<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY , 1998
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 0-21362
------------------
HARVARD INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
FLORIDA 21-0715310
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3 WERNER WAY, LEBANON, NEW JERSEY 08833
(Address of Principal Executive Offices) (Zip Code)
(908) 437-4100
(Registrant's telephone number, including area code)
------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES (X) NO ( )
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS
AND REPORTS REQUIRED TO BE FILED BY SECTION 12, 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN
CONFIRMED BY A COURT. YES (X) NO ( )
APPLICABLE ONLY TO CORPORATE ISSUERS:
THE NUMBER OF SHARES OUTSTANDING OF REGISTRANT'S COMMON STOCK, AS OF FEBRUARY
1, 1998, WAS 7,026,437.
===============================================================================
<PAGE>
HARVARD INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION: PAGE
Item 1. Financial Statements:
Consolidated Balance Sheets
December 31, 1997 (Unaudited) and September 30, 1997 (Audited).....................................2
Consolidated Statements of Operations (Unaudited)
Three Months Ended December 31, 1997 and 1996......................................................3
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended December 31, 1997 and 1996......................................................4
Notes to Consolidated Financial Statements - (Unaudited)....................................................5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................................16
PART II. OTHER INFORMATION:
Item 5. Other Information.................................................................................20
Item 6. Exhibits and Reports on Form 8-K..................................................................21
SIGNATURES.................................................................................................22
</TABLE>
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND SEPTEMBER 30, 1997
(In thousands of dollars)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
ASSETS (Unaudited) (Audited)
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 6,695 $ 9,212
Accounts receivable, net......................... 71,967 76,190
Inventories...................................... 46,966 54,218
Prepaid expenses and other current assets........ 8,836 7,602
---------- ----------
Total current assets........................... 134,464 147,222
Property, plant and equipment, net................. 125,051 132,266
Intangible assets, net............................. 4,021 4,417
Other assets, net.................................. 24,245 23,589
---------- ----------
$ 287,781 $ 307,494
========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities:
Current portion of Debtor-in-possession (DIP)
loans........................................... $ 19,409 $ 36,436
Current portion of long term debt................ 1,913 1,748
Accounts payable................................. 32,407 32,267
Accrued expenses................................. 83,189 72,235
Income taxes payable............................. 2,906 2,440
---------- ----------
Total current liabilities...................... 139,824 145,126
Liabilities subject to compromise.................. 397,020 397,319
DIP loans.......................................... 40,428 51,035
Long-term debt..................................... 11,783 12,339
Postretirement benefits other than pensions........ 98,404 96,929
Other ............................................. 28,780 27,237
---------- ----------
Total liabilities.............................. 716,239 729,985
---------- ----------
14 1/4% Pay-In-Kind Exchangeable Preferred Stock,
(Includes $10,142 of undeclared accrued dividends) 124,637 124,637
---------- ----------
Shareholders' deficiency:
Common Stock, $.01 par value; 15,000,000 shares
authorized shares issued and outstanding:
7,026,437 at December 31, 1997 and at
September 30, 1997............................. 70 70
Additional paid-in capital....................... 32,134 32,134
Additional minimum pension liability............ (3,665) (3,665)
Foreign currency translation adjustment.......... (2,378) (1,930)
Accumulated deficit.............................. (579,256) (573,737)
---------- ----------
Total shareholders' deficiency................. (553,095) (547,128)
---------- ----------
Commitments and contingent liabilities.............
$ 287,781 $ 307,494
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements (Unaudited).
-2-
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(In thousands of dollars, except share and per share data)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Sales.............................................. $ 197,052 $ 187,261
-------- --------
Costs and expenses:
Cost of sales.................................... 191,722 190,462
Selling, general and administrative.............. 9,835 10,205
Interest expense (contractual interest
of $ 12,758 in 1997)............................ 3,853 12,188
Restructuring charges............................ 5,000 -
Gain on sale of operation........................ (11,354) -
Amortization of goodwill......................... 396 3,828
Other (income) expense, net...................... 8 258
-------- --------
Total costs and expenses....................... 199,460 216,941
-------- --------
Loss before reorganization items and income taxes.. (2,408) (29,680)
Reorganization items............................... 2,942 -
-------- --------
Loss before income taxes........................... (5,350) (29,680)
-------- --------
Provision for income taxes......................... 169 488
-------- --------
Net loss........................................... $ (5,519)$ (30,168)
======== ========
PIK preferred dividends and accretion (contractual
amount for the three months ended
December 31, 1997 was $4,763).................... $ - $ 4,224
======== ========
Net loss attributable to common shareholders....... $ (5,519)$ (34,392)
======== ========
Loss per common share............................ $ (0.79)$ (4.90)
======== ========
Weighted average number of common shares
outstanding..................................... 7,026,437 7,015,093
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements (Unaudited).
- 3 -
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(In thousands of dollars)
<TABLE>
<CAPTION>
1997 1996
-------- ---------
<S> <C> <C>
Cash flows related to operating activities:
Loss from continuing operations before reorganization items.... $ (2,577) $(30,168)
Add back (deduct) items not affecting cash and cash equivalents:
Depreciation and amortization................................ 8,108 17,236
Gain on sale of operation.................................... (11,354) -
Loss on disposition of property, plant and equipment......... 15 308
Postretirement benefits...................................... 1,475 1,666
Changes in operating assets and liabilities of continuing
operations net of effects of divestitures and
reorganization items:
Accounts receivable.......................................... 878 18,788
Inventories.................................................. 5,882 (6,855)
Other current assets......................................... (1,234) (181)
Accounts payable............................................. (27) (15,590)
Accrued expenses and income taxes payable.................... 5,881 3,857
Other noncurrent liabilities................................. 2,602 1,101
------- --------
Net cash provided by (used in) continuing operations before
reorganization items......................................... 9,649 (9,838)
Net cash used by reorganization items.......................... (2,445) -
------- --------
Net cash provided by (used in) continuing operations........... 7,204 (9,838)
------- --------
Cash flows related to investing activities:
Acquisition of property, plant and equipment................... (1,354) (9,910)
Net proceeds from sale of operation............................ 16,391 -
Proceeds from disposition of property, plant and equipment..... - 3
Net change in other noncurrent accounts........................ (1,697) (1,084)
------- --------
Net cash provided by (used in) investing activities............ 13,340 (10,991)
------- --------
Cash flows related to financing activities:
Net borrowings (repayments) under DIP financing agreement...... (27,634) 23,529
Advance payment from customer.................................. 5,000 -
Proceeds from sale of stock and exercise of stock options...... - 12
Repayments of long-term debt................................... (391) (392)
Pension fund payments pursuant to PBGC settlement agreement.... - (1,500)
Payment of EPA settlements..................................... (36) (610)
------- --------
Net cash provided by (used in) financing activities............ (23,061) 21,039
------- --------
Net increase (decrease) in cash and cash equivalents............. (2,517) 210
Beginning of period.............................................. 9,212 1,107
------- --------
End of period.................................................... $ 6,695 $ 1,317
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements (Unaudited).
- 4 -
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1
The interim consolidated financial statements are unaudited but, in
the opinion of management, reflect all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the results for the
periods presented. The results of operations for any interim period are not
necessarily indicative of the results to be expected for the full year. These
interim consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto for the year ended
September 30, 1997 included in the Company's Annual Report on Form 10-K.
NOTE 2
On May 8, 1997, Harvard Industries, Inc. and its domestic subsidiaries
(all of whom are hereinafter sometimes designated the "Debtors") filed
voluntary petitions for relief under chapter 11 of the Federal bankruptcy laws
in the United States Bankruptcy Court for the District of Delaware (the
"Court"). Under chapter 11, holders of most claims arising prior to the filing
of the petitions for relief under the Federal bankruptcy laws are stayed from
collecting on such claims while the Debtors continue business operations as
debtors-in-possession ("DIP"). Additional claims may arise subsequent to the
filing date resulting from rejection of executory contracts, including leases.
Holders of pre-petition claims secured by liens against the Debtors' assets
("secured claims") also are stayed from enforcing their rights as secured
creditors without leave of the Court.
The Debtors have received approval from the Court to pay or otherwise
honor certain pre-petition obligations including certain employee wages,
salaries and other compensation, employee benefits, reimbursable employee
expenses and certain workers' compensation claims, as well as to continue
pre-petition customer practices with respect to warranties, refunds and return
policies. All proofs of claim were required to be filed against the Debtors by
February 9, 1998 or be forever barred from assertion.
The Debtors have not yet filed with the Court any plans of
reorganization. Under the Bankruptcy Code, a Debtor is given an exclusive
period of 120 days to file a plan of reorganization and 180 days to solicit
acceptances to such plan. These periods afforded to the Debtors under the
Bankruptcy Code initially expired on September 5, 1997 and November 4, 1997,
respectively, and have been extended by the Court from time to time. The Court
has given the Debtors until June 2, 1998 to formulate and file their plans of
reorganization, and until August 1, 1998 to solicit plan acceptances thereto.
In the event such plans are formulated and approved by the creditors and the
Court, continuation of the Debtors' business after reorganization is dependent
upon the success of future operations and the ability to meet obligations as
they become due. The accompanying consolidated financial statements have been
prepared on a going concern basis, which contemplates continuity of operations
and the realization of assets and liquidation of liabilities in the ordinary
course of business. However, as a result of the chapter 11 proceedings and
circumstances related to this event, including the Company's highly
5
<PAGE>
leveraged financial structure and recurring losses from operations as reflected
in the consolidated statements of operations, such realization of assets and
liquidation of liabilities is subject to substantial doubt. Management is
unable to predict how and when the chapter 11 proceedings will be concluded or
the expense associated therewith, which could be substantial. There can be no
assurances that the liabilities of the Company will not be found in the chapter
11 proceedings to exceed the fair value of its assets. This could result in
claims being provided for in the chapter 11 proceedings at less than 100% of
their face value. It is impossible at this time to predict with certainty the
actual recovery the creditors and shareholders will realize.
The Company discontinued accruing interest on its 12% and 11 1/8%
Notes (aggregating $300,000 of principal amount) and dividends on the PIK
Preferred stock since the date of filing bankruptcy.
NOTE 3
In November 1997, the Company sold the Material Handling division of
its Kingston-Warren subsidiary for approximately $18,000 of gross proceeds.
Proceeds of $7,840 were applied to the scheduled DIP term loans quarterly
payments of $3,250 (November 30, 1997 and February 28, 1998 and $1,340 was
applied to the May 31, 1998 payment), and $7,840 was applied to the final
installment due May 1999. The balance of the proceeds was used to reduce the
DIP revolving facility. The transaction resulted in a gain on sale of
approximately $11,400 in the first quarter of 1998.
In January 1998, the Company sold its land and building related to the
Harvard Interiors Furniture Division located in St. Louis, Missouri, for
$2,275. Of the proceeds, $450 was applied to the May 31, 1998 DIP quarterly
term loan principal payment, $450 was applied to the May 8, 1999 payment and
the balance to reduce the DIP revolving facility.
Management plans to wind-down existing operations at its
Doehler-Jarvis Toledo, Inc. subsidiary or otherwise sell or dispose of the
Toledo, Ohio facility, and to maintain the operations of its remaining
Doehler-Jarvis facilities located at Greeneville, Tennessee and Pottstown,
Pennsylvania. Both Ford and General Motors are negotiating with the Company to
defray certain expenses and assume certain obligations in connection with the
wind-down of the Toledo facility. The Company is unable to estimate its costs
associated with this wind-down as the method of wind-down and related costs
will be determined on completion of negotiations with the two major customers.
One of the major customers provided the Company with an advance payment of
$5,000 to be applied against cash operating losses.
Condensed operating data of operations disposed or being disposed of
(Harman, Interiors, Material Handling and the Toledo facility) is as follows:
The Company is also negotiating for the sale of a plant of
its Hayes-Albion subsidiary.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------------------------
1997 1996
------------------ ---------------
<S> <C> <C>
Sales...................................... $ 46,508 $ 55,071
Gross profit (loss)........................ ( 2,256) (3,116)
</TABLE>
NOTE 4
On three separate occasions in fiscal 1994, the Company became aware
that certain products of its ESNA division were not manufactured and/or tested
in accordance with required specifications at its Union, New Jersey and/or
Pocohontas, Arkansas facility. These fastener products were sold to the United
States Government and other customers for application in the construction of
aircraft engines and
6
<PAGE>
air frames. In connection therewith, the Company notified the Department of
Defense Office of Inspector General ("DoD/OIG") and, upon request, was admitted
into the Voluntary Disclosure Program of the Department of Defense (the "ESNA
matter"). At December 31, 1997, the remaining accrued costs of discontinued
operations, including the ESNA matter, are primarily related to legal costs,
fines and penalties. The ultimate cost of disposition of the ESNA matter, as
well as the required funding of such cost, is dependent upon future events, the
outcomes of which are not determinable at the present time. Such outcomes could
have a material effect on the Company's financial condition, results of
operations and/or liquidity. If it is ultimately determined that the deviations
from specifications and certifications made in connection therewith constitute
violations of various statutory and regulatory provisions, the Company may,
among other things, be subject to criminal prosecution, treble damages and
penalties under the Civil False Claims Act or the Racketeer Influenced and
Corrupt Organization Act ("RICO"), as well as administrative sanctions, such as
debarment from future government contracting. The Company is unable to
determine the effect, if any, of the bankruptcy filing on the ESNA matter.
NOTE 5
The Company failed to meet the fixed charge ratio financial covenant
in connection with its DIP financing agreement during the months of October and
November 1997. On December 29, 1997 the Company entered into Amendment No. 1
Waiver and Consent (the "Amendment") to Post-Petition Loan and Security
Agreement with its lenders whereby the lenders from December 29, 1997 waived
all defaults or events of default which have occurred prior to such date from
the failure to comply with the above financial covenant. The lenders also
entered into the Amendment to replace the fixed charge ratio covenant with
monthly consolidated EBITDA and consolidated tangible net worth covenents
commencing calculations at December 31, 1997. The Amendment requires the
lenders' consent for capital expenditures in excess of $30,000 for the year
ending September 30, 1998. The Company was in compliance with the EBITDA and
consolidated tangible net worth covenants at December 31, 1997.
The Company also entered into Amendment No. 2 and Consent to the
Post-Petition Loan and Security Agreement, dated January 27, 1998, (the
"Amended DIP Financing Agreement"), pursuant to which the lenders have
consented to the term loan, discussed in Note 7, the creation of subordinated
liens thereunder, and to certain asset sales. In addition, the Amended DIP
Financing Agreement presently provides for an availability reserve of $5,000
and will be reduced to $0, upon the receipt by the lenders of not less than
$15,000 from the sale or other disposition of the Toledo facility. The Company
is to use the Toledo proceeds to prepay remaining installments, 50% in direct
order and 50% in inverse order of their maturities.
The term of the Amended DIP Facility is the earlier of (i) the date
occurring two years from May 8, 1997, or (ii) the date the line of credit is
terminated, and (a) the earlier of the effective date a Plan of Reorganization
is confirmed by an order of the bankruptcy court and (b) the date on which any
distributions are made under a Plan of Reorganization that is confirmed by
order of a bankruptcy court.
The Amended DIP Financing provides that any asset sale proceeds (other
than Toledo proceeds) are to be used to pay pre-petition and revolving loans
indebtedness so that after giving effect thereto the aggregate net availability
is restored to its status immediately prior to the transaction giving rise to
the proceeds; and then to prepay remaining installments in the order described
above.
The lenders have consented to certain minimum realizations from future
asset sales, as follows: not less than $2 million with
7
<PAGE>
respect to the sale of Harman Automotive, not less than $15 million with
respect to the sale or disposition of Toledo, and not less than $2 million with
respect to the sale of Harvard Interiors, all with prepayments of indebtedness
to be effected in the manner set forth above. There is no assurance that such
minimum realizations will be obtained.
NOTE 6
During the current quarter, the Company recorded $5,000 in
restructuring charges representing estimated shutdown costs of $2,500, related
primarily to severance and moving costs associated with the move of the
Corporate headquarters from Tampa, Florida to Lebanon, New Jersey and
approximately $2,500 for two senior executive officers to induce them to stay
until the earlier of (i) the date of consummation of the plan of reorganization,
plus, if requested by the Board, up to additional 60 days beyond such date,
(ii) the date of termination by the executive for good reason, death,
disability or retirement, or (iii) the termination by the Company of the
executive's employment for any reason.
NOTE 7
The Company entered into a Term Loan Agreement dated as of January 16,
1998, for a $25,000 postpetition term loan facility which is subordinated to
the security interests under the existing DIP loans. The loan is payable May 8,
1999 or the date the existing DIP loan is terminated and bears interest at a
rate per annum equal to the greater of the highest per annum interest rate for
term loans and revolving credit loans under the existing DIP loans plus 3%, or
13%. The net proceeds from the loan were used to reduce the current balance of
the revolver portion of the DIP loans to zero. Excess proceeds will be used
for future expenditures. As a result the collateral reserve was reduced to
$5,000 creating additional availability.
NOTE 8
Effective with the quarter ended December 31, 1997, loss per common
share is computed by dividing net loss after deducting accrued dividends and
accretion related to PIK Preferred Stock by the weighted average number of
common shares outstanding in accordance with the standards of SFAS128 and the
change had no effect on such calculation. Options to purchase 836,571 shares
of common stock are outstanding at December 31, 1997. No consideration was
given in either period to equivalent shares related to stock options since
such assumed exercise would be anti-dilutive.
NOTE 9
The Company is also a party to various claims and routine litigation
arising in the normal course of its business. Based on information currently
available, management of the Company believes, after consultation with legal
counsel, that the result of such claims and litigation, except for the
uncertainties related to ESNA discussed in Note 4, will not have a material
effect on the financial position or results of operations of the Company.
NOTE 10
The income tax provision results principally from having an operating
profit in Canada and an operating loss in the U.S. for which benefit was not
recognized.
NOTE 11
Both the 12% Notes and the 11 1/8% Notes are guaranteed on a senior
unsecured basis, pursuant to guaranties (the "Guaranties") by all of the
Company's wholly-owned direct and certain of its wholly-owned indirect domestic
subsidiaries (the "Guarantors"). Both Notes are unconditionally guarantied,
jointly and severally, on a senior unsecured basis, by each of the Guarantors
under such Guarantor's
8
<PAGE>
guaranty (a "Guaranty"). Each Guaranty by a Guarantor is limited to an amount
not to exceed the maximum amount that can be guarantied by that Guarantor
without rendering the Guaranty, as it relates to such Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer. As
such, a Guaranty could be effectively subordinated to all other indebtedness
(including guaranties and other contingent liabilities) of the applicable
Guarantor, and, depending on the amount of such indebtedness, a Guarantor's
liability on its Guaranty could be reduced to zero. The Company conducts all of
its automotive business through and derives virtually all of its income from
its subsidiaries. Therefore, the Company's ability to make required principal
and interest payments with respect to the Company's indebtedness (including the
Notes) and other obligations depends on the earnings of its subsidiaries and on
its ability to receive funds from its subsidiaries through dividends or other
payments. The ability of its subsidiaries to pay such dividends or make
payments on intercompany indebtedness or otherwise will be subject to
applicable state laws.
The Note indentures provide that upon the sale or other disposition of
a Guarantor or the sale or disposition of all or substantially all of the
assets of a Guarantor (in each case other than to the Company or an affiliate
of the Company) permitted by such indentures governing the Notes, such
Guarantor will be released and relieved from all of its obligations under its
Guaranty.
The following condensed consolidating information presents:
1. Condensed balance sheets as of December 31, 1997 and September 30,
1997 and condensed statements of operations and cash flows for the three months
ended December 31, 1997 and 1996.
2. The Parent Company and Combined Guarantor Subsidiaries with their
investments in subsidiaries accounted for on the equity method.
3. Elimination entries necessary to consolidate the Parent Company and
all of its subsidiaries.
4. Reorganization items have been included under the Parent Company in
the accompanying condensed consolidating statements of operations and cash
flows.
5. The Parent Company, pursuant to the terms of an interest bearing
note with Guarantor Subsidiaries, has included in their allocation of expenses,
interest expense for the three months ended December 31, 1997 and 1996.
The Company believes that providing the following condensed
consolidating information is of material interest to investors in the Notes and
has not presented separate financial statements for each of the Guarantors,
because it was deemed that such financial statements would not provide the
investor with any material additional information.
9
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1997
(In thousands of dollars)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 3,597 $ 3,873 $ (775) $ - $ 6,695
Accounts receivable, net.................... 2,076 65,993 3,898 - 71,967
Inventories................................. 2,065 43,975 926 - 46,966
Prepaid expenses and other current assets... 2,325 6,505 6 - 8,836
--------- --------- ------------ ------------ -----------
Total current assets...................... 10,063 120,346 4,055 - 134,464
Investment in subsidiaries.................... (49,110) 11,471 - 37,639 -
Property, plant and equipment, net............ 3,761 112,677 8,613 - 125,051
Intangible assets, net........................ - 4,021 - - 4,021
Intercompany receivables...................... 240,411 349,544 9,389 (599,344) -
Other assets, net............................. 19,878 4,367 - - 24,245
--------- --------- ------------ ------------ -----------
$ 225,003 $ 602,426 $ 22,057 $ (561,705) $ 287,781
========= ========= ============ ============ ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIENCY)
Current liabilities:
Current portion of DIP loans................ $ 851 $ 18,558 $ - $ - $ 19,409
Current portion of long-term debt........... - 1,913 - - 1,913
Accounts payable............................ 13 30,241 2,153 - 32,407
Accrued expenses............................ 19,629 63,378 182 - 83,189
Income taxes payable........................ 225 1,766 915 - 2,906
--------- --------- ------------ ------------ -----------
Total current liabilities............... 20,718 115,856 3,250 - 139,824
Liabilities subject to compromise(a).......... 317,585 79,361 74 - 397,020
DIP loans..................................... 486 39,942 - 40,428
Long-term debt................................ - 11,783 - 11,783
Postretirement benefits other than pensions... - 98,404 - - 98,404
Intercompany payables......................... 311,702 281,332 6,310 (599,344) -
Other......................................... 2,970 24,858 952 - 28,780
--------- --------- ------------ ------------ -----------
Total liabilities...................... 653,461 651,536 10,586 (599,344) 716,239
--------- --------- ------------ ------------ -----------
PIK Preferred................................. 124,637 - - - 124,637
--------- --------- ------------ ------------ -----------
Shareholders' equity (deficiency):
Common stock and additional
paid-in-capital........................... 32,204 73,054 10 (73,064) 32,204
Additional minimum pension liability........ (3,665) (3,659) - 3,659 (3,665)
Foreign currency translation adjustment..... (2,378) (2,378) (2,378) 4,756 (2,378)
Retained earnings (deficiency).............. (579,256) (116,127) 13,839 102,288 (579,256)
--------- --------- ------------ ------------ -----------
Total shareholders' equity (deficiency)... (553,095) (49,110) 11,471 37,639 (553,095)
--------- --------- ------------ ------------ -----------
$ 225,003 $ 602,426 $ 22,057 $ (561,705) $ 287,781
========= ========= ============ ============ ===========
</TABLE>
(a) Includes $309,728 senior notes payable and accrued
interest which are subject to the guaranty of the combined
guarantor subsidiaries.
10
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 1997
(In thousands of dollars)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
---------- -------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 3,324 $ 5,376 $ 512 $ - $ 9,212
Accounts receivable, net....................... 2,795 71,355 2,040 - 76,190
Inventories.................................... 2,475 50,662 1,081 - 54,218
Prepaid expenses and other current assets...... 1,698 5,904 - - 7,602
--------- --------- ----------- ---------- ----------
Total current assets......................... 10,292 133,297 3,633 - 147,222
Investment in subsidiaries....................... (48,751) 12,138 - 36,613 -
Property, plant and equipment, net............... 3,878 119,164 9,224 - 132,266
Intangible assets, net........................... - 4,417 - - 4,417
Intercompany receivables......................... 240,542 276,424 9,483 (526,449) -
Other assets, net................................ 20,164 3,425 - - 23,589
--------- --------- ----------- ---------- ----------
$ 226,125 $ 548,865 $ 22,340 $ (489,836) $ 307,494
========= ========= =========== ========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIENCY)
Current liabilities:
Current portion of DIP loans................... $ 867 $ 35,569 $ - $ - $ 36,436
Current portion of long-term debt.............. - 1,748 - - 1,748
Accounts payable............................... 228 30,214 1,825 - 32,267
Accrued expenses............................... 16,088 55,959 188 - 72,235
Income taxes payable........................... (1,751) 1,246 2,945 - 2,440
--------- --------- ----------- ---------- ----------
Total current liabilities.................. 15,432 124,736 4,958 - 145,126
Liabilities subject to compromise(a)............. 317,508 79,742 69 - 397,319
DIP loans........................................ 705 50,330 - - 51,035
Long-term debt................................... - 12,339 - - 12,339
Postretirement benefits other than pensions...... - 96,929 - - 96,929
Intercompany payables............................ 311,955 210,284 4,210 (526,449) -
Other............................................ 3,016 23,256 965 - 27,237
--------- --------- ----------- ---------- ----------
Total liabilities......................... 648,616 597,616 10,202 (526,449) 729,985
--------- --------- ----------- ---------- ----------
PIK Preferred.................................... 124,637 - - - 124,637
--------- --------- ----------- ---------- ----------
Shareholders' equity (deficiency):
Common stock and additional
paid-in-capital.............................. 32,204 73,054 10 (73,064) 32,204
Additional minimum pension liability........... (3,665) (3,659) - 3,659 (3,665)
Foreign currency translation adjustment........ (1,930) (1,930) (1,930) 3,860 (1,930)
Retained earnings (deficiency)................. (573,737) (116,216) 14,058 102,158 (573,737)
--------- --------- ----------- ---------- ----------
Total shareholders' equity (deficiency)...... (547,128) (48,751) 12,138 36,613 (547,128)
--------- --------- ----------- ---------- ----------
$ 226,125 $ 548,865 $ 22,340 $ (489,836) $ 307,494
========= ========= =========== ========== ==========
</TABLE>
(a) Includes $309,728 senior notes payable and accrued
interest which are subject to the guaranty of the combined
guarantor subsidiaries.
11
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING INCOME STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1997
(In thousands of dollars)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Elimination Consolidated
------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Sales..................................... $ 4,018 $ 188,871 $ 4,163 $ - $ 197,052
--------- ----------- --------- ----------- ---------
Costs and expenses:
Cost of sales........................... 3,933 183,738 4,051 - 191,722
Selling, general and administrative..... 2,237 7,598 - - 9,835
Interest expense........................ 833 3,016 3 - 3,852
Restructuring charges................... 5,000 - - - 5,000
Gain on sale of operation............... - (11,359) - - (11,359)
Amortization of goodwill................ - 396 - - 396
Other (income) expense, net............. - 16 (2) - 14
Equity in (income) loss of -
subsidiaries.......................... (89) 219 - (130) -
Allocated expenses...................... (5,369) 5,039 330 - -
--------- ----------- --------- ----------- ---------
Total costs and expenses............ 6,545 188,663 4,382 (130) 199,460
--------- ----------- --------- ----------- ---------
Income (loss) before income taxes and
reorganization items................. (2,527) 208 (219) 130 (2,408)
Reorganization items...................... 2,992 (50) - - 2,942
--------- ----------- --------- ----------- ---------
Income (loss) before income taxes......... (5,519) 258 (219) 130 (5,350)
Provision for income taxes................ - 169 - - 169
--------- ----------- --------- ----------- ---------
Net loss............................... $ (5,519) $ 89 $ (219) $ 130 $ (5,519)
========= =========== ========= =========== =========
</TABLE>
12
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING INCOME STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1996
(In thousands of dollars)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Elimination Consolidated
------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Sales...................................... $ 6,991 $ 174,502 $ 5,768 $ - $ 187,261
--------- --------- --------- --------- ---------
Costs and expenses:
Cost of sales............................ 6,580 178,779 5,103 - 190,462
Selling, general and administrative...... 2,558 7,647 - - 10,205
Interest expense......................... 9,246 2,897 45 - 12,188
Amortization of goodwill................. 3,828 - - 3,828
Other (income) expense, net.............. (46) 301 3 - 258
Equity in (income) loss of
subsidiaries........................... 24,201 (37) - (24,164) -
Allocated expenses....................... (5,380) 4,961 419 - -
--------- --------- --------- --------- ---------
Total costs and expenses............. 37,159 198,376 5,570 (24,164) 216,941
--------- --------- --------- --------- ---------
Income (loss) before income taxes.......... (30,168) (23,874) 198 24,164 (29,680)
Provision for income taxes................. - 327 161 488
--------- --------- --------- --------- ---------
Net income (loss)....................... $ (30,168) $ (24,201) $ 37 $ 24,164 $ (30,168)
========= ========= ========= ========= =========
</TABLE>
13
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1997
(In thousands of dollars)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Elimination Consolidated
------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows related to operating activities:
Loss from continuing operations before
reorganization items.......................... $ (2,577) $ 39 $ (219) $ 180 $ (2,577)
Add back (deduct) items not affecting
cash and cash equivalents:
Equity in (income) loss of subsidiaries....... (39) 219 - (180) -
Depreciation and amortization................. 518 7,223 367 - 8,108
Gain on sale of operation..................... - (11,354) - - (11,354)
Loss on disposition of property, plant and
equipment.................................... - 15 - - 15
Postretirement benefits....................... - 1,475 - - 1,475
Changes in operating assets and liabilities net
of effects from reorganization items:
Accounts receivable........................... 719 2,017 (1,858) - 878
Inventories................................... 410 5,317 155 - 5,882
Other current assets.......................... (627) (601) (6) - (1,234)
Accounts payable.............................. (138) (222) 333 - (27)
Accrued expenses and income taxes payable..... 4,984 2,933 (2,036) - 5,881
Other noncurrent liabilities.................. - 2,602 - - 2,602
---------- --------- --------- --------- ---------
Net cash provided by (used in) continuing
operations before reorganization items....... 3,250 9,663 (3,264) - 9,649
Net cash provided by (used in) reorganization
items........................................ (2,495) 50 - - (2,445)
---------- --------- --------- --------- ---------
Net cash provided by (used in) continuing
operations................................... 755 9,713 (3,264) - 7,204
---------- --------- --------- --------- ---------
Cash flows related to investing activities:
Acquisition of property, plant and equipment.... (85) (1,181) (88) - (1,354)
Net proceeds from sale of operation............. 16,391 - - 16,391
Net change in other noncurrent accounts......... (40) (1,528) (129) - (1,697)
---------- --------- --------- --------- ---------
Net cash provided by (used in) investing
activities...................................... (125) 13,682 (217) - 13,340
---------- --------- --------- --------- ---------
Cash flows related to financing activities:
Net borrowings (repayments) under DIP financing (235) (27,399) - - (27,634)
Advance payment from customer................... - 5,000 - - 5,000
Repayments of long-term debt.................... - (391) - - (391)
Payment of EPA settlements...................... - (36) - - (36)
Net changes in intercompany balances............ (122) (2,072) 2,194 - -
---------- --------- --------- --------- ---------
Net cash provided by (used in) financing
activities...................................... (357) (24,898) 2,194 - (23,061)
---------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents..................................... 273 (1,503) (1,287) - (2,517)
Cash and cash equivalents:
Beginning of period............................. 3,324 5,376 512 - 9,212
---------- --------- --------- --------- ---------
End of period................................... $ 3,597 $ 3,873 $ (775) $ - $ 6,695
========== ========= ========= ========= =========
</TABLE>
14
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1996
(In thousands of dollars)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Elimination Consolidated
------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows related to operating activities:
Net income (loss).................................... $ (30,168) $ (24,201) $ 37 $ 24,164 $ (30,168)
Add back (deduct) items not affecting
cash and cash equivalents:
Equity in (income) loss of subsidiaries............ 24,201 (37) - (24,164)
Depreciation and amortization...................... 760 16,269 207 - 17,236
Loss on disposition of property, plant and
equipment......................................... - 308 - - 308
Postretirement benefits............................ - 1,666 - - 1,666
Changes in operating assets and liabilities:
Accounts receivable................................ 687 17,934 167 - 18,788
Inventories........................................ 234 (6,483) (606) - (6,855)
Other current assets............................... (383) 218 (16) - (181)
Accounts payable................................... (1,584) (13,379) (627) - (15,590)
Accrued expenses and income taxes payable.......... 8,904 (4,715) (332) - 3,857
Other noncurrent liabilities........................ - 1,101 - - 1,101
--------- --------- -------------- --------- ---------
Net cash provided by (used in) operations.......... 2,651 (11,319) (1,170) - (9,838)
--------- --------- -------------- --------- ---------
Cash flows related to investing activities:
Acquisition of property, plant and equipment......... (5) (8,903) (1,002) - (9,910)
Proceeds to date from sale of discontinued operations - - - - 0
Proceeds from disposition of property,
plant and equipment................................ - 3 - - 3
Net change in other noncurrent accounts.............. (129) (993) 38 - (1,084)
--------- --------- -------------- --------- ---------
Net cash provided by (used in) investing activities.... (134) (9,893) (964) - (10,991)
--------- --------- -------------- --------- ---------
Cash flows related to financing activities:
Net borrowings under revolver........................ 3,404 20,125 - - 23,529
Proceeds from exercise of stock options.............. 12 - - - 12
Repayments of long-term debt......................... - (392) - - (392)
Pension fund payment pursuant to PBGC settlement
agreement........................................... (1,500) - - - (1,500)
Payment of EPA settlements........................... (511) (99) - - (610)
Net changes in intercompany balances................. 2,729 (2,584) (145) -
--------- --------- -------------- --------- ---------
Net cash provided by (used in) financing activities... 4,134 17,050 (145) - 21,039
--------- --------- -------------- --------- ---------
Net increase (decrease) in cash and cash equivalents... 6,651 (4,162) (2,279) - 210
Cash and cash equivalents:
Beginning of period.................................. (1,655) 4,367 (1,605) - 1,107
--------- --------- -------------- --------- ---------
End of period........................................ $ 4,996 $ 205 $ (3,884) $ $ 1,317
========= ========= ============== ========= =========
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
FORWARD - LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking
statements. Additional written or oral forward-looking statements may be made
by the Company from time to time, in filings with the Securities and Exchange
Commission or otherwise. Such forward-looking statements are within the meaning
of that term in Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. Such statements may include, but not be
limited to, projections of revenues, income or losses, covenants provided for
in the DIP financing agreements, capital expenditures, plans for future
operations, financing needs or plans, plans relating to products or services of
the Company, as well as assumptions relating to the foregoing. In addition,
when used in this discussion, the words "anticipates," "believes," "estimates,"
"expects," "intends," "plans" and similar expressions are intended to identify
forward-looking statements.
Forward-looking statements are inherently subject to risks and
uncertainties, including, but not limited to, product demand, pricing, market
acceptance, risk of dependence on third party suppliers, intellectual property
rights and litigation, risks in product and technology development and other
risk factors detailed in the Company's Securities and Exchange Commission
filings, some of which cannot be predicted or quantified based on current
expectations. Consequently, future events and actual results could differ
materially from those set forth in, contemplated by, or underlying the
forward-looking statements. Statements in this Quarterly Report, particularly
in the Notes to Consolidated Financial Statements and "Management's Discussion
and Analysis of Financial Condition and Results of Operations," describe
factors, among others, that could contribute to or cause such differences.
Other factors that could contribute to or cause such differences include
unanticipated increases in launch and other operating costs, a reduction and
inconsistent demand for passenger cars and light trucks, labor disputes,
capital requirements, adverse weather conditions, the ability to consummate
successfully negotiations looking towards defraying certain costs in connection
with the wind-down of the Toledo, Ohio facility, unanticipated developments in
the bankruptcy proceedings and the impact thereof, as well as other pending
litigation, liquidity through consummation of a plan of reorganization, and
increases in borrowing costs.
Readers are cautioned not to place undue reliance on any
forward-looking statements contained herein, which speak only as of the date
hereof. The Company undertakes no obligation to publicly release the result of
any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
RESULTS OF OPERATIONS
Three Months Ended December 31, 1997 Compared to Three Months Ended December
31,1996
Sales. Consolidated sales increased $9,791 from $187,261 to $197,052,
or 5.2%. Aggregate sales for Harman Automotive, the furniture product line
of Harvard Interiors, Toledo and the Material Handling Division of
Kingston-Warren, each of which has been designated for sale ("Operations
16
<PAGE>
designated for sale or wind-down"), decreased approximately $8,563 from $55,071
to $46,508 related to the wind-down. The decrease was offset by $2,800 due to
an increase in average aluminum prices. The remaining operations sales
increased $18,354 from $132,190 to $150,544, of which $16,000 was due to a
higher demand for its products together with the fact that there was a GM
strike in the prior period and $2,900 to an increase in the average aluminum
prices.
Gross Profit. The consolidated gross profit expressed as a percentage
of sales (the "gross profit margin") increased from (1.7%) to 2.7%, or $8,531.
The gross loss for Operations designated for sale or wind-down amounted to
$(2,256) and $(3,116) in 1997 and 1996, respectively, and the improvement was
due mainly to a decrease of $2,800 in depreciation resulting from the
write-down of certain property, plant and equipment in the fourth quarter of
1997. The remaining operations gross profit (loss) increased from $(85) to
$7,586. The increase in gross profit for the remaining operations was mainly
due to volume increases mentioned above and $3,200 from decreases in
depreciation resulting from the write-down of certain property, plant and
equipment, mainly at the continuing operations of Doehler-Jarvis.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased from $10,205 to $9,835. The decrease reflects
reductions of $1,000 related to Operations designated for sale or wind-down.
Interest Expense. Interest expense decreased from $12,188 to $3,853.
However, but for giving effect to the discontinuance of accruing interest on
the senior notes of $8,905 from the date of filing bankruptcy, interest expense
would have increased by $570. This increase resulted from increased borrowings
and rate increases under the DIP financing agreements.
Amortization of Goodwill. The decrease of $3,432 in goodwill
amortization occurred because goodwill related to the acquisition of
Doehler-Jarvis ceased March 31, 1997, when such goodwill was written-off as
impaired.
Restructuring Charges. During the current quarter, the Company
recorded $5,000 in restructuring charges representing estimated shutdown and
relocation costs of $2,500, related primarily to severance and moving costs
associated with the move of the Corporate headquarters from Tampa, Florida to
Lebanon, New Jersey and approximately $2,500 for two senior executive officers
to induce them to stay until the earliest of (i) the date of consummation of
the plan of reorganization, plus, if requested by the Board, up to an
additional 60 days beyond such date, (ii) the date of termination by the
executive for good reason, death, disability or retirement, or (iii) the
termination by the Company of the executive's employment for any reason.
Gain on Sale of Operation. In November 1997, the Company sold the
Material Handling division of its Kingston-Warren subsidiary that resulted in a
gain on sale of $11,354.
Other (Income) Expense, Net. The change of $250 was mainly due to a
reduction in losses on disposal of machinery and equipment.
Reorganization Items. These charges represent mainly professional fees
incurred in connection with the bankruptcy proceedings.
Provision for Income Taxes. The decrease in the provision for income
taxes resulted from a decrease in operating profit in Canada.
17
<PAGE>
Net Loss. The net loss increased from $30,168 to $5,519 for the
reasons described above.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended December 31, 1997, the Company had a cash
flow from continuing operations of $7,204 as compared with a negative cash flow
from operations of $9,838 for the three months ended December 31, 1996. The
1997 cash flows improved due to increased profit margins, and by more rapid
payment terms by a major customer, but were negatively affected by payments of
reorganization items and advance and accelerated payments to post-petition
suppliers. The cash flow from operations in 1997, together with the proceeds
from the sale of an operation of $16,391, an advance payment from a customer in
connection with a supply agreement of $5,000, and cash on hand was used
primarily to fund capital expenditures of $1,354 and to repay financing
activities amounting to $28,061. The Company had a deficiency of earnings over
fixed charges and dividends on preferred stock of $2,408 and $33,904 in 1997
and 1996, respectively.
Projected cash flows for 1998 contemplate spending $12,000 in
reorganization items, $15,000 in restructuring charges and approximately
$6,000 to make the Company Year 2000 Compliant, resulting in a negative cash
flow from continuing operations. Additionally, capital expenditures of $30,000
are contemplated for 1998. The Company, therefore, entered into a Term Loan
Agreement, dated as of January 16, 1998, for a $25,000 postpetition term loan
facility to allow greater borrowing ability for its ongoing operations. This
facility is subordinated to the security interests under the existing DIP
loans, and is payable May 8, 1999, or the date the existing DIP loan is
terminated and bears interest at a rate per annum equal to the greater of the
highest per annum interest rate for term loans and revolving credit loans under
the existing DIP loans plus 3%, or 13%. The Company was required to pay
facility and funding fees aggregating $2,500. The net proceeds were used to
reduce the current balance of the revolver portion of the DIP loans to zero
and any balance will be used for future expenditures.
The Company failed to meet the fixed charge ratio financial covenant
during the months of October and November 1997. On December 29, 1997, the
Company entered into Amendment No. 1 Waiver and Consent (the "Amendment") to
Post-Petition Loan and Security Agreement with its lenders whereby the lenders
from December 29, 1997 waived all defaults or events of default which have
occurred prior to such date from the failure to comply with the above financial
covenant. The lenders also entered into the Amendment to replace the fixed
charge ratio covenant with monthly consolidated EBITDA and consolidated
tangible net worth covenants commencing calculations at December 31, 1997. The
Amendment requires the lenders' consent for capital expenditures in excess of
$30,000 for the year ending September 30, 1998. The Company was in compliance
with the EBITDA and consolidated tangible net worth covenants at December 31,
1997.
The Company also entered into Amendment No. 2 and Consent to the
Post-Petition Loan and Security Agreement, dated as of January 27, 1998,
pursuant to which the lenders have consented to the term loan, discussed
above, the creation of subordinated liens thereunder, and to certain asset
sales. In addition, the Amended DIP Financing Agreement presently provides for
an availability reserve of $5,000 and will be reduced to $0, upon the receipt
by the lenders of not less than $15,000 from the sale or other disposition of
the Toledo facility. The Company is to use the Toledo proceeds to prepay
remaining installments, 50% in direct order and 50% in inverse order of their
maturities.
As of February 9, 1998, the Company had availability to borrow
funds in the amount of $55,000 pursuant to the DIP revolving credit facility.
The Company is not permitted to borrow any money for funding any costs
or expenses incurred in connection with the wind-down of the Doehler-Jarvis
Toledo facility under both the DIP loan agreement and the subordinated loan
agreement unless reimbursed.
It is contemplated that the costs and expenses of the wind-down of the
Doehler-Jarvis Toledo facility will be borne by two major customers.
Negotiations are currently being conducted to effect these arrangements.
Definitive agreements reflecting such obligations are subject to the consent of
the DIP lenders, the Bankruptcy Court and the Toledo unions.
18
<PAGE>
ESNA. The Company believes that the 1998 estimated costs of the ESNA
matter, exclusive of possible fines, damages and penalties, if any, will not be
material. Such costs relate to costs associated with the Company's ongoing
participation in the Department of Defense Voluntary Disclosure Program.
However, the ultimate cost of disposition of this matter, as well as the
required funding of such costs, depends upon future events, the outcomes of
which are not determinable at the present time, including the Company receiving
favorable consideration from the government as a result of its admission into
the Voluntary Disclosure Program. Such outcomes could have a material effect
on the Company's financial condition, results of operations and/or liquidity.
If it is ultimately determined that the deviation from specifications and
certifications made in connection therewith constitute violations of various
statutory and regulatory provisions, the Company may, among other things, be
subject to criminal prosecution, treble damages and penalties under the Civil
False Claims Act or Racketeer Influenced and Corrupt Organization Act, as well
as administrative sanctions, such as debarment from future government
contracting. The Company is unable to determine the effect, if any, of the
bankruptcy filing on the ESNA matter.
Year 2000 Compliance. Certain of the Company's information systems are
not presently compliant with the requirements of the year 2000. The Company has
committed the resources necessary to ensure that its critical information
systems and technology infrastructure are "Year 2000 Compliant" before
transactions for the year 2000 are expected. Certain of the Company's systems
will be replaced with an "Enterprise Resource Planning" (ERP) solution. In
January 1998, the Company purchased 2000 compliant software and implementation
support at a cost of approximately $10,000 of which approximately $2,500 will
be spent in the second quarter. The Company estimates it will also incur
approximately $2,500 of internal costs associated with implementation of the
new software during the remainder of fiscal 1998 and 1999 to complete its
2000 compliance requirements.
19
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
On January 27, 1998, the Company and its direct subsidiaries (the
"Borrowers") entered into a Term Loan Agreement, dated as of January 16, 1998,
with a group of lenders, including two members of the official committee of
unsecured creditors in the chapter 11 proceedings (and certain of the latter's
affiliates), pursuant to which a $25 million postpetition term loan facility
subordinated to the security interests under the existing DIP Financing
Agreement is provided to the Borrowers to allow greater borrowing ability and
working capital sufficient for the Borrowers' ongoing operations (the
"Subordinated DIP Facility"). The Borrowers funded the Subordinated DIP
Facility upon execution of the Term Loan Agreement.
The following summary describes certain provisions of the Subordinated
DIP Facility, a copy of which is included as Exhibit 10.14 to this Quarterly
Report on Form 10-Q. The following summary does not purport to be complete and
is subject to and is qualified in its entirety by reference to the Subordinated
DIP Facility.
The term of the Subordinated DIP Facility is May 8, 1999, or the date
the line of credit under the existing DIP Financing Agreement is terminated.
The Borrowers are jointly and severally liable for the loan, which bears
interest at a rate per annum equal to the greater of (i) the highest per annum
interest rate for term loans and revolving credit loans under the existing DIP
Financing Agreement plus 3% and (ii) 13%. Interest is payable monthly in
arrears. The Borrowers paid upon consummation of the loan a facility fee of
$500,000 and a $2 million funding fee, both of which are non-refundable and
were funded out of the loan proceeds.
The Borrowers paid to The CIT Group/Business Credit, Inc., as Agent
under the existing DIP Financing Agreement, the net proceeds of the term loan,
after payment of the above fees and other expenses, to reduce revolving credit
loans and to pay certain other expenses under the existing DIP Financing
Agreement.
As collateral security for the loan, the Borrowers have pledged
substantially all of their assets, and priority liens have been placed on all
assets and properties of the Borrowers, subordinate to the collateral security
interests and liens under the existing DIP Financing Agreement.
The Borrowers are not permitted to borrow any money for funding any
costs or expenses incurred in connection with the closing of the facilities of
Doehler-Jarvis in Toledo, Ohio, unless reimbursed.
An Event of Default (as defined in the Subordinated DIP Facility) may,
among other things, be deemed to exist under the Subordinated DIP Facility if
Mr. Roger Pollazzi shall cease to be the Chief Executive Officer or Chief
Operating Officer of the Company or if the employment of Mr. Ted Vogtman or Mr.
Vince Toscano shall be terminated for any reason, other than by reason of such
employee's death or disability.
20
<PAGE>
The following summary describes certain provisions of Amendment No. 2
and Consent to the Post-Petition Loan and Security Agreement, dated as of
January 27, 1998, among the Borrowers and The CIT/Business Group, Inc., as
Agent for the lenders described therein, and the lenders, a copy of which is
included as Exhibit 10.13 to this Quarterly Report on Form 10-Q. The following
summary does not purport to be complete and is subject to and is qualified in
its entirety by reference to the document.
The Borrowers entered into Amendment No. 2 and Consent to the
Post-Petition Loan and Security Agreement (the "Amended DIP Financing
Agreement"), pursuant to which the lenders have consented to the term loan and
the Subordinated DIP Facility, the creation of subordinated liens thereunder,
and to certain asset sales. In addition, the Amended DIP Financing Agreement
presently provides for an Availability Reserve of $5 million and will be
reduced to $0, upon the receipt by the Agent of not less than $15 million from
the sale or other disposition of the Toledo facility. The Borrowers are to use
the Toledo proceeds to prepay remaining installments, 50% in direct order and
50% in inverse order of their maturities.
The term of the Amended DIP Facility is the earlier of (i) the date
occurring two years from May 8, 1997, or (ii) the date the line of credit is
terminated, and (a) the earlier of the effective date a Plan of Reorganization
is confirmed by an order of the bankruptcy court and (b) the date on which any
distributions are made under a Plan of Reorganization that is confirmed by
order of a bankruptcy court.
The Amended DIP Financing Agreement provides that any asset sale
proceeds (other than Toledo proceeds) are to be used to pay pre-petition and
revolving loans indebtedness so that after giving effect thereto the Aggregate
Net Availability is restored to its status immediately prior to the transaction
giving rise to the proceeds; and then to prepay remaining installments in the
order described above.
The lenders have consented to certain minimum realization from future
asset sales, as follows: not less than $2 million with respect to the sale of
Harman Automotive, not less than $15 million with respect to the sale or
disposition of Toledo, and not less than $2 million with respect to the sale of
Harvard Interiors, all with prepayments of indebtedness to be effected in the
manner set forth above.
The Ratio of Earnings to Fixed Charges and Dividends on Preferred
Stock, and the supporting compilations thereof, are filed as Exhibit 12.1 to
this Quarterly Report on Form 10-Q and are incorporated herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.13 Amendment No. 2 and Consent to Post-Petition Loan and
Security Agreement, dated as of January 16, 1998, among
the Company and certain of its subsidiaries and the CIT
Group/Business Credit, Inc. and other lenders therein
specified.
10.14 Term Loan Agreement, dated as of January 16, 1998, among
the Company and certain of its subsidiaries and the lenders
therein specified.
12.1 Computation of Ratio of Earnings to Fixed Charges and
Dividends on Preferred Stock.
(b) Reports on Form 8-K:
None.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto authorized.
HARVARD INDUSTRIES, INC.
(Registrant)
February 13, 1998 BY /s/ Joseph J. Gagliardi
--------------------------------------------
Joseph J. Gagliardi
Senior Vice President Finance and
Chief Financial Officer
(Principal Financial Officer)
February 13, 1998 BY /s/ William J. Warren
-------------------------------------------
William J. Warren
Vice President and Chief Accounting Officer
(Principal Accounting Officer)
22
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
10.13 Amendment No. 2 and Consent to Post-Petition
Loan and Security Agreement, dated as of
January 16, 1998, among the Company and
certain of its subsidiaries and the CIT
Group/Business Credit, Inc. and other
lenders therein specified.
10.14 Term Loan Agreement, dated as of January 16,
1998, among the Company and certain of its
subsidiaries and the lenders therein
specified.
12.1 Computation of Ratio to Earnings to Fixed
Charges and Dividends on Preferred Stock.
27.1 Financial Data Schedule
<PAGE>
AMENDMENT NO. 2 AND CONSENT
TO
POST-PETITION LOAN AND SECURITY AGREEMENT
THE CIT GROUP/BUSINESS CREDIT, INC.
AS AGENT AND LENDER
AND
CONGRESS FINANCIAL CORPORATION
GENERAL ELECTRIC CAPITAL CORPORATION
HELLER FINANCIAL, INC.
FINOVA CAPITAL CORPORATION
FOOTHILL CAPITAL CORPORATION
AND
BANKBOSTON, N.A.
AS LENDERS
AND
HARVARD INDUSTRIES, INC.,
THE KINGSTON-WARREN CORPORATION,
HARMAN AUTOMOTIVE, INC.,
HAYES-ALBION CORPORATION,
DOEHLER-JARVIS, INC.,
DOEHLER-JARVIS GREENEVILLE, INC.,
DOEHLER-JARVIS POTTSTOWN, INC.,
DOEHLER-JARVIS TECHNOLOGIES, INC.,
AND
DOEHLER-JARVIS TOLEDO, INC.
(AS COMPANIES)
DATED AS OF: JANUARY 16, 1998
<PAGE>
AMENDMENT NO. 2 AND CONSENT (the "Amendment") dated as of
January 16, 1998, by and among HARVARD INDUSTRIES, INC., a Florida corporation
and a debtor and debtor in possession under chapter 11 of the Bankruptcy Code
(herein "Harvard"), DOEHLER-JARVIS, INC., a Delaware corporation and a debtor
and debtor in possession under chapter 11 of the Bankruptcy Code ("DJ Inc."),
THE KINGSTON-WARREN CORPORATION, a New Hampshire corporation and a debtor and
debtor in possession under chapter 11 of the Bankruptcy Code ("Kingston
Warren"), HARMAN AUTOMOTIVE, INC., a Michigan corporation and a debtor and
debtor in possession under chapter 11 of the Bankruptcy Code ("Harman
Automotive"), HAYES-ALBION CORPORATION, a Michigan corporation and a debtor and
debtor in possession under chapter 11 of the Bankruptcy Code ("Hayes- Albion"),
DOEHLER-JARVIS GREENEVILLE, INC., a Delaware corporation and a debtor and
debtor in possession under chapter 11 of the Bankruptcy Code, DOEHLER-JARVIS
POTTSTOWN, INC., a Delaware corporation and a debtor and debtor in possession
under chapter 11 of the Bankruptcy Code ("DJ Pottstown"), DOEHLER-JARVIS
TECHNOLOGIES. INC., a Delaware corporation and a debtor and debtor in
possession under chapter 11 of the Bankruptcy Code ("DJ Technologies"), and
DOEHLER-JARVIS TOLEDO, INC., a Delaware corporation and a debtor and debtor in
possession under chapter 11 of the Bankruptcy Code ("DJ Toledo"), THE CIT
GROUP/BUSINESS CREDIT, INC. ("CITBC") as agent for the Lenders whose names are
set forth on the signature pages hereto (each a "Lender" and collectively the
"Lenders" and CITBC as such agent being the "Agent") and the Lenders. Harvard
and each of the entities subsequently identified above (other than the Agent
and the Lenders) are referred to herein individually as a "Company" and
collectively as the "Companies").
W I T N E S S E T H
WHEREAS, each Company has filed a separate petition for
relief under chapter 11 of title 11 of the United States Code (the "Chapter 11
Cases") with the United States Bankruptcy Court for the District of Delaware
(the "Court") and continues to operate its business as a debtor-in-possession;
and
WHEREAS, the Companies, the Lenders and CITBC, as Agent, are
parties to that certain Post-Petition Loan and Security Agreement, dated as of
May 8, 1997 (as amended hereby and by Amendment No. 1, Waiver and Consent dated
December 29, 1997, and as further amended, extended, supplemented or otherwise
modified from time to time, the "DIP Financing Agreement" and capitalized terms
defined in the DIP Financing Agreement and not otherwise defined herein having
the meanings provided therein), providing for, inter alia, Term Loans and
Revolving
<PAGE>
Credit Loans to the Companies in the aggregate principal amounts of $65,000,000
for the Term Loans and up to $110,000,000 for the Revolving Credit Loans; and
WHEREAS, pursuant to the Final Order dated June 12, 1997 (the
"Final Order") the Court, inter alia, approved the DIP Financing Agreement and
all transactions contemplated by the DIP Financing Agreement; and
WHEREAS, pursuant to the Final Order and the DIP Financing
Agreement, the Post-Petition Obligations (as defined in the Final Order) (i)
are secured by fully perfected and subsisting first priority liens on and
security interests in all assets and properties of the Companies (subject only
to the Carve-Out, Superior Existing Liens and Permitted Purchase Money Liens
(each as defined in the Final Order)) and (ii) constitute in accordance with
section 364(c)(1) of the Bankruptcy Code, claims against each of the Companies
which are administrative expense claims having priority over any and all
administrative expenses of the kind specified in sections 503(b) or 507(b) of
the Bankruptcy Code, subject only to the Carve-Out; and
WHEREAS, pursuant to that certain Term Loan Agreement, dated
as of January 16, 1998, (the "Junior Loan Agreement") the lenders named therein
(the "Junior Lenders") have agreed to loan $25,000,000 (the "Junior Loan") to
the Companies, on a subordinated basis, to be used by the Companies, inter
alia, to repay Revolving Credit Loans which are outstanding on the Effective
Date (as hereinafter defined); and
WHEREAS, the Companies have requested the Agent and the
Lenders to enter into this Amendment, inter alia, (i) to permit the incurrence
of the Indebtedness and the creation of the Liens under the Junior Loan
Agreement, (ii) to amend certain provisions of the DIP Financing Agreement and
(iii) to consent to certain asset sales, each upon the terms and subject to the
conditions contained in this Amendment; and
WHEREAS, it is a condition precedent to the Agent and the
Lenders agreeing to amend the DIP Financing Agreement as requested by the
Companies that (i) the parties hereto enter into the Amendment and (ii) the
Junior Lenders, the Agent and the Lenders, enter into an Intercreditor
Agreement substantially in the form attached as Exhibit A hereto (the
"Intercreditor Agreement"), duly acknowledged by the Companies, in order to
establish, inter alia, the relative priority of their respective claims,
security interests and liens and the procedures for enforcing such claims,
security interests and liens; and
2
<PAGE>
WHEREAS, the Lenders have agreed with the Companies to enter
into this Amendment upon the terms and subject to the conditions contained
herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Amendments to the DIP Financing Agreement. Upon
the satisfaction of the conditions in Section 3 of this Amendment relating to
the effectiveness of this Section 1, the DIP Financing Agreement is hereby
amended as follows:
(i) Section 1 is hereby amended by:
(a) Deleting the existing definition of "Availability
Reserve" and replacing it in its entirety with the following:
"Availability Reserve" means $15,000,000, as such amount may
be reduced from time to time in accordance with Section 2.11 of this
Agreement.
(b) Deleting the existing definition of "Permitted
Encumbrances" and replacing it in its entirety with the following:
"Permitted Encumbrances" means (i) the Existing Liens; (ii)
any Lien created under the Post-Petition Loan Documents; (iii)
Permitted Purchase Money Liens; (iv) Customarily Permitted Liens; (v)
any Lien created under the Junior Loan Documents; and (v) the
arrangements contemplated by the Customer Transition Agreements.
(c) Deleting the existing definition of "Permitted
Indebtedness" and replacing it in its entirety with the following:
"Permitted Indebtedness" means: (i) Indebtedness in existence
on the Petition Date; (ii) Indebtedness secured by Permitted Purchase
Money Liens; (iii) Obligations; (iv) Indebtedness between or among the
Companies; (v) the obligations of the Companies pursuant to Interest
Rate Protection Agreements and hedging arrangements covering aluminum
and other raw materials, in either case entered into with the Agent's
consent; and (vi) Indebtedness arising under the Junior Loan Agreement
in an aggregate principal amount at any one time outstanding not to
exceed $25,000,000.
(d) Deleting the existing definition of "Termination Date"
and replacing it in its entirety with the following:
3
<PAGE>
"Termination Date" means the earliest of (i) the date
occurring two (2) years from the Closing Date, (ii) the date the Line
of Credit is terminated, and (iii) the Consummation Date.
(e) Adding the following new definitions in appropriate
alphabetical order:
"Consummation Date" means the earlier to occur of (i) the
effective date of a Plan of Reorganization confirmed by an order of
the Bankruptcy Court and (ii) the date on which any distributions are
made under a Plan of Reorganization that is confirmed by an order of
the Bankruptcy Court.
"Customer Transition Agreements" means the agreements which
may be entered into among the Companies and certain customers of DJ
Toledo which shall be in form and substance satisfactory to the
Lenders, relating to the reimbursement or payment by such customers of
certain costs and expenses related to the continued operation of DJ
Toledo, including without limitation, the Ford Transition Agreement
and the GM Transition Agreement.
"Ford Transition Agreement" means the agreement to be entered
into among the Companies and Ford Motor Company ("Ford") which shall
be in form and substance satisfactory to the Lenders, relating to (i)
the reimbursement or payment by Ford of certain costs and expenses
related to the continued operation of DJ Toledo, and (ii) the
assurance by Ford of the receipt by the Companies of a residual value
of the fixed assets of DJ Toledo of not less than $15,000,000.
"GM Transition Agreement" means the agreement to be entered
into among the Companies and General Motors Corporation ("GM") which
shall be in form and substance satisfactory to the Lenders, relating
to the reimbursement or payment by GM of certain costs and expenses
related to the continued operation of DJ Toledo.
"Intercreditor Agreement" means the Intercreditor Agreement,
dated as of January 16, 1998 between the Lenders and the Junior
Lenders and acknowledged by the Companies.
"Junior Lenders" means those Persons who are party to the
Junior Loan Agreement as "Term Lenders" and the Intercreditor
Agreement as "Junior Lenders".
4
<PAGE>
"Junior Loan Agreement" means the Term Loan Agreement dated
as of January 16, 1998 among the Companies and the Junior Lenders.
"Junior Loan" means the loan of $25,000,000 to the Companies
to be made pursuant to the Junior Loan Agreement.
"Junior Loan Documents" means the Junior Loan Agreement and
each document and instrument executed or delivered in connection
therewith or pursuant thereto or under which rights or remedies with
respect to any such document or instrument are governed, as the same
may from time to time be amended, supplemented or otherwise modified.
"Plan of Reorganization" means a proposed plan or plans of
reorganization for any one or more of the Companies whether filed with
or confirmed by order of the Bankruptcy Court.
"Toledo Proceeds" has the meaning set forth in Section 2.11.
(ii) Section 2 is hereby amended as follows:
(a) Deleting Section 2.4(c) and replacing it in its entirety
with the following:
(c) The Companies shall use Asset Sale Proceeds (other than
the Toledo Proceeds) to prepay principal in respect of Pre-Petition
Revolving Credit Loans and then Revolving Credit Loans to the extent
necessary so that after giving effect thereto the Aggregate Net
Availability is the same as existed immediately prior to the
transaction giving rise to such Asset Sale Proceeds; and then to
prepay scheduled Repayment Installments, to be applied fifty percent
(50%) in inverse order of their maturities and fifty percent (50%) in
direct order of their maturities. The Companies shall apply the Toledo
Proceeds as required by Section 2.11 of this Agreement.
(b) Adding a new Section 2.11 as follows:
2.11 Reduction in Availability Reserve; Application of Toledo
Proceeds. The Availability Reserve shall be reduced as follows: (a) to
$5,000,000 upon the application to the Revolving Credit Loans of not
less than $20,000,000 of the net proceeds of the Junior Loan; and (b)
to $0, upon the receipt by the Agent of not less than $15,000,000 from
the sale or other disposition of DJ Toledo (the "Toledo Proceeds")
(whether received as Asset
5
<PAGE>
Sale Proceeds, pursuant to Ford's obligations under the Ford
Transition Agreement or any combination thereof). The Companies shall
use the Toledo Proceeds to prepay remaining Repayment Installments,
50% in direct order and 50% in inverse order of their maturities.
(iii) Section 9 is hereby amended by adding a new Section
9.9 as follows:
9.9 DJ Toledo. Notwithstanding anything to the contrary
contained in this Agreement, no Company shall borrow any money or
incur any obligation hereunder or under any of the Post-Petition Loan
Documents for the purpose of funding any costs or expenses incurred in
connection with the closing of the manufacturing facilities and/or
premises of DJ Toledo in Toledo, Ohio, unless such Company has been or
will be reimbursed for all of such costs and expenses under and in
accordance with the terms and provisions of the Customer Transition
Agreements.
(iv) Section 11 is hereby amended by deleting the period at
the end of Section 11.1(s) and replacing it with "; or" and by adding the
following additional Events of Default as Sections 11.1(t) and (u):
(t) Any "Event of Default" shall have occurred under the
Junior Loan Agreement; or
(u) the Bankruptcy Court shall not have approved the
transactions contemplated by the Ford Transition Agreement and the GM
Transition Agreement by April 30, 1998.
SECTION 2. Representations and Warranties. Each of the
Companies hereby represents and warrants as to itself and its Subsidiaries that
(a) the execution, delivery and performance of this Amendment have been duly
authorized by all necessary corporate action on the part of such Company and
this Amendment constitutes a legal, valid and binding obligation of such
Company, enforceable against it in accordance with its terms, (b) except as
disclosed in writing to the Agent and the Lenders, no event has occurred and is
continuing on the date hereof that constitutes a Default or an Event of Default
or would constitute a Default or an Event of Default after giving effect to
this Amendment, and (c) the representations and warranties of such Company
contained in Section 6 of the DIP Financing Agreement are true and correct both
before and after giving effect to this Amendment, except to the extent such
representations and warranties are stated to be true only as of a particular
date,
6
<PAGE>
in which case such representations and warranties were correct on and as of such
date.
SECTION 3. Conditions to Effectiveness. The amendments and
consents in Sections 1, 4 and 6 of this Amendment shall become effective on the
date (the "Effective Date") when counterparts hereof shall have been executed
by all of the Lenders, the Agent and the Companies, and the following
conditions precedent shall have been satisfied:
(i) The Agent shall have received the following, each in form
and substance satisfactory to the Agent and the Lenders:
(a) The Intercreditor Agreement, duly executed by the Lenders
and the Junior Lenders and acknowledged by the Companies;
(b) The Junior Loan Agreement, duly executed by the Junior
Lenders and the Companies;
(c) A certificate of the secretary or an assistant secretary
of each of the Companies, dated the Effective Date, in form and
substance satisfactory to the Agent, certifying the names and true
signatures of each officer of such Company who have been authorized to
execute and deliver any document required to be executed and delivered
hereunder by or on behalf of such Company; and
(d) An order of the Bankruptcy Court authorizing and
approving the Junior Loan Agreement and this Amendment (the "Order").
(ii) The Order shall have been entered by the Bankruptcy
Court and shall be in full force and effect and shall not have been vacated,
reversed, modified, amended or stayed in any respect.
(iii) The Agent shall have received for application to the
Revolving Credit Loans net proceeds of not less than $20,000,000 from the
Junior Loan.
SECTION 4. Consent to Certain Asset Sales. The Lenders hereby
consent with effect from the Effective Date, to the extent required under the
DIP Financing Agreement, to the following transactions:
(i) The sale of Harman Automotive for net proceeds of not
less than $2,000,000, subject to (a) the entry of an order of the
Bankruptcy Court, in
7
<PAGE>
form and substance satisfactory to the Lenders, approving the sale,
and (b) Asset Sale Proceeds of not less than $2,000,000 being applied
50% towards remaining scheduled Repayment Installments in inverse
order of their maturities and 50% towards the Revolving Credit Loans.
(ii) The sale or disposition of DJ Toledo for net proceeds of
not less than $15,000,000, subject to (a) the entry of an order of the
Bankruptcy Court, in form and substance satisfactory to the Lenders,
approving the sale, and (b) Toledo Proceeds of not less than
$15,000,000 being applied to the remaining Repayment Installments as
required by Section 2.11 of the DIP Financing Agreement (as amended by
this Amendment).
(iii) The sale of Harvard Interiors for net proceeds of not
less than $2,000,000, subject to (a) the entry of an order of the
Bankruptcy Court, in form and substance satisfactory to the Lenders,
approving the sale, and (b) Asset Sale Proceeds of not less than
$1,000,000 being applied to prepay Revolving Credit Loans and Term
Loans as required by Sections 2.4 and 8.7 of the DIP Financing
Agreement (as amended by this Amendment).
SECTION 5. Effect on the DIP Financing Agreement. Except as
amended hereby, the DIP Financing Agreement and the other Post-Petition Loan
Documents shall remain in full force and effect. Nothing in this Amendment
shall be deemed to (i) constitute a waiver of compliance by any of the
Companies of any term, provision or condition of the DIP Financing Agreement or
any other instrument or agreement referred to therein or under the
Post-Petition Loan Documents or (ii) prejudice any right or remedy that Agent
or any Lender may now have or may have in the future under or in connection
with the DIP Financing Agreement or any other Post-Petition Loan Document.
SECTION 6. Consent to Junior Loan Agreement. The Lenders
hereby consent to the execution and delivery by the Companies of the Junior
Loan Agreement and the performance by the Companies of their obligations
thereunder.
SECTION 7. Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which taken together constitute one and the same
agreement.
SECTION 8. Governing Law. The validity, interpretation and
enforcement of this Amendment shall be governed by the law of the State of New
York.
8
<PAGE>
SECTION 9. Headings. Section headings in this Amendment are
included herein for the convenience of reference only and shall not constitute
part of this Amendment for any other purpose.
SECTION 10. References. References herein and in the
Post-Petition Loan Documents and the Final Order to the "DIP Financing
Agreement", the "Post-Petition Loan and Security Agreement", the "Postpetition
Loan Agreement", "this Agreement", "hereunder", "hereof", or words of like
import referring to the DIP Financing Agreement, shall mean and be a reference
to the DIP Financing Agreement as amended hereby.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered by their proper and duly authorized
officers as of the date set forth above. This Amendment shall take effect as of
the date set forth above after being accepted below by an officer of the Agent
and the Lenders after which, the Agent shall forward to Harvard a fully
executed original for its files.
HARVARD INDUSTRIES, INC.
THE KINGSTON-WARREN CORPORATION
HARMAN AUTOMOTIVE, INC.
HAYES-ALBION CORPORATION
DOEHLER-JARVIS, INC.
DOEHLER-JARVIS GREENEVILLE, INC.
DOEHLER-JARVIS POTTSTOWN, INC.
DOEHLER-JARVIS TECHNOLOGIES, INC.
DOEHLER-JARVIS TOLEDO, INC.
By: /s/ Joseph J. Gagliardi
------------------------
Name: Joseph J. Gagliardi
Title: Chief Financial Officer
THE CIT GROUP/BUSINESS CREDIT, INC.,
AS AGENT AND LENDER
By: /s/ Frank A. Grimaldi
---------------------------
Name: Frank A. Grimaldi
Title: Vice President
CONGRESS FINANCIAL CORPORATION,
AS LENDER
By: /s/ Laurence S. Forte
----------------------------
Name: Laurence S. Forte
Title: First Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION, AS LENDER
By: /s/ Martin S. Greenberg
------------------------------
Name: Martin S. Greenberg
Title: Duly Authorized Signatory
10
<PAGE>
HELLER FINANCIAL, INC., AS LENDER
By: /s/ Thomas W. Bukowski
-----------------------------
Name: Thomas W. Bukowski
Title: Senior Vice President
FINOVA CAPITAL CORPORATION,
AS LENDER
By: /s/ Brian Rujawitz
-------------------------------
Name: Brian Rujawitz
Title: Assistant Vice President
FOOTHILL CAPITAL CORPORATION,
AS LENDER
By: /s/ Matthew J. Simoneau
---------------------------
Name: Matthew J. Simoneau
Title: Vice President
BANKBOSTON, N.A. AS LENDER
By: /s/ Garrett M. Quinn
------------------------
Name: Garrett M. Quinn
Title: Vice President
11
<PAGE>
EXHIBIT A
Intercreditor Agreement
<PAGE>
TERM LOAN AGREEMENT,
dated as of January 16, 1998,
among
HARVARD INDUSTRIES, INC.,
THE KINGSTON-WARREN CORPORATION,
HARMAN AUTOMOTIVE, INC.
HAYES-ALBION CORPORATION,
DOEHLER-JARVIS, INC.
DOEHLER-JARVIS POTTSTOWN, INC.
DOEHLER-JARVIS TECHNOLOGIES, INC.
DOEHLER-JARVIS GREENVILLE, INC.
and
DOEHLER-JARVIS TOLEDO, INC.
AS BORROWERS,
and
THE LENDERS LISTED ON THE SIGNATURE PAGES HERETO,
AS LENDERS
<PAGE>
TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS; CONSTRUCTION .................................... 2
1.01. Certain Definitions ............................... 2
1.02. Construction ...................................... 13
1.03. Accounting Principles ............................. 13
ARTICLE II.
THE TERM LOAN ................................................ 13
2.01. Term Loan ......................................... 13
2.02. Term Notes ........................................ 13
2.03. Maturity Date ..................................... 14
2.04. Joint and Several Liability ....................... 14
2.05. Facility Fee ...................................... 15
2.06. Funding Fee ....................................... 15
2.07. Interest Rate ..................................... 15
2.08. Interest Payment Dates ............................ 15
2.09. Payments .......................................... 16
2.10. Use of Proceeds ................................... 16
2.11. Taxes ............................................. 16
ARTICLE III.
CONDITIONS PRECEDENT TO EFFECTIVENESS OF TERM LOAN ........... 18
3.01. Conditions Precedent to Effectiveness ............ 18
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES ............................... 21
4.01. Corporate Existence; Compliance with Law ......... 21
4.02. Corporate Power Authorization; Enforceable
Obligations ...................................... 21
4.03. Ownership of Property Liens ....................... 22
4.04. Labor Relations; Collective Bargaining Agreements.. 22
4.05. Other Ventures .................................... 23
4.06. Investment Company Act ............................ 23
4.07. Margin Regulations ............................... 23
4.08. Taxes ............................................. 23
4.09. ERISA ............................................ 24
4.10. Brokers ........................................... 26
-i-
<PAGE>
4.11. Intellectual Property ............................. 26
4.12. Full Disclosure .................................. 27
4.13. Environmental Matters ............................. 27
4.14. Capital Stock ..................................... 28
4.15. Holding Company and Investment Company Acts ....... 28
4.16. Permits, Etc. ..................................... 28
4.17. Schedules ......................................... 28
4.18. Insurance ........................................ 28
4.19. Financial Accounting Practices, Etc. .............. 29
4.20. Location of Bank Accounts ......................... 29
4.21. Lien Priority ..................................... 29
4.22. Court Orders ..................................... 29
4.23. Registration of Transfer of Term Notes ............ 29
ARTICLE V.
COLLATERAL ................................................... 30
5.01. Grant of Security Interest ........................ 30
5.02. Administrative Priority ........................... 32
5.03. Grants, Rights and Remedies Cumulative ............ 32
5.04. No Filings Required ............................... 32
5.05. Survival .......................................... 33
ARTICLE VI.
AFFIRMATIVE AND NEGATIVE COVENANTS ........................... 33
6.01. Covenants Under Existing DIP Loan Agreement ....... 33
6.02. Liens ............................................. 34
6.03. Indebtedness ...................................... 34
6.04. Overadvances ...................................... 34
ARTICLE VII.
DEFAULTS ..................................................... 35
7.01. Events of Default ................................. 35
7.02. Consequences of an Event of Default ............... 36
7.03. Certain Remedies .................................. 36
ARTICLE VIII.
MISCELLANEOUS ................................................ 37
8.01. Holidays .......................................... 37
8.02. Amendments and Waivers ............................ 37
-ii-
<PAGE>
8.03. No Implied Waiver; Cumulative Remedies ............ 37
8.04. Notices ........................................... 38
8.05. Expenses; Taxes; Attorneys' Fees; Indemnification . 38
8.06. Several and Not Joint; Limited Liability .......... 40
8.07. Application ...................................... 40
8.08. Sharing of Proceeds of Collateral ................. 41
8.09. Severability ...................................... 41
8.10. Governing Law .................................... 41
8.11. Prior Understandings .............................. 41
8.12. Duration; Survival ................................ 41
8.13. Participations .................................... 42
8.14. Counterparts ...................................... 42
8.15. Successors and Assigns ............................ 42
8.16. Waiver of Jury Trial .............................. 43
8.17. Right of Setoff ................................... 43
8.18. Headings .......................................... 43
-iii-
<PAGE>
SCHEDULES
Schedule 2.10 Wire Transfer Instructions
Schedule 4.03(a)(i) Ownership of Property; Liens
Schedule 4.03(a)(ii) Ownership of Property; Liens
Schedule 4.03(b) Ownership of Property; Liens
Schedule 4.04 Labor Relations
Schedule 4.05 Other Ventures
Schedule 4.08 Taxes
Schedule 4.9(a) ERISA
Schedule 4.9(c) ERISA
Schedule 4.9(g) ERISA
Schedule 4.9(h) ERISA
Schedule 4.9(k) ERISA
Schedule 4.13 Environmental Matters
Schedule 4.14 Capital Stock
Schedule 4.18 Insurance
Schedule 4.20 Location of Bank Accounts
<PAGE>
EXHIBITS
Exhibit A Existing DIP Loan Amendment
Exhibit B Form of Final Order
Exhibit C Intercreditor Agreement
Exhibit D Form of Term Note
<PAGE>
TERM LOAN AGREEMENT
THIS TERM LOAN AGREEMENT, dated as of January 16, 1998, among, Harvard
Industries, Inc., a Florida corporation and a debtor and debtor-in-possession
under chapter 11 of the Bankruptcy Code, The Kingston-Warren Corporation, a
New Hampshire corporation and a debtor and debtor-in-possession under chapter
11 of the Bankruptcy Code, Harman Automotive, Inc., a Michigan corporation and
a debtor and debtor-in-possession under chapter 11 of the Bankruptcy Code,
Hayes-Albion Corporation, a Michigan corporation and a debtor and
debtor-in-possession under chapter 11 of the Bankruptcy Code, Doehler-Jarvis,
Inc., a Delaware corporation and a debtor and debtor-in-possession under
chapter 11 of the Bankruptcy Code, Doehler-Jarvis Greeneville, Inc., a
Delaware corporation and a debtor and debtor-in-possession under chapter 11 of
the Bankruptcy Code, Doehler-Jarvis Pottstown, Inc., a Delaware corporation
and a debtor and debtor-in-possession under chapter 11 of the Bankruptcy Code,
Doehler-Jarvis Technologies, Inc., a Delaware corporation and a debtor and
debtor-in-possession under chapter 11 of the Bankruptcy Code, and
Doehler-Jarvis Toledo, Inc., a Delaware corporation and a debtor and
debtor-in-possession under chapter 11 of the Bankruptcy Code (each a
"Borrower" and collectively, the "Borrowers"), and each of the entities listed
on the signature pages hereto (each a "Term Lender" and collectively, the
"Term Lenders").
BACKGROUND
Each Borrower has filed a separate petition for relief under chapter 11
of title 11 of the United States Code with the United States Bankruptcy Court
for the District of Delaware and continues to operate its business as a
debtor-in-possession.
The Borrowers have requested the Term Lenders to provide the Borrowers
with a term loan having an aggregate principal amount of $25 million and,
subject to the terms and conditions set forth herein, the Term Lenders have
agreed to provide such loan.
In consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
agree as follows:
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ARTICLE I.
DEFINITIONS; CONSTRUCTION
1.01. Certain Definitions
In addition to other words and terms defined elsewhere in this
Agreement, as used herein the following words and terms shall have the
following meanings, respectively, unless the context hereof otherwise clearly
requires:
"Accelerated Maturity Date" shall mean the date on which the Obligations
(including, without limitation, the entire unpaid principal balance of the
Term Loans and accrued but unpaid interest thereon) shall become due and
payable pursuant to the terms of any of the Term Loan Documents, including,
without limitation, by reason of the occurrence of an Event of Default.
"Accounts" shall mean all of each Borrowers' now existing and future
accounts (as defined in the U.C.C.) and any and all other receivables (whether
or not specifically listed on schedules furnished to the Term Lenders),
including, without limitation, all accounts created by or arising from all of
its sales of goods or rendition of services to its customers, and all accounts
arising from sales or rendition of services made under any of its trade names
or styles, or through any of its divisions.
"Agreement" shall mean this Term Loan Agreement as amended, modified,
supplemented or restated from time to time in accordance with the terms hereof
and as permitted by the Intercreditor Agreement.
"Bankruptcy Code" shall mean Title 11, United States Code, 11 U.S.C.
ss.ss. 101 et seq., as amended from time to time.
"Bankruptcy Rules" shall mean the Federal Rules of Bankruptcy Procedure,
as amended from time to time.
"Board" shall mean the Board of Governors of the Federal Reserve System
of the United States.
"Borrower" and "Borrowers" shall have the meanings given such terms in
the introductory paragraph to this Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banking institutions are authorized or obligated to close in New
York, New York.
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"Canadian Subsidiary" means Trim Trends Canada Limited, a corporation
organized under the federal laws of Canada, but only so long as such entity is
a Subsidiary of a Company.
"Case" shall mean, collectively, the voluntary chapter 11 cases of the
Debtors under the Bankruptcy Code pending in the Court.
"Cash Collateral Account" shall have the meaning given to such term in
the Existing DIP Loan Agreement.
"Charges" shall mean all federal, state, county, city, municipal, local,
foreign or other governmental (including, without limitation, PBGC) taxes at
the time due and payable, levies, assessments, charges, liens, claims or
encumbrances upon or relating to (i) the Collateral, (ii) the Obligations,
(iii) the Borrowers' employees, payroll, income or gross receipts, (iv) the
Borrowers' ownership or use of any of its assets, or (v) any other aspect of
the Borrowers' businesses.
"Chattel Paper" shall mean any "chattel paper," as such term is defined
in the U.C.C., now owned or hereafter acquired by the Borrowers.
"CIT" shall mean The CIT Group/Business Credit, Inc., a New York
corporation.
"Closing Date" shall mean the date on which the conditions set forth in
Section 3.01 hereof shall be satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, and regulations thereunder, in each case
as in effect from time to time. References to sections of the Code shall be
construed also to refer to any successor sections.
"Collateral" shall have the meaning given such term in Section 5.01
hereof.
"Concentration Account" shall have the meaning given to such term in the
Existing DIP Loan Agreement.
"Contracts" shall mean all contracts, undertakings, or other agreements
(other than rights evidenced by Chattel Paper, Documents or Instruments) in or
under which a Borrower may now or hereafter have any right, title or interest,
including, without limitation, with respect to an Account, or any agreement
relating to the terms of payment or the terms of performance thereof.
"Court" shall mean the United States Bankruptcy Court for the District
of Delaware or any other court having jurisdiction over the Case.
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"Customer Transition Agreements" shall mean the agreements which may be
entered into among the Borrowers and certain customers of DJ Toledo which
shall be in form and substance satisfactory to the Existing DIP Lenders and
the Term Lenders relating to the reimbursement or payment by such customers of
certain costs and expenses related to the continued operation of DJ Toledo,
including without limitation, the Ford Transition Agreement and the GM
Transition Agreement.
"Debtors" shall mean the Borrowers.
"Designated Borrowing Officer" shall mean Roger Pollazzi, Ted Vogtman,
Joe Gagliardi or such other officer as shall be designated from time to time
in writing by the Borrowers to the Term Lenders.
"Designated Financial Officer" of a Person shall mean the individual
designated from time to time by the Board of Directors or governing body
performing like functions of such Person to be the chief financial officer or
treasurer of such Person (and individuals designated from time to time by the
Board of Directors or governing body performing like functions of such Person
to act in lieu of the chief financial officer or the treasurer).
"DJ Toledo" shall mean Doehler-Jarvis Toledo, Inc.
"Documents" shall mean all present and future documents (as defined in
the U.C.C.), including, without limitation, all warehouse receipts, bills of
lading, shipping documents, chattel paper, instruments and similar documents,
all whether negotiable or not and all goods and Inventory relating thereto.
"Dollar," "Dollars" and the symbol "$" shall mean lawful money of the
United States of America.
"Effective Date" shall mean the earlier to occur of (i) the effective
date of a Plan of Reorganization confirmed by an Order of the Court and (ii)
the date on which any distributions are made under a Plan of Reorganization
that is confirmed by an Order of the Court.
"Environmental Actions" means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, proceeding, judgment,
letter or other communication from any Governmental Authority or any third
party involving a Release (i) from or onto any of the properties presently or
formerly owned or leased by any of the Borrowers or (ii) from or onto any
facilities which received Hazardous Materials from any of the Borrowers or
involving any violation of any Environmental Law.
"Environmental Law" shall have the meaning given such term in the
Existing DIP Loan Agreement.
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"Environmental Liabilities and Costs" shall have the meaning given such
term in the Existing DIP Loan Agreement.
"Environmental Lien" shall have the meaning given such term in the
Existing DIP Loan Agreement.
"Equipment" shall mean all of a Borrower's present and hereafter
acquired equipment (as defined in the U.C.C.) including, without limitation,
all machinery, equipment, furnishings and fixtures, and all additions,
substitutions and replacements thereof, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto; provided, however, that Equipment shall not include "Excluded
Equipment" as such term is defined in the Existing DIP Loan Agreement.
"ERISA" shall have the meaning given such term in the Existing DIP Loan
Agreement.
"ERISA Affiliate" shall have the meaning given such term in the Existing
DIP Loan Agreement.
"ERISA Event" shall have the meaning given such term in the Existing DIP
Loan Agreement.
"Event of Default" shall mean any of the Events of Default described in
Section 7.01 hereof.
"Excluded Taxes" shall have the meaning given such term in Section 2.11
hereof.
"Existing DIP Agent" shall mean CIT in its capacity as agent for the
Existing DIP Lenders under the Existing DIP Loan Agreement.
"Existing DIP Debt Documents" shall mean the Existing DIP Loan
Agreement, the Existing DIP Financing Order and all other instruments and
documents that are in effect as of the date hereof and are executed in
connection with or otherwise relating to any Existing DIP Debt Document, all
as amended, supplemented or otherwise modified, from time to time, in
accordance with their respective terms and as permitted in the Intercreditor
Agreement.
"Existing DIP Financing Order" shall mean that certain Final Order (i)
Authorizing Debtors to Obtain Postpetition Financing Pursuant to Section
364(c) of the Bankruptcy Code, and (ii) Granting Liens, Super-Priority Claims
and Adequate Protection to the Existing DIP Lenders, dated June 12, 1997.
"Existing DIP Lenders" shall mean the "Lenders" as defined in the
Existing DIP Loan Agreement and their respective successors and assigns.
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"Existing DIP Liens" shall mean the Liens granted to the Existing DIP
Lenders pursuant to the Existing DIP Debt Documents.
"Existing DIP Loan Agreement" shall mean that certain Post-Petition Loan
and Security Agreement, dated as of May 8, 1997, by and among the Borrowers,
the Existing DIP Lenders and the Existing DIP Agent, as amended by that
certain Amendment No. 1, Waiver and Consent dated December 29, 1997, as
further amended by the Existing DIP Loan Amendment and as may be further
amended, supplemented or otherwise modified from time to time in accordance
with its terms and as permitted in the Intercreditor Agreement.
"Existing DIP Loan Amendment" shall mean an amendment to the Existing
DIP Loan Agreement in substantially the form annexed hereto as Exhibit A.
"Existing Liens" shall have the meaning given such term in the Existing
DIP Loan Agreement.
"Facility Fee" shall have the meaning given to such term in Section 2.06
hereof.
"Final Order" shall mean an order entered by the Court in the form
annexed hereto as Exhibit B pursuant to section 364 of the Bankruptcy Code,
approving, among other things, this Agreement and the other Term Loan
Documents and authorizing, among other things, the incurrence by the Borrowers
of permanent post-petition secured and super-priority indebtedness in
accordance with this Agreement and the other Term Loan Documents, and as to
which no stay has been entered and which has not been reversed, modified,
vacated or overturned.
"Ford Transition Agreement" shall mean the agreement to be entered into
between the Borrowers and Ford Motor Company ("Ford") which shall be in form
and substance satisfactory to the Existing DIP Lenders and the Term Lenders,
relating to (i) the reimbursement or payment by Ford of certain costs and
expenses related to the continued operation of DJ Toledo, and (ii) the
assurance by Ford of the receipt by the Borrowers of a residual value of the
fixed assets of DJ Toledo of not less than $15,000,000.
"Funding Fee" and "Funding Fees" shall have the meanings given such
terms in Section 2.07 hereof.
"GAAP" shall have the meaning given to such term in the Existing DIP
Loan Agreement.
"General Intangibles" shall mean all of a Borrowers' "general
intangibles" as such term is defined in the U.C.C. and shall include, without
limitation, all present and future right, title and interest in and to all
trade names, Trademarks (together with the goodwill associated therewith),
Patents, licenses, customer lists, distribution agreements, supply agreements
and
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tax refunds, together with all monies and claims for monies now or
hereafter due and payable in connection with any of the foregoing or
otherwise.
"GM Transition Agreement" shall mean the agreement to be entered into
between the Borrowers and General Motors Corporation ("GM") which shall be in
form and substance satisfactory to the Existing DIP Lenders and the Term
Lenders, relating to the reimbursement or payment by GM of certain costs and
expenses related to the continued operation of DJ Toledo.
"Governmental Authority" shall have the meaning given such term in the
Existing DIP Loan Agreement.
"Harvard" shall mean Harvard Industries, Inc.
"Hazardous Materials" shall have the meaning given such term in the
Existing DIP Loan Agreement.
"Indebtedness" shall mean without duplication, all liabilities,
contingent or otherwise, which are any of the following: (a) obligations in
respect of money (borrowed or otherwise and including, without limitation,
reimbursement and all similar obligations with respect to surety bonds,
letters of credit and bankers' acceptances, whether or not matured) or for the
deferred purchase price of property, services or assets, other than Inventory,
but excluding trade payables not more than 30 days overdue incurred in the
ordinary course of business or (b) lease obligations which, in accordance with
GAAP, have been or which should be capitalized.
"Indemnified Parties" shall have the meaning given such term in Section
8.05 hereof.
"Indemnified Taxes" shall have the meaning given such term in Section
2.11 hereof.
"Instruments" means any "instrument," as such term is defined in the
U.C.C., now owned or hereafter acquired by a Borrower, other than instruments
that constitute, or are a part of a group of writings that constitute, Chattel
Paper.
"Intercreditor Agreement" shall mean the Intercreditor Agreement,
substantially in the form of Exhibit C hereto, by and among the Term Lenders,
the Existing DIP Agent, and the Existing DIP Lenders and acknowledged by the
Borrowers, dated as of the date hereof, as amended, modified and supplemented
and in effect from time to time, regarding, inter alia, the relative priority
of the Liens granted to the Term Lenders under this Agreement and the Existing
DIP Liens, and the relative priority of the claims of the Term Lenders under
this Agreement and the claims of the Existing DIP Lenders under the Existing
DIP Debt Documents.
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"Interest Rate" shall have the meaning given such term in Section 2.07
hereof.
"Inventory" shall mean all of a Borrower's present and hereafter
acquired inventory (as defined in the U.C.C.), including, without limitation,
all merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same; in
all stages of production from raw materials through work-in-progress to
finished goods.
"IRS" shall mean the Internal Revenue Service, or any successor thereto.
"Leases" shall mean, with respect to the Borrowers, all of those
leasehold interests in real property owned by any of the Borrowers, as lessee,
as such may be amended, supplemented or otherwise modified from time to time
to the extent permitted by this Agreement.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever intended to assure
payment of any Indebtedness or other obligation, and includes, without
limitation, any conditional sale or other title retention agreement, the
interest of a lessor under a Capital Lease, any financing lease having
substantially the same economic effect as any of the foregoing, and the
filing, under the U.C.C. or comparable law of any jurisdiction, of any
financing statement naming the owner of the asset to which such Lien relates
as debtor; provided, however, that Liens shall not include the Access and
Occupancy Agreement and related Accommodation Agreement between any Borrower
and General Motors Corporation and any similar agreement consented to by the
Term Lenders. The term "Capital Lease", shall have the meaning given to such
term in the Existing DIP Loan Agreement, as in effect on the date hereof.
"Local Account" shall have the meaning given to such term in the
Existing DIP Loan Agreement.
"Magten" shall mean Magten Asset Management Corp., as agent on behalf of
certain of its accounts.
"Material Adverse Change" shall mean a material adverse change in any of
(i) the condition (financial or otherwise), business, performance, operations
or properties of the Borrowers taken as one enterprise, (ii) the legality,
validity or enforceability of any Term Loan Document, (iii) the perfection or
priority of the Liens granted pursuant to this Agreement, (iv) the ability of
the Borrowers to repay the Obligations or to perform their obligations under
any of the Term Loan Documents, or (v) the rights and remedies of the Term
Lenders under the Term Loan Documents. A Material Adverse Change shall not
include a change resulting solely from any amendment, modification or waiver
of or under any
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Existing DIP Debt Document or any Term Loan Document that is permitted under
the Intercreditor Agreement.
"Material Adverse Effect" shall mean an effect that results in or
causes, or has a reasonable likelihood of resulting in or causing, a Material
Adverse Change.
"Maturity Date" shall mean the earlier to occur of (a) the Accelerated
Maturity Date, (b) the Stated Maturity Date and (c) the Effective Date.
"Multiemployer Plan" shall have the meaning given such term in the
Existing DIP Loan Agreement.
"Note Register" shall have the meaning given such term in Section 4.23
hereof.
"Note Registrar" shall have the meaning given such term in Section 4.23
hereof.
"Obligations" shall mean any and all Term Loans and all other
indebtedness, obligations, indemnities and liabilities of every kind, nature
and description owing by any one or more Borrowers to the Term Lenders under
this Agreement or any other Term Loan Document including, without limitation,
the Facility Fee, the Funding Fee, and all principal, interest, charges, fees,
costs and expenses, however evidenced, whether now existing or hereafter
arising, whether arising before, during or after the initial or any renewal
term of this Agreement or any other Term Loan Document, whether for payment or
performance, whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated,
secured or unsecured, and however acquired by the Term Lenders in their
capacity as such. Obligations shall not include any prepetition obligations
owing to the Term Lenders.
"Operating Account" shall have the meaning given to such term in the
Existing DIP Loan Agreement.
"Other Taxes" shall have the meaning given to such term in Section 2.11
hereof.
"Patents" shall mean all present and hereafter acquired patents and/or
patent rights of the Borrowers.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Pension Plan" shall have the meaning given such term in the Existing
DIP Loan Agreement.
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"Permitted Expenses" shall have the meaning given to such term in the
Existing DIP Loan Agreement.
"Percentage Interest" shall mean, with respect to each Term Lender, the
percentage interest of the Term Loan made by such Term Lender as set forth
next to such Term Lender's name on the signature pages hereto.
"Permitted Liens" shall mean, collectively, the (i) Existing DIP Liens,
(ii) Liens granted pursuant to the Term Loan Documents, (iii) Liens permitted
under the Existing DIP Debt Documents including, without limitation "Permitted
Purchase Money Liens", as such term is defined in the Existing DIP Loan
Agreement, (iv) Permitted Expenses and (v) Superior Existing Liens.
"Person" shall mean an individual, corporation, partnership, limited
liability company, limited liability partnership, trust, unincorporated
association, joint venture, joint-stock company, government (including
political subdivisions), Governmental Authority or agency, or any other
entity.
"Petition Date" shall mean May 8, 1997.
"Plan" means an employee benefit plan, as defined in Section 3(3) of
ERISA, which any of the Borrowers maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were employed
by any of them.
"Plan of Reorganization" shall have the meaning given such term in the
Existing DIP Loan Agreement.
"Pledged Collateral" shall mean (i) all of the Pledged Shares; (ii) all
additional shares of stock or other securities of any issuer of the Pledged
Shares from time to time acquired by any of the Borrowers in any manner; (iii)
the certificates representing the shares referred to in clause (i) and (ii)
above; and (iv) all dividends, cash, instruments and other property or
proceeds, from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the foregoing to the extent
provided herein.
"Pledged Shares" shall mean all of the shares of capital stock of a
Subsidiary (other than the Canadian Subsidiary and 177192 Canada Inc.) owned
at the date hereof by any of the Borrowers.
"Potential Default" shall mean any event or condition which, with notice
or passage of time, or any combination of the foregoing, would constitute an
Event of Default.
"Pre-Petition Obligations" shall have the meaning given to such term in
the Existing DIP Loan Agreement.
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"Proceeds" shall mean "proceeds," as such term is defined in Section
9-306(1) of the U.C.C., and, in any event, shall include, without limitation,
(a) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to any Borrower from time to time with respect to any of the
Collateral, (b) any and all payments (in any form whatsoever) made or due and
payable to any Borrower from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any Governmental Authority (or any Person acting under color of
Governmental Authority), and (c) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.
"Qualified Plan" shall have the meaning given such term in the Existing
DIP Loan Agreement.
"Real Estate" means the Borrowers' fee and/or leasehold interests in
real property.
"Release" shall have the meaning given such term in the Existing DIP
Loan Agreement.
"Remedial Action" shall have the meaning given such term in the Existing
DIP Loan Agreement.
"Required Term Lenders" shall mean, at any time, Term Lenders whose
aggregate Percentage Interests are in excess of 50%.
"Service Marks" shall mean all service marks and certificates of
registration of the Borrowers, together with the goodwill of the business
associated with or symbolized by such marks and registrations together with
(i) all other tradenames, trademarks, service marks, corporate names, company
names, business names, fictitious business names, trade styles, logos, other
designs or sources of business identifiers or similar devices, all
registrations with respect thereto, and all applications with respect to the
foregoing, and all reissues, divisions, continuations, extensions, renewals,
and continuations-in-part with respect to any of the foregoing, (ii) all of
the goodwill of the business connected with and symbolized by such tradenames,
Trademarks, service marks, corporate names, company styles, logos, other
designs, or sources of business identifiers or similar devices, throughout the
world, in each case whether now owned or hereafter created or acquired, and
(iii) all rights associated with the foregoing, including license royalties,
claims or rights against third parties for any past, present or future
infringement of any mark, Trademark or similar device, and all corresponding
rights, throughout the world.
"Stated Maturity Date" shall mean May 8, 1999, which date is two years
from and after the Closing Date of the Existing DIP Loan Agreement, or the
date the "Line of Credit", as such term is now defined in the Existing DIP
Loan Agreement, is terminated.
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"Subsidiary" shall have the meaning given such term in the Existing DIP
Loan Agreement.
"Superior Existing Liens" shall mean all valid, perfected, enforceable,
and nonavoidable liens and security interests of record existing immediately
prior to the Petition Date and includes all such valid, perfected and
nonavoidable liens and security interests under the "Pre-Petition Loan
Documents", as such term is defined in the "Existing DIP Loan Agreement".
"Term Lender" and "Term Lenders" shall have the meanings given such
terms in the introductory paragraph to this Agreement.
"Term Loan" shall have the meaning given such term in Section 2.01
hereof.
"Term Loan Documents" shall mean this Agreement, the Term Notes, the
Intercreditor Agreement, the Final Order and all other instruments, agreements
and documents delivered in connection herewith or therewith.
"Term Note" and "Term Notes" shall have the meanings given such terms in
Section 2.02 hereof.
"Title IV Plan" shall have the meaning given such term in the Existing
DIP Loan Agreement.
"Trademarks" shall mean all present and hereafter acquired trademarks
and/or trademark rights (together with the goodwill associated therewith) and
all cash and non-cash proceeds thereof.
"U.C.C." shall mean the Uniform Commercial Code as in effect from time
to time in the State of New York.
"Unfunded Pension Liability" shall have the meaning given such term in
the Existing DIP Loan Agreement.
"Welfare Benefit Plan" shall have the meaning given such term in the
Existing DIP Loan Agreement.
"Withdrawal Liability" shall have the meaning given such term in the
Existing DIP Loan Agreement.
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1.02. Construction
Unless the context of this Agreement otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or." References in this Agreement to "determination" by the Term Lenders
include good faith estimates by the Term Lenders (in the case of quantitative
determinations) and good faith beliefs by the Term Lenders (in the case of
qualitative determinations). The words "hereof," "herein," "hereunder" and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. The section and other headings
contained in this Agreement and the Table of Contents preceding this Agreement
are for reference purposes only and shall not control or affect the
construction of this Agreement or the interpretation thereof in any respect.
Section, subsection and exhibit references are to this Agreement unless
otherwise specified.
1.03. Accounting Principles
Except as otherwise provided in this Agreement, all computations
and determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and
prepared in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP.
ARTICLE II.
THE TERM LOAN
2.01. Term Loan
Subject to the terms and conditions hereof, the Term Lenders agree
to make a term loan to Borrowers in the principal amount of Twenty-Five
Million Dollars ($25,000,000) on the Closing Date (the "Term Loan"). Not later
than one (1) Business Day prior to the anticipated Closing Date, the Borrowers
shall provide notice to the Term Lenders (the "Notice of Borrowing") setting
forth: (a) the Borrowers' request that the Term Loan be funded and (b) the
account information where the proceeds of the Term Loan are to be received.
Such Notice of Borrowing shall be given to the Term Lenders in writing by a
Designated Borrowing Officer.
2.02. Term Notes
The Borrowers agree that in order to evidence the Term Loan, the
Borrowers will execute and deliver to each Term Lender on the Closing Date a
promissory note, dated as
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of the Closing Date, substantially in the form of Exhibit D (each a "Term Note"
and collectively, the "Term Notes"), payable to the order of the Term Lender in
the principal amount of its respective Percentage Interest in such Term Loan.
2.03. Maturity Date
On the Maturity Date, all Obligations (including, without
limitation, all outstanding amounts under the Term Notes, and all accrued and
unpaid interest on the Obligations) shall become immediately due and payable
without notice or demand.
2.04. Joint and Several Liability
The Borrowers shall be jointly and severally liable for the
payment and performance of all Obligations to be performed by any of them, and
each Borrower shall be bound by any notices, consents or other actions
furnished or taken by any of the Borrowers. At the request of the Term
Lenders, each Borrower shall confirm in writing any action taken or proposed
to be taken by any of the other Borrowers; provided, however, that the failure
by any Borrower to furnish such confirmation shall not affect such Borrower's
obligations under the preceding sentence or any other provision of this
Agreement. Each Borrower hereby agrees that it shall be jointly and severally
liable for all Obligations and that such liability shall be absolute and
unconditional irrespective of:
(i) any lack of validity or enforceability of any
provision of this Agreement, any other Term Loan Document or any other
agreement or instrument relating to this Agreement or any other Term Loan
Document, or avoidance or subordination of any of the Obligations, in any case
relating to any other Borrower;
(ii) any change in the time, manner or place of
payment of, or in any other term of, or any increase in the amount of, all or
any of the Obligations, or any other amendment or waiver of any term of, or
any consent to departure from any requirement of, this Agreement, any Term
Note or any of the other Term Loan Documents;
(iii) any exchange, release or non-perfection of any
Lien on any collateral for, or any release or amendment or waiver of any term
of any guaranty of, or any consent to departure from any requirement of any
guaranty of, all or any of the Obligations;
(iv) the absence of any attempt to collect any of the
Obligations from any other Borrower or from any other guarantor or any other
action to enforce the same or the election of any remedy by the Term Lenders;
(v) any waiver, consent, extension, forbearance or
granting of any indulgence to any other Borrower by the Term Lenders with
respect to any provision of this Agreement or any other Term Loan Document; or
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(vi) any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a borrower or a
guarantor.
2.05. Facility Fee
On the Closing Date, the Borrowers shall pay the Term Lenders a
facility fee in the aggregate amount of $500,000 (the "Facility Fee"). The
Facility Fee shall be for all purposes fully earned and non-refundable by the
Term Lenders on the Closing Date. The Facility Fee shall be funded out of the
proceeds of the Term Loan.
2.06. Funding Fee
On the Closing Date, the Borrowers shall pay the Term Lenders a
fee (the "Funding Fee") in an aggregate amount equal to $2,000,000. The
Funding Fee shall be for all purposes fully earned and non-refundable by the
Term Lenders on the Closing Date. The Funding Fee shall be funded out of the
proceeds of the Term Loan.
2.07. Interest Rate
The unpaid principal amount of the Term Loan shall bear interest
at a rate (the "Interest Rate") per annum equal to the greater of (i) the
highest per annum interest rate for "Term Loans" and "Revolving Credit Loans"
(as such terms are used in the Existing DIP Loan Agreement) in effect on any
day from time to time under the Existing DIP Loan Agreement plus 3% and (ii)
13%. Notwithstanding any other provision of this Agreement, the maximum rate
of interest payable on the Obligations shall not exceed the maximum rate
permitted by applicable law. If interest in excess of said maximum rate shall
be paid hereunder, the excess shall be returned to the Borrowers unless an
Event of Default (as defined in the Existing DIP Loan Agreement) shall have
occurred and is continuing under the Existing DIP Loan Agreement, in which
event such excess shall be disbursed as provided in the Intercreditor
Agreement or if the Intercreditor Agreement shall no longer be in effect, then
the excess shall be used to reduce the outstanding principal due under the
Term Loan.
2.08. Interest Payment Dates
The Borrowers shall pay interest on the unpaid principal amount of
the Term Loan from the Closing Date until such principal amount shall be paid
in full, which interest shall be payable monthly in arrears on the first
Business Day of each month, commencing on the first Business Day of the month
following the Closing Date.
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2.09. Payments
(a) Time, Place and Manner. All payments to be made in
respect of the Obligations or other amounts due hereunder, under the Term
Notes or any other Term Loan Document shall be payable at or before 1:00 P.M.,
New York City time, on the day when due without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived. Such payments
shall be made in Dollars by wire transfer in funds immediately available to
each Term Lender in its Percentage Interest of such payments according to the
wire instructions set forth on Schedule 2.09 hereto (or at any other address
at which such Term Lender shall notify the Borrowers in writing, provided such
Term Lender has given the Borrowers notice of such other address at least five
(5) days in advance of when such payment is due), without setoff, counterclaim
or other deduction or defense of any nature or kind whatsoever. Interest on
all Obligations and all fees that accrue on a per annum basis shall be
computed on the basis of the actual number of days elapsed in the period
during which interest or such fee accrues and a year of 360 days. In computing
interest on any Term Loan, the date of the making of such Term Loan shall be
included and the date of payment shall be excluded.
(b) Interest Upon Events of Default. To the extent permitted
by law, after there shall have occurred and so long as there is continuing an
Event of Default pursuant to Section 7.01, all principal, interest, fees,
indemnities or any other Obligations of the Borrowers hereunder, or under any
Term Note or any other Term Loan Document (and including, without limitation,
interest accrued under this subsection 2.09) shall bear interest both before
and after judgment, at a rate per annum of 2% above the otherwise applicable
Interest Rate for such day, compounded daily, and such interest shall be
payable on demand.
2.10. Use of Proceeds
The Borrowers hereby covenant, represent and warrant that the
proceeds of the Term Loan made to them less the Facility Fee, the Funding Fee
and the expenses set forth in Section 8.05(a) for which a statement is
presented on or before the Closing Date (which fees and expenses shall be paid
from the proceeds of the Term Loan) will, upon Borrowers' receipt of such
proceeds, be paid by Borrowers to the Existing DIP Agent to reduce the accrued
and unpaid interest on and the then outstanding principal balance of the
"Revolving Credit Loans," as such term is defined in the Existing DIP Loan
Agreement and to pay the amounts due under Section 12.2 of the Existing DIP
Loan Agreement for which a statement is presented on or before the Closing
Date.
2.11. Taxes
(a) Any and all payments by the Borrowers hereunder or under
the Term Notes shall be made free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, attributable thereto and all liabilities with respect thereto,
excluding taxes imposed on or measured by the gross or net
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income or revenues of the Term Lenders by the jurisdiction under the laws of
which any Term Lender is organized or any political subdivision thereof (all
such excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Excluded Taxes" and all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Indemnified Taxes"). If the
Borrowers shall be required by law to deduct any Indemnified Taxes from or in
respect of any sum payable hereunder or under the Term Notes to the Term
Lenders, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.11) each Term Lender receives an
amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrowers shall make such deductions, and (iii) the Borrowers
shall pay the full amount deducted to the relevant taxing or other authority
in accordance with applicable law.
(b) In addition, the Borrowers agree to pay any present or
future stamp or documentary taxes or any other sales, excise or other property
taxes, charges or similar levies that arise from any payment made hereunder or
under the Term Notes or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or the Term Notes (hereinafter
referred to as "Other Taxes").
(c) The Borrowers shall indemnify the Term Lenders for the
full amount of Indemnified Taxes, Excluded Taxes or Other Taxes (but in the
case of Excluded Taxes, only Excluded Taxes that are imposed by any
jurisdiction on any additional amounts payable under this Section 2.11) paid
by the Term Lenders and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such
Indemnified Taxes, Excluded Taxes or Other Taxes were correctly or legally
asserted. This indemnification shall be made thirty (30) days from the date
any Term Lender makes written demand therefor.
(d) Prior to the Closing Date, each Term Lender that is not
organized under the laws of the United States of America, a state thereof or
the District of Columbia agrees that it will deliver to Harvard on behalf of
the Borrowers (i)(x) two duly completed copies of Internal Revenue Service
Form 1001 or 4224 or successor applicable form, as the case may be, or (y) in
the case of a Term Lender claiming exemption from United States withholding
taxes under Section 871(h) or 881(c) of the Code with respect to payments of
"portfolio interest" (a "Registered Holder"), a certificate representing that
such Registered Holder is entitled to the benefits of such Section 871(h) or
881(c), as the case may be, and (ii) two duly completed copies of Internal
Revenue Service Form W-8 or successor applicable form.
Each such Term Lender also agrees to deliver to Harvard on behalf of the
Borrowers two further copies of the said Form 1001 or 4224 or applicable
certificate, and Form W-8, or successor applicable forms or other manner of
certification, as the case may be, on or before the date that any such form or
certificate expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form or certificate previously delivered
by it to Harvard on behalf of the Borrowers, and such extensions or renewals
thereof as may
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reasonably be requested by Harvard, unless in any such case an event
(including, without limitation, any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such form or certificate inapplicable or which
would prevent such Term Lender from duly completing and delivering any such
form or certificate with respect to it and such Term Lender so advises Harvard
on behalf of the Borrowers.
Such Term Lender shall certify (i) in the case of (x) a Form 1001 or
4224, that it is entitled to receive payments under this Agreement and the
Term Notes without deduction or withholding of any United States federal
income taxes or (y) a Term Lender that is a Registered Holder, that it is
entitled to the benefits of Section 871(h) or 881(c) of the Code, as the case
may be, and (iii) in the case of a Form W-8, that it is entitled to an
exemption from United States backup withholding tax.
Notwithstanding the other provisions of this Section 2.11, the Borrowers
shall not be required to pay any increased amount on account of Indemnified
Taxes (or Other Taxes related thereto) pursuant to this Section 2.11 to any
Term Lender that fails to furnish any form, statement or certification that it
is required to furnish in accordance with this Section 2.11 and, to the extent
required by law, the Borrowers shall be entitled to deduct Indemnified Taxes
from the payments owed to such Term Lender.
(e) The foregoing provisions of this Section 2.11 are
subject to the provisions of Section 8.13(d).
ARTICLE III.
CONDITIONS PRECEDENT TO EFFECTIVENESS OF TERM LOAN
3.01. Conditions Precedent to Effectiveness.
This Agreement shall become effective as of the Business Day when
each of the following conditions precedent shall have been satisfied or waived
by the Term Lenders and the obligation of Term Lenders to make the Term Loan
hereunder shall be subject to the satisfaction or waiver by the Term Lenders
of the following conditions precedent:
(a) Payment of Expenses, Etc.
The Borrowers shall have paid all amounts then owing to the
Term Lenders by the Borrowers hereunder, or under any other Term Loan
Document, including, without limitation, those amounts due and payable on the
Closing Date pursuant to Sections
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2.05, 2.06 and, to the extent statements therefor have been furnished to the
Borrowers, 8.05(a) hereof.
(b) Representations and Warranties; No Event of Default
The representations and warranties contained in Article IV
of this Agreement and in each other Term Loan Document and certificate or
other writing delivered to the Term Lenders pursuant hereto or thereto or
prior to the Closing Date shall be correct in all material respects on and as
of the Closing Date as though made on and as of such date; and no Potential
Default or Event of Default shall have occurred and be continuing on the
Closing Date or would result from this Agreement becoming effective in
accordance with its terms or the making of the Term Loan on the Closing Date.
(c) Delivery of Documents
The Term Lenders shall have received on or before the
Closing Date the following, each in form and substance satisfactory to the
Term Lenders and their counsel and, unless indicated otherwise, dated the
Closing Date:
(i) the Intercreditor Agreement and the Existing DIP
Loan Amendment duly executed by the parties thereto, which documents shall be
in full force and effect.
(ii) a copy of the resolutions adopted by the Board
of Directors of each of the Borrowers, certified as of the Closing Date by
authorized officers thereof, authorizing (A) in the case of the Borrowers, the
borrowing hereunder and the transactions contemplated by the Term Loan
Documents to which each Borrower is or will be a party, and (B) the execution,
delivery and performance by such Borrower of each Term Loan Document and the
execution and delivery of the other documents to be delivered by such Borrower
in connection therewith;
(iii) a certificate of an authorized officer of each
Borrower, certifying the names and true signatures of the officers of such
Borrower authorized to sign each Term Loan Document to which such Borrower is
or will be a party and the other documents to be executed and delivered by
such Borrower in connection therewith, together with evidence of the
incumbency of such authorized officers;
(iv) a certificate of the Designated Financial
Officer of each of the Borrowers, certifying as to the matters set forth in
Section 3.01(b);
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(v) a certificate of an authorized officer of the
Borrowers certifying the names and true signatures of those officers of the
Borrowers that are authorized to provide all notices under this Agreement and
the Term Loan Documents; and
(vi) such other agreements, instruments, approvals,
and other documents as the Term Lenders may reasonably request.
(d) Lien Priority
The Liens in favor of the Term Lenders pursuant to the Term
Loan Documents shall be valid and perfected Liens on the Collateral, subject
only to the Permitted Liens.
(e) Legal Restraints/Litigation
Except as set forth in any public filings made by any
Borrower with the Securities and Exchange Commission and except for any
matters disclosed on Schedule 3.01(f) hereto, there shall be no (1)
litigation, investigation or proceeding (judicial or administrative) pending
or, to their knowledge, threatened against the Borrowers or their assets or
properties (other than the Case), by any Person relating in any way to the
transactions contemplated by this Agreement and the other Term Loan Documents,
(2) injunction, writ or restraining order restraining or prohibiting the
transactions contemplated by this Agreement and the other Term Loan Documents,
or (3) suit, action, investigation or proceeding (judicial or administrative)
pending or threatened against the Borrowers or their assets, which, in the
opinion of the Term Lenders, if adversely determined could have a Material
Adverse Effect.
(f) Indebtedness
The Borrowers shall have no Indebtedness or other
liabilities other than (1) Indebtedness to the Existing DIP Lenders under the
Existing DIP Debt Documents, (2) Indebtedness permitted under the Existing DIP
Debt Documents, and (3) Indebtedness permitted under the Term Loan Documents.
(g) Information. Debtors shall have furnished the Term
Lenders with all financial information, projections, budgets, business plans,
cash flows and such other information as the Term Lenders shall have
requested.
(h) Entry of Final Order. The Final Order shall have been
entered by the Court on or before January 31, 1998 and such Final Order shall
be in full force and effect and shall not have been vacated, reversed,
modified, amended or stayed in any respect and, in the event that such order
is the subject of any pending appeal, the performance of any obligation
hereunder of any party hereto shall not be the subject of a stay pending
appeal.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
To induce the Term Lenders to make the Term Loan, each Borrower (and
Harvard on behalf of itself and each Borrower) makes the following
representations and warranties to the Term Lenders, each and all of which
shall be true and correct as of the date of execution and delivery of this
Agreement, and shall survive the execution and delivery of this Agreement:
4.01. Corporate Existence; Compliance with Law.
Such Borrower (i) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation; (ii) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification (except
for jurisdictions in which such failure so to qualify or to be in good
standing would not have a Material Adverse Effect); (iii) has the requisite
corporate power and authority and the legal right to own, pledge, mortgage or
otherwise encumber and operate its properties, to lease the property it
operates under lease, and to conduct its business as now, heretofore and
proposed to be conducted; (iv) has all material licenses, permits, consents or
approvals from or by, and has made all material filings with, and has given
all material notices to, all governmental authorities having jurisdiction, to
the extent required for such ownership, operation and conduct; (v) is in
compliance with its certificate or articles of incorporation and by-laws; and
(vi) is in compliance with all applicable provisions of law where the failure
to comply would have a Material Adverse Effect.
4.02. Corporate Power Authorization; Enforceable Obligations.
The execution, delivery and performance by such Borrower of the
Term Loan Documents and all instruments and documents to be delivered by such
Borrower, to the extent it is party thereto, hereunder and the creation of all
Liens provided for herein and therein: (i) are within such Borrower's
corporate power; (ii) have been duly authorized by all necessary or proper
corporate action and by the Closing Date will be authorized by the Final
Order; (iii) are not in contravention of any provision of such Borrower's
certificates or articles of incorporation or by-laws; (iv) will not, upon the
entry of the Final Order by the Court, violate any law or regulation, or any
order or decree of any court or governmental instrumentality; (v) will not,
upon the entry of the Final Order by the Court and the execution and delivery
of the Existing DIP Loan Amendment, conflict with or result in the breach or
termination of, constitute a default under or accelerate any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which such Borrower is a party or by which such Borrower or any
of its property is bound and the effect of which will not be
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subject to the automatic stay pursuant to section 362 of the Bankruptcy Code
upon the entry of the Final Order by the Court; (vi) will not result in the
creation or imposition of any Lien upon any of the property of such Borrower
other than those in favor of the Term Lenders, all pursuant to the Term Loan
Documents; and (vii) do not require the consent or approval of any
governmental body, agency, authority or any other Person other than the entry
by the Court of the Final Order and the execution and delivery of the Existing
DIP Loan Amendment. Each of the Term Loan Documents has been duly executed and
delivered for the benefit of or on behalf of the Borrowers and each
constitutes a legal, valid and binding obligation of the Borrowers,
enforceable against them in accordance with its terms.
4.03. Ownership of Property Liens
(a) Each Borrower owns good and marketable fee simple title
to all of the Real Estate described on Schedule 4.03(a)(i) hereto under the
name of such Borrower and each Borrower has good, valid and marketable
leasehold interests in the Leases described in Schedule 4.03(a)(ii) hereto
under the name of such Borrower, and good and marketable title to, or valid
leasehold interests in, all of its other properties and assets and none of the
properties and assets of such Borrower, including, without limitation, the
Real Estate and Leases, is subject to any Liens, except Permitted Liens; and
each Borrower has received all deeds, assignments, waivers, consents,
non-disturbance and recognition or similar agreements, bills of sale and other
documents, and duly effected all recordings, filings and other actions
necessary to establish, protect and perfect such Borrower's right, title and
interest in and to all such property except where the failure to have received
such documents or effected such actions will not, in the aggregate, have a
Material Adverse Effect.
(b) All real property owned or leased by the Borrowers is
set forth on Schedule 4.03(b). No Borrower owns any other Real Estate or is
lessee or lessor under any leases other than as set forth therein. Schedule
4.03(b) is true and correct in all material respects. Part one of Schedule
4.03(b) hereto sets forth all leases of real property held by the Borrowers as
lessee and part two of Schedule 4.03(b) sets forth all leases of real property
held by the Borrowers as lessor together with information regarding the
commencement date, termination date, renewal options (if any) and annual base
rents for the fiscal years 1995 and 1996. Each of such leases is valid and
enforceable in accordance with its terms and is in full force and effect
except as the same may be affected by the commencement of the Case and the
transactions contemplated thereby.
4.04. Labor Relations; Collective Bargaining Agreements.
None of the Borrowers is engaged in any unfair labor practice that is
reasonably likely to have a Material Adverse Effect. Except as set forth in
Schedule 4.04, there is (i) no significant unfair labor practice complaint
pending against any of the Borrowers or, to the best knowledge of any of the
Borrowers, threatened against any of them, before the National Labor Relations
Board, and no significant grievance or significant arbitration proceeding
arising out
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of or under any Collective Bargaining Agreement is now pending against any of
the Borrowers or, to the best knowledge of any of the Borrowers, threatened
against any of them, (ii) no significant strike, labor dispute, slowdown or
stoppage pending against any of Borrowers or, to the best knowledge of any of
the Borrowers, threatened against any of Borrowers, and (iii) to the best
knowledge of any of the Borrowers, no union representation question existing
with respect to the employees of any of the Borrowers, except (with respect to
any matter specified in clause (i), (ii) or (iii) above, either individually
or in the aggregate) such as would have no Material Adverse Effect.
4.05. Other Ventures
Except as set forth in Schedule 4.05, no Borrower is engaged in
any joint venture or partnership with any other Person.
4.06. Investment Company Act
None of the Borrowers is an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended. The making of the Term Loan, the application of the proceeds and
repayment thereof by the Borrowers and the consummation of the transactions
contemplated by this Agreement and the other Term Loan Documents will not
violate any provision of such Act or any rule, regulation or order issued by
the Securities and Exchange Commission thereunder.
4.07. Margin Regulations
None of the Borrowers owns any "margin security," as that term is
defined in Regulations G and U of the Board, and the proceeds of the Term Loan
will be used only for the purposes contemplated hereunder. The Term Loan will
not be used, directly or indirectly, for the purpose of purchasing or carrying
any margin security, for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any margin security or for
any other purpose which might cause any of the loans under this Agreement to
be considered a "purpose credit" within the meaning of Regulations G, T, U or
X of the Board. None of the Borrowers will take or permit any agent acting on
its behalf to take any action which might cause this Agreement or any document
or instrument delivered pursuant hereto to violate any regulation of the
Board.
4.08. Taxes
All federal, state, local and foreign tax returns, reports and
statements required to be filed by the Borrowers after the Petition Date have
been filed with the appropriate governmental agencies and all Charges and
other impositions shown thereon to be due and payable have been paid prior to
the date on which any fine, penalty, interest or late charge
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may be added thereto for nonpayment thereof, or any such fine, penalty,
interest, late charge or loss has been paid. Each Borrower has paid when due
and payable all Charges required to be paid by it. Proper and accurate amounts
have been withheld by the Borrowers from their respective employees for all
periods in full and complete compliance with the tax, social security and
unemployment withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the respective
governmental agencies. Schedule 4.08 sets forth for each Borrower those
taxable years for which its tax returns are currently being audited by the IRS
or any other applicable Governmental Authority. No Borrower has executed or
filed with the IRS or any other Governmental Authority any agreement or other
document extending, or having the effect of extending, the period for
assessment or collection of any Charges. No Borrower has filed a consent
pursuant to Code Section 341(f) or agreed to have Code Section 341(f)(2) apply
to any dispositions of subsection (f) assets (as such term is defined in Code
Section 341(f)(4)). None of the property owned by the Borrowers is property
which such Borrower is required to treat as being owned by any other Person
pursuant to the provisions of Code Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended, and in effect immediately prior to the enactment of
the Tax Reform Act of 1986 or is "tax-exempt use property" within the meaning
of Code Section 168(h). No Borrower has agreed or has been requested to make
any adjustment under Code Section 481(a) by reason of a change in accounting
method or otherwise. No Borrower is a party to any written tax sharing
agreement with a Person other than a Borrower or a Subsidiary.
4.09. ERISA
(a) Schedule 4.09(a) separately identifies all Qualified
Plans, all Title IV Plans, all Multiemployer Plans, all unfunded Pension Plans
and all Welfare Benefit Plans that provide retiree benefits (other than
continuation coverage provided pursuant to Section 4980B of the Code).
(b) Each Qualified Plan has been determined by the IRS to
qualify under Section 401 of the Code, and the trusts created thereunder have
been determined to be exempt from tax under the provisions of Section 501 of
the Code, and to the best knowledge of the Borrowers nothing has occurred
which would cause the loss of such qualification or tax-exempt status.
(c) Except as set forth on Schedule 4.09(c), each Plan is in
compliance in all material respects with applicable provisions of ERISA and
the Code, including, without limitation, the filing of reports required under
ERISA or the Code which are true and correct in all material respects as of
the date filed, and with respect to each Plan, other than a Qualified Plan,
all required contributions and benefits have been paid in accordance with the
provisions of each such Plan.
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(d) None of the Borrowers or any ERISA Affiliate, with
respect to any Qualified Plan, has failed to make any contribution or pay any
amount due as required by Section 412 of the Code or Section 302 of ERISA or
the terms of any such Qualified Plan.
(e) With respect to all Welfare Benefit Plans, the present
value of future anticipated expenses for benefits pursuant to the latest
actuarial projections of liabilities does not exceed $110,000,000, and copies
of such latest projections have been made available to the Term Lenders.
(f) With respect to Pension Plans, other than Qualified
Plans, the present value of the liabilities for current participants
thereunder using PBGC interest assumptions does not exceed $2,500,000. The
Unfunded Pension Liability, in the aggregate, for all Title IV Plans does not
exceed the amount reflected in the Borrowers' financial statements delivered
to the Term Lenders.
(g) Except as set forth on Schedule 4.09(g), there has been
no, nor is there reasonably expected to occur, any ERISA Event or event
described in Section 4068 of ERISA with respect to any Title IV Plan.
(h) Except as set forth on Schedule 4.09(h), there are no
pending or, to the knowledge of the Borrowers, threatened claims, actions or
lawsuits (other than claims for benefits in the normal course), asserted or
instituted against (i) any Plan or any Qualified Plan or the assets of any
such Plan, (ii) any fiduciary with respect to any Plan or Qualified Plan or
(iii) the Borrowers with respect to any Plan or Qualified Plan.
(i) None of the Borrowers or any ERISA Affiliate has
incurred or has any reasonable likelihood of incurring any Withdrawal
Liability under Section 4201 of ERISA as a result of a complete or partial
withdrawal from a Multiemployer Plan (and no event has occurred which, with
the giving of notice under Section 4219 of ERISA, would result in any such
liability).
(j) Within the last five years none of the Borrowers or any
ERISA Affiliate has engaged in a transaction which resulted in a Title IV Plan
with Unfunded Pension Liabilities being transferred outside of the "controlled
group" (within the meaning of Section 4001(a)(14) of ERISA) of any such
entity.
(k) Except as set forth on Schedule 4.09(k), no Welfare
Benefit Plan provides for continuing benefits or coverage for any participant
or any beneficiary of a participant after such participant's termination of
employment (except as may be required by Section 4980B of the Code and at the
sole expense of the participant or the beneficiary of the participant) which
would result in a liability in an amount which would have a Material Adverse
Effect. Each Borrower and each ERISA Affiliate has complied with the notice
and continuation coverage requirements of Section 4980B of the Code and the
regulations
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thereunder, except for non-compliances which in the aggregate would have no
Material Adverse Effect.
(l) None of the Borrowers has engaged in a prohibited
transaction, as defined in Section 4975 of the Code or Section 406 of ERISA,
in connection with any Plan, which would subject or has any reasonable
likelihood of subjecting the Borrowers (after giving effect to any exemption)
to a material tax on prohibited transactions imposed by Section 4975 of the
Code or any other material liability.
(m) No liability under any Plan or Qualified Plan (whether
terminated or on-going) has been funded or satisfied through the purchase of a
contract from an insurance company that is not rated AA or better by Standard
& Poor's Corporation or any equivalent or higher rating by another nationally
recognized rating agency.
(n) None of the Borrowers and no ERISA Affiliate has any
liability under any terminated "employee benefit plan", as defined in Section
3(3) of ERISA, of any related or unrelated entity.
(o) The present value of the liability, if any, with respect
to all unfunded Pension Plans of the Borrowers is reflected on the most recent
audited financial statements delivered to the Term Lenders pursuant to this
Agreement.
4.10. Brokers
No broker or finder acting on behalf of the Borrowers brought
about the obtaining, making or closing of the loans contemplated by this
Agreement and the Borrowers have no obligation to any Person in respect of any
finder's or brokerage fees in connection with the loans or other transactions
contemplated by this Agreement.
4.11. Intellectual Property
The Borrowers own or license or otherwise have the right to use
all material licenses, permits, Patents, Patent applications, Trademarks,
Trademark applications, Service Marks, trade names, copyrights, copyright
applications, franchises, authorizations and other intellectual property
rights that are necessary for the operations of their respective businesses,
without infringement upon or conflict with the rights of any other Person with
respect thereto, including, without limitation, all trade names associated
with products of any of the Borrowers. To the best knowledge of the Borrowers,
no slogan or other advertising device, product, process, method, substance,
part or component, or other material now employed, or now contemplated to be
employed, by the Borrowers or any of their respective subsidiaries infringes
upon or conflicts with any rights owned by any other Person, and no claim or
litigation regarding any of the foregoing is pending or threatened.
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4.12. Full Disclosure
No representation or warranty made by the Borrowers in this
Agreement or any other Term Loan Document is inaccurate or misleading in any
material respect and none contains any material misstatement of fact or omits
to state a material fact or any fact necessary to make the statements
contained herein or therein not misleading. To the extent the Borrowers
furnish any projections of the financial position and results of operations of
the Borrowers for, or as at the end of, certain future periods, such
projections were believed at the time furnished to be reasonable, have been or
will have been prepared on a reasonable basis and in good faith by the
Borrowers, and have been or will be based on assumptions believed by the
Borrowers to be reasonable at the time made and upon the best information then
reasonably available to the Borrowers. There is no fact materially adversely
affecting the condition or operations, financial or otherwise, of the business
or prospects of any of the Borrowers which has not been set forth in a
footnote included in the financial statements previously delivered to the Term
Lenders, in a Schedule hereto or in any other written information previously
delivered to the Term Lenders.
4.13. Environmental Matters
Except as disclosed in Schedule 4.13, (i) none of the operations
of the Borrowers are the subject of any federal, state or local investigation
to determine whether any Remedial Action is needed to address the presence or
disposal of a Hazardous Material or a Release or threatened Release, (ii) to
the best of the Borrowers' knowledge, information and belief, the Borrowers do
not have any contingent liability in connection with any Release, which could
reasonably be expected to result in material Environmental Liabilities and
Costs, (iii) the operations of the Borrowers are in compliance in all material
respects with all Environmental Laws; (iv) there has been no Release at any of
the properties owned or operated by the Borrowers or, to the best of the
Borrowers' knowledge, information and belief, any predecessor in interest or
title, or to the best of the Borrowers' knowledge, information and belief and
except as disclosed in writing to the Term Lenders, at any disposal or
treatment facility which received Hazardous Materials generated by the
Borrowers or, to the best of the Borrowers' knowledge, information and belief,
any predecessor in interest or title, which is reasonably likely to result in
the Borrowers' incurring material Environmental Liabilities and Costs; (v) no
Environmental Actions are pending or, to the best of the Borrowers' knowledge,
information and belief, threatened against the Borrowers or, to the best of
the Borrowers' knowledge, information and belief, any predecessor in interest
or title which, if adversely determined, could reasonably be expected to
result in the Borrowers incurring material Environmental Liabilities and
Costs; (vi) the Borrowers have obtained all permits, approvals, authorizations
and licenses required by Environmental Laws necessary for their operations,
and all such permits, approvals, authorizations and licenses are in effect and
the Borrowers are in compliance with all terms and conditions of such permits,
approvals, authorizations and licenses except where failure to obtain or
comply could not result in material Environmental Liabilities and Costs; and
(vii) to the best of the Borrowers' knowledge, information and
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belief, and except as disclosed in writing to the Term Lenders, no
Environmental Actions have been asserted against any facilities that may have
received Hazardous Materials generated by the Borrowers or any predecessor in
interest or title which, if adversely determined, are reasonably likely to
result in material Environmental Liabilities and Costs to the Borrowers.
4.14. Capital Stock
Set forth on Schedule 4.14 is a complete and accurate list
showing, as of the date hereof, all Subsidiaries of the Borrowers and, as to
each such Subsidiary, the jurisdiction of its incorporation, the number of
shares of each class of stock authorized, the number outstanding on the date
hereof and the percentage of the outstanding shares of each such class owned
(directly or indirectly) by the Borrowers. No stock of any Subsidiary of the
Borrowers is subject to any outstanding option, warrant, right of conversion
or purchase or any similar right. All of the outstanding capital stock of each
such Subsidiary has been validly issued, is fully paid and non-assessable and
is owned by the Borrowers, free and clear of all Liens other than Permitted
Liens.
4.15. Holding Company and Investment Company Acts
None of the Borrowers is a (i) a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act
of 1935, as amended, or (ii) an "investment company" or an "affiliated person"
or "promoter" of, or "principal underwriter" of or for, an "investment
company", as such terms are defined in the Investment Company Act of 1940, as
amended.
4.16. Permits, Etc.
The Borrowers have all material permits, material licenses,
authorizations and material approvals required for them lawfully to own and
operate their business.
4.17. Schedules
All of the information which is required to be scheduled to this
Agreement is set forth on the Schedules attached hereto, is correct and
accurate and does not omit to state any information material thereto.
4.18. Insurance
The Borrowers keep their properties adequately insured and
maintain (i) insurance to such extent and against such risks, including fire,
as is customary with companies in the same or similar businesses, (ii)
workmen's compensation insurance in the amount required by applicable law,
(iii) public liability insurance in the amount customary with
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companies in the same or similar business against claims for personal injury
or death on properties owned, occupied or controlled by it, and (iv) such
other insurance as may be required by law or by the Existing DIP Debt
Documents. Schedule 4.18 hereto sets forth a list of all insurance maintained
by the Borrowers on the Closing Date.
4.19. Financial Accounting Practices, Etc.
The Borrowers make and keep books, records and accounts which, in
reasonable detail, accurately and fairly reflect their respective transactions
and dispositions of their respective assets and maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization, and (ii) transactions are recorded as necessary (A) to permit
preparation of financial statements in conformity with GAAP except as
previously disclosed to the Term Lenders and (B) to maintain accountability
for assets.
4.20. Location of Bank Accounts
Schedule 4.20 sets forth a complete and accurate list of all
deposit and other accounts maintained by the Borrowers together with a
description thereof (i.e. the bank at which such deposit or other account is
maintained and the account number and the purpose thereof).
4.21. Lien Priority
The Liens on the Collateral granted hereby shall be valid and
perfected Liens (subject only to the Permitted Liens) to the extent provided
in the Final Order.
4.22. Court Orders.
The Final Order is in full force and effect, and has not been
reversed, stayed, modified or amended absent the joinder and consent of the
Term Lenders.
4.23. Registration of Transfer of Term Notes.
(a) The Borrowers shall cause to be kept at the principal
office of Harvard a register (the register maintained in such office being
herein referred to as the "Note Register") in which the Borrowers shall
provide for the registration of the Term Notes and the transfer thereof. The
name and address of each registered holder of a Term Note, each transfer
thereof made pursuant to paragraph (b) of this Section 4.23, and the name and
address of each transferee of the Term Notes shall be registered in the Note
Register. The Note Register shall be in written form or any other form capable
of being converted into written form within a reasonable time. The Borrowers
hereby appoint Harvard as security registrar (the "Note
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Registrar") for the purpose of registering Term Notes and transfers of Term
Notes as herein provided.
(b) Upon surrender for registration of transfer of any Term
Note at the office of Harvard as set forth above, the Borrowers shall execute
and deliver, in the name of the designated transferee or transferees, one or
more new Term Notes of denominations of a like aggregate principal amount. All
Term Notes issued upon any registration of transfer of Term Notes shall be the
valid obligations of the Borrowers evidencing the same debt and entitled to
the same benefits under this Agreement and the other Term Loan Documents, as
the Term Notes surrendered upon such registration of transfer. Every Term Note
presented or surrendered for registration of transfer shall (if so required by
the Borrowers) be duly endorsed, or be accompanied by a written instrument of
transfer, in form reasonably satisfactory to the Borrowers duly executed by
the registered holder thereof or his attorney duly authorized in writing. No
service charge shall be made for any registration of transfer of Term Notes.
No transfer or registration of transfer of any Term Note shall be permitted or
effected unless and until the proposed designated transferee or transferees
become party to the Intercreditor Agreement.
ARTICLE V.
COLLATERAL
5.01. Grant of Security Interest
(a) As collateral security for all of the Obligations and
subject in all respects only to the Permitted Liens, each Borrower hereby
pledges and assigns to the Term Lenders, their successors and assigns, and
hereby grants to the Term Lenders an undivided continuing security interest in
and to all of such Borrower's right, title and interest in and to the
following, whether acquired prior to, on or after the Petition Date (the
"Collateral"):
(i) all Accounts of each of the Borrowers;
(ii) all Chattel Paper of each of the Borrowers;
(iii) all Contracts of each of the Borrowers;
(iv) all Documents of each of the Borrowers;
(v) all Equipment of each of the Borrowers;
(vi) all General Intangibles of each of the Borrowers;
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(vii) all Instruments of each of the Borrowers;
(viii) all Inventory of each of the Borrowers;
(ix) all Leases to which any of the Borrowers are a
party;
(x) all Real Estate owned by any of the Borrowers;
(xi) all Trademarks of each of the Borrowers;
(xii) all Service Marks of each of the Borrowers;
(xiii) all Pledged Collateral;
(xiv) all causes of action of each of the Borrowers;
(xv) each Local Account, the Concentration Account,
the Operating Account and the Cash Collateral
Account;
(xvi) all other goods, real and personal property of
each of the Borrowers, whether tangible or
intangible and whether now owned or hereafter
acquired and wherever located;
(xvii) to the extent not otherwise included, all monies
and other property of any kind which, after the
Petition Date, is received by any of the
Borrowers in connection with refunds with respect
to taxes, assessments and governmental charges
imposed on the Borrowers or any of their property
or income;
(xviii)to the extent not otherwise included, all monies
and other property of any kind and nature
recovered by any of the Borrowers in accordance
with the provisions of the Bankruptcy Code,
including, without limitation, sections 542, 553,
544, 547 and 548 thereof, or other applicable
law;
(xix) any such other property not included under
paragraphs (i) through (xviii) above that would
otherwise be deemed to constitute "Collateral" as
defined in the Existing DIP Loan Agreement, as
such agreement may be amended, modified or
replaced from time to time, or in any other
Existing DIP Debt Document (including, without
limitation, the Existing DIP Financing Order);
and
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(xx) to the extent not otherwise included, all
Proceeds of each of the foregoing and all
accessions to, substitutions and replacements
for, and rents, profits and products of each of
the foregoing;
in each case howsoever any Borrowers' interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).
(b) In addition, as collateral security for the prompt and
complete payment when due of the Obligations and in order to induce the Term
Lenders, as aforesaid, each Borrower hereby further grants to the Term Lenders
a Lien (subject in all respects to the Permitted Liens) on all property of
such Borrower held by the Term Lenders, including, without limitation, all
property of every description, now or hereafter in the possession or custody
of or in transit to the Term Lenders for any purpose, including safekeeping,
collection or pledge, for the account of such Borrower or as to which such
Borrower may have any right or power.
5.02. Administrative Priority.
After the entry of the Final Order, the Obligations shall
constitute, in accordance with section 364(c)(1) of the Bankruptcy Code,
claims against each of the Borrowers in its Case which are administrative
expense claims having priority over any and all administrative expenses of the
kind specified in sections 503(b) or 507(b) of the Bankruptcy Code, except
that the Obligations shall be subject and subordinate to (i) the Post-Petition
Obligations (as such term is defined in the Existing DIP Financing Order);
(ii) the Permitted Expenses; and (iii) the Carve-Out (as such term is defined
in the Existing DIP Financing Order).
5.03. Grants, Rights and Remedies Cumulative.
This Agreement, the Final Order and the Term Loan Documents supplement
each other, and the grants, priorities, rights and remedies of the Term
Lenders hereunder and thereunder are cumulative.
5.04. No Filings Required
The Liens and security interests referred to in Section 5.01
hereof and in the other Term Loan Documents shall be deemed valid and
perfected upon entry of the Final Order which shall have occurred on or before
the Closing Date. The Term Lenders shall not be required to file any financing
statements, notices of lien or similar instruments in any jurisdiction or
filing office or to take any other action in order to validate or perfect the
Liens and security interests granted by or pursuant to this Agreement, the
Final Order or any other Term Loan Document.
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5.05. Survival
The Liens, lien priority, administrative priority, other rights
and remedies granted to the Term Lenders pursuant to this Agreement, the Final
Order and the other Term Loan Documents (specifically including, but not
limited to, the existence, perfection and priority of the Liens and security
interests provided herein and therein, and the administrative priority
provided herein and therein) shall not be modified, altered or impaired in any
manner by any other financing or extension of credit or incurrence of debt by
any Borrower (pursuant to section 364 of the Bankruptcy Code or otherwise), or
by any dismissal or conversion of the Case, or by any other act or omission
whatever, except in accordance with the Final Order.
ARTICLE VI.
AFFIRMATIVE AND NEGATIVE COVENANTS
6.01. Covenants Under Existing DIP Loan Agreement.
All the provisions of sections 8 and 9 (other than sections 8.7,
9.1, 9.2, 9.3 and 9.9) of the Existing DIP Loan Agreement and any definitions
of any capitalized terms set forth in such sections which are set forth in the
Existing DIP Loan Agreement (in each case as in effect on the date of this
Agreement after giving effect to the terms and provisions of the Existing DIP
Loan Amendment) shall be incorporated by reference in this Agreement (without
regard to any further amendment, supplement, modification or waiver relating
thereto other than as permitted under the Intercreditor Agreement, or the
termination or expiration thereof) to the same extent as if set forth at
length herein, except that (i) all references to the terms "Lender" or "Agent"
contained therein, other than those contained in Sections 8.3 and 8.13
therein, shall mean the Term Lenders, (ii) the word "first" contained in the
first sentence of Section 8.2(b) therein shall not apply herein, (iii) from
and after the time that all "Post-Petition Obligations" (as defined in the
Existing DIP Financing Order) have been fully satisfied, all references to the
terms "Agent" or "Lender" contained in Section 8.3 therein shall mean Term
Lenders, (iv) all references to the term "Agent" contained in Section 8.13
therein shall mean the Required Term Lenders, and (v) all references to the
term "Required Lenders" contained therein shall mean the Required Term
Lenders, and the Borrowers jointly and severally agree to cause the Borrowers
to perform and observe their covenants, agreements and obligations under the
foregoing provisions of Sections 8 and 9 as so modified, so long as the
Obligations (whether or not due) remain unpaid in full in cash, including
without limitation all principal of and accrued and unpaid interest on the
Term Loans. Consistent with the foregoing, the Term Lenders shall be deemed to
have consented to any asset sale or disposition which is consented to by the
Existing DIP Lenders.
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6.02. Liens
No Borrower shall create, incur, assume or suffer to exist any
Lien on any of its assets or properties including, without limitation, the
Collateral, except the Permitted Liens.
6.03. Indebtedness
(a) No Borrower shall incur, create, assume, become or be
liable in any manner with respect to, or permit to exist any Indebtedness,
except (a) Indebtedness to the Existing DIP Lenders under the Existing DIP
Debt Documents, (b) Indebtedness permitted under the Existing DIP Debt
Documents, and (c) Indebtedness permitted under the Term Loan Documents.
(b) Notwithstanding anything to the contrary contained in
this Term Loan Agreement or the Existing DIP Debt Documents, no Borrower shall
borrow any money or incur any obligation under the Existing DIP Debt Documents
for the purpose of funding any costs or expenses incurred in connection with
the closing of the manufacturing facilities and/or premises of DJ Toledo in
Toledo, Ohio, unless such Borrower has been or will be reimbursed for all of
such costs and expenses under and in accordance with the terms and provisions
of the Customer Transition Agreements.
6.04. Overadvances
Without the prior written consent of the Required Term Lenders, no
Borrower shall request, incur, create, assume, become or be liable in any
manner with respect to, or permit to exist, any advance under the Existing DIP
Debt Documents such that the aggregate amount of Revolving Credit Loans (as
such term is defined in the Existing DIP Loan Agreement), including all
outstanding Letters of Credit (as such term is defined in the Existing DIP
Loan Agreement), shall exceed at any time the Aggregate Net Availability (as
such term is defined in the Existing DIP Loan Agreement) plus the sum of (i)
$4,000,000 and (ii) the maximum amount of Permitted Overadvances (as such term
is defined in the Existing DIP Loan Agreement) which are permitted from time
to time under the Existing DIP Loan Agreement.
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ARTICLE VII.
DEFAULTS
7.01. Events of Default.
An Event of Default shall mean the occurrence or existence of one
or more of the following events or conditions (whatever the reason for such
Event of Default and whether voluntary, involuntary or effected by operation
of law):
(a) The Borrowers shall (i) fail to make any payment of
principal or interest required herein to be made with respect to the
Obligations when due and payable or declared due and payable or (ii) fail to
make any payment of any other amount owing in respect of the Term Loan or any
of the other Obligations owing under this Agreement or any of the other Term
Loan Documents within five (5) days after such amount is due and payable; or
(b) Any representation or warranty herein or in any Term
Loan Document or in any written statement pursuant thereto or hereto, report,
financial statement or certificate made or delivered to the Term Lenders by
any Borrower or on behalf of any Borrower shall be untrue or incorrect in any
material respect, as of the date when made or deemed made; or
(c) Any "Event of Default" (as defined in the Existing DIP
Loan Agreement) shall have occurred and be continuing under the Existing DIP
Loan Agreement; or
(d) Any material provision of any Term Loan Document shall,
for any reason, cease to be valid and binding on any Borrower, or any Borrower
shall so state in writing; or
(e) Any Term Loan Document or the Final Order shall, for any
reason, cease to create a valid Lien in any of the Collateral purported to be
covered thereby or such Lien shall cease to be a perfected Lien having the
priority provided for herein (and in the Intercreditor Agreement) pursuant to
section 364(c) of the Bankruptcy Code against each Borrower or any Borrower
shall so allege in any pleading filed in any court; or
(f) The Final Order shall cease to be in full force and
effect, or any Borrower shall fail to comply with the terms of the Final Order
in any material respect, or the Final Order shall be amended, supplemented,
stayed, reversed, vacated or otherwise modified (or any of the Borrowers shall
apply for authority to do so) without the consent of the Required Term
Lenders; or
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(g) An application shall be filed by any of the Borrowers
for the approval of, or there shall arise, (i) any other Claim having priority
senior to or pari passu with the claims of the Term Lenders under the Term
Loan Documents or any other claim having priority over any or all
administrative expenses of the kind specified in sections 503(b) or 507(b) of
the Bankruptcy Code, except as expressly provided herein or in the
Intercreditor Agreement; or (ii) any Lien on the Collateral having a priority
senior to or pari passu with the liens and security interests granted or
confirmed herein, except as expressly provided herein or in the Intercreditor
Agreement; or
(h) Any Existing DIP Debt Document shall be amended, waived,
modified or supplemented subsequent to the date hereof in a manner expressly
prohibited by the Intercreditor Agreement; or
(i) Roger Pollazzi shall cease to be the Chief Executive
Officer or Chief Operating Officer of Harvard or the employment of either Ted
Vogtman or Vince Toscano shall be terminated for any reason, other than by
reason of such employee's death or disability.
Notwithstanding anything in this Section 7.01 to the contrary, no Event of
Default shall be deemed to have occurred solely as a result of an amendment or
modification to or waiver given under any Existing DIP Debt Document, after
giving effect to the Existing DIP Loan Amendment, not prohibited under the
Intercreditor Agreement.
7.02. Consequences of an Event of Default.
If an Event of Default shall occur and be continuing or shall
exist, the Term Lenders may by notice to the Borrowers,
(a) declare all Obligations, including, without limitation
the Term Loans, all interest thereon and all other amounts, to be immediately
due and payable without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrowers, and an action
therefor shall immediately accrue; or
(b) give notice to the Borrowers of the occurrence and
continuance of an Event of Default.
7.03. Certain Remedies.
If an Event of Default occurs, the Term Lenders may (subject to the
terms and provisions of the Intercreditor Agreement) exercise all rights and
remedies which they may have hereunder or under any other Term Loan Document
or at law or in equity or otherwise. All such remedies shall be cumulative and
not exclusive.
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ARTICLE VIII.
MISCELLANEOUS
8.01. Holidays.
Except as otherwise provided herein, whenever any payment or
action to be made or taken hereunder or under the Term Notes, or the other
Term Loan Documents shall be stated to be due on a day which is not a Business
Day, such payment or action shall be made or taken on the next following
Business Day and such extension of time shall be included in computing
interest or fees, if any, in connection with such payment or action.
8.02. Amendments and Waivers.
No amendment or waiver of any provision of this Agreement or of
any of the other Term Loan Documents, nor consent to any departure by any
Borrower therefrom, shall in any event be effective unless the same shall be
consented to in writing by the Required Term Lenders, and then any such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which it was given; provided, however, that no amendment,
waiver or consent shall, unless consented to by all the Term Lenders in
writing, do any of the following: (a) amend the Agreement to (i) increase the
aggregate principal amount of the Term Loan; (ii) reduce the Interest Rate;
(iii) reduce or waive (A) any fees in which the Term Lenders share hereunder
or (B) the repayment of any Obligations due the Term Lenders; or (iv) extend
the maturity of the Obligations; (b) alter or amend this Section 8.02 or the
definition of "Collateral" or "Required Term Lenders;" or (c) release
Collateral in bulk, other than in connection with a release approved under the
Existing DIP Loan Agreement, without a corresponding reduction in the
Obligations to the Term Lenders. In all other respects, the Required Term
Lenders are authorized to take such actions or fail to take such actions if
the Required Term Lenders, in their discretion, deem such to be advisable and
in the best interests of the Term Lenders, including, but not limited to, the
termination of the Agreement upon the occurrence of an Event of Default. No
notice to or demand on the Borrowers in any case shall entitle the Borrowers
to any other or further notice or demand in similar or other circumstances.
8.03. No Implied Waiver; Cumulative Remedies
No course of dealing and no delay or failure of the Term Lenders
in exercising any right, power or privilege under this Agreement, the Term
Notes or any other Term Loan Document shall affect any other or future
exercise thereof or exercise of any other right, power or privilege; nor shall
any single or partial exercise of any such right, power or privilege or any
abandonment or discontinuance of steps to enforce such a right, power or
privilege preclude any further exercise thereof or of any other right, power
or privilege. The
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rights and remedies of the Term Lenders under this Agreement, the Term Notes
and the other Term Loan Documents are cumulative and not exclusive of any
rights or remedies which the Term Lenders have hereunder or thereunder or at
law or in equity or otherwise. The Term Lenders may exercise their rights and
remedies against the Borrowers and the Collateral as the Term Lenders may
elect, and regardless of the existence or adequacy of any other right or
remedy.
8.04. Notices.
(a) Unless otherwise provided herein, all notices, requests,
demands, directions and other communications (collectively "notices") under
the provisions of this Agreement, the Term Notes or any other Term Loan
Document shall be in writing and shall be mailed (by certified mail, postage
prepaid and return receipt requested), telecopied, or delivered and shall be
effective (i) if mailed, three days after being deposited in the mails, (ii)
if telecopied, when sent, confirmation received and (iii) if delivered, upon
delivery. All notices shall be sent to the applicable party at the address
stated on the signature page hereof or in accordance with the last unrevoked
written direction from such party to the other parties hereto.
(b) Without limiting Section 8.04 or any other provision of
this Agreement, the Term Lenders may rely, and shall be fully protected in
relying, on any notice purportedly made by or on behalf of the Borrowers and
the Term Lenders shall have no duty to verify the identity or authority of any
Person giving such notice. The preceding sentence shall apply to all notices
whether or not made in a manner authorized or required by this Agreement or
any other Term Loan Document.
8.05. Expenses; Taxes; Attorneys' Fees; Indemnification.
The Borrowers agree to pay or cause to be paid, on demand, and to
save the Term Lenders harmless against liability for the payment of, all
reasonable out-of-pocket expenses, regardless of whether the transactions
contemplated hereby are consummated, including but not limited to reasonable
fees and expenses of counsel for the Term Lenders incurred by the Term Lenders
in their capacity as such from time to time arising from or relating to: (a)
the negotiation, preparation, execution and delivery of this Agreement and the
other Term Loan Documents, (b) any requested amendments, waivers or consents
to this Agreement or the other Term Loan Documents whether or not such
documents become effective or are given, (c) the preservation and protection
of any of the Term Lenders' rights under this Agreement or the other Term Loan
Documents (other than the Intercreditor Agreement unless the Borrowers consent
thereto or the Borrowers reimburse the Agent or Existing DIP Lenders or their
representatives for costs in connection therewith, (d) the defense of any
claim or action asserted or brought against any Term Lender by any Person that
arises from or relates to this Agreement, any other Term Loan Document (other
than the Intercreditor Agreement unless the Borrowers consent thereto or the
Borrowers reimburse the
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Agent or Existing DIP Lenders or their representatives for costs in connection
therewith), such Term Lender's claims against the Borrowers, or any and all
matters in connection therewith, (e) the commencement or defense of, or
intervention in, any court proceeding arising from or related to this
Agreement or any other Term Loan Document (other than the Intercreditor
Agreement unless the Borrowers consent thereto or the Borrowers reimburse the
Agent or Existing DIP Lenders or their representatives for costs in connection
therewith), (f) the filing of any petition, complaint, answer, motion or other
pleading by any Term Lender, or the taking of any action in respect of the
Collateral or other security, in connection with this Agreement or any other
Term Loan Document, (g) the protection, collection, lease, sale, taking
possession of or liquidation of, any Collateral or other security in
connection with this Agreement or any other Term Loan Document, (h) any
attempt to enforce any lien or security interest in any Collateral or other
security in connection with this Agreement or any other Term Loan Document,
(i) any attempt to collect from the Borrowers, (j) the receipt of any advice
with respect to any of the foregoing, (k) all Environmental Liabilities and
Costs arising from or in connection with the past, present or future
operations of any of the Borrowers involving any damage to real or personal
property or natural resources or harm or injury alleged to have resulted from
any Release of Hazardous Materials on, upon or into such property, (l) any
costs or liabilities incurred in connection with the investigation, removal,
cleanup and/or remediation of any Hazardous Materials present or arising out
of the operations of any facility of the Borrowers, or their Subsidiaries, or
(m) any costs or liabilities incurred in connection with any Environmental
Lien. Without limitation of the foregoing or any other provision of any Term
Loan Document: if the Borrowers fail to perform any covenant or agreement
contained herein or in any other Term Loan Document, any Term Lender may
itself perform or cause performance of such covenant or agreement, and the
expenses of such Term Lender incurred in connection therewith shall be
reimbursed on demand by the Borrowers. The Borrowers agree to indemnify and
defend the Term Lenders and their directors, officers, employees, partners,
counsel and agents and any affiliate of any of the foregoing (collectively,
the "Indemnified Parties") from, and hold each of them harmless against, any
and all losses, liabilities, claims, damages, costs or expenses of any nature
whatsoever (including, without limitation, fees, expenses and disbursements of
counsel and amounts paid in settlement) incurred by, imposed upon or asserted
against any of them arising out of or by reason of any investigation,
litigation or other proceeding brought or threatened relating to, or otherwise
arising out of or relating to, the execution of this Agreement or any other
Term Loan Document (other than the Intercreditor Agreement), the transactions
contemplated hereby or thereby or the Term Loan hereunder (including, but
without limitation, any use made or proposed to be made by the Borrowers of
the proceeds thereof) but excluding any such losses, liabilities, claims,
damages, costs or expenses to the extent finally judicially determined, by a
final and non-appealable order of a court of competent jurisdiction, to have
directly resulted from the gross negligence or willful misconduct of the
Indemnified Party or of any other Indemnified Party of which such Indemnified
Party is a director, officer, employee, partner, counsel, agent or affiliate.
39-
<PAGE>
8.06. Several and Not Joint; Limited Liability
(a) Notwithstanding anything herein or in any other Term
Loan Document to the contrary, the parties hereto agree that the obligations,
liabilities and indemnities of each Term Lender hereunder shall be several and
not joint, and no Term Lender shall have any liability hereunder for any
breach by any other Term Lender of any obligation of such Term Lender set
forth herein or in any other Term Loan Document.
(b) The Borrowers hereby acknowledge and agree that neither
this Agreement nor any other Term Loan Document is being executed on behalf of
the partners of any Term Lender that is a limited partnership as individuals
and the obligations of this Agreement are not binding upon any of the
partners, officers, employees or beneficiaries of such Term Lender
individually but are binding only upon the assets and property of such Term
Lender, and the Borrowers agree that no beneficiary, partner, employee or
officer of such Term Lender may be held personally liable or responsible for
any obligations of such Term Lender arising out of this Agreement or any other
Term Loan Document. With respect to obligations of each Term Lender arising
out of this Agreement or any other Term Loan Document, the Borrowers shall
look for payment or satisfaction of any claim solely to the assets and
property of such Term Lender.
(c) Magten represents and warrants to the Borrowers that it
has full power and authority to execute and deliver this Agreement and each
other Term Loan Document as agent or as general partner, as applicable, for
the Term Lenders on whose behalf Magten is executing this Agreement as set
forth on the signature pages hereto. Except for the foregoing representations
and warranties, the Borrowers hereby acknowledge and agree that Magten shall
not have any personal obligation or liability to the Borrowers under this
Agreement or any other Term Loan Document but that it is acting solely for and
on behalf of the aforementioned Term Lenders, and without limiting the
generality of the foregoing, the Borrowers shall have no recourse against
Magten for the performance or satisfaction of any obligation under this
Agreement or any other Term Loan Document, but shall look for payment or
satisfaction of any claim arising under this Agreement or any other Term Loan
Document solely to the assets and properties of the Term Lenders.
8.07. Application
Except to the extent, if any, expressly set forth in this
Agreement or in the Term Loan Documents, each Term Lender shall have the right
to apply any payment received or applied by it in connection with the
Obligations to such of the Obligations then due and payable as it may elect.
40-
<PAGE>
8.08. Sharing of Proceeds of Collateral
If any Term Lender sells or otherwise disposes of Collateral or
otherwise receives any payment in excess of its Percentage Interest in the
Term Loan, the proceeds of such sale or other disposition or such excess
payment shall be distributed by such Term Lender to each Term Lender based
upon each Term Lender's Percentage Interest.
8.09. Severability
The provisions of this Agreement are intended to be severable. If
any provision of this Agreement shall be held invalid or unenforceable in
whole or in part in any jurisdiction such provision shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
8.10. Governing Law
This Agreement and the Term Notes shall be deemed to be contracts
under the laws of the State of New York, without regard to choice of law
principles, and for all purposes shall be governed by and construed and
enforced in accordance with the laws of said State.
8.11. Prior Understandings
This Agreement supersedes all prior understandings and agreements,
whether written or oral, among the parties hereto relating to the transactions
provided for herein, other than the Final Order.
8.12. Duration; Survival.
All representations and warranties of the Borrowers contained
herein or made in connection herewith shall survive the making of the Term
Loan and shall not be waived by the execution and delivery of this Agreement,
the Term Notes or any other Term Loan Document, any investigation by or
knowledge of the Term Lenders, the making of any Term Loan hereunder, or any
other event whatsoever. All covenants and agreements of the Borrowers
contained herein shall continue in full force and effect from and after the
date hereof until the Obligations have been paid in full in cash. Without
limitation, it is understood that all obligations of the Borrowers to make
payments to or indemnify the Term Lenders (including, without limitation,
obligations arising under Section 8.05 hereof) shall survive the payment in
full of the Term Notes and all Obligations, the termination of this Agreement
and all other events whatsoever and whether or not any Term Loans are made
hereunder.
41-
<PAGE>
8.13. Participations
(a) The Borrowers acknowledge that the Term Lenders may sell
participations in the loans and extensions of credit made to the Borrowers
hereunder provided that any such sale does not increase the Borrowers'
obligations under Section 2.11 hereof.
(b) The Borrowers authorize each Term Lender to disclose to
any participant or permitted assignee (each, a "Transferee") and any
prospective Transferee who agrees in writing for the benefit of the Borrowers
to be bound by the provisions of Section 8.13(c) any and all financial
information in such Term Lender's possession concerning the Borrowers and
their affiliates which has been delivered to such Term Lender by or on behalf
of the Borrowers pursuant to this Agreement or which has been delivered to
such Term Lender by or on behalf of the Borrowers in connection with such Term
Lender's credit evaluation of the Borrowers and their affiliates prior to
entering into this Agreement.
(c) Each Term Lender agrees to keep information obtained by
it pursuant hereto confidential in accordance with such Term Lender's, as the
case may be, customary practices and agrees that it will only use such
information in connection with the transactions contemplated by this Agreement
and not disclose any of such information other than (i) to such Term Lender's,
as the case may be, employees, representatives, agents and affiliates who are
or are expected to be involved in the evaluation of such information in
connection with the transactions contemplated by this Agreement and who are
advised of the confidential nature of such information, (ii) to the extent
such information presently is or hereafter becomes available to such Term
Lender, as the case may be, on a non-confidential basis from a source other
than the Borrowers, (iii) to the extent disclosure is required by law,
regulation or judicial order or requested or required by bank regulators or
auditors, or (iv) to Transferees or any prospective Transferee as provided in
Section 8.13(b).
(d) No Transferee shall have any rights under Section 2.11.
8.14. Counterparts
This Agreement may be executed in any number of counterparts and
by the different parties hereto on separate counterparts each of which, when
so executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument.
8.15. Successors and Assigns
This Agreement and the other Term Loan Documents shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
8.16. Waiver of Jury Trial
42-
<PAGE>
BY ITS EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE
BORROWERS AND THE TERM LENDERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT,
THE TERM NOTES OR ANY OTHER TERM LOAN DOCUMENT, ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE TERM LENDERS OR ANY
BORROWER IN CONNECTION HEREWITH OR THEREWITH. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS AGREEMENT.
8.17. Right of Setoff
Upon the occurrence and during the continuance of any Event of
Default, each Term Lender may, and is hereby authorized to, at any time from
time to time, without notice to the Borrowers (any such notice being expressly
waived by the Borrowers) and to the fullest extent permitted by law, set off
and apply any and all deposits (general or special, time or demand, provision
or final) at any time held and other indebtedness at any time owing by such
Term Lender to or for the credit or the account of the Borrowers against any
and all Obligations of the Borrowers now or hereafter existing under the Term
Loan Documents, irrespective of whether or not such Term Lender shall have
made any demand hereunder or thereunder and although such Obligations may be
contingent or unmatured. Each Term Lender agrees promptly to notify the
Borrowers after any such setoff and application made by such Term Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such setoff and application. The rights of the Term Lenders under
this Section 8.17 are in addition to the other rights and remedies (including,
without limitation, other rights of setoff under applicable law or otherwise)
which the Term Lenders may have.
8.18. Headings
Section headings herein are included for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.
43-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed and delivered this Agreement as of the date first
above written.
BORROWERS:
HARVARD INDUSTRIES, INC.,
as a Debtor and Debtor-in-Possession
By: /s/ Joseph J. Gagliardi
-----------------------
Name: Joseph J. Gagliardi
Title: Chief Financial Officer
THE KINGSTON-WARREN CORPORATION,
as Debtor and Debtor-in-Possession
By: /s/ Joseph J. Gagliardi
-----------------------
Name: Joseph J. Gagliardi
Title: Chief Financial Officer
HARMAN AUTOMOTIVE, INC.,
as a Debtor and Debtor-in-Possession
By: /s/ Joseph J. Gagliardi
-----------------------
Name: Joseph J. Gagliardi
Title: Chief Financial Officer
HAYES-ALBION CORPORATION
as a Debtor and Debtor-in-Possession
By: /s/ Joseph J. Gagliardi
-----------------------
Name: Joseph J. Gagliardi
Title: Chief Financial Officer
44-
<PAGE>
DOEHLER-JARVIS, INC.,
as a Debtor and Debtor-in-Possession
By: /s/ Joseph J. Gagliardi
-----------------------
Name: Joseph J. Gagliardi
Title: Chief Financial Officer
DOEHLER-JARVIS GREENEVILLE, INC.,
as a Debtor and Debtor-in-Possession
By: /s/ Joseph J. Gagliardi
-----------------------
Name: Joseph J. Gagliardi
Title: Chief Financial Officer
DOEHLER-JARVIS POTTSTOWN, INC.,
as a Debtor and Debtor-in-Possession
By: /s/ Joseph J. Gagliardi
-----------------------
Name: Joseph J. Gagliardi
Title: Chief Financial Officer
DOEHLER-JARVIS TECHNOLOGIES, INC.,
as a Debtor and Debtor-in-Possession
By: /s/ Joseph J. Gagliardi
-----------------------
Name: Joseph J. Gagliardi
Title: Chief Financial Officer
DOEHLER-JARVIS TOLEDO, INC., as a Debtor
and Debtor-in-Possession
By: /s/ Joseph J. Gagliardi
-----------------------
Name: Joseph J. Gagliardi
Title: Chief Financial Officer
45-
<PAGE>
Address for Notices:
2502 North Rocky Point Drive
Tampa, Florida 33607
Attn: Roger Pollazzi
With a copy to:
Willkie Farr & Gallagher
One Citicorp Center
New York, New York 10022
Attn: Myron Trepper
LENDERS
MELLON BANK, N.A., solely in its capacity Percentage Interest: 27.08%
as Trustee for GENERAL MOTORS EMPLOYEES
DOMESTIC GROUP PENSION TRUST (as directed by
Magten Asset Management Corp. and not in its
individual capacity)
As Lender
By: /s/ Bernadette T. Rist
--------------------------------
Name: Bernadette T. Rist
Title: Authorized Signatory
DEPARTMENT OF PENSIONS-CITY OF LOS ANGELES Percentage Interest: 17.24%
as Lender
By: MAGTEN ASSET MANAGEMENT
CORP., as attorney-in-fact
By: /s/ Robert J. Capozzi
-----------------------------
Name: Robert J. Capozzi
Title: Managing Director
Magten Asset Management
The decision to participate in this investment, any representations made herein
by the participant, and any actions taken hereunder by the participant has/
have been made solely at the direction of the investment fiduciary who has
sole investment discretion with respect to this investment.
46-
<PAGE>
HUGHES MASTER RETIREMENT TRUST Percentage Interest: 10.44%
as Lender
By: MAGTEN ASSET MANAGEMENT
CORP., as attorney-in-fact
By: /s/ Robert J. Capozzi
-----------------------------
Name: Robert J. Capozzi
Title: Managing Director
Magten Asset Management
SATURN FUND, LTD. Percentage Interest: 2.52%
as Lender
By: MAGTEN ASSET MANAGEMENT
CORP., as attorney-in-fact
By: /s/ Robert J. Capozzi
-----------------------------
Name: Robert J. Capozzi
Title: Managing Director
Magten Asset Management
MAGTEN OFFSHORE FUND LTD. Percentage Interest: 3.36%
as Lender
By: MAGTEN ASSET MANAGEMENT CORP.,
as attorney-in-fact
By: /s/ Robert J. Capozzi
-----------------------------
Name: Robert J. Capozzi
Title: Managing Director
Magten Asset Management
MAGTEN PARTNERS, L.P. Percentage Interest: 2.52%
as Lender
By: MAGTEN ASSET MANAGEMENT
CORP., its General Partner
By: /s/ Robert J. Capozzi
-----------------------------
Name: Robert J. Capozzi
Title: Managing Director
Magten Asset Management
47-
<PAGE>
MAGTEN GROUP TRUST Percentage Interest: 0.84%
as Lender
By: MAGTEN ASSET MANAGEMENT
CORP., as its attorney-in-fact
By: /s/ Robert J. Capozzi
-----------------------------
Name: Robert J. Capozzi
Title: Managing Director
Magten Asset Management
MUTUAL BEACON FUND, a series of Percentage Interest: 12.00%
FRANKLIN MUTUAL SERIES FUND, INC.
as Lender
By: FRANKLIN MUTUAL ADVISERS, INC.,
its Advisor
By: /s/
---------------------------------
Name: PETER A. LANGERMAN
Title: CHIEF OPERATING OFFICER
& SENIOR VICE PRESIDENT
MUTUAL QUALIFIED FUND, a series of Percentage Interest: 6.8%
FRANKLIN MUTUAL SERIES FUND, INC.
as Lender
By: FRANKLIN MUTUAL ADVISERS, INC.,
its Advisor
By: /s/
---------------------------------
Name: PETER A. LANGERMAN
Title: CHIEF OPERATING OFFICER
& SENIOR VICE PRESIDENT
48-
<PAGE>
FRANKLIN MUTUAL BEACON FUND, a subfund of Percentage Interest: 0.7%
TEMPLETON GLOBAL STRATEGY FUNDS
as Lender
By: FRANKLIN MUTUAL ADVISERS, INC.,
its Advisor
By: /s/ Peter A. Langerman
---------------------------------
Name: PETER A. LANGERMAN
Title: CHIEF OPERATING OFFICER
& SENIOR VICE PRESIDENT
MUTUAL BEACON FUND, Percentage Interest 0.5%
as Lender
By: FRANKLIN MUTUAL ADVISERS, INC.,
its Advisor
By: /s/ Peter A. Langerman
---------------------------------
Name: PETER A. LANGERMAN
Title: CHIEF OPERATING OFFICER
& SENIOR VICE PRESIDENT
PACHOLDER VALUE OPPORTUNITY FUND, L.P. Percentage Interest: 6.0%
as Lender
By: /s/ James P. Shanahan Jr.
-----------------------------------
Name: James P. Shanahan Jr.
Title: Manager of General Partner
PACHOLDER HERON, L.P. Percentage Interest: 2.0%
as Lender
By: /s/ James P. Shanahan Jr.
-----------------------------------
Name: James P. Shanahan Jr.
Title: Manager of General Partner
49-
<PAGE>
USF&G PACHOLDER FUND, INC. Percentage Interest: 8.0%
as Lender
By: /s/ James P. Shanahan Jr.
-----------------------------------
Name: James P. Shanahan Jr.
Title: Manager of General Partner
Addresses for Notices:
Magten Asset Management Corp.
35 East 21st Street
New York, New York 10010
Attn: Allan Brown
Pacholder Associates, Inc.
8044 Montgomery Road
Bank One Towers, Suite 382
Cincinnati, Ohio 45236
Attn: Mark H. Prenger
50-
<PAGE>
EXHIBIT 12.1
HARVARD INDUSTRIES INC.
(DEBTOR-IN-POSSESSION)
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
DIVIDENDS ON PREFERRED STOCK
(In thousands of dollars)
Three months ended
December 31,
----------------------
1997 1996
----------- -----------
Pre-tax loss from continuing operations........... $ (2,408) $ (29,680)
Add: Fixed charges................................ 5,353 12,513
----------- -----------
Income as adjusted................................ $ 2,945 $ (17,167)
=========== ===========
Fixed charges:
Interest on indebtedness...................... $ 3,853 $ 12,188
Portion of rents representative of the
interest factor........................... 1,500 325
----------- -----------
Fixed charges................................. 5,353 12,513
Dividends on preferred stock and accretion........ 4,224
----------- -----------
Fixed charges and dividends on preferred stock.... $ 5,353 $ 16,737
=========== ===========
Deficiency of earnings over fixed charges and
dividends on preferred stock.................. $ (2,408) $ (33,904)
=========== ===========
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 6,695
<SECURITIES> 0
<RECEIVABLES> 71,967
<ALLOWANCES> 0
<INVENTORY> 46,966
<CURRENT-ASSETS> 8,836
<PP&E> 254,838
<DEPRECIATION> 129,787
<TOTAL-ASSETS> 287,781
<CURRENT-LIABILITIES> 139,824
<BONDS> 0
124,637
0
<COMMON> 70
<OTHER-SE> (553,165)
<TOTAL-LIABILITY-AND-EQUITY> 287,781
<SALES> 197,052
<TOTAL-REVENUES> 197,052
<CGS> 191,722
<TOTAL-COSTS> 191,722
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,852
<INCOME-PRETAX> (5,350)
<INCOME-TAX> 169
<INCOME-CONTINUING> (5,519)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,519)
<EPS-PRIMARY> (0.79)
<EPS-DILUTED> 0
</TABLE>
