated basis, setting forth comparative figures
or corresponding dates for the previous fiscal year,
and (iii) management (internal) financial statements
for each Borrower and its respective operating
Subsidiaries, and for all the Borrowers and their
respective Consolidated Subsidiaries on a fully
consolidated basis, in form satisfactory to the
Required Banks;
(iv) within 30 days after the end of each
quarter of each fiscal year of the Borrowers, a
detailed aged receivable and Inventory report as at
the end of such quarter in form satisfactory to the
Agent;
(v) simultaneously with the delivery of the
financial statements referred to in SECTIONS
6.01(b)(i) and (ii) above, a certificate of the chief
financial officer of Johnston certifying that to the
best of his knowledge, no Default or Event of Default
has occurred and is continuing or, if a Default or
Event of Default has occurred and is continuing, a
statement as to the
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<PAGE> 39
nature thereof and the action which is proposed to be
taken with respect thereto, and at all other times,
prompt notice in writing to each Bank of the
occurrence of any Default or Event of Default with
any such notice being deemed a Notice of Default for
purposes of this Agreement;
(vi) if requested by the Required Banks,
simultaneously with the delivery of the annual
financial statements referred to in SECTION
6.01(b)(i), a certificate of the independent public
accountants who audited such statements to the effect
that, in making the examination necessary for the
audit of such statements, they have obtained no
knowledge of any condition or event which constitutes
a Default or Event of Default, or if such accountants
shall have obtained knowledge of any such condition
or event, specifying in such certificate each such
condition or event of which they have knowledge and
the nature and status thereof;
(vii) promptly after the commencement
thereof, notice of all actions, suits, and
proceedings before any court or governmental
department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting any
of the Borrowers or any of their respective
Subsidiaries which, if determined adversely to the
Borrowers or such Subsidiary, could have a material
adverse effect on the financial condition,
properties, or operations of any of the Borrowers or
such Subsidiary;
(viii) promptly after the filing or receiving
thereof and if requested by the Required Banks,
copies of all reports and notices which the Borrowers
or any Subsidiary files with or receives from the
PBGC or the U.S. Department of Labor under ERISA,
except that the annual reports that the Borrowers or
any Subsidiary files with the PBGC or the U.S.
Department of Labor under ERISA shall always be
delivered, and each certificate of the chief
financial officer to be delivered under SECTION
6.01(b)(ii) shall include a statement that no
Reportable Event or Prohibited Transaction has
occurred with respect to any Plan; and as soon as
possible and in any event within 10 days after the
Borrowers or any of their respective Subsidiaries
knows or has reason to know that any Reportable Event
or Prohibited Transaction has occurred with respect
to any Plan or that the PBGC or the Borrowers or any
such Subsidiary has instituted or will institute
proceedings under Title IV of ERISA to terminate any
Plan, the Borrowers will deliver to each Bank a
certificate of the chief financial officer of the
Borrowers setting forth details as to such Reportable
Event or Prohibited Transaction or Plan
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<PAGE> 40
termination and the action the Borrowers propose to
take with respect thereto;
(ix) promptly after the furnishing thereof,
copies of any statement or report furnished to or
received from any other party pursuant to the terms
of any indenture, stock pledge, loan or credit or
similar agreement and not otherwise required to be
furnished to the Banks pursuant to any other clause
of this SECTION 6.01;
(x) promptly after the sending or filing
thereof, copies of all proxy statements, financial
statements and reports which the Borrowers or any of
their respective Subsidiaries sends to its
stockholders, and copies of all regular, periodic and
special reports, including, without limitation,
annual budgets, management letters and shareholder
reports and all registration or other statements
which the Borrowers or any of their respective
Subsidiaries file with, or receive from any Person
related to any of the Borrowers with respect to, the
Securities and Exchange Commission or any
governmental authority which may be substituted
therefor, or with any national securities exchange;
(xi) within 90 days upon the Agent's request,
an updated title report, and within 90 days upon the
Agent's request, a current Phase I environmental
report and/or a current appraisal of the plant, Real
Property and equipment of the Borrowers, in form and
substance satisfactory to the Agent;
(xii) copy of each Secured Guaranty executed
by Johnston and delivered to FUNB (or any other bank
or financial institution) within 10 days of issuance;
and
(xiii) such other information respecting the
condition or operations, financial or otherwise, of
each Borrower or any of their respective Subsidiaries
as any of the Banks from time to time may reasonably
request.
(c) Borrowers shall, and shall cause their respective
Subsidiaries to, pay and discharge, in the ordinary course of
business, all of their respective obligations and liabilities
(including, without limitation, tax liabilities and other
governmental charges, but excluding intercompany obligations
and liabilities unless the failure to pay and discharge such
obligations or liabilities would have a material adverse
affect on Borrowers or such Subsidiaries or on any of their
properties or assets), except where the same may be contested
in good faith by appropriate proceedings, and maintain in
accordance with GAAP appropriate accruals for any of the same.
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<PAGE> 41
(d) Each Borrower shall, and shall cause its
respective Subsidiaries to, maintain their respective
corporate existence, rights and franchises necessary to
continue their respective businesses in the manner
historically conducted and to comply with all laws and
regulations and agreements applicable to them and their
property and operations, the non-compliance with which could
affect adversely their respective businesses, properties or
financial condition, and maintain the properties used or
useful in their respective businesses in good working order
and condition.
(e) Borrowers shall, and shall cause their respective
Subsidiaries to, permit any authorized representative
designated by any Bank to visit and inspect the properties of
the Borrowers or their respective Subsidiaries including their
respective books of account, and to discuss their affairs,
finances and accounts with appropriate officers, at such
reasonable times and as often as may be reasonably requested
by such Bank.
(f) Borrowers shall, and cause their respective
Subsidiaries to, keep their assets which are of an insurable
character insured by financially sound and reputable insurers
against loss or damage by fire, extended coverage and
explosion in amounts sufficient to prevent Borrowers or their
respective Subsidiaries from becoming a co-insurer and not in
any event less than for full coverage (i.e. not replacement)
value, and maintain with financially sound and reputable
insurers, or state or other governmentally operated insurance
funds, comprehensive general liability insurance against other
hazards and risks and liability to persons and property to the
extent and in amounts deemed acceptable, from time to time, by
the Required Banks. Borrowers shall cause the Agent to be
named as co-insured and the loss payee on any such property
insurance.
(g) Borrowers shall, and shall cause their respective
Subsidiaries to, keep accurate records and books of account in
which full, accurate and correct entries will be made of all
dealings or transactions in relation to their respective
businesses and affairs.
(h) Borrowers shall, and shall cause their respective
Subsidiaries to, duly comply in all material respects with all
laws applicable to them and their respective properties,
operations, business and employees, unless Borrowers are, in
good faith, contesting such laws.
(i) Borrowers agree to pay, and protect, indemnify
and save harmless each of the Banks and the Agent and, in
their respective capacity as such, their respective officers,
directors, shareholders, controlling persons, employees,
agents and servants from and against, all liabilities, losses,
claims, damages, penalties, causes of
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<PAGE> 42
action, suits, judgments, costs, expenses or disbursements
(including, without limitation, reasonable attorneys' fees and
expenses) of any kind whatsoever which may at any time be
imposed on, incurred by or asserted against the Banks or the
Agent in any way relating to or arising out of this Agreement,
the Notes, Collateral Security Documents, any other Loan
Documents or any documents contemplated by or referred to
therein or the transactions contemplated thereby, provided
that Borrowers will not be liable to the Banks or the Agent
for such liabilities, losses, claims, damages, penalties,
causes of action, suits, judgments, costs, expenses or
disbursements (including, without limitation, attorneys' fees)
or judgments arising from the Banks' or the Agent's gross
negligence or willful misconduct. The Banks and the Agent
agree that with respect to any action, suit or proceeding
against any of them, or any of their respective officers,
directors, shareholders, controlling persons, employees,
agents and servants, in respect of which indemnity may be
sought hereunder, that they will give written notice of the
commencement of such action to Borrowers within 15 Business
Days after any of them is made a party to such action. Upon
receipt of any such notice by Borrowers, Borrowers shall be
entitled to assume the defense of such action, including the
employment of counsel and the payment of all expenses in
connection with such defense, and shall have the right to
negotiate and consent to settlement. Any indemnified party
shall have the right to employ separate counsel in any such
action against it and to participate in the defense thereof,
and the fees and expenses of such counsel shall be at the
expense of the Banks or the Agent, as the case may be.
Notwithstanding the foregoing, Borrowers shall not have the
right to defend the indemnified party in any action or
proceeding if such indemnified party has been advised by its
own counsel that there are legal defenses available to such
indemnified party which are different from, additional to or
conflict with the defenses available to Borrowers, in which
case, the fees and expenses of such separate counsel to such
indemnified party shall be at the expense of the Borrowers.
Borrowers shall not be liable for any settlement of any such
action effected without its consent; but if any such action is
settled with the consent of Borrowers or if there be a final
judgment for the plaintiff in any such action, Borrowers shall
indemnify and hold harmless each indemnified party from and
against any losses, claims, damages, liabilities or expenses
incurred or suffered by reason of such settlement of judgment,
except as otherwise set forth herein. The provisions of this
Section 6.01(i) shall survive the repayment in full of the
Notes and the satisfaction of all obligations of the Borrowers
under this Agreement and the Collateral Security Documents.
(j) Borrowers shall notify the Agent of any
acquisition or disposition of the equity ownership of Johnston
which is subject to reporting requirements of
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Section 13(d) of the Securities and Exchange Act of 1939, as
amended, promptly after knowledge (whether actual or
constructive) thereof.
(k) Borrowers hereby agree to perform all covenants
contained in each of the Collateral Security Documents with
the same effect as if set forth in its entirety herein.
(l) None of the Borrowers has failed to perform any
acts or omitted any action or steps which would cause any of
the Borrowers to be in violation of any of the covenants,
terms and conditions of this Agreement and of any of the Loan
Documents.
SECTION 6.02. Negative Covenants. The Borrowers covenant and
agree that from and after the date of execution hereof and so long as any
amount may be borrowed hereunder or remains unpaid on account of any Amended
Revolving Credit Note, or Borrowers shall have any obligation to the Banks or
the Agent hereunder or pursuant hereto, Borrowers shall not, and shall not
permit their respective Subsidiaries to, without the prior written consent of
the Required Banks in each instance:
(a) Restriction on Debt. Incur, create, assume,
guarantee or suffer to exist, or become or remain liable,
directly or indirectly, for or on account of any Debt except:
(i) Debt to the Banks hereunder, including
the Senior Facilities and under the Notes;
(ii) Permitted Debt, including all renewals,
extensions or refinancings thereof provided that the
principal amount thereof does not increase;
(iii) Secured Guaranties, including all
renewals, extensions or refinancings thereof,
provided that the aggregate principal amount thereof
does not at any time exceed $8,500,000;
(iv) Debt of any of the Borrowers or their
respective Subsidiaries, which is secured by purchase
money Liens permitted under SECTION 6.02(d);
(v) Debt of the Borrowers to one another or
to any Subsidiary, or of any Subsidiary to a
Borrower, or of any Subsidiary to any other
Subsidiary;
(vi) Debt for borrowed money which is short
term (i.e., Debt which by its terms matures no more
than one year from the date incurred) that is not
otherwise allowed pursuant to this SECTION 6.02(a),
provided, however, that (i) no Event of Default, or
event which with the passage of time or giving of
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notice or both would constitute an Event of Default
shall have occurred and be continuing or shall occur
immediately after giving effect to such borrowing,
(ii) the Borrowers and their respective Subsidiaries
are free of any such Debt (unless otherwise allowed
pursuant to this SECTION 6.02(a) for a period of at
least 60 consecutive days in the immediate preceding
twelve month period and (iii) such Debt is unsecured
and subordinate, with respect to the Borrowers, to
amounts owed under the Senior Facilities, by
agreements in form and substance satisfactory to the
Agent;
(vii) Long Term Debt that is not otherwise
allowed pursuant to this SECTION 6.02(a), provided
that (x) no Event of Default, or event which with the
passage of time or giving of notice or both would
constitute an Event of Default, shall have occurred
and be continuing or shall occur as a result of such
borrowing and (y) such Debt is unsecured and
subordinated to existing Debt of the Borrowers or
their respective Subsidiaries, as appropriate, and,
with respect to the Borrowers, to amounts owed under
each of the Senior Facilities, by agreements in form
and substance satisfactory to the Agent; and
(viii) Increases in existing Unfunded Vested
Liabilities, provided that such increases do not
result from benefit increases voluntarily granted by
Borrowers or a Subsidiary (it being understood that
there shall in all events be permitted such increases
as may result from any requirements for continued
qualification of the subject Plan, or from reasonable
modifications agreed to by Borrower's consulting
actuary based on computations or actuarial
assumptions).
(b) Merger and Sale of Substantially All Assets.
Merge or consolidate with any other Person, or sell, lease or
otherwise transfer to any Person all or substantially all of
its assets or permit any Subsidiary to do so, except for
transfer of assets, consolidations or mergers (i) among the
Borrowers, (ii) among the Consolidated Subsidiaries of the
Borrowers, or transfers of assets to, consolidations with, or
mergers into, any Person whose business is related to the
textile industry, provided that the surviving entity is one of
the Borrowers or a Consolidated Subsidiary of any of the
Borrowers.
(c) Collateral. Sell, assign, discount or otherwise
dispose of all or any portion of the Collateral, other than in
the ordinary course of business, or permit anything to be done
to any Collateral that materially impairs the value of any
Collateral or the security interest intended to be afforded by
this Agreement and/or any Collateral Security Document.
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<PAGE> 45
(d) Liens. Create, assume, incur or suffer to exist
any lien, charge, mortgage, deed of trust, pledge, security interest
or other encumbrance with respect to any Collateral and on any of the
Borrowers' or their respective Subsidiaries' assets, other than:
(i) Liens securing the Loans hereunder or any
other Liens granted in favor of all of the Banks;
(ii) Liens for taxes or assessments or other
government charges or levies if not yet due and payable or, if
due and payable, if they are being contested in good faith by
appropriate proceedings and for which appropriate reserves are
maintained;
(iii) Liens arising by operation of law, such
as mechanic's, materialmen's, landlord's, warehousemen's,
carrier's and other similar Liens, securing obligations
incurred in the ordinary course of business which are not past
due for more than 30 days, or which are being contested in
good faith by appropriate proceedings and for which
appropriate reserves have been established;
(iv) Liens under workmen's compensation,
unemployment insurance, social security or similar legislation
(other than ERISA);
(v) Liens, deposits or pledges to secure the
performance of bids, tenders, contracts (other than contracts
for the payment of money), leases (to the extent permitted
under the terms of this Agreement), public or statutory
obligations, surety, stay, appeal, indemnity, performance or
other similar bonds, or other similar obligations arising in
the ordinary course of business;
(vi) judgment and other similar Liens arising
in connection with court proceedings; provided that the
execution or other enforcement of such Liens is effectively
stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(vii) easements, rights-of-way, restrictions
and other similar encumbrances which, in the aggregate, do not
materially interfere with the occupation, use and enjoyment by
the Borrowers or any of their respective Subsidiaries of the
property or assets encumbered thereby in the normal course of
their business or materially impair the value of the property
subject thereto;
(viii) Liens securing obligations of one
Borrower to another Borrower, or of a Borrower to a
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<PAGE> 46
Subsidiary, or of a Subsidiary to a Borrower or another
Subsidiary;
(ix) purchase money Liens on any property
hereafter acquired (including that certain Deed to Secure Debt
and Assignment of Rent granted by Johnston to FUNB in the
principal amount of $1,325,000 dated as of August 20, 1993 in
connection with the purchase of an office building in
Columbus, Georgia) or the assumption of any Lien on property
existing at the time of such acquisition, or a Lien incurred
in connection with any conditional sale or other title
retention agreement or a Capital Lease, provided that:
(1) any property subject to any of the
foregoing is acquired by the Borrowers or any
of their respective Subsidiaries in the
ordinary course of their business and the
Lien on any such property is created
contemporaneously with such acquisition;
(2) the obligation secured by any Lien
so created, assumed or existing shall not
exceed 100% of the lesser of cost or fair
market value as of the time of acquisition of
the property covered thereby to the Borrowers
or such Subsidiary acquiring the same;
(3) each such Lien shall attach only to
the property so acquired and fixed
improvements thereon;
(4) the obligations secured by such
Lien are permitted by the provisions of
SECTION 6.02(a).
(x) Liens existing on the date hereof and set
forth on Schedule I hereto, provided that there are no
renewals of such Liens or extensions of such Liens to property
other than property now subject to such Liens, or to secure
amounts of Debt greater than such amounts as existing on the
date hereof, as such Debt is set forth in Schedule I hereto,
or other Liens existing on the date hereof but not required to
be disclosed in Schedule I;
(xi) any security interest of any factoring
concern in the accounts receivable of Opp or Phenix pursuant
to maturity factoring arrangements, provided that no advances
against such factored receivables are created prior to
maturity of the accounts receivable so factored;
(xii) the security interest of FUNB (or other
bank or financial institution) in the Collateral
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in connection with the Secured Guaranties as permitted by
SECTION 6.02(a); and
(xiii) other Liens not exceeding, in the
aggregate, $500,000 at any one time outstanding for the
Borrowers and their respective Subsidiaries taken as a whole.
(e) Leases. Create, incur, assume or suffer to exist,
or permit any of Subsidiaries to create, incur, assume or suffer to
exist, any obligation as lessee for the rental or hire of any real or
personal property, except: (i) leases (inclusive of Capital Leases and
Operating Leases) existing on the date of this Agreement and any
extensions or renewals thereof; (ii) leases (other than Capital
Leases) which do not in the aggregate require the Borrowers and their
respective Subsidiaries, on a consolidated basis, to make payments
(including taxes, insurance, maintenance and similar expenses required
under the terms of any lease) in any fiscal year of the Borrowers in
excess of $2,000,000; and (iii) Capital Leases permitted by SECTION
6.02(a).
(f) Investments. Make, or permit any of its
Subsidiaries to make any loan or advance or capital contribution to,
or guaranty directly or otherwise, on a contingent or any other basis,
the Debt of, any Person (including any Affiliate or Unrestricted
Subsidiary) or purchase, exercise an option to purchase or otherwise
acquire, or permit any such Subsidiary to purchase, exercise an option
to purchase or otherwise acquire, any capital stock, assets,
obligations or other securities of, or otherwise invest in, or acquire
any interest in, or pay cash dividends (whether regular or
extraordinary) from July 1, 1991 and thereafter to, or purchase or
redeem stock of, any Person, Affiliate or Unrestricted Subsidiary (any
such loan, advance, capital contribution, guaranty, purchase,
investment or dividend payment hereinafter collectively referred to as
the "Restricted Investments"), except: (i) direct obligations of the
United States of America or any agency thereof with maturities of one
year or less from the date of acquisition; (ii) commercial paper of a
domestic issuer rated at least "A-1" by Standard & Poor's Corporation
or "P-1" by Moody's Investors Service, Inc.; (iii) certificates of
deposit with maturities of one year or less from the date of
acquisition, repurchase agreements and bankers acceptances issued or
purchased by any commercial bank operating within the United States of
America having capital and surplus in excess of $200,000,000; (iv)
capital stock, obligations or securities received in settlement of
debts (created in the ordinary course of business) owing to the
Borrowers or any of their respective Subsidiaries; (v) intercompany
transactions among the Borrowers; and (vi) Acceptable Acquisitions and
(vii) the Secured Guaranties to the extent permitted under SECTION
6.02(a)(iii) (the aforesaid investments in clauses (i) -
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(vii), collectively referred to as the "Permitted Investments");
provided, however, that Borrowers and their respective Subsidiaries
may make such Restricted Investments or otherwise invest in or acquire
any interest in any Person, provided that the aggregate investments at
any time made pursuant to this SECTION 6.02(f), excluding the
Permitted Investments, do not, at any time, exceed the following
amount (the "Aggregate Restrictive Investment Amount"): an amount
which is the lesser of (x) 20% of total assets of the Borrowers and
their respective Consolidated Subsidiaries, on a fully consolidated
basis, as of the date of determination thereof, or (y) $13,500,000,
plus 50% of cumulative Consolidated Net Income of the Borrowers and
their Consolidated Subsidiaries for the period commencing on July 1,
1991, minus 100% of cumulative net losses for the Borrowers and their
respective Consolidated Subsidiaries for such period, as calculated as
of the end of each fiscal quarter of the Borrowers with reference to
the financial statements of the Borrowers and their respective
Consolidated Subsidiaries for such quarter. For the purposes of this
SECTION 6.02(f), any purchase money obligation owing to Borrowers or
their respective Subsidiaries created upon any sale permitted under
this Agreement shall not be deemed to be a Restricted Investment.
(g) Sale of Assets. Except in the ordinary course of
business, sell, lease, assign, transfer or otherwise dispose of, or
permit any Subsidiary to sell, lease, assign, transfer or otherwise
dispose of, any of its now owned or hereafter acquired assets
(including, without limitation, shares of stock and indebtedness of
such Subsidiaries, receivables and leasehold interests) except: (i)
the sale or other disposition of assets no longer used or useful in
the conduct of its business; (ii) that any Consolidated Subsidiary or
Borrower may sell, lease, assign, or otherwise transfer its assets to
any other Borrower or to another Consolidated Subsidiary; (iii) the
sale of any accounts receivable pursuant to factoring arrangements
referred to in SECTION 6.02(d); and (iv) assets to a partnership or
joint venture in connection with an Acceptable Acquisition as defined
in clause (y) of the definition of Acceptable Acquisition.
(h) Acquisitions. Make any Acquisition other than an
Acceptable Acquisition.
(i) Obligations of Third Persons. Guarantee, endorse
or otherwise in any way be or become responsible or permit any
Subsidiary to guarantee, endorse or be or become responsible, in any
way, for obligations of any Person, whether by agreement to purchase
Debt, or agreement for furnishing funds through the purchase of goods,
supplies or services (or by way of stock purchase, capital
contribution, advance or loan) for the purpose of paying or
discharging any Debt or obligation of any other Person, or agreement
to
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maintain minimum working capital or net worth of any Person, or
otherwise, except (i) guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business; (ii) letters of credit issued in the
ordinary course of business provided that the aggregate amount of
letters of credit do not exceed $250,000 outstanding in the aggregate
for the account of the Borrowers and their respective Subsidiaries
taken as a whole; (iii) Secured Guaranties; (iv) other guaranties not
otherwise expressly permitted herein arising in the ordinary course of
business which do not exceed $500,000 in the aggregate at any one time
outstanding for the Borrowers and their respective Subsidiaries taken
as a whole; (v) any guaranty existing on the date hereof and any
renewals thereof and which are permitted under SECTION 6.02(f) hereof;
and (vi) any other guarantee, not otherwise allowed pursuant to this
SECTION 6.02(i), provided that (x) no Event of Default, or event which
with the passage of time or giving of notice or both would constitute
an Event of Default shall have occurred and be continuing hereunder or
shall occur as a result of such guarantee and (y) the obligations
created by such guarantees are subordinated in a manner satisfactory
to the Required Banks to existing Debt of the Borrowers or such
Subsidiary, as appropriate, and, with respect to each Borrower, to
amounts owed under each of the Senior Facilities, by agreements in
form and substance satisfactory to the Agent.
(j) Stock. Declare or pay cash dividends on any
shares of any class of its capital stock, or apply any of its property
or assets to the purchase, redemption or other retirement of, or set
apart any sum for the payment of dividends on, or for the purchase,
redemption or other retirement of, or make any other distribution by
reduction of capital stock or otherwise in respect of, any shares of
any class of its capital stock, except (i) dividends on the common
stock of Phenix and Opp, (ii) dividends on the common stock of any of
the Consolidated Subsidiaries of the Borrowers to any of the
Borrowers, (iii) Johnston may declare and deliver dividends and
purchase or redeem common stock or make distributions as aforesaid in
accordance with SECTION 6.02(f) hereof, up to an amount which does
not, in the aggregate, exceed the Aggregate Restrictive Investment
Amount, and (iv) Borrowers may purchase or otherwise acquire shares of
its capital stock by exchange for or out of proceeds received from a
substantially concurrent issue of new shares of its capital stock.
(k) Affiliates. Enter into or permit any Subsidiary
to enter into any transaction (including without limitation, the
purchase, sale or exchange of securities or other property or the
rendering of any service) with any Affiliate, except in the ordinary
course of and pursuant to the reasonable requirements of its business
upon fair and reasonable terms no less favorable to it as it would
obtain
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in an arm's length transaction with a Person not an Affiliate, and
which would not otherwise violate SECTION 6.02(f) hereof.
(l) Use, Operation, etc. of Collateral. Use, service,
repair, operate or locate (or cause to be used, serviced, repaired or
operated) any of the Collateral (i) in violation of any law, rule,
regulation, order, or ordinance of any Person having jurisdiction of
the Collateral, and (ii) in any area excluded from insurance coverage
as required by the terms of this Agreement.
(m) Change of Ownership. Opp or Phenix to undergo a
change in equity ownership or Johnston to undergo a change in more
than 15% of its equity ownership.
(n) Use of Proceeds. Use the proceeds of the Loans
for any purpose other than as set forth in SECTION 2.08.
(o) Nature of Business. Make any material change in
the nature or scope of any of the Borrowers' or their respective
Subsidiaries' businesses, including, without limitation, material
changes in accounting policies and practices and changes in the fiscal
year of any of the Borrowers or their Consolidated Subsidiaries.
SECTION 6.03. Financial Covenants. The Borrowers covenant and
agree that from and after the date of execution hereof and so long as any
amount may be borrowed hereunder or remains unpaid on account of any Amended
Revolving Credit Note, or Borrowers shall have any obligation to the Banks or
the Agent hereunder or pursuant hereto, Borrowers shall not, and shall not
permit their respective Subsidiaries to, without the prior written consent of
the Required Banks in each instance:
(a) Senior Facilities. Permit the aggregate principal
amount of credit extended under the Senior Facilities (i) to exceed
$55,500,000 at any one time outstanding, or (ii) plus the Secured
Guaranties to exceed $64,000,000 at any one time outstanding.
(b) Capital Expenditures. Incur or commit to any
capital expenditures, as determined in accordance with GAAP, that
would result in a violation of any other provision of this Agreement.
(c) Debt. Incur or permit total debt for borrowed
money under the Senior Facilities to exceed consolidated shareholders'
equity at any time, as determined in accordance with GAAP.
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(d) Working Capital. Permit Working Capital to be
less than $20,000,000 for the period commencing on the Closing Date
and at all times thereafter.
(e) Adjusted Tangible Net Worth. Permit its Adjusted
Tangible Net Worth for the period commencing on the Closing Date and
at all times thereafter to be less than $40,000,000.
(f) Leverage Ratio. Permit the Leverage Ratio to
exceed 1.55:1 at any time for the period commencing on the Closing
Date and at all times thereafter.
(g) Current Ratio. Permit the Current Ratio at any
time during a period listed below to be less than the ratio set forth
opposite such period below:
Period: Ratio:
------- ------
Closing Date - June 30, 1995 1.70:1
July 1, 1995 and all times 2.00:1
thereafter
(h) Net Cash Flow Coverage Ratio. Permit the Net Cash
Flow Coverage Ratio as at the end of the 12-month period ended June
30, 1994 and as at the end of each 12-month period thereafter to be
less than 1.10:1.
(i) Interest Coverage Ratio. Permit the Interest
Coverage Ratio as at the end of the 12-month period ended September
30, 1994 and at all times thereafter to be less than 3.00:1.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) Borrowers shall fail to pay any amounts due
(including principal and interest) hereunder, under the Notes or under any Loan
Document when due (whether by maturity, acceleration or otherwise), provided
that, any such failure of the Borrowers to pay interest under any Amended
Revolving Credit Note or any of the Loan Documents, or any of the Total Costs
due hereunder, shall not constitute an Event of Default hereunder unless such
failure is not cured by the Borrowers within five (5) days after notice thereof
from the Agent to the Borrowers;
(b) Any default or event of default shall have
occurred under the Line of Credit or Term Loan or under any documents executed
or delivered in connection therewith;
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(c) Any representation, warranty or opinion made or
given in this Agreement or in any certificate, opinion, financial or other
statement delivered pursuant to or in connection with this Agreement or by
Borrowers in any Loan Document shall prove to have been untrue, false or
misleading in any material respect on or as of (as the case may be) the date as
of which made;
(d) Borrowers shall fail in the observance or
performance of any of the covenants and agreements contained in ARTICLE VI of
this Agreement;
(e) Borrowers shall fail in the observance or
performance of any other covenant or agreement contained in this Agreement, or
Borrowers or any of their respective Subsidiaries shall fail in the observance
or performance of any covenant or agreement contained in any of the Collateral
Security Documents or Loan Documents and the continuance of the same for 30
days after receipt by Borrowers of notice of such default from any Bank;
(f) The occurrence of any event or circumstance, and
continuation thereof unremedied for any applicable grace period, under any
agreement, guaranty or evidence of Debt relating to any obligation of the
Borrowers or any of their respective Subsidiaries for borrowed money, other
than the Debt evidenced by the Senior Facilities, which would give the holder
thereof or any other Person the right to declare such obligation due and
payable, assuming that any required notice had been given at the time of such
occurrence and, with respect to a default in the payment of principal or
interest on such Debt, which Debt has an outstanding principal amount in excess
of $500,000 in the aggregate for the Borrowers and their respective
Subsidiaries;
(g) The entry of a decree or order for relief by a
court having jurisdiction in the premises in respect of any Borrower or any of
their respective Subsidiaries in an involuntary case under the federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of any of the Borrowers or any of their respective Subsidiaries, or
for any substantial part of any of their property, or ordering the winding-up
or liquidation of any of their affairs and the continuance of any such decree
or order unstayed and in effect for a period of 30 consecutive days;
(h) The commencement by any Borrower or any of their
respective Subsidiaries of a voluntary case under the federal bankruptcy laws,
as now constituted or hereafter amended, or any other applicable federal or
state bankruptcy, insolvency or other similar laws, or the consent by any of
them to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official) of the
Borrowers or any of their respective
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Subsidiaries, or for any substantial part of any of their property, or the
making by any of them of any assignment for the benefit of creditors, or the
failure of any Borrower or any of their respective Subsidiaries generally to
pay their debts as such debts become due, or the taking of corporate or other
action by any Borrower or any of their respective Subsidiaries in furtherance
of any of the foregoing;
(i) The entry of any judgments against any Borrower
or any of their respective Subsidiaries aggregating more than $500,000 or any
attachments or other levy against the property of any Borrower or any of their
respective Subsidiaries with respect to claims aggregating in excess of
$500,000, if the same remain unpaid, unappealed, undischarged, unbonded,
unstayed or undismissed, for a period of 30 days;
(j) This Agreement, the Notes or any Loan Document
shall, at any time after their respective execution and delivery and for any
reason, cease to be in full force and effect or shall be declared to be null
and void, or the validity or enforceability thereof shall be contested by any
Borrower or any of their respective Subsidiaries or any Borrower or any of
their respective Subsidiaries shall deny that they have any or further
liability or obligation under this Agreement, the Notes or any Loan Document;
and
(k) Any material adverse change in the condition,
affairs or operations (financial or otherwise) of any Borrower or any of their
respective Consolidated Subsidiaries, or the value of the Collateral,
determined in the sole good faith discretion of Required Banks;
then, in the case of any of the events specified in paragraphs (g) and (h), the
Commitment shall be immediately terminated and each Amended Revolving Credit
Note and all other amounts payable by Borrowers to the Banks and the Agent
under this Agreement and the Notes shall be immediately due and payable without
any action on the part of the Agent, any of the Banks, Borrowers or any other
Person, and, in the case of any of the other events specified above, the Agent
(i) upon written notice to any Borrower, may immediately terminate the then
unused portion of the Commitment and/or declare the Notes to be immediately due
and payable, whereupon the Commitment shall be immediately terminated and/or
the unpaid principal balance of the Notes, together with accrued interest
thereon, shall become immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived,
and (ii) shall have the right to first set off without demand or notice upon
any and all accounts of any Borrower at the Agent to the extent necessary to
cure said event of default before exercising any other remedy under this
ARTICLE VII or ARTICLE VIII, provided, however, that the Agent shall give the
Borrowers notice after any exercise of such right of setoff.
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SECTION 7.02. Setoff. This Agreement shall not limit any
rights which the Agent or any of the Banks have by law to set off and apply
deposits held by the Agent or any of the Banks at any of their respective
offices to or for the credit or the account of any Borrower against any and all
of the obligations of the Borrowers then due and payable under the Senior
Facilities, including this Agreement, the Notes, any Collateral Security
Document or any other Loan Document.
ARTICLE VIII
REMEDIES AFTER DEFAULT
SECTION 8.01. Remedies. Upon maturity of the Notes, whether by
acceleration or otherwise, unless Borrowers shall have paid in full all amounts
due thereunder and under this Agreement and the Collateral Security Documents,
the Agent may, at its option, and in addition to any rights it may have at law,
in equity or pursuant to any of the Collateral Security Documents:
(a) notify the mortgagors, obligors, lessees or other
parties interested in the Collateral of their respective interests therein and
of any action proposed to be taken with respect thereto, and inform any such
parties that all payments otherwise payable to Borrowers with respect thereto
shall thereafter be made to the Agent:
(b) receive and retain all payments and all other
distributions of any kind upon any and all of the Collateral;
(c) exercise any rights of consent pertaining to any
item of Collateral to the same extent as if the Agent were the owner thereof,
or cause any item of the Collateral to be transferred to its own name and have
such transfer recorded in any place or places deemed appropriate by the Agent;
provided, however, that the Agent agrees that if it takes title to the
Collateral, it shall proceed in a commercially reasonable manner to realize on
such Collateral and apply the proceeds of the sale of the Collateral in the
same manner provided in this ARTICLE VIII;
(d) take such action with respect to the foreclosure,
sale, assignment and delivery of the whole of, or from time to time any part
of, the Collateral, including, without limitation, sell, assign and deliver the
whole of, or from time to time any part of, the Collateral at any broker's
board or at any private sale, or at public auction, after advertisement of the
time and place of sale, for cash, for credit or for other property, for
immediate or future delivery, and for such price or prices as the Agent shall
each determine, and the Agent may bid for and purchase the whole or any part of
the Collateral so sold free from any right or equity of redemption; adjourn any
such sale or cause the same to be adjourned from time to time to a subsequent
time and place announced at the time and place fixed
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for the sale; carry out any agreement to sell any item or items of Collateral
in accordance with the terms of such agreement, notwithstanding the fact that
after the Agent shall have entered into such an agreement, the Notes and other
indebtedness due under this Agreement may have been paid in full, unless the
Agent is able to terminate or cancel such Agreement to its satisfaction without
any liability to any Person; and
(e) in addition to, and not by way of limitation of,
any of the rights specified above, exercise any and all rights and remedies
afforded to it, as a secured party (and as Agent for the Banks hereunder) in
possession of Collateral or otherwise, under any and all applicable provisions
of law.
SECTION 8.02. No Liability. Neither the Agent nor any Bank nor
any of its respective officers, directors, shareholders, employees, counsel and
agents shall incur any liability as a result of the sale of the Collateral, or
any part thereof, in accordance with applicable law and the provisions of this
Agreement or any Collateral Security Document, for the failure to sell or offer
for sale the Collateral, or any part thereof, for any reason whatsoever.
Borrowers waive any claims against the Agent, any Bank and any of its
respective officers, directors, shareholders, employees, counsel and agents
arising with respect to the price at which the Collateral, or any part thereof,
may have been sold by reason of the fact that such price was less than the
aggregate amount of the indebtedness due under the Notes, this Agreement and
the Loan Documents.
SECTION 8.03. Application of Proceeds. (a) Subject to SECTION
10.02, the Agent shall apply the proceeds received from any sale or other
disposition of the Collateral or from any other source, together with any other
monies at the time held by the Agent under the provisions of this Agreement or
any Collateral Security Document, after deducting all costs and expenses
incurred by the Agent and each Bank in connection with such collection and sale
(including, without limitation, reasonable counsel fees, brokers' fees and
expenses), as follows and in the following order:
(i) to the payment of any fees, disbursements
and other amounts then due and owing to the Agent and the Banks
hereunder or under any of the Loan Documents;
(ii) to payment in full of the amounts due
under the Notes, this Agreement and the Collateral Security Documents,
first, to payment of interest due on the Notes and second, to
repayment of the outstanding principal amount of the Notes; and
(iii) the remainder, if any, shall be paid to
Borrowers, as their interests may appear, or Borrowers' designee.
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(b) If the amount of all proceeds received in
liquidation of the Collateral which shall be applied to payment of the
indebtedness due in respect of this Agreement, the Notes and the Collateral
Security Documents shall be insufficient to pay all such indebtedness or
obligations in full, Borrowers acknowledge that they shall remain jointly and
severally liable for any deficiency, together with interest thereon and costs
of collection thereof (including counsel fees and legal expenses).
SECTION 8.04. Attorneys-in-Fact. Borrowers hereby jointly and
severally make, constitute and appoint the Agent, and its respective agents and
designees, the true and lawful agent and attorney-in-fact of each Borrower,
with full power of substitution, to take any or all of the following actions
upon the occurrence of an Event of Default: (i) to receive, open and dispose of
all mail addressed to any Borrower relating to the Collateral, (ii) to notify
and direct the United States Post Office authorities by notice given in the
name of any Borrower and signed on its behalf, to change the address for
delivery of all mail addressed to such Borrower relating to the Collateral to
an address to be designated by the Agent, and to cause such mail to be
delivered to such designated address where the Agent may open all such mail and
remove therefrom any notes, checks, acceptances, drafts, money orders or other
instruments in payment of the Collateral in which the Banks have a security
interest hereunder and any documents relative thereto, with full power to
endorse the name of any Borrower upon any such notes, checks, acceptances,
drafts, money orders or other form of payment or on Collateral or security of
any kind and to effect the deposit and collection thereof, and the Agent shall
have the further right and power to endorse the name of each Borrower on any
documents otherwise relating to such Collateral, and (iii) to do any and all
other things necessary or proper to carry out the intent of this Agreement and
to perfect and protect the liens and rights of the Banks created under this
Agreement, including, without limitation, to claim, bring suit, settle or
adjust any insurance proceeds claims relating to the Collateral. After taking
any of the aforesaid actions, the Agent shall provide the Borrowers with notice
thereof. For purposes of this Section 8.04, Borrowers agree that neither the
Agent nor any of its respective officers, directors, shareholders, employees,
counsel, agents, designees or attorneys-in-fact will be liable for any acts of
commission or omission, or for any error of judgment or mistake of fact or law,
except for any acts of gross negligence or willful misconduct. The powers
granted hereunder are coupled with an interest and shall be irrevocable during
the term hereof.
ARTICLE IX
THE AGENT
SECTION 9.01. Appointment. Powers and Immunities. Each Bank
hereby irrevocably appoints and authorizes Chase to act as its agent hereunder
and under the other Loan Documents with
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such powers as are specifically delegated to the Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. The Agent (which term as used in this Agreement
shall include reference to its Affiliates and its own and its Affiliates'
officers, directors, employees and agents): (a) shall have no duties or
responsibilities except those expressly set forth in this Agreement and in the
other Loan Documents and shall not by reason of this Agreement or any other
Loan Document be a trustee for any Bank; (b) shall not be responsible to the
Banks for any recitals, statements, representations or warranties contained in
this Agreement or in any other Loan Document, or in any certificate or other
document referred to or provided for in, or received by any of them under, this
Agreement or any other Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement,
the Notes or any other Loan Document or any other document referred to or
provided for herein or therein or for any failure by the Borrowers or any other
Person to perform any of its obligations hereunder or thereunder; (c) shall not
be required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Loan Document; (d) shall not be responsible for
any action taken or omitted to be taken by it hereunder or under any other Loan
Document or under any other document or instrument referred to or provided for
herein or therein or in connection herewith or therewith, except for its own
gross negligence or willful misconduct; and (e) shall not, in its capacity as
Agent, be responsible to the Borrowers or the Banks for any funding or other
obligations of a Bank hereunder nor for (i) determining whether or not any of
the transactions contemplated hereby qualifies as a highly leveraged
transaction ("HLT") as defined by any bank regulatory authority, (ii) notifying
the Banks regarding the HLT status of any transaction contemplated hereby or of
any change in that status or (iii) the correctness of any determination as to
HLT status. The Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact, so long as the Agent was not grossly negligent in selecting
such agents or attorneys-in-fact.
SECTION 9.02. Reliance by Agent. The Agent shall be entitled
to rely upon any certification, notice or other communication (including,
without limitation, any thereof by telephone, telecopy, telex, telegram or
cable) believed by it to be genuine and correct and to have been signed or sent
by or on behalf of the proper Person or Persons, and upon advice and statements
of legal counsel, independent accountants and other experts selected by the
Agent. As to any matters not expressly provided for by this Agreement or any
other Loan Document, the Agent shall in all cases be fully protected in acting,
or in refraining from acting, hereunder or thereunder in accordance with
instructions given by the Required Banks or, if provided herein, in accordance
with the instructions given by all of the Banks as is required in such
circumstance, and such instructions
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and any action taken or failure to act pursuant thereto shall be binding on all
of the Banks.
SECTION 9.03. Defaults. The Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default (other than the non-payment
of principal of or interest on the Loans, the Term Loan, the Chase Line of
Credit and the Revolving Credit Commitment Fee) unless the Agent has received
notice from a Bank or a Borrower specifying such Default and stating that such
notice is a "Notice of Default". In the event that the Agent receives such a
notice of the occurrence of a Default, the Agent shall give prompt notice
thereof to the Banks (and shall give each Bank prompt notice of each such
non-payment). The Agent shall (subject to Section 9.07 hereof) take such action
with respect to such Default as shall be directed by the Required Banks or, if
provided herein, all of the Banks, provided that, unless and until the Agent
shall have received such directions, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interests of the Banks except to
the extent that this Agreement expressly requires that such action be taken, or
not be taken, only with the consent or upon the authorization of the Required
Banks or all of the Banks.
SECTION 9.04. Rights as a Bank. With respect to its
Commitments and the Loans, the Term Loan and Lines of Credit made by it, Chase
(and any successor acting as Agent) in its capacity as a Bank hereunder shall
have the same rights and powers hereunder as any other Bank and may exercise
the same as though it were not acting as the Agent, and the term "Bank" or
"Banks" shall, unless the context otherwise indicates, include the Agent in its
individual capacity. Chase (and any successor acting as Agent) and its
affiliates may (without having to account therefor to any Bank) accept deposits
from, lend money to, make investments in and generally engage in any kind of
banking, trust or other business with the Borrowers (and any of their
Subsidiaries or Affiliates) as if it were not acting as the Agent, and Chase
and its affiliates may accept fees and other consideration from the Borrowers
for services in connection with this Agreement or otherwise without having to
account for the same to the Banks.
SECTION 9.05. Indemnification. The Banks agree to indemnify
the Agent (to the extent not reimbursed under Section 6.01(i) hereof, but
without limiting the obligations of the Borrowers under said Section 6.01(i))
ratably in accordance with the aggregate principal amount of the Loans held by
the Banks, for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever that may be imposed on, incurred by or asserted
against the Agent (including by any Bank) arising out of or by reason of any
investigation in or in any way relating to or arising out of this Agreement,
the Notes or any other Loan Document or any other documents contemplated by or
referred to herein or therein or the
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<PAGE> 59
transactions contemplated hereby or thereby (including, without limitation, the
costs and expenses that the Borrowers are obligated to pay under Section 11.04
hereof), or the enforcement of any of the terms hereof or thereof or of any
such other documents; provided that no Bank shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified.
SECTION 9.06. Non-Reliance on Agent and Other Banks. Each Bank
agrees that it has, independently and without reliance on the Agent or any
other Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of each Borrower and its Subsidiaries
and decision to enter into this Agreement and 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 analysis and decisions in taking or not taking action under this Agreement.
The Agent shall not be required to keep itself informed as to the performance
or observance by the Borrowers of this Agreement or any of the other Loan
Documents or any other document referred to or provided for herein or therein
or to inspect the properties or books of the Borrowers or any of its
Subsidiaries. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the affairs, financial condition or
business of any Borrower or any of their Subsidiaries (or any of their
Affiliates) that may come into the possession of the Agent or any of its
Affiliates.
SECTION 9.07. Failure to Act. Except for action expressly
required of the Agent hereunder and under the other Loan Documents, the Agent
shall in all cases be fully justified in failing or refusing to act hereunder
and thereunder unless it shall receive further assurances to its satisfaction
from the Banks of their indemnification obligations under Section 9.05 hereof
against any and all liability and expense that may be incurred by it by reason
of taking or continuing to take any such action.
SECTION 9.08. Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent
may resign at any time by giving notice thereof to the Banks and the Borrowers,
and the Agent may be removed at any time with or without cause by the Required
Banks. Upon any such resignation or removal, the Required Banks shall have the
right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Required Banks and shall have accepted such appointment within
30 days after the retiring Agent's giving of notice of resignation or the
Required Banks' removal of the retiring Agent, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, that shall be a bank which has
an office in New York, New York with a combined capital and surplus of at least
$100,000,000. Upon the
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<PAGE> 60
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations as Agent hereunder.
After any retiring Agent's resignation or removal hereunder as Agent, the
provisions of this Article IX shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as the Agent.
ARTICLE X
RELATIONS AMONG THE BANKS AND THE BORROWERS
SECTION 10.01. Obligations and Rights of Banks. The failure of
any Bank to make any Loan to be made by it on the date specified therefor shall
not relieve any other Bank of its obligation to make its Loan on such date, but
no Bank shall be responsible for the failure of any other Bank to make a Loan
to be made by such other Bank. The amounts payable at any time hereunder to
each Bank shall be a separate and independent debt, and each Bank shall be
entitled to protect and enforce its rights arising out of this Agreement, and
it shall not be necessary for any other Bank to be joined as an additional
party in any proceeding for such purpose, subject to the provisions of Article
IX.
SECTION 10.02. Pro Rata Treatment. Except to the extent
otherwise provided herein, (a) each borrowing under SECTION 2.02 shall be made
from the Banks pro rata in accordance with their respective Commitments, (b)
each payment of principal, including any prepayments pursuant to SECTIONS 2.05
and 2.06, shall be made pro rata in accordance with the respective amounts
thereof then outstanding, (c) each payment of interest on Loans, commitment
fees or Total Costs shall be made for the account of the Banks pro rata in
accordance with their respective amounts thereof then due and payable, and (d)
each reduction in the Commitments shall be made pro rata in accordance with the
Banks' respective Commitments.
SECTION 10.03. Sharing of Recoveries. Each Bank agrees that,
if, as a result of (a) the exercise of any right of counterclaim, setoff,
banker's lien or similar right, (b) its receipt of a secured claim under any
applicable bankruptcy, insolvency or other similar law, (c) the allocation of
payments by the Borrowers in a manner contrary to the provisions hereunder or
(d) any other reason, such Bank receives payment of a proportion of the
aggregate amount due and payable to it hereunder and under its Amended
Revolving Credit Note as principal, interest or commitment fees that is greater
than the proportion received by any other Bank in respect of the aggregate of
such amounts due and payable, proratably, to such other Bank hereunder and
under its Amended Revolving Credit Note, then the Bank receiving such
proportionately greater payment shall
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<PAGE> 61
purchase participations (which it shall be deemed to have done simultaneously
upon the receipt of such payment) in the rights of the other Bank hereunder and
under its Amended Revolving Credit Note so that all such recoveries with
respect to such amounts due and payable hereunder and under all the Notes held
by the Banks shall be pro rata; provided that if all or part of such
proportionately greater payment received by the purchasing Bank is thereafter
recovered by or on behalf of any Borrower from such Bank, such purchases shall
be rescinded and the purchase prices paid for such participations shall be
returned to such Bank to the extent of such recovery, but without interest
(unless the purchasing Bank is required to pay interest on the amount recovered
to the Person recovering such amount, in which case the selling Bank shall be
required to pay interest at a like rate); provided further that nothing in this
SECTION 10.03 shall impair the right of any Bank to exercise any right of
setoff or counterclaim it may have and to apply the amount subject to such
exercise to the payment of Debt of any Borrower and their respective
Subsidiaries. The Borrowers expressly consent to the foregoing arrangements and
agree that any holder of a participation in any rights hereunder so purchased
or acquired pursuant to this SECTION 10.03 shall, with respect to such
participation, be entitled to all of the rights of a Bank hereunder and may
exercise any and all rights of setoff with respect to such participation as
fully as if the Borrowers were directly indebted to the holder of such
participation for Loans in the amount of such participation.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments, Waivers, Etc. Except as otherwise
provided herein, the Agent may, with the prior consent of the Required Banks
(but not otherwise), consent to any amendment, modification, supplement or
waiver under this Agreement or any of the Loan Documents, provided that,
without the prior written consent of each Bank, the Agent shall not (except as
provided herein) increase the amount of any Bank's Commitment, extend the
Termination Date, reduce the Interest Rate, release any Collateral or otherwise
terminate any Lien under any Loan Document providing for collateral security,
or agree to additional obligations being secured by such collateral security
(unless the Lien for such additional obligations shall be junior to the Lien in
favor of the other obligations secured by such Loan Documents), except that no
such consent shall be required, and the Agent is hereby authorized, to release
any Lien covering property which is the subject of a disposition of property
permitted hereunder or to which the Required Banks have consented. Subject to
the foregoing, no such amendment, modification, supplement or waiver shall in
any event be effective unless the same shall be in writing and signed by the
Required Banks or each Bank, as the case may be, and each Borrower, or the
chief financial officer of Johnston or of any
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<PAGE> 62
Consolidated Subsidiary of Johnston, and then such amendment, modification,
supplement, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
SECTION 11.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic communication) and mailed, telecopied, telegraphed or
hand-delivered as follows:
If to the Borrowers: Johnston Industries, Inc.
105 Thirteenth Street
Columbus, Georgia 31901
Attention: John W. Johnson
Telecopier: (706) 641-3159
Southern Phenix Textiles, Inc.
Broad Street Extension
P.O. Box 1108
Phenix City, Alabama 36867
Attention: Larry L. Galbraith
Telecopier: (205) 297-4753
Opp and Micolas Mills, Inc.
111 West 40th Street
21st Floor
New York, New York 10018
Attention: Roger Gilmartin
Telecopier: (212) 768-3764
If to the Banks or the Agent,
to the Agent at
its Lending
Office: The Chase Manhattan Bank, N.A.
1411 Broadway - 5th Floor
New York, New York 10018
Attention: Jo Zalon Meer
Telecopier: (212) 768-9514/15
or, as to each party, at such other address as shall be designated by such
party in a written notice to the other parties. All such notices and
communications shall be effective when received.
SECTION 11.03. No Waiver, Remedies. No failure on the part of
any Bank to exercise, and no delay in exercising, any right hereunder or under
any Amended Revolving Credit Note or any of the Collateral Security Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder or under any Amended Revolving Credit Note or any of the
Collateral Security Documents preclude any other or further exercise thereof or
the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.
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<PAGE> 63
SECTION 11.04. Costs, Expenses, Taxes, Investments. Borrowers
jointly and severally agree to pay on demand all costs and expenses together
with any taxes thereon incurred by the Agent and the Banks in connection with
the preparation, execution and delivery of this Agreement, the Notes, or any of
the Collateral Security Documents and any other documents to be delivered
hereunder or thereunder, including, without limitation, all reasonable fees and
expenses incurred with respect to valuation and accounting, and the reasonable
fees and out-of-pocket expenses of counsel of and for the Agent and the Banks
with respect thereto and with respect to advising the Agent and the Banks as to
their rights and responsibilities under this Agreement and such other
documents, and all costs and expenses, if any (including, without limitation,
reasonable fees and out-of-pocket expenses of counsel of and for the Banks), in
connection with the enforcement of this Agreement, the Notes, the Collateral
Security Agreements and any other documents to be delivered hereunder or
thereunder; in addition, Borrowers shall pay any and all stamp and other taxes
payable or determined to be payable in connection with the execution and
delivery of this Agreement, the Notes, the Collateral Security Agreements and
any other documents to be delivered hereunder or thereunder and any fees due
under SECTIONS 2.04 and 2.11 hereunder (all of the foregoing being referred to
herein collectively as the "Total Costs") and agree to hold the Agent and the
Banks harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes. The Agent and
the Banks shall not be responsible for any costs or expenses of any kind
whatsoever incurred by Borrowers and/or any Person on behalf of Borrowers in
connection with the preparation of this Agreement, the Notes, the Collateral
Security Agreements, or any other documents to be delivered hereunder or
thereunder.
SECTION 11.05. Limitation on Interest. No provision of this
Agreement or the Notes shall require the payment or permit the collection of
interest in excess of the maximum rate permitted by applicable law.
SECTION 11.06. Severability. Every provision of this Agreement
is intended to be severable, and if any term or provision hereof shall be
invalid, illegal, or unenforceable for any reason, the validity, legality, and
enforceability of the remaining provisions hereof shall not be affected or
impaired thereby, and any invalidity, illegality, or unenforceability in any
jurisdiction shall not affect the validity, legality, or enforceability of any
such term or provision in any other jurisdiction.
SECTION 11.07. Binding Effect; Governing Law; Consent to
Jurisdiction; Waiver of Jury Trial; Construction. This Agreement shall become
effective when it shall have been executed and delivered by each Borrower, the
Agent and each Bank and thereafter shall be binding upon and inure to the
benefit of each Borrower, the Agent each Bank and their respective successors
and assigns. This Agreement, the Notes and the Loan Documents shall
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<PAGE> 64
be governed by, and construed in accordance with, the laws of the State of New
York without regard to the principles of conflicts of laws, except only to the
extent that the validity or perfection of the security interest hereunder, in
respect of any particular Collateral, are governed by the laws of a
jurisdiction other than the State of New York.
Borrowers hereby irrevocably submit to the nonexclusive
jurisdiction of the courts of the State of New York and the Federal District
Court for the Southern District of New York. Borrowers agree that service of
process may be effectuated hereunder by mailing a copy of the summons and
complaint or other pleadings to Borrowers at their respective addresses set
forth above.
Borrowers hereby irrevocably waive all rights to a trial by
jury in any action, proceeding or counterclaim arising out of or relating to
this Agreement.
In this Agreement, the singular includes the plural, the
plural, the singular, and the word "or" is used in the inclusive sense.
SECTION 11.08. Assignment. This Agreement may not be assigned,
in whole or in part, by any Borrower without the prior written consent of each
Bank. The Banks may at any time sell, assign, transfer, negotiate, grant
participations in or otherwise dispose of their respective rights under this
Agreement.
SECTION 11.09. Entire Agreement. This Agreement contains the
entire understanding of and supersedes all prior agreements, written and
verbal, among the Banks, the Agent and
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<PAGE> 65
the Borrowers with respect to the subject matter hereof and shall not be
modified except in writing executed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
THE LENDERS:
THE CHASE MANHATTAN BANK, N.A.
By: Jodi Starbecker
---------------------------
Name: Jodi Starbecker
Title: Vice President
COMERICA BANK NATIONSBANK, N.A (CAROLINAS)
(Formerly, NationsBank of
North Carolina, N.A.)
By: Michael Krzystevrzyk
---------------------------
Name: Michael Krzystevrzyk By: J. Lance Walton
Title: Vice President ---------------------------
Name: J. Lance Walton
Title: Vice President
THE BORROWERS:
THE AGENT:
JOHNSTON INDUSTRIES, INC.
THE CHASE MANHATTAN BANK, N.A.
By: John W. Johnson
---------------------------
Name: John W. Johnson By: Jodi Starbecker
Title: Vice President ---------------------------
Name: Jodi Starbecker
Title: Vice President
OPP AND MICOLAS MILLS, INC.
By: John W. Johnson
---------------------------
Name: John W. Johnson
Title: Vice President
SOUTHERN PHENIX TEXTILES, INC.
By: John W. Johnson
---------------------------
Name: John W. Johnson
Title: Vice President
-61-
<PAGE> 1
JOHNSTON INDUSTRIES, INC.
Item 6(a) EXHIBIT 11 - Statement of Computation of Per Share Earnings
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
March 31 March 31
------------- ------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
The weighted average number of
common and common share
equivalents are as follows:
Weighted average common shares
outstanding 10,565,457 10,716,924 10,611,168 10,710,292
Shares issued from assumed
exercise of incentive
stock options (1) -0- 543 -0- 1,578
Shares issued from assumed
exercise of non-qualified
stock options (1) 116,880 145,818 100,502 144,374
---------- ---------- ---------- ----------
Weighted average number of
shares outstanding, as
adjusted 10,682,337 10,863,285 10,711,670 10,856,244
========== ========== ========== ==========
</TABLE>
Note:
(1) Shares issued from assumed exercise of options included the number of
incremental shares which result from applying the "treasury stock method"
for options, APB 15, paragraph 36.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF JOHNSTON INDUSTRIES, INC. FOR THE PERIOD ENDED MARCH 31,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH INFORMATION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 8,955
<SECURITIES> 9,097
<RECEIVABLES> 43,232
<ALLOWANCES> 1,433
<INVENTORY> 53,898
<CURRENT-ASSETS> 115,640
<PP&E> 189,868
<DEPRECIATION> 76,827
<TOTAL-ASSETS> 254,299
<CURRENT-LIABILITIES> 45,696
<BONDS> 0
<COMMON> 1,241
0
0
<OTHER-SE> 61,243
<TOTAL-LIABILITY-AND-EQUITY> 254,299
<SALES> 175,972
<TOTAL-REVENUES> 175,972
<CGS> 137,926
<TOTAL-COSTS> 137,926
<OTHER-EXPENSES> (1,880)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,906
<INCOME-PRETAX> 12,154
<INCOME-TAX> 4,811
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,829
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
</TABLE>
