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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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(MARK ONE)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year 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 number: 0-8410
WYANT CORPORATION (FORMERLY HOSPOSABLE PRODUCTS, INC.)
(Exact name of registration as specified in its charter)
<TABLE>
<S> <C>
NEW YORK 11-2236837
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
100 READINGTON ROAD, SOMERVILLE, NEW JERSEY 08876
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code 908-707-1800
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
COMMON STOCK ON WHICH REGISTERED
Common Stock Traded on the NASDAQ
par value $.01 per share National Market
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____________
_______
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K (X).
The aggregate market value of the voting stock held by non-affiliates of
the registrant (i.e., by persons other than officers and directors of Wyant
Corporation as reflected in the table incorporated by reference in Item 12 of
this Annual Report on Form 10-K) as of March 18, 1998, was $5,358,373.
As of March 18, 1998, there were 1,703,676 Common Shares of the Registrant
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1. The Exhibits identified in Item 14 (a) 3.
2. The 1998 Proxy Statement identified in Items 10, 11, 12 and 13.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
PART I.
1. Business............................................... 1
2. Properties............................................. 5
3. Legal Proceedings...................................... 6
4. Submission of Matters to a Vote of Security Holders.... 6
PART II.
5. Market for the Registrant's Common Stock and Related
Shareholder Matters................................... 7
6. Selected Financial Data................................ 8
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 9
8. Financial Statements and Supplementary Data............ 12
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................... 12
PART III.
10. Directors and Executive Officers....................... 13
11. Executive Compensation................................. 13
12. Security Ownership of Certain Beneficial Owners and
Management........................................... 13
13. Certain Relationships and Related Transactions......... 13
PART IV.
14. Exhibits, Consolidated Financial Statements and
Schedules and Reports on Form 8-K.................... 14
</TABLE>
iii
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PART 1
ITEM 1. BUSINESS
A. GENERAL
Wyant Corporation (formerly Hosposable Products, Inc.), a New York
corporation incorporated in 1971 (hereinafter "Wyant"), has three wholly-owned
subsidiaries, Bridgewater Manufacturing Corp., a New Jersey corporation
("Bridgewater"), IFC Disposables, Inc., a Tennessee corporation ("IFC") and Wood
Wyant Inc. (formerly 3290441 Canada Inc.), a Canadian corporation ("Wood
Wyant"). Through its Wyant Health Care division, it manufactures and distributes
adult incontinent products, including disposable underpads and adult briefs. IFC
manufactures and distributes disposable wipers and sanitary paper products and
systems. Wyant Health Care and IFC products are sold primarily in domestic
markets. Wood Wyant manufactures and distributes sanitation products and systems
to commercial and institutional markets in Canada. (The "Company" is used herein
to make general references, without distinction among Wyant, Wyant Health Care
Division, Bridgewater, IFC and Wood Wyant).
WOOD WYANT
Wood Wyant is a manufacturer and national distributor of a broad range of
industrial and institutional sanitation products, including paper hand towels,
bathroom tissue, related sanitary paper products, janitorial chemicals, waste
receptacles and cleaning equipment and systems. Wood Wyant is the only dedicated
national distributor of a full line of sanitary paper products, janitorial
chemicals and equipment, and sanitation supplies to institutional markets in
Canada. Wood Wyant, headquartered in Montreal, employs approximately 350 people
and operates a paper converting plant and a chemical manufacturing facility in
Ontario and services some 12,000 customers through a direct sales organization
supported by customer service centers located across Canada.
Wood Wyant's manufacturing operations include the conversion of base paper
and the manufacture of janitorial chemicals. Base paper is converted into paper
hand towels and bathroom tissue at a plant owned by Wood Wyant in Pickering,
Ontario. Specialized machinery in this plant cuts, folds or winds the paper into
finished products that are packaged and placed in shipping containers.
Wood Wyant develops and manufactures janitorial chemicals from raw
materials produced by major base chemical suppliers. The chemicals are blended
in large tanks and packed into shipping containers for sale by Wood Wyant's
distribution network.
Wood Wyant's distribution operations are conducted from leased facilities
throughout Canada, thereby providing flexibility in meeting market requirements
and eliminating the need to make capital expenditures for real estate.
WYANT HEALTH CARE DIVISION
The majority of the sales of the Wyant Health Care Division's branded
products are to distributors for eventual use by hospitals, nursing homes and
other health care institutions, and to government agencies. Disposable underpads
and adult briefs are the Division's principal products. Their end-use is for
protection against incontinence. A portion of the Division's revenue is derived
through the sale of finished products as private label brands for major
customers. The Division's airlaid fabrics (Airlay(TM)) are used as components of
wiping products manufactured by IFC, and also are sold in roll good form to
converters and manufacturers who produce a wide range of health care, consumer
and industrial products.
In late 1996 the Division purchased a high speed adult brief converting
line. Both branded and private label adult briefs were introduced in 1997 to
further expand the Division's line of incontinent care products in this growth
market.
The Division's products are manufactured on a number of continuous
production lines that automatically assemble the various layers of product
materials, bond them with various fixative means, cut the materials to specific
lengths and fold, count, stack and bag/box the completed products. During 1997,
the Division produced the vast majority of its products with its own equipment,
at leased facilities in Fresno, California and at its principal manufacturing
facility in Branchburg, New Jersey purchased by Wyant in December 1993. The
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Division's products are sold by a direct sales organization supported by a
customer service department located at the Branchburg facility.
IFC
IFC's operations are conducted at a newly established location in
Brownsville, Tennessee. IFC's manufacturing operations include the conversion of
various materials into wiping products. Specialized machinery cuts, folds or
winds various materials into finished products which are packaged and placed
into shipping containers. IFC's products are sold to some 300 distributors and
brokers by a direct sales organization supported by customer service located at
the Brownsville facility.
B. INDUSTRY SEGMENTS
The Company operates in three industry segments. Its assets, net sales and
net income (loss) are shown in the "Notes to Consolidated Financial Statements"
(Part IV, Item 14).
C. SUPPLY OF RAW MATERIALS
The Company purchases raw materials necessary for the manufacture of its
products from several unaffiliated suppliers. These raw materials are readily
available from numerous sources. The Company is not dependent upon any one major
source of supply, and is not limited by any supply contracts.
In February 1994, coincidental with the sale of its fifty percent joint
venture interest in a paper producing mill, Wood Wyant signed a five year supply
agreement to purchase 16,000 short tons annually of paper toweling and tissue at
market prices. This supplier provides substantially all of Wyant's requirement
for these products.
D. MARKETING AND SALES
WOOD WYANT
Wood Wyant's products are sold by a field sales organization of 90. Sales
(other than inter-company transactions with IFC) are made primarily to end
users, with a minor percentage made to distributors.
STRATEGY AND MARKETING
Wood Wyant's marketing strategy was established in the fall of 1994
following an extensive study of its sales organization by Wood Wyant and
Canada's leading sales and marketing consulting group. This study, which was
undertaken over a period of several months, led to the corporate strategy of
building a business with superior return based upon a consultative approach of
developing comprehensive cost effective solutions to customers' sanitation
needs. In pursuing this strategy, Wood Wyant's primary focus was on washroom and
floor care programs within the health care, education, industrial and office
channels of distribution. This strategy has required increased investment in
sales training activities to increase product knowledge and improve sales and
account management capabilities. In addition, a broad cross-section of managers
participated under the direction of a task force in the development of a
strategic sales plan designed to ensure growth consistent with Wood Wyant's
objective.
Wood Wyant's direction in marketing calls for profitable growth based upon
a consultative selling approach where skilled and highly trained account
managers provide customers with cost effective solutions to sanitation problems.
Wood Wyant's marketing activities are consolidated in Montreal and have been
strengthened. The marketing group of Wood Wyant is responsible for the strategic
direction and profitable growth and development of Wyant's various product
lines.
SERVICE AND LOGISTICS
Wood Wyant operates six full service customer service centers located
strategically across Canada in Halifax, Montreal, Toronto, Winnipeg, Edmonton
and Vancouver. Responsibility for logistics is centralized to provide greater
control over essential operations of the business in the areas of forecasting,
production planning, inventory control and management and purchasing. Service
level standards are established and performance is monitored on a continuous
basis. Wood Wyant maintains a policy of next day delivery of all core stocking
products from its major service centers. Such deliveries are made via courier
companies,
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transportation companies, local cartage or company-operated vehicles in selected
locations. As a result of these service levels and short lead times for
replenishment, there are no material backlogs.
Wood Wyant's principal customer channels are in the health care and
education (including schools, universities and colleges) segments, but also
include industrial entities and distributors. Most of its customers are located
in Canada, with customers in the United States accounting for less than 8% of
sales. Wood Wyant has no single customer that accounts for more than 7% of
sales.
WYANT HEALTH CARE DIVISION
The Division's products are sold by 12 salaried sales and marketing
personnel and by several independent sales organizations that work on a
commission basis.
Most of the Division's sales (other than inter-company transactions with
IFC) are made to distributors that, in turn, sell the Company's products to
institutional users such as hospitals and nursing homes, and to industrial
users. Other sales are made to private labellers that sell to retail
individual/chain stores. The retail chains usually sell the products under
private label.
The following table shows, for the years indicated, percentage information
in respect of the Division's net sales.
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Major Distributors.................................... 12.5 11.1 11.8 10.5 12.4
Other Distributors.................................... 52.9 55.9 36.5 34.7 19.9
Government Agencies................................... 1.0 0.8 1.0 1.0 1.1
Private Label......................................... 3.1 2.5 18.6 18.4 28.9
Converters (airlaid/nonwoven fabrics)................. 6.1* 7.0* 8.2* 7.0* 5.2*
Industrial Wiping Products (IFC Disposables, Inc.).... 24.4 22.7 23.9 28.4 32.5
</TABLE>
- ---------------
* Does not include inter-company sales of $2,498,939, $1,542,772, $1,709,494,
$1,266,306 and $1,235,853, in 1997, 1996, 1995, 1994, and 1993, respectively,
to IFC Disposables, Inc.
At December 31, 1997 the Division had a backlog of firm orders of
approximately $1,460,000, which was virtually unchanged from the backlog at
December 31, 1996.
IFC
IFC's products are sold by 8 salaried sales personnel and by several
independent sales organizations that are paid on a commission basis.
IFC's sales are made primarily to distributors that resell IFC's products
to institutional users such as hospitals, nursing homes and restaurants.
E. COMPETITION
WOOD WYANT
Wood Wyant competes in the sanitary paper and janitorial product markets
across Canada. The Canadian market for sanitary paper and sanitation products is
fragmented and is served by over 200 distribution companies that compete
directly with Wood Wyant on a regional basis and that tend to be small to medium
sized. Only two companies compete on a national basis, with Wood Wyant being the
only national full line distributor focused solely on the institutional
sanitation market.
Wood Wyant's distribution capabilities are enhanced by its vertical
integration as a converter of paper products and a manufacturer of a complete
line of sanitation chemicals. Wood Wyant's size also permits it to take full
advantage of the benefits of bulk pricing and volume discounts offered by its
suppliers. However, Wood Wyant's ability to compete successfully is dependent
upon its ability to make timely delivery of quality products at competitive
prices. With respect to sanitary paper products, Wood Wyant is not fully
integrated and competes with fully integrated sanitary paper producers that have
substantial financial resources and
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significant market share relative to Wood Wyant; therefore, Wood Wyant's results
of operations could be adversely affected if such fully integrated producers
attempt to significantly increase market share.
WYANT HEALTH CARE DIVISION
The industry in which the Division competes is highly competitive. Among
the competitors are such firms as Kendall, Paper-Pak and others with
substantially greater resources than the Company's, as well as many firms
comparable to the Division in "size" and the primary businesses of which are
directly competitive. Although the Division is a leading manufacturer of
underpads, it is not a significant factor in the overall adult incontinent
market.
The Division's ability to compete successfully is dependent upon its
ability to make timely deliveries of value added products of a quality similar
to or higher than that of its competitors and at competitive prices.
IFC
IFC competes with major paper mills and smaller converters of towel, tissue
and disposable wiping products. The major mill category of competition includes
such companies as Kimberly Clark, Fort James and Wisconsin Tissue. The smaller
converters are multiple in number and are more regional in their market
approach.
In order to compete successfully, IFC must supply its customers with
quality products at competitive prices. Customer service and sales support
programs are necessary to insure that IFC is regarded as a valuable partner by
its customers.
F. EMPLOYEES/UNION CONTRACT
WOOD WYANT
Wood Wyant currently has approximately 350 employees, including
approximately 259 salaried employees and 91 hourly employees. Wood Wyant's
hourly workers are covered under four separate collective bargaining agreements,
the largest of which covers 66 workers at Wood Wyant's Pickering plant and
expires on October 25, 1999. Wood Wyant has never had a work stoppage in its
history, nor has it had any other material labor problems.
WYANT HEALTH CARE DIVISION
The Division has 225 employees, of whom 178 are employed in New Jersey, and
47 are employed in Fresno, California.
The Division is party to collective bargaining agreements with the
International Production Service & Sales Employees Union that serves its New
Jersey factory-labor employees. The agreements expire in 1998. The Division
considers its relations with its employees to be satisfactory, and no labor
disputes are anticipated, nor have any affected operations negatively to date.
IFC
IFC employs 65 personnel at its facility in Brownsville, Tennessee.
Employees are not unionized.
G. PATENTS AND TRADEMARKS
The Company is the owner of 26 patents and 153 trademarks.
Of the patents, 25 apply to the Sanitation Products segment and relate to
dispensers used with the Company's paper and chemicals products. The remaining
patent is for "Tuckables(R)" underpads manufactured by the Health Care Products
segment. The Company is not able to assess any economic advantage particularly
attributable to any of the above patents.
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The trademarks also relate primarily to the Sanitation Products segment
(131 trademarks), with 10 applicable to the Health Care Products segment and 12
to the Wiping Products segment. These trademarks are used to protect the
identification of individual products, but the Company is unable to assess any
economic advantage particularly attributable to any of them. Moreover, there is
no assurance that trademark rights are enforceable as a mere consequence of
trademark registration.
ITEM 2. PROPERTIES
WOOD WYANT
Wood Wyant's manufacturing operations include the conversion of base paper
and the manufacturing of janitorial chemicals. Base paper is converted into
paper hand towels and bathroom tissue at a plant owned by Wood Wyant in
Pickering (Toronto), Ontario. Specialized machinery in this plant cuts, folds or
winds the paper into finished products that are packaged and placed in shipping
containers. The Pickering plant occupies approximately 149,000 square feet. For
the year ended December 31, 1997, production at Pickering totalled approximately
1,742,000 cases, which represents approximately 64% of capacity.
Wood Wyant develops and blends janitorial chemicals from raw materials
produced by major base chemical suppliers. The chemicals are blended in large
tanks and packed into shipping containers for sale by the Wood Wyant
distribution network. The plant is located in a rented 42,000 square foot
facility. For the year ended December 31, 1997 total production at the plant
reached approximately 2,663,000 liters (49% of capacity).
Wood Wyant's distribution operations are conducted through leased
facilities throughout Canada, thereby providing flexibility in meeting market
requirements and eliminating the need to make capital expenditures for real
estate. The location of the leased facilities, including square footage and
lease expiration dates, are as follows:
<TABLE>
<CAPTION>
AREA IN YEAR OF
FACILITY SQUARE FEET EXPIRATION
-------- ----------- ----------
<S> <C> <C>
Dartmouth (Halifax), Nova Scotia............................ 15,700 1998
Lachine (Montreal), Quebec.................................. 91,700 2004
Scarborough (Toronto), Ontario.............................. 42,800 2001
Scarborough (Toronto), Ontario.............................. 42,100 2001
Winnipeg, Manitoba.......................................... 12,000 2001
Edmonton, Alberta........................................... 14,000 1999
Burnaby (Vancouver), B.C.................................... 10,400 2000
</TABLE>
WYANT HEALTH CARE DIVISION
Since May 31, 1994 the Division has conducted all New Jersey operations at
its Branchburg, New Jersey location. This facility accommodates manufacturing
operations, warehousing and administrative activities in a 111,640 square foot
building.
The Division leases approximately 80,000 square feet, used for
manufacturing and warehousing, in a building at 95 Santa Fe Avenue, Fresno,
California, from Len-Sid Realty Co. Leonard Schramm, a former President of the
Company is a partner in Len-Sid Realty Co. The terms of the lease agreement,
including $112,116 as annual rent, are comparable to terms that might be
obtainable from an unaffiliated lessor of like property in the immediate
vicinity of the Fresno warehouse. The lease term is for one year, but terminable
on 90 days' notice (essentially, because the landowner, The Atchison, Topeka and
Santa Fe Railroad, has the right to terminate Len-Sid Realty Co.'s "possession"
on 90 days' notice).
IFC
During November 1997, IFC relocated its manufacturing operations from
leased premises in Jackson, Tennessee to a leased facility in Brownsville,
Tennessee. Although final documentation is not yet executed, the
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lease for this 100,000 square foot facility will expire on December 31, 2004.
IFC has the option to extend the term by three years to December 31, 2007.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company may be a party to legal proceedings
incidental to its business. At present, there are no legal proceedings that are
material to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 5, 1997, the Company held its annual meeting of shareholders. A
total of 1,118,023 shares, a quorum, were represented in person or by proxy.
Gerald W. Wyant, James A. Wyant, Donald C. MacMartin, John B. Wight, Thomas R.M.
Davis, Nicholas Gallopo, Richard Charles and Robert Briggs were each elected to
serve as a director for a one-year period expiring in 1998 (each with 1,114,913
"for", except for Robert Briggs, 937,690 "for").
The appointment of Ernst & Young LLP as auditors for the year ended
December 31, 1997 was ratified (1,117,023 "for"). At a Board of Directors
meeting held directly following the annual meeting, Mr. Donald C. MacMartin was
elected as Chairman of the Board of Directors.
On March 17, 1997, the Company held a special meeting of shareholders.
1,377,981 shares, a quorum, were represented in person or by proxy. The
following matters were acted on by shareholders:
1. A proposal to approve the Asset Purchase Agreement dated as of November
12, 1996, as amended (the "Purchase Agreement"), by and among the
Company, 3290441 Canada Inc., a wholly owned and newly formed Canadian
subsidiary of the Company ("Sub"), and G.H. Wood + Wyant Inc., the
holder of a majority of the outstanding shares of the Company's Common
Stock, pursuant to which Sub would acquire the business and all
operating assets and assume the operating liabilities of G.H. Wood +
Wyant Inc. upon the terms and conditions set forth in the Purchase
Agreement. The proposed Acquisition and the related transactions
provided for in the Purchase Agreement were ratified (1,065,269 "for").
2. A proposal to approve the 1997 Stock Incentive Plan, to allow the
Company to grant incentives to directors, key employees and consultants
in the form of options, stock appreciation rights, restricted stock and
other performance awards. An aggregate of 300,000 shares of Company
common stock is available under the plan. The Plan was ratified
(1,075,735 "for").
3. A proposal to amend the Company's Certificate of Incorporation to change
the name to Wyant Corporation from Hosposable Products, Inc. The
proposal was ratified (1,364,100 "for").
4. A proposal to amend the Company's Certificate of Incorporation to
increase the number of authorized shares of the Company's common stock
par value $0.01 per share from 3,000,000 shares to 6,000,000 shares. The
proposal was ratified (1,356,927 "for").
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
PRINCIPAL MARKET AND SALES PRICES
The Company's Common Stock is traded on the NASDAQ National Market. The
sales highs and lows during each quarter of the last three fiscal years are as
follows:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1995
1st Quarter............................................... 7 3/4 5 1/2
2nd Quarter............................................... 7 5/8 5
3rd Quarter............................................... 8 1/4 4
4th Quarter............................................... 8 3/4 6 3/4
1996
1st Quarter............................................... 7 5
2nd Quarter............................................... 8 1/4 7
3rd Quarter............................................... 8 1/4 4 5/8
4th Quarter............................................... 5 1/2 4 1/2
1997
1st Quarter............................................... 5 3/4 4 1/2
2nd Quarter............................................... 5 1/4 4 1/4
3rd Quarter............................................... 6 1/2 3 1/2
4th Quarter............................................... 7 5 1/2
</TABLE>
On August 8, 1997 the Corporation sold 11,200 shares of Common Stock held
in treasury to the Chairman of the Board, President and Chief Executive Officer
for a total consideration of $49,000.
The number of holders of the Company's Common Stock as at March 18, 1998,
was approximately 800 based on the number of holders of record and an estimate
of the number of individual participants represented by security position
listings.
The Company has never paid a cash dividend on its common shares, and does
not anticipate doing so in the foreseeable future.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
Unaudited Unaudited
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales................................ $ 91,220 $ 92,845 $ 91,355 $ 86,120 $ 87,330
Cost of sales........................ 62,200 63,530 62,113 58,356 56,375
--------- --------- --------- --------- ---------
Gross profit......................... 29,020 29,315 29,242 27,764 30,955
Selling, general and administrative
expenses........................... 26,851 27,214 26,141 26,887 31,612
Amortization......................... 567 631 650 766 783
Non-recurring items.................. -- 550 1,808 61 --
Interest expense..................... 968 751 1,064 1,060 1,053
Other income......................... (295) (323) (265) (397) (222)
--------- --------- --------- --------- ---------
28,091 28,823 29,398 28,377 33,226
Income (loss) before income taxes and
extraordinary gain................. 929 492 (156) (613) (2,271)
Income tax expense (benefit)......... 511 348 (250) 91 (740)
--------- --------- --------- --------- ---------
Income (loss) before extraordinary
gain............................... 418 144 94 (704) (1,531)
Extraordinary gain, net of income
taxes.............................. 92 -- -- -- --
--------- --------- --------- --------- ---------
Net income (loss).................... 510 144 94 (704) (1,531)
Dividends and accretion of
mandatorily redeemable preferred
shares............................. 191 -- -- -- --
--------- --------- --------- --------- ---------
Net income (loss) attributable to
common shares...................... $ 319 $ 144 $ 94 $ (704) $ (1,531)
========= ========= ========= ========= =========
Per common share
Basic
Income (loss) before extraordinary
gain............................ $ 0.09 $ 0.05 $ 0.03 $ (0.26) $ (0.57)
Net income (loss).................. $ 0.12 $ 0.05 $ 0.03 $ (0.26) $ (0.57)
Diluted
Income (loss) before extraordinary
gain............................ $ 0.09 $ 0.05 $ 0.03 $ (0.26) $ (0.57)
Net income (loss).................. $ 0.12 $ 0.05 $ 0.03 $ (0.26) $ (0.57)
Weighted average number of common
shares outstanding................. 2,697,907 2,692,476 2,692,476 2,691,906 2,704,158
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31
---------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
Unaudited Unaudited Unaudited
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital...................... $ 2,759 $ 5,627 $ 10,793 $ 11,202 $ 3,611
Total assets......................... 43,833 45,572 46,472 46,107 51,281
Long-term obligations (excluding
current maturities)................ 5,548 10,187 10,235 12,355 15,615
Redeemable preferred shares.......... 4,930 2,268 2,268 2,268 2,268
Cash Dividends declared per common
share.............................. -- -- -- -- --
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997
INTRODUCTION
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and accompanying notes. (See Item 14).
RESULTS OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED
DECEMBER 31, 1996
SALES: Sales for the year ended December 31, 1997 declined by $1,625,559 or
1.75% to $91,219,621 from the level of $92,845,180 in the year 1996, after
eliminating inter-segment sales, which increased to $7,738,864 in 1997 from
$3,874,873 in 1996. Sales of the health care products segment were $31,324,702
in 1997, a reduction of $505,010 or 1.6% from the total of $31,829,712 in 1996.
The reduction resulted primarily from the loss of a major private label
customer, the failure of a significant regional distributor and the
reorganization of the sales force, all of which were partially offset by the
sales derived from the new adult brief product line.
Sales of the wiping products segment increased by $3,095,060 or 25.8% to
$15,099,055 in 1997, from $12,003,995 in 1996. This improvement was the result
of significantly higher sales of paper products and systems.
Sales of the sanitation products segment were $52,534,728 in 1997, down by
$351,618 or 0.7% from the 1996 sales of $52,886,346. This reduction resulted
from the negative impact of a weaker Canadian dollar translation rate and lower
selling prices for paper products, partially offset by higher sales volume of
paper products and increased sales of sanitation products and equipment.
COST OF SALES AND GROSS PROFIT: Gross profit of the health care products
segment for 1997 was $5,151,798 or 16.4% of sales, compared with $4,875,297 or
15.3% of sales in 1996. The improved margin percentage was due to cost
reductions and improved operating efficiencies. Gross profit of the wiping
products segment was $2,699,437 or 17.9% of sales in 1997. In 1996 gross profit
amounted to $2,447,344 or 20.4% of sales. The lower margin was the result of the
significant increase in sales of paper products, which generate lower margins
than the segment's other product lines.
The sanitation products segment realized gross profit of $21,169,065 or
40.3% of sales in 1997, compared with $21,991,889 or 41.6% of sales in 1996. The
margin reduction was primarily caused by the competitive pricing environment for
paper products in 1997.
SELLING, GENERAL AND ADMINISTRATIVE: Selling, general and administrative
expenses for 1997 totalled $26,850,337, a reduction of $363,626 from the 1996
level of $27,213,963. Expenses of the health care products segment were
$6,172,413 in 1997, a decrease of $15,610 from the 1996 expense of $6,188,023.
In the wiping products segment, 1997 expenses amounted to $2,524,882, increasing
by $417,929 or 19.8% over the 1996 expenses of $2,106,953. This resulted
primarily from higher outward freight costs associated with the increased sales
activity ($180,660) and related selling expense increases ($203,746). Expenses
of the sanitation products segment declined by $765,945 in 1997 to $18,153,042,
compared with the total of $18,918,987 in 1996. The reduction was primarily due
to lower staffing levels in 1997 and the favorable impact of the weaker Canadian
dollar translation rate, together with lower marketing and promotion expenses
than in 1996, when a new product catalogue was produced. During 1997, the
Company transferred its Ontario Distribution Center from a leased facility in
Scarborough, Ontario to the company-owned facility at Pickering, Ontario. The
Company is attempting to sublease the Scarborough facility and has provided
approximately $238,000 at December 31, 1997 for related future costs.
AMORTIZATION: Amortization amounted to $567,437 in 1997, a reduction of
$63,469 from the 1996 level due to the relatively low level of capital spending
in 1997.
NON-RECURRING ITEMS: A charge of $549,805 was recorded in 1996 for expenses
incurred in relation to the Wood Wyant acquisition which occurred in March 1997.
9
<PAGE> 13
INTEREST EXPENSE: Interest expense totalled $968,128 for 1997, an increase
of $217,022 over the 1996 expense of $751,106, as the additional interest costs
related to the debt used to finance the Wood Wyant acquisition more than offset
the favorable impact of lower interest rates in 1997.
OTHER INCOME: Other income for 1997 of $295,087 was $28,188 lower than in
1996. The decrease resulted from lower levels of interest income and gains on
disposal of assets, partially offset by foreign exchange gains in Canada.
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY GAIN: Income before tax and
extraordinary gain totalled $929,485 in 1997, an improvement of $437,460 over
the 1996 amount of $492,025. The sanitation products and health care products
segments improved by $326,224 and $282,660 respectively, while the wiping
products segment declined by $171,424.
INCOME TAXES: Income tax expense increased by $163,352 in 1997 to $510,987,
reflecting primarily the higher pre-tax income in 1997.
EXTRAORDINARY GAIN: An extraordinary gain of $91,958 or $0.03 per common
share, net of tax of $47,372, was realized in 1997 on the refinancing of certain
term debt.
NET INCOME: Net income for 1997 amounted to $510,456, an improvement of
$366,066 over the 1996 income of $144,390. After deducting dividends and
accretion relating to the mandatorily redeemable preferred shares, the earnings
amounted to $0.12 per common share in 1997, compared with $0.05 per common share
in 1996.
RESULTS OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED
DECEMBER 31, 1995
SALES: Sales for the year ended December 31, 1996 increased by $1,489,570
to $92,845,180 from the total of $91,355,610 in 1995, after eliminating
intersegment sales, which increased to $3,874,873 in 1996 from $3,031,064 in
1995. Sales of the health care products segment declined by $707,007 or 2.2% to
$31,829,712 in 1996, primarily due to lower sales volume of airlaid roll goods.
Sales of the wiping products segment increased by $2,319,679 or 24.0% due to
higher sales volume. Sales of the sanitation products segment at $52,886,346
were $720,709 higher than in 1995, as a result of increased sales of paper
products and equipment, which more than offset a reduction in sales of chemical
products.
COST OF SALES AND GROSS PROFIT: Gross profit of the health care products
segment for 1996 was $4,875,297 or 15.3% of sales, compared with $5,737,322 or
17.6% of sales in 1995. The decline in margin was due to downtime associated
with the installation of equipment, together with operating inefficiencies.
Gross profit of the wiping products segment amounted to $2,447,344 or 20.4% of
sales in 1996, up from $1,743,275 or 18.0% of sales in 1995. The improved margin
reflected the more efficient capacity utilization. For the sanitation products
segment, gross profit in 1996 was $21,991,889 or 41.6% of sales, compared with
$21,761,076 or 41.7% of sales in 1995.
SELLING, GENERAL AND ADMINISTRATIVE: Selling, general and administrative
expenses for 1996 were $27,213,963, an increase of $1,072,430 over the 1995
level of $26,141,533. In the health care products segment, expenses of
$6,188,023 in 1996 were $719,745 higher than in 1995, due to increased freight
costs and professional and consulting fees. The level of expenses in the wiping
products segment rose by $237,041 in 1996 to $2,106,953, primarily due to an
increase of $213,594 in freight costs resulting from the higher sales volume.
Expenses of the sanitation products segment were $18,918,987 in 1996, an
increase of $155,645 over 1995.
AMORTIZATION: Amortization amounted to $630,906 in 1996, a decrease of
$19,152 from 1995.
NON-RECURRING ITEMS: A charge of $549,805 was recorded in 1996 for expenses
incurred for the proposed acquisition of the Canadian operations of G.H. Wood +
Wyant Inc. In 1995, non-recurring expenses totalling $1,807,792 were incurred,
comprising $1,059,304 for the termination of a supply agreement and $748,488 for
the write-down of assets.
10
<PAGE> 14
INTEREST EXPENSE: Interest expense in 1996 amounted to $751,106, a
reduction of $313,043 from the 1995 expense of $1,064,149 due primarily to the
lower level of debt in 1996.
OTHER INCOME: Other income increased by $57,849 in 1996 to $323,275,
compared with $265,426 in 1995. The increase resulted in part from gains on
disposal of assets, which were $26,319 higher than in 1995.
INCOME BEFORE TAX: Income before tax amounted to $492,025 in 1996, an
improvement of $648,458 over the pre-tax loss of $156,433 incurred in 1995. The
health care products segment reported a loss before tax of $1,989,644 in 1996,
compared with pre-tax income of $347,599 in 1995. For the wiping products
segment, pre-tax results improved by $1,046,445 to an income of $326,558 in
1996. The sanitation products segment recorded an improvement of $1,939,256 in
1996, with pre-tax income of $2,155,111.
INCOME TAXES: Income tax expense increased to $347,635 in 1996 from the tax
recovery of $250,381 in 1995. The higher expense in 1996 reflected the income
taxes on the improved pre-tax results. In 1995, the tax recovery included an
amount of $174,122 reflecting the tax benefit of prior year losses carried
forward in Canada.
NET INCOME: Net income for 1996 was $144,390, an increase of $50,442 over
the 1995 net income of $93,948. Earnings per common share were $0.05 in 1996,
compared with $0.03 per common share in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and capital resources of the Company's United States operations
- -- the Wyant Health Care Division and IFC Disposables, Inc. -- are discussed
together, while the Canadian operations (Wood Wyant Inc.) are discussed
separately, as each is self-financing and has separate banking facilities.
U.S. OPERATIONS
A total of $1,414,494 of cash was utilized during 1997. Working capital
increased by $976,515 during the year, primarily due to a reduction in accounts
payable and accrued expenses ($635,381) and increases in accounts receivable
($985,434) and prepaid expenses ($176,440), all of which were partially offset
by a reduction in inventories of $692,112. The higher accounts receivable
reflected, in part, the growth in sales of paper products and systems at IFC,
while the reduction to inventories resulted from a planned decrease in inventory
levels at Wyant Health Care, partially offset by higher inventories at IFC to
support the increased sales. Capital expenditures in 1997 amounted to $887,053.
The Company borrowed $4,000,000 on March 18, 1997 from First Union National
Bank, of which $3,667,033 was utilized to finance the Wood Wyant acquisition. On
November 18, 1997, the Company obtained a secured line of credit with Congress
Financial Corporation of $13,000,000. This facility was used to repay all
amounts then owing to First Union totalling $5,034,524 and also guarantees the
balance outstanding under the loan agreement with the New Jersey Economic
Development Authority, which at December 31, 1997 amounted to $3,940,000. Debt
repayments during 1997, other than the First Union repayment referred to above,
amounted to $894,157. The 11,200 shares of common stock held in treasury were
sold on August 8, 1997 for proceeds of $49,000. Marketable securities of
$446,812 were also sold during 1997.
Management believes that future operating cash flows, together with
borrowing available under the new credit facility, will enable the Company to
meet its ongoing cash requirements, including repayments of term debt and cash
required for capital asset additions.
CANADIAN OPERATIONS
Cash utilized during 1997 amounted to $911,368. Cash generated from
operations, net of a working capital increase of $347,005, amounted to
$1,439,846. The working capital increase resulted from an increase in accounts
receivable ($1,237,836) together with a decrease in accounts payable of
$1,218,311, which were largely offset by lower inventories ($1,054,389) and
prepaid expenses ($402,172) and an increase in income taxes payable of $652,581.
The accounts receivable increase was due primarily to the impact of a postal
strike in Canada in late-1997, together with the increased receivables resulting
from the expanded sales of paper products to IFC. Capital expenditures in 1997
amounted to $991,126. In September 1997, the Company
11
<PAGE> 15
obtained a revolving credit facility of $2,097,169 (Cdn $3,000,000) with the
Bank of Nova Scotia. The Company utilized this facility to repay two outstanding
term loans totalling $1,122,508 (Cdn $1,554,000). The balance is available to
finance future capital expenditures. As at December 31, 1997 the available
balance was $960,294. The Company also has a secured revolving line of credit in
Canada of $4,194,338 (Cdn $6,000,000). As at December 31, 1997, the available
balance was approximately $2,000,000. In September 1997, the Company entered
into an agreement to lease computer equipment to a maximum value of $1,398,113
(Cdn $2,000,000). As at December 31, 1997 approximately $618,000 was available
under this facility. Principal repayments of debt during 1997, in addition to
the above repayment of term loans of $1,122,508, amounted to $1,234,770.
Management believes that future operating cash flows and the unused balance
available under existing credit facilities will be sufficient to meet its
ongoing operating cash requirements, to repay the term debt as it becomes due
and to meet cash requirements for capital asset additions.
BACKLOG, IMPACT OF INFLATION, SEASONALITY
The Company attempts to maintain sufficient inventory levels for all
products to allow shipment against most orders for health care products within a
three week period, for wiping products within a one week period and next day for
core stocking items of the Company's sanitation products. To some extent,
however, certain components must be inventoried further in advance of actual
orders to ensure availability. For the most part, purchases are based upon
quarterly requirements as projected after calculating sales indications from the
sales and marketing departments.
The Company's products are not subject to significant seasonal influences.
Because its products are sold to distributors and wholesale and retail
outlets throughout the United States and to distributors and end-users in
Canada, the Company is affected by general economic conditions. Accordingly, any
adverse change in the economic climate may have an adverse impact on the
Company's sales and financial condition.
YEAR 2000
The Wyant Health Care division has installed software which has been
operating since July 1996 and which is Year 2000 compliant. Wood Wyant Inc. is
currently in the process of installing new software which also is Year 2000
compliant and expects that this will be operational in the third quarter of
1998. The total cost of purchasing and installing this software is estimated to
be $1,747,641 (Cdn $2,500,000) and will be financed through lease facilities
established with the Bank of Nova Scotia. With respect to IFC Disposables, Inc.,
the Company expects to integrate the IFC operations into the Wood Wyant software
system and does not anticipate that the cost of doing so will be material.
The Company does not know the state of preparedness for Year 2000 issues at
all of its customers. However, no single customer exceeds 5% of consolidated
sales and therefore the Company faces only a broad based risk if many customers
are unable to use information systems necessary to place orders for Company
products.
The Company also does not know the state of preparedness for Year 2000
issues at all of its suppliers. However, all of the companies' raw materials are
widely available and the Company is not dependent on any one supplier, or any
one group of suppliers.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
12
<PAGE> 16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Information as required for this Item 10 is incorporated by reference to
the Company's definitive proxy statement for its Annual Meeting of Shareholders
(the "1998 Proxy Statement"), to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION
Information as required in respect of this Item 11 is incorporated by
reference to the 1998 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information as required in respect of this Item 12 is incorporated by
reference to the 1998 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information as required in respect of this Item 13 is incorporated by
reference to the 1998 Proxy Statement.
13
<PAGE> 17
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES AND REPORTS
ON FORM 8-K
(a) 1. The following Financial Statements are included in Item 8.
<TABLE>
<S> <C>
Reports of Independent Auditors.......................... F-1
Consolidated Balance Sheet as at December 31, 1997 and
1996................................................... F-3
Consolidated Statement of Operations for the years ended
December 31, 1997, 1996 and 1995....................... F-4
Consolidated Statement of Stockholders' Equity for the
years ended December 31, 1997, 1996 and 1995........... F-5
Consolidated Statement of Cash Flows for the years ended
December 31, 1997, 1996 and 1995....................... F-6
Notes to Consolidated Financial Statements............... F-7
2. Financial Statement Schedules.
Schedule II -- Valuation and Qualifying Accounts......... F-23
</TABLE>
All other schedules are omitted because they are not applicable or not
required, or the applicable information is shown in the Consolidated Financial
Statements or in notes thereto.
3. Exhibits
The following exhibits are filed herewith or incorporated by reference as
indicated. Exhibit numbers refer to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
3.1 Articles of Incorporation and Amendments thereof (with the
exception of Exhibit 3.2 below) and By-Laws are incorporated
by reference. They were filed as exhibits with the Company's
February 2, 1984 and January 7, 1987 Registration Statements
and the Registrant's Proxy Statement filed May 30, 1990.
3.2 Certificate of Amendment of the Articles of Incorporation
dated March 18, 1997 filed with the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 is
incorporated by reference thereto.
10.1 The 1991 Stock Option Plan filed with the Company's 1994
Proxy Statement is incorporated by reference thereto.
10.2 The 1997 Stock Incentive Plan filed with the Company's Form
S-8 on March 19, 1997 is incorporated by reference thereto.
10.3 Loan and Security Agreement between Congress Financial
Corporation and Wyant Corporation, IFC Disposables, Inc. and
Bridgewater Manufacturing Corp. dated November 18, 1997.
10.4 Credit facilities agreement between the Bank of Nova Scotia
and Wood Wyant Inc. dated September 30, 1997.
</TABLE>
14
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.5 Employment Agreement dated November 11, 1996 between James
A. Wyant and Wood Wyant Inc. (successor to G.H. Wood + Wyant
Inc.), as amended.
10.6 Retirement Arrangement Agreement dated June 27, 1994 between
Wood Wyant Inc. (successor to G.H. Wood + Wyant Inc.) and
Donald C. MacMartin.
21.1 Subsidiaries.
</TABLE>
(b) Reports on Form 8-K
No current reports on Form 8-K have been filed during the quarter ended
December 31, 1997.
Shareholders may obtain a copy of any exhibit not filed herewith by writing
to Wyant Corporation, P.O. Box 8609, Somerville, New Jersey 08876.
15
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Company has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WYANT CORPORATION
/s/ D.C. MACMARTIN
By:
--------------------------------------
D.C. MacMartin
Chairman of the Board,
President and Chief Executive
Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
annual report has been signed below by the named persons in the indicated
capacities and on the indicated dates.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ D.C. MACMARTIN Chairman of the Board, March 19, 1998
- --------------------------------------------- President and Chief Executive
D.C. MacMartin Officer
(Principal Executive Officer)
/s/ J.A. WYANT Vice-Chairman of the Board and March 19, 1998
- --------------------------------------------- Corporate Secretary
J.A. Wyant
/s/ M. A. D'AMOUR Vice President, March 19, 1998
- --------------------------------------------- Chief Financial Officer and
M. A. D'Amour Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
/s/ R.E. BRIGGS Director and President, March 19, 1998
- --------------------------------------------- Wyant Health Care
R.E. Briggs
/s/ R. J. CHARLES Director March 19, 1998
- ---------------------------------------------
R. J. Charles
/s/ T.R.M. DAVIS Director March 19, 1998
- ---------------------------------------------
T.R.M. Davis
/s/ N.A. GALLOPO Director March 19, 1998
- ---------------------------------------------
N.A. Gallopo
/s/ J.B. WIGHT Director March 19, 1998
- ---------------------------------------------
J.B. Wight
</TABLE>
16
<PAGE> 20
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
WYANT CORPORATION (formerly Hosposable Products, Inc.)
We have audited the accompanying consolidated balance sheet of Wyant
Corporation (formerly Hosposable Products, Inc.) as of December 31, 1997, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the year ended December 31, 1997. Our audit also included the
financial statement schedule listed in the Index at 14(a). These financial
statements and the schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Wyant
Corporation at December 31, 1997, and the consolidated results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
We previously audited and reported on the consolidated balance sheet and
the related consolidated statements of income, stockholders' equity and cash
flows of The Canadian Operations of G.H. Wood + Wyant Inc. and Subsidiaries for
the years ended December 31, 1996 and 1995, prior to their restatement for the
1997 transaction more fully described in Note 2. The contribution of G.H. Wood +
Wyant Inc. and Subsidiaries to total assets, revenues and expenses represented
46.9%, 56.9% and 68.8% and 48.8%, 57.1% and 73.3% of the respective restated
totals for 1996 and 1995, respectively. Financial statements of the other pooled
company included in the 1996 and 1995 restated consolidated statements were
audited and reported on separately by other auditors. We also have audited, as
to combination only, the accompanying consolidated balance sheet and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years ended December 31, 1996 and 1995, after restatement for the 1997
pooling of interests; in our opinion, such consolidated financial statements
have been properly combined on the basis described in Note 2 to the consolidated
financial statements.
Princeton, New Jersey
February 13, 1998 ERNST & YOUNG LLP
F-1
<PAGE> 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
HOSPOSABLE PRODUCTS, INC.:
We have audited the accompanying consolidated balance sheets of Hosposable
Products, Inc. (a New York corporation) and subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hosposable Products, Inc.
and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
February 11, 1997 (except with respect
to matters discussed in Note 13 as to
which the date is March 18, 1997)
F-2
<PAGE> 22
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31
<TABLE>
<CAPTION>
1997 1996
$ $
---------- ----------
(Restated)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................... 156,131 1,570,625
Marketable securities (note 3).............................. -- 446,812
Receivables (note 4)........................................ 12,920,004 11,299,555
Inventories (note 5)........................................ 8,245,125 10,012,033
Other....................................................... 1,782,667 1,790,300
---------- ----------
TOTAL CURRENT ASSETS........................................ 23,103,927 25,119,325
---------- ----------
Property, plant and equipment, net of accumulated
depreciation and amortization of $17,676,929 (1996 --
$16,675,648) (notes 6 & 8)................................ 19,318,814 19,281,210
Other assets (note 7)....................................... 1,410,142 1,171,546
---------- ----------
Total assets................................................ 43,832,883 45,572,081
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank indebtedness........................................... 2,204,719 1,293,351
Committed revolving credit facility (note 8)................ 5,880,748 --
Accounts payable............................................ 7,172,023 9,240,741
Accrued expenses............................................ 2,495,027 2,903,229
Income taxes payable........................................ 1,252,988 280,727
Current portion of long-term debt (note 8).................. 789,035 2,106,873
Current portion of preferred stock of subsidiary (note 2)... 550,084 --
Dividend payable............................................ -- 3,667,033
---------- ----------
TOTAL CURRENT LIABILITIES................................... 20,344,624 19,491,954
---------- ----------
Long-term debt, excluding current portion (note 8).......... 5,548,021 10,186,656
Preferred stock of subsidiary (note 2)...................... 4,379,527 2,267,900
Deferred income taxes (note 9).............................. 1,780,726 1,813,889
Commitments (note 14)
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share, authorized 6,000,000
shares; issued and issuable 2,703,676 in 1997 and 1996.... 27,037 27,037
Additional paid-in capital.................................. 6,806,867 6,789,397
Retained earnings........................................... 5,112,006 4,999,823
Cumulative translation adjustment........................... (165,925) 26,955
---------- ----------
11,779,985 11,843,212
Less: Cost of 11,200 shares of common stock held in treasury
in 1996................................................... -- 31,530
---------- ----------
TOTAL STOCKHOLDERS' EQUITY.................................. 11,779,985 11,811,682
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. 43,832,883 45,572,081
========== ==========
</TABLE>
See accompanying notes
F-3
<PAGE> 23
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996 1995
$ $ $
---------- ---------- ----------
(Restated) (Restated)
<S> <C> <C> <C>
NET SALES............................................ 91,219,621 92,845,180 91,355,610
Cost of sales........................................ 62,199,321 63,530,650 62,113,937
---------- ---------- ----------
Gross profit......................................... 29,020,300 29,314,530 29,241,673
---------- ---------- ----------
EXPENSES
Selling.............................................. 14,941,765 14,882,849 14,117,843
General and administration........................... 11,908,572 12,331,114 12,023,690
Amortization......................................... 567,437 630,906 650,058
Non-recurring items (note 11)........................ -- 549,805 1,807,792
Interest expense..................................... 968,128 751,106 1,064,149
Other income (note 12)............................... (295,087) (323,275) (265,426)
---------- ---------- ----------
28,090,815 28,822,505 29,398,106
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY GAIN................................. 929,485 492,025 (156,433)
Income tax expense (benefit) (note 9)................ 510,987 347,635 (250,381)
---------- ---------- ----------
Income before extraordinary gain..................... 418,498 144,390 93,948
Extraordinary gain, net of income taxes (note 13).... 91,958 -- --
---------- ---------- ----------
NET INCOME........................................... 510,456 144,390 93,948
Dividends and accretion of mandatorily redeemable
preferred stock.................................... 191,746 -- --
---------- ---------- ----------
Net income attributable to common shares............. 318,710 144,390 93,948
========== ========== ==========
Per common share (note 15)
BASIC
Income before extraordinary gain..................... 0.09 0.05 0.03
Extraordinary gain................................... 0.03 -- --
Net income........................................... 0.12 0.05 0.03
DILUTED
Income before extraordinary gain..................... 0.09 0.05 0.03
Extraordinary gain................................... 0.03 -- --
Net income........................................... 0.12 0.05 0.03
</TABLE>
See accompanying notes
F-4
<PAGE> 24
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
(Restated) (Restated)
<S> <C> <C> <C>
COMMON STOCK AT PAR VALUE......................... $ 27,037 $ 27,037 $ 27,037
----------- ----------- -----------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year...................... 6,789,397 6,789,397 6,789,397
Gain on sale of treasury stock.................... 17,470 -- --
----------- ----------- -----------
BALANCE AT END OF YEAR............................ 6,806,867 6,789,397 6,789,397
----------- ----------- -----------
RETAINED EARNINGS
Balance at beginning of year...................... 4,999,823 5,390,064 5,656,620
Net income........................................ 510,456 144,390 93,948
Dividends declared................................ (125,746) -- --
Accretion......................................... (66,000) -- --
Distribution to minority shareholders............. (206,527) (534,631) (360,504)
----------- ----------- -----------
BALANCE AT END OF YEAR............................ 5,112,006 4,999,823 5,390,064
----------- ----------- -----------
CUMULATIVE TRANSLATION ADJUSTMENTS................ (165,925) 26,955 72,146
----------- ----------- -----------
TREASURY STOCK
Balance at beginning of year...................... (31,530) (31,530) (31,530)
Treasury stock sold, at cost...................... 31,530 -- --
----------- ----------- -----------
BALANCE AT END OF YEAR............................ -- (31,530) (31,530)
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY........................ $11,779,985 $11,811,682 $12,247,114
=========== =========== ===========
COMMON SHARES
Number issued..................................... 1,703,676 1,703,676 1,703,676
TREASURY STOCK
Held at beginning of year......................... (11,200) (11,200) (11,200)
Sold during the year.............................. 11,200 -- --
----------- ----------- -----------
HELD AT END OF YEAR............................... -- (11,200) (11,200)
----------- ----------- -----------
COMMON SHARES ISSUED AND OUTSTANDING.............. 1,703,676 1,692,476 1,692,476
COMMON SHARES ISSUABLE UPON CONVERSION OF
EXCHANGEABLE SHARES (NOTE 2).................... 1,000,000 1,000,000 1,000,000
----------- ----------- -----------
COMMON SHARES ISSUED, ISSUABLE AND OUTSTANDING.... 2,703,676 2,692,476 2,692,476
=========== =========== ===========
</TABLE>
See accompanying notes
F-5
<PAGE> 25
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996 1995
$ $ $
---------- ---------- ----------
(Restated) (Restated)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................... 510,456 144,390 93,948
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization........................ 1,652,720 1,846,038 1,938,223
Gain on sale of fixed assets......................... (28,470) (122,810) (96,491)
Deferred income tax expense (benefit)................ (25,823) 814,027 (260,004)
Deferred pension costs............................... (92,177) (13,200) (35,480)
Decrease (increase) in deferred charges.............. (320,234) -- 29,947
Write-down of assets................................. -- -- 748,488
Decrease (increase) in working capital............... (1,323,520) (124,158) 3,291,091
Increase (decrease) in other liabilities............. -- (100,000) 100,000
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES............ 372,952 2,444,287 5,809,722
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................................. (1,878,179) (3,940,838) (1,867,384)
Cash proceeds from sale of fixed assets.............. 35,628 236,188 401,797
Sale of marketable securities........................ 446,812 1,488,783 1,049,936
Purchase of marketable securities.................... -- (573,362) --
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES................ (1,395,739) (2,789,229) (415,651)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Committed revolving credit facility.................. 5,880,748 -- --
Repayment of long-term debt.......................... (8,285,959) (2,416,431) (1,927,156)
Increase in long-term debt........................... 5,242,507 2,233,353 --
Distribution to minority shareholders................ (206,527) (534,631) (360,504)
Sale of treasury stock............................... 49,000 -- --
Dividends paid....................................... (125,746) -- --
Increase (decrease) in bank indebtedness............. 911,368 (481,598) (911,414)
Distribution to G.H. Wood + Wyant Inc. shareholders
(note 2)........................................... (3,667,033) -- --
Decrease (increase) in acquisition escrow fund....... (4,428) 251,673 712,737
---------- ---------- ----------
NET CASH USED IN FINANCING ACTIVITIES................ (206,070) (947,634) (2,486,337)
---------- ---------- ----------
Effect of exchange rate changes on cash.............. (185,637) (56,268) (13,443)
Net increase (decrease) in cash and cash
equivalents........................................ (1,414,494) (1,348,844) 2,894,291
Cash and cash equivalents, beginning of year......... 1,570,625 2,919,469 25,178
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR............... 156,131 1,570,625 2,919,469
========== ========== ==========
DECREASE (INCREASE) IN WORKING CAPITAL
Decrease (increase) in accounts receivable........... (1,620,449) 950,216 (607,563)
Decrease (increase) in inventories................... 1,766,908 (145,196) 500,426
Decrease (increase) in other current assets.......... 34,680 (181,957) 395,351
Increase (decrease) in accounts payable and accrued
liabilities........................................ (2,476,920) (1,027,948) 3,002,877
Increase in income taxes payable..................... 972,261 280,727 --
---------- ---------- ----------
(1,323,520) (124,158) 3,291,091
---------- ---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid (received) during the year for
Interest........................................... 753,192 735,620 1,037,543
Income taxes....................................... (216,376) (300,690) 293,023
---------- ---------- ----------
</TABLE>
See accompanying notes
F-6
<PAGE> 26
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Wyant Corporation (formerly Hosposable Products, Inc.), a New York
corporation incorporated in 1971 (the "Corporation"), operates the following
wholly owned subsidiaries: Bridgewater Manufacturing Corp., a New Jersey
corporation ("Bridgewater"), IFC Disposables, Inc., a Tennessee corporation
("IFC") and Wood Wyant Inc. (formerly 3290441 Canada Inc.), a Canadian
corporation ("Wood Wyant"). Through its Wyant Health Care division it
manufactures and distributes adult incontinent products, including disposable
underpads and adult briefs. IFC manufactures and distributes disposable wipers
and sanitary paper products and systems. Wyant Health Care and IFC products are
sold primarily in domestic markets. Wood Wyant manufactures and distributes
sanitation products and systems to commercial and institutional markets in
Canada.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Corporation and its wholly owned subsidiaries, Bridgewater, IFC and Wood Wyant
(collectively, the "Company"). All significant intercompany balances and
transactions have been eliminated in consolidation.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
UTILIZATION OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
EARNINGS PER SHARE
Basic earnings per share are calculated using the weighted average number
of shares outstanding during the period. Contingently issuable shares are
considered outstanding common shares and included in the calculation of basic
earnings per share only when there is no circumstance under which these shares
would not be issued.
Diluted earnings per share are calculated taking into consideration the
effect of the potential exercise of stock options.
INVENTORIES
Inventories are stated at the lower of cost and net realizable value. Cost
is determined on a first-in, first-out basis.
F-7
<PAGE> 27
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation and
amortization of property, plant and equipment in the United States is provided
utilizing the straight-line method over the estimated useful lives of the
respective assets ranging from 5 to 30 years; in Canada, the declining balance
method is used, with rates ranging from 5% to 20% per year. Leasehold
improvements are amortized on a straight-line basis over the term of the related
leases or the estimated useful life, whichever is shorter. Patents and
trademarks are amortized on a straight-line basis over periods from 5 to 17
years.
GOODWILL
Goodwill is amortized on a straight-line basis over periods not exceeding
40 years. The Company periodically reviews goodwill for possible impairment,
which would be recognized if a permanent decline in value has occurred.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards ("SFAS") No.123, "Accounting
for Stock-Based Compensation," encourages, but does not require companies to
record compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to continue to account for stock-based
compensation awards to employees and directors using the intrinsic value method
prescribed in Accounting Principles Board Opinion ("APB") No.25, "Accounting for
Stock Issued to Employees," and related Interpretations. Accordingly,
compensation cost for stock options awarded to employees and directors is
measured as the excess, if any, of the quoted market price of the Corporation's
stock at the date of grant over the amount an employee or director must pay to
acquire the stock.
As required, the Company has adopted SFAS No.123 to account for stock-based
compensation awards to outside consultants and affiliates. Accordingly,
compensation costs for stock option awards to outside consultants and affiliates
are measured at the date of grant based on the fair value of the award using the
Black-Scholes option pricing model.
INCOME TAXES
The Company files a consolidated federal income tax return for its United
States companies. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the year in which those temporary
differences are expected to be recovered or settled. Deferred income taxes
result primarily from differences between financial and tax reporting of
depreciation.
FOREIGN CURRENCY TRANSLATION
The Corporation translates the accounts of its self-sustaining foreign
subsidiary, Wood Wyant, using the current rate method whereby the assets and
liabilities of the foreign subsidiary are translated into U.S. dollars at rates
of exchange prevailing at the year-end. Exchange gains and losses arising from
these translations are deferred and included as a separate component of
stockholders' equity on the consolidated balance sheet ("Cumulative Translation
Adjustment"). Revenue and expense items are translated at average rates of
exchange prevailing during the year.
F-8
<PAGE> 28
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
ACCOUNTING PRONOUNCEMENTS
FAS 130, "Reporting Comprehensive Income," was issued in June 1997 and is
effective for the Company's 1998 fiscal year. This statement requires the
reporting of comprehensive income as part of a full set of financial statements.
There is not expected to be any material effect on the Company's consolidated
financial position or operating results as a result of the adoption of this
pronouncement.
2. ACQUISITION
On March 18, 1997 the Corporation, through a wholly owned subsidiary, Wood
Wyant Inc., purchased the Canadian operations of G.H. Wood + Wyant Inc. for (i)
cash consideration of Cdn $5,000,000 (US $3,667,033), (ii) a promissory note
("the Note") in the amount of Cdn $4,068,951 (US $2,961,606) having a fair value
of US $2,798,794, (iii) 3,800,000 shares of Class B Preferred Stock of Wood
Wyant Inc. having a liquidation preference of Cdn $3,800,000 (US $2,765,849) and
a fair value of US $2,267,900, and (iv) 1,000,000 shares of Class E Preferred
Stock of Wood Wyant Inc. having a liquidation preference per share of one share
of Wyant Corporation Common Stock. The fair value of Class E Preferred shares at
March 18, 1997 was US $5,000,000. These Class E Preferred shares are recorded at
par value of $10,000 in Wyant Corporation Common Stock and $4,990,000 in
additional paid-in capital. Each Class E Preferred share is exchangeable by the
holder at any time for one share of Wyant Corporation Common Stock.
The transaction represents a combination of entities under common control
and has been accounted for in a manner similar to a pooling of interests.
Accordingly, the comparative figures in these financial statements have been
restated to retroactively reflect the financial information of the combined
entities. The excess of the fair value of the consideration paid of US
$13,733,727 over the book value of the net assets acquired of US $8,638,875 (Cdn
$11,868,951) is considered a deemed dividend for accounting purposes, which
reduces the additional paid-in capital by US $5,094,852. The Note, which yielded
interest at 6% per annum, was exchanged on August 29, 1997 for shares of Class A
Preferred Stock of Wood Wyant Inc. on the basis of one share for each Cdn $1.00
of unpaid principal amount of the Note.
The Class A and B Preferred shares entitle holders to fixed cumulative
preferential dividends at the rate of 4% and 3.999999%, respectively, of their
redemption price of $1.00 Cdn per share and are mandatorily redeemable in ten
consecutive annual tranches, each equal to 10% of their combined redemption
value, commencing on January 3, 1998. No Class B Preferred shares shall be
redeemed until all Class A Preferred shares have been redeemed. The Class E
Preferred shares entitle holders to receive dividends on a pro-rata basis
equivalent to dividends declared to the Corporation's common stockholders.
F-9
<PAGE> 29
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
Included in the consolidated statement of operations for the three years
ended December 31, 1997 are the following results of the previously separate
companies for periods prior to the transaction date.
<TABLE>
<CAPTION>
CANADIAN
OPERATIONS OF
G.H. WOOD + HOSPOSABLE
WYANT INC. PRODUCTS, INC. CONSOLIDATED
$ $ $
------------- -------------- ------------
<S> <C> <C> <C>
UNAUDITED
1997
Revenue from external customers.................... 12,287,019 9,842,579 22,129,598
Inter Company revenues............................. 726,293 116,675 842,968
Net income (loss).................................. 474,869 (651,354) (176,485)
---------- ---------- ----------
UNAUDITED
1996
Revenue from external customers.................... 50,835,445 42,009,735 92,845,180
Inter Company revenues............................. 2,050,901 283,898 2,334,799
Net income (loss).................................. 1,199,580 (1,055,190) 144,390
---------- ---------- ----------
UNAUDITED
1995
Revenue from external customers.................... 51,096,805 40,258,805 91,355,610
Inter Company revenues............................. 1,068,832 221,933 1,290,765
Net income (loss).................................. 303,154 (209,206) 93,948
---------- ---------- ----------
</TABLE>
3. MARKETABLE SECURITIES
Marketable securities at December 31 consisted of:
<TABLE>
<CAPTION>
1997 1996
$ $
---------- ----------
<S> <C> <C>
Municipal bonds............................................. -- 200,156
Corporate bonds............................................. -- 246,656
---------- ----------
-- 446,812
========== ==========
</TABLE>
As at December 31, 1996, all marketable securities were classified as
available for sale. These securities are stated at market value. As cost
approximates market value, any gross unrealized holding gains and losses were
immaterial to the financial statements.
4. RECEIVABLES
<TABLE>
<CAPTION>
1997 1996
$ $
---------- ----------
<S> <C> <C>
Trade....................................................... 12,854,131 11,717,573
Less allowance for doubtful accounts........................ 571,655 556,077
---------- ----------
12,282,476 11,161,496
Other....................................................... 637,528 138,059
---------- ----------
12,920,004 11,299,555
========== ==========
</TABLE>
F-10
<PAGE> 30
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
5. INVENTORIES
<TABLE>
<CAPTION>
1997 1996
$ $
---------- ----------
<S> <C> <C>
Raw materials............................................... 3,016,029 4,004,172
Finished goods.............................................. 5,229,096 6,007,861
---------- ----------
8,245,125 10,012,033
========== ==========
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31 consisted of the following:
<TABLE>
<CAPTION>
ACCUMULATED
DEPRECIATION NET BOOK
COST AND AMORTIZATION VALUE
$ $ $
---------- ---------------- ----------
<S> <C> <C> <C>
1997
Land.............................................. 1,000,991 -- 1,000,991
Buildings and improvements........................ 7,010,945 1,662,601 5,348,344
Machinery and equipment........................... 22,002,098 11,482,533 10,519,565
Computer equipment................................ 1,567,487 1,385,706 181,781
Furniture, fixtures and equipment................. 3,134,014 2,370,935 763,079
Leasehold improvements............................ 942,052 439,970 502,082
Patents and trademarks............................ 1,338,156 335,184 1,002,972
---------- ---------- ----------
36,995,743 17,676,929 19,318,814
========== ========== ==========
1996
Land.............................................. 1,027,917 -- 1,027,917
Buildings and improvements........................ 6,978,551 1,495,478 5,483,073
Machinery and equipment........................... 21,480,614 10,869,987 10,610,627
Computer equipment................................ 1,617,245 1,370,840 246,405
Furniture, fixtures and equipment................. 3,044,688 2,214,995 829,693
Leasehold improvements............................ 785,725 481,630 304,095
Patents and trademarks............................ 1,022,118 242,718 779,400
---------- ---------- ----------
35,956,858 16,675,648 19,281,210
========== ========== ==========
</TABLE>
Depreciation and amortization expense amounted to $1,484,756, $1,708,622
and $1,801,708 in 1997, 1996 and 1995, respectively.
F-11
<PAGE> 31
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
7. OTHER ASSETS
<TABLE>
<CAPTION>
1997 1996
$ $
--------- ---------
<S> <C> <C>
Goodwill, at cost........................................... 916,925 956,997
Accumulated amortization.................................... 654,946 546,855
--------- ---------
Net book value.............................................. 261,979 410,142
Deferred pension costs...................................... 484,586 410,915
Acquisition escrow fund..................................... 100,101 95,673
Deferred charges............................................ 563,476 254,816
--------- ---------
1,410,142 1,171,546
========= =========
</TABLE>
Amortization expense amounted to $167,964, $137,416 and $136,515 in 1997,
1996 and 1995, respectively.
8. LONG-TERM DEBT
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
1997 1996
$ $
---------- ----------
<S> <C> <C>
WYANT CORPORATION
Authority Bonds (a)....................................... 3,940,000 4,305,000
Notes payable (b)......................................... -- 1,463,681
Other..................................................... 20,000 --
---------- ----------
3,960,000 5,768,681
Less: Unamortized discount on Authority bonds............. 10,131 12,663
---------- ----------
3,949,869 5,756,018
WOOD WYANT INC.
Term loan repayable in monthly instalments of Cdn $20,476
plus interest at prime plus 0.75% (prime at December
31, 1997 -- 6%) maturing October 1, 2001. Principal
amount Cdn $1,938,571 (December 31, 1996 --
$2,184,285)............................................ 1,355,170 1,593,671
Revolving credit facility (Cdn $1,476,300) (d)............ 1,032,017 --
Term loan repayable in monthly instalments of Cdn $126,000
plus interest at prime plus 0.75%, maturing May 31,
1998 (principal amount December 31, 1996 -- Cdn
$2,108,000) (d)....................................... -- 1,538,013
Term loan repayable in monthly instalments of Cdn $28,000
plus interest at prime plus 0.75%, maturing June 1,
1999 (principal amount December 31, 1996 -- Cdn
$832,000) (d).......................................... -- 607,033
Promissory note (principal amount December 31, 1996 -- Cdn
$3,845,263) (note 2)................................... -- 2,798,794
---------- ----------
6,337,056 12,293,529
Current portion........................................... 789,035 2,106,873
---------- ----------
5,548,021 10,186,656
========== ==========
</TABLE>
F-12
<PAGE> 32
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
The exchange rate used at December 31, 1997 to translate the long-term debt
denominated in Canadian dollars was Cdn $1.4305 = US $1.00 (December 31, 1996 --
Cdn $1.3706 = US $1.00).
Maturities of long-term debt over the next five years are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 789,035
1999........................................................ 1,381,518
2000........................................................ 586,768
2001........................................................ 1,283,866
2002........................................................ 140,000
</TABLE>
(a)In December 1993, the Corporation entered into a loan agreement with
the New Jersey Economic Development Authority (the "Authority") and
First Union National Bank ("First Union"), whereby the Authority issued
Economic Development Bonds with an aggregate principal amount of
$5,325,000 to be loaned to the Corporation to finance the acquisition of
a building and the land upon which it is situated, as well as to
purchase machinery and equipment. As at December 31, 1997, total
proceeds of approximately $5,229,000 had been distributed to the
Corporation in order to complete its purchase of the above-mentioned
land, building, machinery and equipment. The remaining balance is held
in escrow and will be distributed to the Corporation as machinery and
equipment are purchased. The bonds are secured by a letter of credit
provided by First Union.
The remaining bond maturity dates range from December 1, 1998 to
December 1, 2013, and bear interest at fixed rates from 4.7% to 5.7%.
The bonds mature at various amounts throughout this period ranging from
$140,000 to $440,000. The bonds maturing December 1, 2007, 2009 and 2013
are to be redeemed commencing December 1, 2005 and on each December 1
thereafter through sinking fund payments ranging from $165,000 to
$255,000.
(b)In October 1996, the Corporation entered into a loan agreement with
First Union in the amount of $1,500,000 bearing interest at 8.12%. The
proceeds of the loan were used to acquire production machinery. The
principal was repayable in monthly instalments of $17,857 through
November 2003. The loan was secured by the machinery purchased.
(c)In March 1997, the Corporation borrowed $4,000,000 from First Union,
of which $2,000,000 was a term loan repayable in monthly instalments of
$33,333 plus interest at 9.43%, maturing March 13, 2002, and $2,000,000
was a revolving line of credit maturing April 1, 1999, with interest at
the prime rate. A portion of these proceeds was used to finance the
acquisition described in note 2.
(d)In September 1997, Wood Wyant obtained a secured revolving credit
facility in the amount of Cdn $3,000,000 with the Bank of Nova Scotia
which expires on September 30, 1999 and bears interest at prime plus
0.75%. This facility was utilized on September 30, 1997 to repay two
existing term loans totalling Cdn $1,554,000. This amount is being
repaid by monthly instalments of Cdn $25,900. The balance is available
to finance future equipment purchases. Maximum availability under the
facility reduces monthly by Cdn $50,000. Unused availability at December
31, 1997 was Cdn $1,373,700.
LINES OF CREDIT
On November 18, 1997, the Corporation obtained a secured line of credit
with Congress Financial Corporation ("Congress") in the amount of $13,000,000
which expires on November 18, 2000 and bears interest at prime plus 1% (prime
rate at December 31, 1997 -- 8.5%). This facility was utilized on
F-13
<PAGE> 33
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
November 18, 1997 to repay in full all outstanding balances owing to First Union
on the loans described in (b) and (c) above.
The maximum amount that the Corporation may borrow at any time is
determined by the sum of:
i. Amounts based on advance formulas applicable to the book value of
accounts receivable and inventories of the Corporation, Bridgewater and
IFC ("Tranche A")
and
ii. Advance formulas applicable to the November 1997 appraised values of
property, plant and equipment to a maximum of $5,500,000 less the
amounts required to guarantee amounts outstanding under Authority bonds
described in (a) above ("Tranche B").
Maximum availability under Tranche B reduces monthly by $76,388.
The facility is secured by substantially all of the assets of the
Corporation, Bridgewater and IFC, tangible and intangible, except for the
Corporation's investment in the shares of Wood Wyant. Unused availability at
December 31, 1997 was approximately $1,000,000. Amounts outstanding under the
line of credit are classified as a current liability due to the inclusion in the
loan agreement of a subjective acceleration clause and a lock box arrangement.
The agreement also contains a minimum adjusted net worth requirement.
Wood Wyant has available a secured revolving line of credit in Canada in
the amount of Cdn $6,000,000 with the Bank of Nova Scotia which is subject to
periodic review and which bears interest at the prime rate (6% at December 31,
1997). This line of credit and the term loan of Wood Wyant are collateralized by
a general assignment of book debts of Wood Wyant, a pledge of inventory under
Section 427 of the Bank Act, a hypothec in the amount of Cdn $24,000,000 on all
movable property and a general security agreement.
9. INCOME TAXES
Details of the income tax provision are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
$ $ $
-------- -------- --------
<S> <C> <C> <C>
CURRENT
Federal.................................................. (429,672) (705,540) (19,407)
State.................................................... 21,000 15,475 12,482
Foreign.................................................. 945,482 223,673 16,548
-------- -------- --------
536,810 (466,392) 9,623
======== ======== ========
DEFERRED
Federal.................................................. (107,619) 177,267 (119,339)
State.................................................... -- (95,098) (36,818)
Foreign.................................................. 81,796 731,858 (103,847)
-------- -------- --------
(25,823) 814,027 (260,004)
-------- -------- --------
INCOME TAX PROVISION..................................... 510,987 347,635 (250,381)
======== ======== ========
</TABLE>
F-14
<PAGE> 34
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
The reported income tax provision differs from the amount computed by
applying the Federal tax rate to income before income taxes. The reasons for
this difference and the related tax effects are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
$ $ $
-------- -------- --------
<S> <C> <C> <C>
Expected Federal tax rate................................ 34.0% 34.0% 34.0%
Expected tax provision................................... 316,025 167,289 (53,187)
State income tax......................................... 37,179 15,744 (6,727)
Foreign tax rate differences............................. 66,408 84,464 5,259
Recognition of income tax benefits....................... -- -- (161,229)
Non-deductible expenses.................................. 38,297 46,110 18,635
Other.................................................... 53,078 34,028 (53,132)
-------- -------- --------
REPORTED INCOME TAX PROVISION............................ 510,987 347,635 (250,381)
======== ======== ========
</TABLE>
Deferred income taxes result principally from temporary differences in the
recognition of certain revenue and expense items for financial and tax reporting
purposes. Significant components of the Company's deferred tax assets and
liabilities as at December 31, 1997 and December 31, 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
$ $
--------- ---------
<S> <C> <C>
Deferred tax assets
Net operating tax loss carryforwards...................... -- 163,758
Reserves and allowances................................... 236,000 107,400
Goodwill.................................................. 137,474 116,884
Other..................................................... 151,821 110,206
--------- ---------
TOTAL DEFERRED TAX ASSETS................................... 525,295 498,248
Deferred tax liabilities
Book and tax differences on property, plant and
equipment.............................................. 1,572,601 1,647,587
Pension................................................... 194,689 165,621
Other..................................................... 13,436 681
--------- ---------
TOTAL DEFERRED TAX LIABILITIES.............................. 1,780,726 1,813,889
--------- ---------
NET DEFERRED INCOME TAX LIABILITY........................... 1,255,431 1,315,641
========= =========
</TABLE>
Income before taxes attributable to all foreign operations was $2,481,335,
$2,155,111 and $215,855 in each of fiscal 1997, 1996 and 1995, respectively.
F-15
<PAGE> 35
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
10. STOCK-BASED COMPENSATION PLANS
The Corporation has three stock option plans, the 1997 Stock Incentive Plan
(the "1997 Plan"), the 1991 Stock Option Plan (the "1991 Plan") and the 1987
Stock Option Plan (the "1987 Plan"). The Company accounts for options granted to
employees and directors under these plans using APB No. 25, under which no
compensation cost has been recognized for stock options granted. Had
compensation cost for these stock options been determined consistent with SFAS
No. 123, the Company's pro forma earnings per share would have been as follows:
<TABLE>
<CAPTION>
1997 1996 1995
$ $ $
--------- --------- ---------
<S> <C> <C> <C>
Net income (loss) available to common stockholders
As reported......................................... 318,710 144,390 93,948
Pro forma........................................... (248,852) (273,691) (59,612)
Basic and diluted earnings (loss) per share
As reported......................................... 0.12 0.05 0.03
Pro forma........................................... (0.09) (0.10) (0.02)
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. Additional awards in future years are anticipated.
During 1997, 1991 and 1987, the stockholders of the Company approved the
adoption of the 1997 Plan, the 1991 Plan and the 1987 Plan, respectively. Each
plan authorizes the granting of stock options (either nonqualified stock options
or incentive stock options), the exercise of which would allow up to an
aggregate of 300,000 shares of the Company's common stock under the 1997 Plan,
and 250,000 shares under each of the 1991 and 1987 Plans, to be acquired by the
holders of the stock options. The 1997 Plan also permits the granting of other
types of stock-based awards.
F-16
<PAGE> 36
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
Under the 1997, 1991 and 1987 Plans, nonqualified stock options have been
granted to directors, employees and consultants for terms of up to ten years at
exercise prices of not less than 100% of the fair market value of the shares at
the date of grant, exercisable in whole or in part at stated times from the date
of grant to up to two years thereafter. No further grants will be issued under
the 1987 Plan. At December 31, 1997, options to purchase 120,250 shares, 111,750
shares, and 25,000 shares of common stock were exercisable with respect to the
1997 Plan, the 1991 Plan and the 1987 Plan, respectively. Option activity during
1997, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
-------- --------
<S> <C> <C>
1997
OUTSTANDING, BEGINNING OF YEAR.............................. 249,000 $7.22
Granted..................................................... 312,000 5.35
Canceled/surrendered........................................ (117,000) 6.67
-------- -----
OUTSTANDING, END OF YEAR.................................... 444,000 6.04
-------- -----
EXERCISABLE, END OF YEAR.................................... 257,000 6.21
======== =====
Weighted average fair value of options granted.............. 2.25
1996
OUTSTANDING, BEGINNING OF YEAR.............................. 106,000 $7.04
Granted..................................................... 188,000 7.46
Expired..................................................... (16,000) 5.78
Canceled/surrendered........................................ (29,000) 7.25
-------- -----
OUTSTANDING, END OF YEAR.................................... 249,000 7.22
-------- -----
EXERCISABLE, END OF YEAR.................................... 162,000 7.10
======== =====
Weighted average fair value of options granted.............. 3.35
1995
OUTSTANDING, BEGINNING OF YEAR.............................. 88,700 $4.73
Granted..................................................... 65,000 6.90
Expired..................................................... (47,700) 3.64
-------- -----
OUTSTANDING, END OF YEAR.................................... 106,000 7.04
-------- -----
EXERCISABLE, END OF YEAR.................................... 106,000 7.04
======== =====
Weighted average fair value of options granted.............. 2.36
</TABLE>
F-17
<PAGE> 37
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
The fair value of options at date of grant was estimated using the
Black-Scholes pricing model with the following weighted average assumptions.
<TABLE>
<CAPTION>
1997 1996
% %
------ ------
<S> <C> <C>
Expected life (years)....................................... 5.00 5.00
Risk-free interest rates.................................... 6.22 6.32
Volatility.................................................. 37.60 39.59
Dividend yield.............................................. 0.00 0.00
</TABLE>
The following table summarizes information with respect to stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------------------------- -------------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AT AVERAGE WEIGHTED EXERCISABLE AT WEIGHTED
RANGE OF DECEMBER 31, REMAINING AVERAGE DECEMBER 31, AVERAGE
EXERCISE PRICES 1997 CONTRACTUAL LIFE EXERCISE PRICE 1997 EXERCISE PRICE
--------------- -------------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$4.00--$7.50 444,000 8.20 $6.04 257,000 $6.21
</TABLE>
11. NON-RECURRING ITEMS
<TABLE>
<CAPTION>
1997 1996 1995
$ $ $
--------- --------- ---------
<S> <C> <C> <C>
Acquisition costs....................................... -- 549,805 --
Termination of supply agreement......................... -- -- 1,059,304
Write-down of assets.................................... -- -- 748,488
--------- --------- ---------
-- 549,805 1,807,792
========= ========= =========
</TABLE>
ACQUISITION COSTS
During 1996, the Company incurred $549,805 for professional services in
connection with the acquisition described in note 2.
TERMINATION OF SUPPLY AGREEMENT
On February 17, 1993, as part of an asset purchase agreement, the Canadian
operations of the Company entered into a seven-year supply agreement to purchase
a specified minimum volume of chemical products. On December 29, 1995, an
agreement was entered into which commuted this obligation.
WRITE-DOWN OF ASSETS
During the fourth quarter of 1995, the Company recorded a charge of
$748,488 for selected asset write-downs including machinery and equipment,
leasehold improvements and leased property. The charge resulted from the
decision to dispose of certain surplus machinery and to accrue for underutilized
space at its IFC facility.
F-18
<PAGE> 38
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
12. OTHER INCOME
<TABLE>
<CAPTION>
1997 1996 1995
$ $ $
------- ------- -------
<S> <C> <C> <C>
Interest income............................................. 69,272 131,252 148,571
Gain on disposal of assets.................................. 28,470 122,810 96,491
Other....................................................... 197,345 69,213 20,364
------- ------- -------
295,087 323,275 265,426
======= ======= =======
</TABLE>
13. EXTRAORDINARY GAIN
In 1997, the Company realized a net gain of $139,330 ($91,958 net of income
tax) as a result of the refinancing of certain term debt.
14. COMMITMENTS
The Company occupies manufacturing, warehousing and office facilities under
operating leases which expire at various dates to December 31, 2004. Future
minimum rental commitments are as follows:
<TABLE>
<S> <C>
1998........................................................ $1,153,964
1999........................................................ 950,292
2000........................................................ 898,901
2001........................................................ 587,124
2002........................................................ 512,957
Thereafter.................................................. 729,979
</TABLE>
Aggregate rental expense amounted to $1,588,445 (net of sublease income of
$128,973), $1,242,186 (net of sublease income of $140,000 and $100,000
previously provided for (note 11)) and $1,363,026 (net of sublease income of
$152,000) for the years ended December 31, 1997, 1996 and 1995, respectively.
In February 1994, the Company signed a five-year supply agreement to
purchase 16,000 short tons of paper towelling and tissue annually at market
prices. This supplier provides 100% of the Company's requirements for these
products.
In September 1997, the Company entered into a lease agreement for a maximum
amount of Cdn $2,000,000 for computer equipment. The equipment leases under this
agreement will be for a maximum term of five years and will be based on either a
floating rate of bank prime plus 0.75%, or a fixed rate of the leasing company's
base rate at the commencement date of each lease plus 1.75%. As at December 31,
1997, an amount of Cdn $1,115,983 had been committed under this agreement.
F-19
<PAGE> 39
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
15. EARNINGS PER SHARE
<TABLE>
<CAPTION>
1997 1996 1995
$ $ $
--------- --------- ---------
<S> <C> <C> <C>
Numerator
Income before extraordinary gain...................... 418,498 144,390 93,948
Preferred stock dividends and accretion............... 191,746 -- --
--------- --------- ---------
Numerator for basic and diluted earnings per share -
income available to common stockholders before
extraordinary gain.................................... 226,752 144,390 93,948
--------- --------- ---------
Denominator
Denominator for basic earnings per share -
weighted-average shares issued, issuable and
outstanding........................................ 2,697,907 2,692,476 2,692,476
Effect of dilutive securities
Stock options...................................... 5,001 3,060 8,607
--------- --------- ---------
Denominator for diluted earnings per share - adjusted
weighted-average shares............................... 2,702,908 2,695,536 2,701,083
========= ========= =========
Basic earnings per share before extraordinary gain...... 0.09 0.05 0.03
========= ========= =========
Diluted earnings per share before extraordinary gain.... 0.09 0.05 0.03
========= ========= =========
</TABLE>
Options to purchase 408,000 shares of common stock at exercise prices
ranging from $5.00 to $7.50 per share were outstanding during 1997 but were not
included in the computation of diluted earnings per share because the options'
exercise prices were greater than the average market price of the common stock
and, therefore, the effect would be anti-dilutive.
16. PENSION PLANS
The Company maintains a defined benefit final average pension plan which
covers certain of its Canadian employees. The periodic cost of pension benefits
is determined using the projected benefit method prorated on service. The
pension plan is administered by a major Canadian financial institution. At
December 31, 1997, the Company had made or accrued for all required
contributions.
Net periodic pension expense (income) in 1997, 1996 and 1995 included the
following components:
<TABLE>
<CAPTION>
1997 1996 1995
$ $ $
-------- -------- --------
<S> <C> <C> <C>
Current service cost..................................... $161,731 $182,605 $153,723
Interest cost on projected benefit obligations........... 272,176 274,861 239,837
Expected return on plan assets........................... (442,936) (409,358) (369,445)
Net amortization and deferral............................ (84,875) (61,308) (59,595)
-------- -------- --------
Net periodic pension expense (income).................... (93,904) (13,200) (35,480)
======== ======== ========
</TABLE>
The assumptions used in the Company's plan at December 31, 1997, 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate.............................. 7.5% 7.5% 7.5%
Expected long-term rate of return on assets................. 7.5 7.5 7.5
</TABLE>
F-20
<PAGE> 40
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
The following table sets forth the funded status of the Company's defined
benefit plan at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
$ $
---------- ----------
<S> <C> <C>
Actuarial present value of
Vested benefit obligation................................. 2,648,165 2,447,322
Non-vested benefit obligation............................. -- 13,644
---------- ----------
Accumulated benefit obligation.............................. 2,648,165 2,460,966
Additional benefits based on salary projection.............. 1,001,118 1,281,628
---------- ----------
Projected benefit obligation................................ 3,649,283 3,742,594
Plan assets at fair market value
(primarily listed stocks and bonds)....................... 6,417,616 6,089,304
---------- ----------
Plan assets in excess of projected benefit obligation....... 2,768,333 2,346,710
Unrecognized net asset at transition........................ (46,976) (53,918)
Unrecognized net gain....................................... (2,647,746) (2,337,662)
Unrecognized prior service cost............................. 410,975 455,785
---------- ----------
PENSION ASSET INCLUDED IN THE CONSOLIDATED BALANCE SHEET.... 484,586 410,915
========== ==========
</TABLE>
The Company has a pension plan under Section 401(k) of the Internal Revenue
Code for certain of its US employees. Under the terms of the 401(k) plan, the
Company makes a matching contribution of up to 6% of each eligible employee's
earned wages, to a maximum of $1,000 per employee per year. Under this plan
employees may also contribute up to 15% of their earned wages. The Company makes
monthly contributions to the plan whereby $84,114 was paid in 1997 and $55,397
in 1996. No amount was paid in 1995.
The Company has a non-contributory defined contribution pension plan for
certain of its Canadian employees. Under the terms of the plan, the Company
contributed 3% of each eligible employee's earned wages. The Company made
monthly contributions to the plan whereby $15,061 was paid in 1997, $62,527 was
paid in 1996 and $44,275 was paid in 1995. In March 1997 the Company ceased to
contribute to this plan and instead contributed the 3% of each eligible
employee's earned wages to a group retirement savings plan. The monthly
contributions made to this plan in 1997 amounted to $54,993.
17. FINANCIAL INSTRUMENTS
OFF-BALANCE-SHEET RISK
The Company's policy with respect to foreign currency exposure is to manage
its financial exposure to certain foreign exchange fluctuations with the
objective of neutralizing some of the impact of foreign currency exchange
movements. To achieve this objective, the Company enters into foreign exchange
forward contracts to hedge certain non-local-currency payables. The Company
enters into foreign exchange forward contracts with a major Canadian chartered
bank, and therefore does not anticipate non-performance by its counterparty. The
amount of the exposure on account of any non-performance is restricted to the
unrealized gains in such contracts. As at December 31, 1997, the Company had no
foreign exchange forward contracts outstanding.
FAIR VALUE OF FINANCIAL INSTRUMENTS
For certain of the Company's financial instruments, including cash and cash
equivalents, short-term investments, accounts receivable, accounts payable and
other accrued charges, the carrying amounts
F-21
<PAGE> 41
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
approximate the fair value due to their short maturities. The carrying value of
long-term debt and preferred stock approximates the fair value.
18. SEGMENT INFORMATION
The Company's reportable segments are strategic business units that offer
different products. They are managed separately because each business requires
different technology and marketing services and has a different customer base.
The Company conducts business in three operating segments: Sanitation
Products, Health Care Products and Wiping Products. The Sanitation Products
segment manufactures and distributes sanitary paper products, cleaning and
maintenance chemicals, sanitation products, electro-mechanical and maintenance
systems. The Health Care Products segment manufactures and sells adult
incontinent products, including underpads and adult briefs, for the acute-care
and chronic-care institutional markets. The Wiping Products segment manufactures
and distributes disposable wiping products and sanitary papers products and
systems.
The information in this note is prepared based on FAS 131, which has been
implemented for the 1997 year-end. The Company evaluates performance based on
profit or loss from operations before income taxes not including non-recurring
gains and losses and foreign exchange gains and losses.
The Company accounts for intersegment sales and transfers as if the sales
or transfers were to third parties, that is, at current market prices.
<TABLE>
<CAPTION>
SANITATION HEALTH CARE WIPING
PRODUCTS PRODUCTS PRODUCTS TOTAL
SEGMENT INFORMATION $ $ $ $
- ------------------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
1997
Revenues from external customers............ 48,847,534 28,825,763 13,546,324 91,219,621
Intersegment revenues....................... 3,687,194 2,498,939 1,552,731 7,738,864
Interest revenue............................ -- 61,949 7,323 69,272
Interest expense............................ 356,089 612,039 -- 968,128
Depreciation and amortization of property,
plant and equipment and goodwill.......... 748,985 712,859 190,876 1,652,720
Segment income (loss) before taxes.......... 2,481,335 (1,706,984) 155,134 929,485
Segment assets (1).......................... 21,777,683 18,696,511 6,316,975 43,832,883
Expenditures for segment property, plant and
equipment and goodwill.................... 991,126 613,219 273,834 1,878,179
---------- ---------- ---------- ----------
1996
Revenues from external customers............ 50,835,445 30,254,473 11,755,262 92,845,180
Intersegment revenues....................... 2,050,901 1,575,239 248,733 3,874,873
Interest revenue............................ -- 119,699 11,553 131,252
Interest expense............................ 444,253 306,853 -- 751,106
Depreciation and amortization of property,
plant and equipment and goodwill.......... 856,990 808,185 180,863 1,846,038
Segment income (loss) before taxes.......... 2,155,111 (1,989,644) 326,558 492,025
Segment assets (1).......................... 21,927,086 20,402,652 4,139,909 45,572,081
Expenditures for segment property, plant and
equipment and goodwill.................... 894,743 3,005,844 40,251 3,940,838
---------- ---------- ---------- ----------
</TABLE>
F-22
<PAGE> 42
WYANT CORPORATION
(FORMERLY HOSPOSABLE PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SANITATION HEALTH CARE WIPING
PRODUCTS PRODUCTS PRODUCTS TOTAL
SEGMENT INFORMATION $ $ $ $
- ------------------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
1995
Revenues from external customers............ 51,096,805 30,816,085 9,442,720 91,355,610
Intersegment revenues....................... 1,068,832 1,720,636 241,596 3,031,064
Interest revenue............................ -- 137,532 11,039 148,571
Interest expense............................ 742,494 321,655 -- 1,064,149
Depreciation and amortization of property,
plant and equipment and goodwill.......... 955,871 741,729 240,623 1,938,223
Segment income (loss) before taxes.......... 215,855 347,599 (719,887) (156,433)
Expenditures for segment property, plant and
equipment and goodwill.................... 362,243 1,449,546 55,595 1,867,384
---------- ---------- ---------- ----------
</TABLE>
GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
PROPERTY, PLANT
REVENUES(2) AND EQUIPMENT
-------------------- AND GOODWILL
$ % $
----------- ----- ---------------
<S> <C> <C> <C>
1997
United States.......................................... 41,551,160 45.6 11,560,405
Canada................................................. 48,521,689 53.2 8,020,388
Other foreign countries................................ 1,146,772 1.2 --
----------- ----- -----------
91,219,621 100.0 19,580,793
=========== ===== ===========
1996
United States.......................................... 41,391,166 44.6 11,544,476
Canada................................................. 50,615,592 54.5 8,146,876
Other foreign countries................................ 838,422 0.9 --
----------- ----- -----------
92,845,180 100.0 19,691,352
=========== ===== ===========
1995
United States.......................................... 39,449,338 43.2 9,445,198
Canada................................................. 51,014,686 55.8 8,015,099
Other foreign countries................................ 891,586 1.0 --
----------- ----- -----------
91,355,610 100.0 17,460,297
=========== ===== ===========
</TABLE>
- ---------------
Notes
(1) Inter segment eliminations at December 31 were $2,958,286 and $897,566 in
1997 and 1996 respectively.
(2) Revenues are attributed to countries based on location of customers.
F-23
<PAGE> 43
WYANT CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, 1995
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS(1) OF YEAR
----------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Year ended December 31 --
1997......................................... $556,077 $239,961 $224,383 $571,655
1996......................................... $693,540 $455,297 $592,760 $556,077
1995......................................... $618,304 $468,116 $392,880 $693,540
</TABLE>
- ---------------
(1) Represents amounts written off, net of recoveries
F-24
<PAGE> 44
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
3.1 Articles of Incorporation and Amendments thereof (with the
exception of Exhibit 3.2 below) and By-Laws are incorporated
by reference. They were filed as exhibits with the Company's
February 2, 1984 and January 7, 1987 Registration Statements
and the Registrant's Proxy Statement filed May 30, 1990.
3.2 Certificate of Amendment of the Articles of Incorporation
dated March 18, 1997 filed with the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 is
incorporated by reference thereto.
10.1 The 1991 Stock Option Plan filed with the Company's 1994
Proxy Statement is incorporated by reference thereto.
10.2 The 1997 Stock Incentive Plan filed with the Company's Form
S-8 on March 19, 1997 is incorporated by reference thereto.
10.3 Loan and Security Agreement between Congress Financial
Corporation and Wyant Corporation, IFC Disposables, Inc. and
Bridgewater Manufacturing Corp. dated November 18, 1997.
10.4 Credit facilities agreement between the Bank of Nova Scotia
and Wood Wyant Inc. dated September 30, 1997.
10.5 Employment Agreement dated November 11, 1996 between James
A. Wyant and Wood Wyant Inc. (successor to G.H. Wood + Wyant
Inc.), as amended.
10.6 Retirement Arrangement Agreement dated June 27, 1994 between
Wood Wyant Inc. (successor to G.H. Wood + Wyant Inc.) and
Donald C. MacMartin.
21.1 Subsidiaries.
<PAGE> 1
EXHIBIT 10.3
<PAGE> 2
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
CONGRESS FINANCIAL CORPORATION
AS LENDER
AND
WYANT CORPORATION,
IFC DISPOSABLES, INC.
AND
BRIDGEWATER MANUFACTURING CORP.
AS BORROWERS
DATED: NOVEMBER 18, 1997
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. DEFINITIONS...................................... 1
SECTION 2. CREDIT FACILITIES................................ 7
2.1 Revolving Loans..................................... 7
2.2 Letter of Credit Accommodations..................... 8
2.3 Availability Reserves............................... 10
SECTION 3. INTEREST AND FEES................................ 10
3.1 Interest............................................ 10
3.2 Closing Fee......................................... 10
3.3 Servicing Fee....................................... 11
3.4 Unused Line Fee..................................... 11
SECTION 4. CONDITIONS PRECEDENT............................. 11
4.1 Conditions Precedent to Initial Loans and Letter of
Credit Accommodations............................... 11
4.2 Conditions Precedent to All Loans and Letter of
Credit Accommodations............................... 12
SECTION 5. GRANT OF SECURITY INTEREST....................... 12
SECTION 6. COLLECTION AND ADMINISTRATION.................... 13
6.1 Borrowers' Loan Accounts............................ 13
6.2 Statements.......................................... 13
6.3 Collection of Accounts.............................. 14
6.4 Payments............................................ 14
6.5 Authorization to Make Loans......................... 15
6.6 Use of Proceeds..................................... 15
6.7 Appointment of Wyant as Agent for Borrowers......... 15
SECTION 7. COLLATERAL REPORTING AND COVENANTS............... 15
7.1 Collateral Reporting................................ 15
7.2 Accounts Covenants.................................. 16
7.3 Inventory Covenants................................. 17
7.4 Equipment Covenants................................. 17
7.5 Real Property Covenants............................. 18
7.6 Power of Attorney................................... 18
7.7 Right to Cure....................................... 18
7.8 Access to Premises.................................. 18
SECTION 8. REPRESENTATIONS AND WARRANTIES................... 19
8.1 Corporate Existence, Power and Authority;
Subsidiaries........................................ 19
8.2 Financial Statements; No Material Adverse Change.... 19
8.3 Chief Executive Office; Collateral Locations........ 19
8.4 Priority of Liens; Title to Properties.............. 19
8.5 Tax Returns......................................... 19
8.6 Litigation.......................................... 20
8.7 Compliance with Other Agreements and Applicable
Laws................................................ 20
8.8 Bank Accounts....................................... 20
8.9 Employee Benefits................................... 20
8.10 Environmental Compliance............................ 21
8.11 Accuracy and Completeness of Information............ 21
8.12 Survival of Warranties; Cumulative.................. 21
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS............... 21
9.1 Maintenance of Existence............................ 21
9.2 New Collateral Locations............................ 22
9.3 Compliance with Laws, Regulations, Etc.............. 22
9.4 Payment of Taxes and Claims......................... 23
9.5 Insurance........................................... 23
9.6 Financial Statements and Other Information.......... 23
9.7 Sale of Assets, Consolidation, Merger, Dissolution,
Etc................................................ 24
9.8 Encumbrances........................................ 24
9.9 Indebtedness........................................ 25
9.10 Loans, Investments, Guarantees, Etc................. 25
9.11 Dividends and Redemptions........................... 26
9.12 Transactions with Affiliates........................ 26
9.13 Additional Bank Accounts............................ 26
9.14 Compliance with ERISA............................... 26
9.15 Adjusted Net Worth.................................. 27
9.16 Costs and Expenses.................................. 27
9.17 Further Assurances.................................. 27
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.................. 27
10.1 Events of Default................................... 27
10.2 Remedies............................................ 29
10.3 Certain Limitations................................. 30
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS;
GOVERNING LAW.................................. 30
11.1 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver.................................. 30
11.2 Waiver of Notices................................... 31
11.3 Amendments and Waivers.............................. 31
11.4 Waiver of Counterclaims............................. 31
11.5 Indemnification..................................... 31
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS................ 32
12.1 Term................................................ 32
12.2 Notices............................................. 33
12.3 Partial Invalidity.................................. 33
12.4 Successors.......................................... 33
12.5 Entire Agreement.................................... 34
</TABLE>
<PAGE> 5
INDEX TO
EXHIBITS AND SCHEDULES
<TABLE>
<S> <C>
Exhibit A Information Certificate
Exhibit B Certain Account Debtor Concentrations
Schedule 8.4 Existing Liens
Schedule 8.8 Bank Accounts
Schedule 8.9 Environmental Matters
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees
</TABLE>
<PAGE> 6
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated November 18, 1997 is entered into by
and between CONGRESS FINANCIAL CORPORATION, a California corporation ("Lender")
and WYANT CORPORATION, a New York corporation ("Wyant"), IFC DISPOSABLES, INC.,
a Tennessee corporation ("IFC") and BRIDGEWATER MANUFACTURING CORP., a New
Jersey corporation ("Bridgewater"; and together with Wyant and IFC,
individually, a "Borrower" and, collectively "Borrowers").
W I T N E S S E T H :
WHEREAS, Borrowers have requested that Lender enter into certain financing
arrangements with Borrowers pursuant to which Lender may make loans and provide
other financial accommodations to Borrowers; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural unless the context
otherwise requires. All references to Borrowers and Lender pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. The
word "including" when used in this Agreement shall mean "including, without
limitation". An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Lender, if such Event of Default is capable of being
cured as determined by Lender. Any accounting term used herein unless otherwise
defined in this Agreement shall have the meanings customarily given to such term
in accordance with GAAP. For purposes of this Agreement, the following terms
shall have the respective meanings given to them below:
1.1 "Accounts" of a Borrower shall mean all present and future rights of
such Borrower to payment for goods sold or leased or for services rendered,
which are not evidenced by instruments or chattel paper, and whether or not
earned by performance.
1.2 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting from
such book values all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization,
but excluding any subsequent reserve against the Airlay Production Line #2 (as
described in the MB Orderly Liquidation Value Appraisal of Wyant dated September
9, 1997 prepared by MB Valuation Inc.) which represents a one time writedown of
the asset for purposes of adjusting such asset to its net realizable value,
provided, that, after such writedown the net realizable value is not less than
$600,000) and (ii) the aggregate amount of the indebtedness and other
liabilities of such Person and its subsidiaries (including tax and other proper
accruals) plus (b) indebtedness of such Person and its subsidiaries which is
subordinated in right of payment to the full and final payment of all of the
Obligations on terms and conditions acceptable to Lender. For purposes of
Section 9.15 hereof, Adjusted Net Worth of Borrowers shall not include the
Adjusted Net Worth of the Canadian Subsidiary.
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<PAGE> 7
1.3 "Adjusted Net Income" shall mean the amount equal to: (a) Borrowers'
net income on a combined basis determined in accordance with GAAP, minus (b) to
the extent included in calculating such net income: (i) gain arising from the
sale of a capital asset; (ii) gain arising from any write-up in the book value
of an asset; (iii) income or gain of any person acquired by a Borrower in any
manner to the extent realized in any period prior to the date of the
acquisition; (iv) income or gain of any person in which a Borrower has an
ownership interest (other than a wholly owned subsidiary) except and only to the
extent that such Borrower has actually received such income or gain in the form
of cash distributions; (v) gain from the cancellation or forgiveness of
indebtedness; (vi) gain arising from the initial implementation of a change in
GAAP; (vii) gain from extraordinary items or any other nonrecurring transaction;
and (viii) income or gain arising from tax credits in excess of the amount of
taxes that would be imposed on net income without giving effect to such tax
credits.
1.4 "Availability Reserves" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Revolving Loans and Letter of Credit Accommodations which
would otherwise be available to a Borrower under the lending formula(s) provided
for herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, do or could reasonably be expected to affect
either (i) the Collateral or any other property which is security for the
Obligations or its value, (ii) the assets, business or financial condition of a
Borrower or any Obligor or (iii) the security interests and other rights of
Lender in the Collateral (including the enforceability, perfection and priority
thereof) or (b) to reflect Lender's good faith belief that any collateral report
or financial information furnished by or on behalf of a Borrower or any Obligor
to Lender is or may have been incomplete, inaccurate or misleading in any
material respect or (c) to reflect outstanding Letter of Credit Accommodations
as provided in Section 2.2 hereof or (d) to reflect the average amounts of
customer rebates issued by Borrower each month as determined based on the last
audit of Borrower performed by Lender or (e) in respect of any state of facts
which Lender determines in good faith constitutes an Event of Default or may,
with notice or passage of time or both, constitute an Event of Default.
1.5 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.6 "Canadian Subsidiary" shall mean Wood Wyant, Inc., a Canadian company
and a wholly-owned subsidiary of Wyant.
1.7 "Code" shall mean the internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretation thereunder
or related thereto.
1.8 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.9 "Eligible Accounts" of a Borrower shall mean Accounts created by such
Borrower which are and continue to be acceptable to Lender based on the criteria
set forth below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and delivery of
goods by such Borrower or rendition of services by such Borrower in
the ordinary course of its business which transactions are completed
by such Borrower in accordance with the terms and provisions contained
in any documents related thereto;
(b) such Accounts are not unpaid more than sixty (60) days past the
original due date for them or more than ninety (90) days after the
date of the original invoice for them;
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed sale,
sale and return, sale on approval, or other terms under which payment
by the account debtor may be conditional or contingent;
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<PAGE> 8
(e) the chief executive office of the account debtor with respect to such
Accounts is located in the United States of America, or, at Lender's
option, if either: (i) the account debtor has delivered to such
Borrower an irrevocable letter of credit issued or confirmed by a bank
satisfactory to Lender and payable only in the United States of
America and in U.S. dollars, sufficient to cover such Account, in form
and substance satisfactory to Lender and, if required by Lender, the
original of such letter of credit has been delivered to Lender or
Lender's agent and the issuer thereof notified of the assignment of
the proceeds of such letter of credit to Lender, or (ii) such Account
is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender, or (iii) such
Account is otherwise acceptable in all respects to Lender (subject to
such lending formula with respect thereto as Lender may determine);
(f) such Accounts do not consist of progress billings, bill and hold
invoices or retainage invoices, except as to bill and hold invoices,
if Lender shall have received an agreement in writing from the account
debtor, in form and substance satisfactory to Lender, confirming the
unconditional obligation of the account debtor to take the goods
related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not asserted a
counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff
against such Accounts (but the portion of the Accounts of such account
debtor in excess of the amount at any time and from time to time owed
by such Borrower to such account debtor or claimed owed by such
account debtor may be deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce
the amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and perfected
security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens
except those permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the account
debtor with respect to such Accounts is any other Borrower or an
officer, employee or agent of or affiliated with any Borrower directly
or indirectly by virtue of family membership, ownership, control,
management or otherwise;
(k) the account debtors with respect to such Accounts are not any foreign
government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if
the account debtor is the United States of America, any State,
political subdivision, department, agency or instrumentality thereof,
upon Lender's request, the Federal Assignment of Claims Act of 1940,
as amended or any similar State or local law, if applicable, has been
complied with in a manner satisfactory to Lender;
(l) there are no proceedings or actions which are threatened or pending
against the account debtors with respect to such Accounts which could
reasonably be expected to result in any material adverse change in any
such account debtor's financial condition;
(m) such Accounts of a single account debtor or its affiliates do not
constitute more than fifteen (15%) percent of all otherwise Eligible
Accounts of Borrowers or twenty-five (25%) percent of all otherwise
Eligible Accounts of Borrowers in the case of any of the account
debtors listed on Exhibit B hereof or its affiliates (but the portion
of the Accounts not in excess of such percentage may be deemed
Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has Accounts
unpaid more than sixty (60) days after the original due date for them
or more than ninety (90) days after the date of the original invoice
for them which constitute more than fifty (50%) percent of the total
Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total indebtedness to
such Borrower does not exceed the credit limit with respect to such
account debtors as determined by Lender in good faith
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<PAGE> 9
from time to time (but the portion of the Accounts not in excess of
such credit limit may still be deemed Eligible Accounts); and
(p) such Accounts are owed by account debtors deemed creditworthy at all
times by Lender, as determined by Lender in good faith.
General criteria for Eligible Accounts may be established and revised from
time to time by Lender in good faith. Any Accounts which are not Eligible
Accounts shall nevertheless be part of the Collateral.
1.10 "Eligible Equipment" of a Borrower shall mean Equipment owned by such
Borrower which is in good order, repair, running and marketable condition,
located at such Borrower's premises and acceptable to Lender in all respects.
General criteria for Eligible Equipment may be established and revised from time
to time by Lender in good faith. In determining such acceptability Lender may,
but need not, rely on reports furnished to Lender by such Borrower, but reliance
thereon by Lender from time to time shall not be deemed to limit Lender's right
to revise standards of eligibility at any time. In general, Eligible Equipment
shall not include Equipment at the premises of third parties or subject to a
security interest or lien in favor of any third parties except those otherwise
permitted in this Agreement, Equipment which is not subject to Lender's
perfected security interest, fixtures, worn-out, obsolete or defective Equipment
or Equipment not used or usable in the ordinary course of such Borrower's
business as presently conducted; provided, however, any Equipment which would
otherwise be deemed Eligible Equipment at locations which are not owned and
operated by such Borrower may nevertheless be considered Eligible Equipment if
Lender shall have received an agreement in writing, in form and substance
satisfactory to Lender, from the owner and/or operator of such location, as the
case may be, pursuant to which such owner and/or operator, if required by
Lender: (a) acknowledges the first priority lien of Lender on such Equipment,
(b) agrees to waive any and all claims such owner and/or operator may, at any
time, have against such Equipment and (c) grants to Lender the right to enter
and remain on the premises in order to exercise Lender's rights and remedies on
terms acceptable to Lender. Any Equipment which Lender determines to be
ineligible or unacceptable for purposes of the lending formula shall
nevertheless be and remain at all times part of the Collateral.
1.11 "Eligible Inventory" of a Borrower shall mean Inventory of such
Borrower consisting of finished goods held for resale in the ordinary course of
the business of such Borrower and raw materials for such finished goods which
are acceptable to Lender based on the criteria set forth below. In general,
Eligible Inventory shall not include (a) work-in-process; (b) components which
are not part of finished goods; (c) spare parts for equipment; (d) packaging and
shipping materials; (e) supplies used or consumed in such Borrower's business;
(f) Inventory at premises other than those owned and controlled by a Borrower,
except if Lender shall have received an agreement in writing from the person in
possession of such Inventory and/or the owner or operator of such premises in
form and substance satisfactory to Lender acknowledging Lender's first priority
security interest in the Inventory, waiving security interests and claims by
such person against the Inventory and permitting Lender access to, and the right
to remain on, the premises so as to exercise Lender's rights and remedies and
otherwise deal with the Collateral; (g) Inventory subject to a security interest
or lien in favor of any person other than Lender except those permitted in this
Agreement; (h) bill and hold goods; (i) unserviceable, obsolete or slow moving
Inventory; (j) Inventory which is not subject to the first priority, valid and
perfected security interest of Lender; (k) returned, damaged and/or defective
Inventory; and (l) Inventory purchased or sold on consignment. General criteria
for Eligible Inventory may be established and revised from time to time by
Lender in good faith. Any Inventory which is not Eligible Inventory shall
nevertheless be part of the Collateral.
1.12 "Eligible Real Property" shall mean Real Property for which Lender
has received, in form and substance satisfactory to Lender, (a) a Mortgage,
which shall grant in favor of Lender a first priority mortgage lien upon and
security interest in the Real Property, (b) a Phase I environmental audit
conducted by an independent environmental engineering firm acceptable to Lender,
and in form, scope and methodology acceptable to Lender, confirming, as of a
date acceptable to Lender that the Real Property does not contain any Hazardous
Materials, and (c) a valid and effective title insurance policy issued by a
title insurance company and agent acceptable to Lender (i) insuring the
priority, amount and validity of the Mortgage with respect to the Real Property,
(ii) insuring against matters that could be disclosed by surveys and
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<PAGE> 10
(iii) containing any legally available endorsements, assurances or affirmative
coverage requested by Lender for protection of its interest.
1.13 "Environmental Laws" shall mean all federal, state, district, local
and foreign laws, rules, regulations, ordinances, and consent decrees relating
to health, safety, hazardous substances, pollution and environmental matters, as
now or at any time hereafter in effect, applicable to a Borrower's business and
facilities (whether or not owned by it), including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contamination,
chemicals, or hazardous, toxic or dangerous substances, materials or wastes into
the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals, or
hazardous, toxic or dangerous substances, materials or wastes.
1.14 "Equipment" of a Borrower shall mean all of such Borrower's now owned
and hereafter acquired equipment, machinery, computers and computer hardware and
software (whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.15 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.16 "ERISA Affiliate" shall mean any person required to be aggregated
with a Borrower or any of its subsidiaries under Section 414(b), 414(c), 414(m)
or 414(o) of the Code.
1.17 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.18 "Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of (i) the combined amount of
the Revolving Loans available to Borrowers as of such time based on the
applicable lending formulas multiplied by the Net Amount of Eligible Accounts
and the Value of Eligible Inventory, Eligible Equipment and Eligible Real
Property, as determined by Lender, and subject to the sublimits and Availability
Reserves from time to time established by Lender hereunder and (ii) the Maximum
Credit for all Borrowers, minus (b) the sum of: (i) the aggregate amount of all
then outstanding and unpaid Obligations of Borrowers plus (ii) the aggregate
amount of all trade payables of Borrowers which are more than thirty (30) days
past due as of such time.
1.19 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by either
Borrower or any Obligor in connection with this Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
1.20 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied.
1.21 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation. materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including, without
limitation any that are or become classified as hazardous or toxic under any
Environmental Law).
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<PAGE> 11
1.22 "Information Certificate" shall mean the Information Certificates of
Borrowers constituting Exhibit A hereto containing material information with
respect to Borrowers, their business and assets provided by or on behalf of
Borrowers to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.23 "Inventory" of a Borrower shall mean all of such Borrower's now owned
and hereafter existing or acquired raw materials, work in process, finished
goods and all other inventory of whatsoever kind or nature, wherever located.
1.24 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of a Borrower or any Obligor
(including the existing Irrevocable Letter of Credit No. N-303283 dated December
23, 1993 originally issued by First Union National Bank (f/k/a First Fidelity
Bank, N.A., New Jersey) in the original amount of $5,325,000 for the account of
Wyant and naming The Bank of New York, NA, as trustee for the New Jersey
Economic Development Authority, as beneficiary, as amended) or (b) with respect
to which Lender has agreed to indemnify the issuer or guaranteed to the issuer
the performance by a Borrower of its obligations to such issuer.
1.25 "Loans" shall mean the Revolving Loans.
1.26 "Maximum Credit" shall mean the amount of $13,000,000.
1.27 "Mortgage" shall mean the Mortgage and Security Agreement, dated of
even date herewith, by Wyant in favor of Lender with respect to the Real
Property located in Somerville, New Jersey.
1.28 "Net Amount of Eligible Accounts" of a Borrower shall mean the gross
amount of Eligible Accounts of such Borrower less (a) sales, excise or similar
taxes included in the amount thereof and (b) returns, discounts, claims, credits
and allowances of any nature at any time issued, owing, granted, outstanding,
available or claimed with respect thereto.
1.29 "Obligations" shall mean any and all Revolving Loans, Letter of
Credit Accommodations and all other obligations, liabilities and indebtedness of
every kind, nature and description owing by any Borrower or all Borrowers to
Lender and/or its affiliates, including principal, interest, charges, fees,
costs and expenses, however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, whether arising under this Agreement or otherwise,
whether now existing or hereafter arising, whether arising before, during or
after the initial or any renewal term of this Agreement or after the
commencement of any case with respect to a Borrower under the United States
Bankruptcy Code or any similar statute (including, without limitation, the
payment of interest and other amounts which would accrue and become due but for
the commencement of such case), 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 Lender.
1.30 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrowers.
1.31 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.32 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, limited liability company, corporation (including, without
limitation, any corporation which elects subchapter S status under the Internal
Revenue Code of 1986, as amended), business trust, unincorporated association,
joint stock corporation, trust, joint venture or other entity or any government
or any agency or instrumentality or political subdivision thereof.
1.33 "Prime Rate" shall mean the rate from time to time publicly announced
by CoreStates Bank, N.A., or its successors, at its office in Philadelphia,
Pennsylvania, as its prime rate, whether or not such announced rate is the best
rate available at such bank.
1.34 "Real Property" shall mean all now owned and hereafter acquired real
property of Borrowers, including leasehold interests, together with all
buildings, structures, and other improvements located thereon
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<PAGE> 12
and all licenses, easements and appurtenances relating thereto, wherever
located, including the real property and related assets more particularly
described in the Mortgage located in Somerville, New Jersey.
1.35 "Records" of a Borrower shall mean all of such Borrower's present and
future books of account of every kind or nature, purchase and sale agreements,
invoices, ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of such Borrower
with respect to the foregoing maintained with or by any other person).
1.36 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of any Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.37 "Value" shall mean, as determined by Lender in good faith, (a) with
respect to Inventory, the lower of (i) cost computed on a first in first out
basis in accordance with GAAP or (ii) market value, (b) with respect to
Equipment, the orderly liquidation value, and (c) with respect to Real Property,
the fair market value; in each case described in subsection (b) and (c) hereof
as such value is set forth in an appraisal report(s) addressed to Lender, or
upon which Lender is expressly permitted to rely, prepared at Borrowers'
expense, by independent appraisers acceptable to Lender, in scope and
methodology acceptable to Lender.
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to, and upon the terms and conditions contained herein, Lender
agrees to make Revolving Loans to each Borrower from time to time in
amounts requested by such Borrower up to the amount equal to the sum
of:
(i) eighty-five (85%) percent of the Net Amount of Eligible Accounts
of such Borrower, plus
(ii) the lesser of: (A) fifty (50%) percent of the Value of Eligible
Inventory of such Borrower; or (B) $3,000,000, plus
(iii) the lesser of (A) eighty (80%) percent of the Value of Eligible
Equipment or (B) $3,500,000, plus
(iv) the lesser of (A) fifty (50%) percent of the Value of Eligible
Real Property or (B) $2,000,000, less
(v) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not less than
five (5) business days prior notice to a Borrower, (i) reduce the
lending formula with respect to Eligible Accounts to the extent that
Lender determines in good faith that: (A) the dilution with respect to
the Accounts for any period (based on the ratio of (1) the aggregate
amount of reductions in Accounts other than as a result of payments in
cash to (2) the aggregate amount of total sales) has increased in any
material respect or may be reasonably anticipated to increase in any
material respect above historical levels, or (B) the general
creditworthiness of account debtors of Borrowers has declined or (ii)
reduce the lending formula(s) with respect to Eligible Inventory to
the extent that Lender determines in good faith that: (A) the number
of days of the turnover of the Inventory for any period has changed in
any material respect or (B) the liquidation value of the Eligible
Inventory, or any category thereof, has materially decreased, or (C)
the nature and quality of the Inventory has materially deteriorated.
In determining whether to reduce the lending formula(s), Lender may
consider events, conditions, contingencies or risks which are also
considered in determining Eligible Accounts, Eligible Inventory or in
establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the Loans and
the Letter of Credit Accommodations outstanding at any time to any one
or all Borrowers shall not exceed the
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Maximum Credit and the Loans made pursuant to Section 2.1(a)(iii) and
(iv) shall not exceed, at any one time, an amount equal to (i)
$5,500,000 minus (ii) an amount equal to (A) $76,388 multiplied by (B)
the number of calendar months that have passed from the date hereof.
In the event that the outstanding amount of any component of the
Loans, or the aggregate amount of the outstanding Loans and Letter of
Credit Accommodations, exceed the amounts available under the lending
formulas, the sublimits for Letter of Credit Accommodations set forth
in Section 2.2(c) or the Maximum Credit, as applicable, such event
shall not limit, waive or otherwise affect any rights of Lender in
that circumstance or on any future occasions and Borrowers shall, upon
demand by Lender, which may be made at any time or from time to time,
immediately repay to Lender the entire amount of any such excess(es)
for which payment is demanded.
(d) For purposes only of applying the sublimit on Revolving Loans based on
Eligible Inventory pursuant to Section 2.1(a)(ii)(B), Lender may treat
the then undrawn amounts of outstanding Letter of Credit
Accommodations for the purpose of purchasing Eligible Inventory as
Revolving Loans to the extent Lender is in effect basing the issuance
of the Letter of Credit Accommodations on the Value of the Eligible
Inventory being purchased with such Letter of Credit Accommodations.
In determining the actual amounts of such Letter of Credit
Accommodations to be so treated for purposes of the sublimit, the
outstanding Revolving Loans and Availability Reserves shall be
attributed first to any components of the lending formulas in Section
2.1(a) that are not subject to such sublimit, before being attributed
to the components of the lending formulas subject to such sublimit.
2.2 Letter of Credit Accommodations.
(a) Subject to, and upon the terms and conditions contained herein, at the
request of a Borrower, Lender agrees to provide or arrange for Letter
of Credit Accommodations for the account of such Borrower containing
terms and conditions acceptable to Lender and the issuer thereof. Any
payments made by Lender to any issuer thereof and/or related parties
in connection with such Letter of Credit Accommodations shall
constitute additional Revolving Loans to such Borrower pursuant to
this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations, each
Borrower shall pay to Lender a letter of credit fee at a rate equal to
one and five-eighths (1 5/8%) percent per annum on the daily
outstanding balance of the Letter of Credit Accommodations to such
Borrower for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month,
except that such Borrower shall pay to Lender such letter of credit
fee, at Lender's option, after notice to such Borrower, at a rate
equal to three and five-eighths (3 5/8%) percent per annum on such
daily outstanding balance for: (i) the period from and after the date
of termination or non-renewal hereof until Lender has received full
and final payment of all Obligations (notwithstanding entry of a
judgment against Borrower) and (ii) the period from and after the date
of the occurrence of an Event of Default for so long as such Event of
Default is continuing as determined by Lender. Such letter of credit
fee shall be calculated on the basis of a three hundred sixty (360)
day year and actual days elapsed and the obligation of Borrower to pay
such fee shall survive the termination or non-renewal of this
Agreement.
(c) No Letter of Credit Accommodations shall be available to a Borrower
unless on the date of the proposed issuance of any Letter of Credit
Accommodations, the Revolving Loans available to such Borrower
(subject to the Maximum Credit and any Availability Reserves) are
equal to or greater than: (i) if the proposed Letter of Credit
Accommodation is for the purpose of purchasing Eligible Inventory, the
sum of (A) the percentage equal to one hundred (100%) percent minus
the then applicable percentage set forth in Section 2.l(a)(ii)(A)
above of the Value of such Eligible Inventory, plus (B) freight,
taxes, duty and other amounts which Lender estimates must be paid in
connection with such Inventory upon arrival and for delivery to one of
such Borrower's locations for Eligible Inventory within the United
States of America and (ii) if the proposed Letter of Credit
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Accommodation is for any other purpose, an amount equal to one hundred
(100%) percent of the face amount thereof and all other commitments
and obligations made or incurred by Lender with respect thereto.
Effective on the issuance of each Letter of Credit Accommodation, an
Availability Reserve shall be established in the applicable amount set
forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all outstanding Letter of
Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time
exceed $5,000,000. At any time an Event of Default exists or has
occurred and is continuing, upon Lender's request, each Borrower will
either furnish cash collateral to secure the reimbursement obligations
to the issuer in connection with any Letter of Credit Accommodations
to or for the account of such Borrower or furnish cash collateral to
Lender for such Letter of Credit Accommodations, and in either case,
the Revolving Loans otherwise available to such Borrower shall not be
reduced as provided in Section 2.2(c) to the extent of such cash
collateral.
(e) Each Borrower shall jointly and severally indemnify and hold Lender
harmless from and against any and all losses, claims, damages,
liabilities, costs and expenses which Lender may suffer or incur in
connection with any Letter of Credit Accommodations and any documents,
drafts or acceptances relating thereto, including, but not limited to,
any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any
Letter of Credit Accommodation, except as a result of Lender's own
acts or omissions constituting gross negligence or willful misconduct,
as determined pursuant to a final and non-appealable judgment or order
of a court of competent jurisdiction. Each Borrower assumes all risks
with respect to the acts or omissions of the drawer under or
beneficiary of any Letter of Credit Accommodation. Each Borrower
assumes all risks for, and agrees to pay, all foreign, Federal, State
and local taxes, duties and levies relating to any goods subject to
any Letter of Credit Accommodations or any documents, drafts or
acceptances thereunder. Each Borrower hereby releases and holds Lender
harmless from and against any acts, waivers, errors, delays or
omissions, whether caused by any Borrower, by any issuer or
correspondent or otherwise with respect to or relating to any Letter
of Credit Accommodation, except as a result of Lender's own acts or
omissions constituting gross negligence or willful misconduct, as
determined pursuant to a final and non-appealable judgment or order of
a court of competent jurisdiction. The provisions of this Section
2.2(e) shall survive the payment of Obligations and the termination or
non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to grant any
Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any
Letter of Credit Accommodation provided by an issuer other than Lender
unless Lender has duly executed and delivered to such issuer the
application or a guarantee or indemnification in writing with respect
to such Letter of Credit Accommodation. Each Borrower shall be bound
by any interpretation made in good faith by Lender, or any other
issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances
thereunder, notwithstanding that such interpretation may be
inconsistent with any instructions of a Borrower. Lender shall have
the sole and exclusive right and authority to, and Borrowers shall
not: (i) at any time an Event of Default exists or has occurred and is
continuing, (A) approve or resolve any questions of non-compliance of
documents, (B) give any instructions as to acceptance or rejection of
any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and
(ii) at any time, except Borrowers may with the prior written approval
of Lender, (A) grant any extensions of the maturity of, time of
payment for, or time of presentation of, any drafts, acceptances, or
documents, and (B) agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any
letters of credit included in the Collateral. Lender may take such
actions either in its own name or in the applicable Borrower's name.
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(g) Any rights, remedies, duties or obligations granted or undertaken by a
Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any
issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been granted or undertaken by
such Borrower to Lender. Any duties or obligations undertaken by
Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in
favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by the
applicable Borrower to Lender and to apply in all respects to such
Borrower. Nothing herein shall act as a waiver of Borrowers' rights to
a separate cause of action against any issuer of any Letter of Credit
Accommodation for wrongful payment by such issuer under a Letter of
Credit Accommodation.
2.3 Availability Reserves. All Revolving Loans otherwise available to a
Borrower pursuant to the lending formulas and subject to the Maximum Credit and
other applicable limits hereunder shall be subject to Lender's continuing right
to establish and revise Availability Reserves in good faith.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrowers shall pay to Lender interest on the outstanding principal
amount of the non-contingent Obligations that are then due and payable
at the rate of one (1%) percent per annum in excess of the Prime Rate,
except that, at Lender's option, after notice to Borrowers, Borrowers
shall pay to Lender interest at the rate of three (3%) percent per
annum in excess of the Prime Rate: (i) on the non-contingent
Obligations that are then due and payable for (A) the period from and
after the date of termination or non-renewal hereof until such time as
Lender has received full and final payment of all such Obligations
(notwithstanding entry of any judgment against Borrowers), and (B) the
period from and after the date of the occurrence of an Event of
Default for so long as such Event of Default is continuing and (ii) on
the Revolving Loans at any time outstanding in excess of the amounts
available to Borrowers under Section 2 (whether or not such
excess(es), arise or are made with or without Lender's knowledge or
consent and whether made before or after an Event of Default).
(b) Interest shall be payable by each Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall
be calculated on the basis of a three hundred sixty (360) day year and
actual days elapsed. The interest rate shall increase or decrease by
an amount equal to each increase or decrease in the Prime Rate
effective on the first day of the month after any change in such Prime
Rate is announced. The increase or decrease shall be based on the
Prime Rate in effect on the last day of the month in which any such
change occurs. All interest accruing hereunder on and after an Event
of Default or termination or non-renewal hereof shall be payable on
demand. In no event shall charges constituting interest payable by any
Borrower to Lender exceed the maximum amount or the rate permitted
under any applicable law or regulation, and if any such part or
provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform
thereto.
3.2 Closing Fee. Borrowers shall pay to Lender as a closing fee the amount
of $130,000, which fee shall be fully earned as of the date hereof, of which
$65,000 shall be payable on the date hereof, $32,500 shall be payable six (6)
months from the date hereof and $32,500 shall be payable one year from the date
hereof; provided, however, that if Borrowers have Adjusted Net Income in an
amount equal to or greater than $750,000 for the fiscal year of Borrowers ending
December 31, 1997 based upon their annual audited financial statements prepared
on a consolidated basis for such fiscal year and prepared and delivered pursuant
to Section 9.6(a) hereof and Borrowers have Excess Availability in an amount not
less than $1,000,000 for thirty (30) consecutive days immediately prior to the
date one year from the date hereof, then the total closing fee shall be reduced
to $97,500 and the last installment of the closing fee shall be reduced to zero
($0).
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3.3 Servicing Fee. Borrowers shall pay to Lender monthly a servicing fee
in an amount equal to $2,000 in respect of Lender's services for each month (or
part thereof) while this Agreement remains in effect and for so long thereafter
as any of the Loans or Letter of Credit Accommodations are outstanding, which
fee shall be fully earned as of and payable in advance on the date hereof and on
the first day of each month hereafter.
3.4 Unused Line Fee. Borrowers shall pay to Lender monthly an unused line
fee at a rate equal to three-eighths of one ( 3/8%) percent per annum calculated
upon the amount by which the Maximum Credit exceeds the average daily principal
balance of the outstanding Revolving Loans and Letter of Credit Accommodations
to Borrowers during the immediately preceding month (or part thereof) while this
Agreement is in effect and for so long thereafter as any of the non-contingent
Obligations are outstanding, which fee shall be payable on the first day of each
month in arrears.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first
priority security interests in and liens upon the Collateral and any
other property which is intended to be security for the Obligations or
the liability of any Obligor in respect thereof, subject only to the
security interests and liens permitted herein or in the other
Financing Agreements; without limiting the generality of the
foregoing, Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and such other
documents as Lender may request to evidence and effectuate the
termination by the existing lender or lenders to Borrowers of their
respective financing arrangements with Borrowers and the termination
and release by it or them, as the case may be, of any interest in and
to any assets and properties of Borrowers and each Obligor, duly
authorized, executed and delivered by it or each of them, including,
but not limited to, (i) UCC termination statements for all UCC
financing statements previously filed by it or any of them or their
predecessors, as secured party and either Borrower, any affiliate or
former affiliate of Borrowers, or any Obligor, as debtor, if
applicable, and (ii) satisfactions and discharges of any mortgages,
deeds of trust or deeds to secure debt by either Borrower, any
affiliate or former affiliate of Borrowers, or any Obligor in favor of
such existing lender or lenders, in form acceptable for recording in
the appropriate government office;
(b) all requisite corporate action and proceedings in connection with this
Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Lender, and Lender shall have received all
information and copies of all documents, including records of
requisite corporate action and proceedings which Lender may have
requested in connection therewith, such documents where requested by
Lender or its counsel to be certified by appropriate corporate
officers or governmental authorities;
(c) no material adverse change shall have occurred in the assets, business
or prospects of any Borrower since the date of Lender's latest field
examination and no change or event shall have occurred which would
impair the ability of any Borrower or any Obligor to perform its
obligations hereunder or under any of the other Financing Agreements
to which it is a party or of Lender to enforce the Obligations or
realize upon the Collateral;
(d) Lender shall have completed a field review of the Records and such
other information with respect to the Collateral as Lender may require
to determine the amount of Revolving Loans available to Borrowers, the
results of which shall be satisfactory to Lender, not more than three
(3) business days prior to the date hereof;
(e) Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements
from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and
liens upon the Collateral
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or to effectuate the provisions or purposes of this Agreement and the
other Financing Agreements, including acknowledgements by lessors,
mortgagees and warehousemen of Lender's security interests in the
Collateral, waivers by such persons of any security interests, liens
or other claims by such persons to the Collateral and agreements
permitting Lender access to, and the right to remain on, the premises
to exercise its rights and remedies and otherwise deal with the
Collateral;
(f) the Excess Availability as determined by Lender, as of the date
hereof, shall be not less than $1,000,000 for Borrowers after giving
effect to the initial Loans made or to be made and Letter of Credit
Accommodations issued or to be issued in connection with the initial
transactions hereunder;
(g) Lender shall have received an environmental audit of Wyant's plant and
the Real Property located at 100 Readington Road, Somerville, New
Jersey conducted by an independent environmental engineering firm
acceptable to Lender, and in form, scope and methodology satisfactory
to Lender, confirming (i) Borrowers are in compliance with all
material applicable Environmental Laws and (ii) the absence of any
material environmental problems;
(h) Lender shall have received, in form and substance satisfactory to
Lender, a valid and effective title insurance policy issued by a
company and agent acceptable to Lender (i) insuring the priority,
amount and sufficiency of the Mortgage, (ii) insuring against matters
that would be disclosed by surveys and (iii) containing any legally
available endorsements, assurances or affirmative coverage requested
by Lender for protection of its interests;
(i) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing
Agreements, in form and substance satisfactory to Lender, and
certificates of insurance policies and/or endorsements naming Lender
as loss payee;
(j) Lender shall have received, in form and substance satisfactory to
Lender, such opinion letters of counsel to Borrowers and any obligors
with respect to the Financing Agreements and such other matters as
Lender may request; and
(k) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrowers, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the other
Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and
warranties had been made on and as of the date of the making of each
such Loan or providing each such Letter of Credit Accommodation and
after giving effect thereto; and
(b) no Event of Default and no event or condition which, with notice or
passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the
making of such Loan or providing each such Letter of Credit
Accommodation and after giving effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
5.1 To secure payment and performance of all Obligations, each Borrower
hereby grants to Lender a continuing security interest in, a lien upon, and a
right of set off against, and hereby assigns to Lender as security, the
following property and interests in property of such Borrower, whether now owned
or hereafter acquired or existing, and wherever located (collectively, the
"Collateral"):
(a) Accounts;
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(b) all present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade
names, applications for the foregoing, trade secrets, goodwill,
processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, chooses in action and other claims and existing
and future leasehold interests in equipment, real estate and
fixtures), chattel paper, documents, instruments, securities and other
investment property, letters of credit, bankers' acceptances and
guaranties;
(c) all present and future monies, securities (other than the capital
stock of the Canadian Subsidiary), credit balances, deposits, deposit
accounts and other property of such Borrower now or hereafter held or
received by or in transit to Lender or its affiliates or at any other
depository or other institution from or for the account of such
Borrower, whether for safekeeping, pledge, custody, transmission,
collection or otherwise, and all present and future liens, security
interests, rights, remedies, title and interest in, to and in respect
of Accounts and other Collateral, including (i) rights and remedies
under or relating to guaranties, contracts of suretyship, letters of
credit and credit and other insurance related to the Collateral, (ii)
rights of stoppage in transit, replevin, repossession, reclamation and
other rights and remedies of an unpaid vendor, lienor or secured
party, (iii) goods described in invoices, documents, contracts or
instruments with respect to, or otherwise representing or evidencing,
Accounts or other Collateral, including returned, repossessed and
reclaimed goods, and (iv) deposits by and property of account debtors
or other persons securing the obligations of account debtors;
(d) Inventory;
(e) Equipment;
(f) Real Property;
(g) Records; and
(h) all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or
damage to or destruction of any or all of the foregoing.
5.2 Notwithstanding anything to the contrary set forth in Section 5.1
above, the types or items of Collateral described in such Section shall not
include any capital stock of the Canadian Subsidiary owned by Wyant.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrowers' Loan Accounts. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of each Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest. All entries in the loan account(s) shall be made in accordance
with Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Wyant each month a statement
setting forth the balance in the Borrowers' loan account(s) maintained by Lender
for Borrowers pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrowers and conclusively binding
upon Borrowers as an account stated except to the extent that Lender receives a
written notice from a Borrower of any specific exceptions of such Borrower
thereto within sixty (60) days after the date such statement has been mailed by
Lender. Until such time as Lender shall have rendered to Wyant a written
statement as provided above, the balance in Borrowers' loan account(s) shall be
presumptive evidence of the amounts due and owing to Lender by Borrower.
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6.3 Collection of Accounts.
(a) Each Borrower shall establish and maintain, at its expense, blocked
accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Lender may specify, with such banks as are
acceptable to Lender into which such Borrower shall promptly deposit
and direct its account debtors to directly remit all payments on
Accounts and all payments constituting proceeds of Inventory or other
Collateral in the identical form in which such payments are made,
whether by cash, check or other manner. The banks at which the Blocked
Accounts are established shall enter into an agreement, in form and
substance satisfactory to Lender, providing that all items received or
deposited in the Blocked Accounts are the property of Lender, that the
depository bank has no lien upon, or right to setoff against, the
Blocked Accounts, the items received for deposit therein, or the funds
from time to time on deposit therein and that the depository bank will
wire, or otherwise transfer, in immediately available funds, on a
daily basis, all funds received or deposited into the Blocked Accounts
to such bank account of Lender as Lender may from time to time
designate for such purpose ("Payment Account"). Each Borrower agrees
that all payments made to such Blocked Accounts or other funds
received and collected by Lender, whether on the Accounts or as
proceeds of Inventory or other Collateral or otherwise shall be the
property of Lender.
(b) For purposes of calculating the amount of the Loans available to
Borrowers, such payments will be applied (conditional upon final
collection) to the Obligations then due and payable on the business
day of receipt by Lender of immediately available funds in the Payment
Account provided such payments and notice thereof are received in
accordance with Lender's usual and customary practices as in effect
from time to time and within sufficient time to credit Borrowers' loan
account(s) on such day, and if not, then on the next business day. For
the purposes of calculating interest on the Obligations, such payments
or other funds received will be applied (conditional upon final
collection) to the Obligations one (1) business day following the date
of receipt of immediately available funds by Lender in the Payment
Account provided such payments or other funds and notice thereof are
received in accordance with Lender's usual and customary practices as
in effect from time to time and within sufficient time to credit
Borrowers' loan account(s) on such day and if not, then on the next
business day.
(c) Each Borrower and all of its affiliates, subsidiaries, shareholders,
directors, employees or agents shall, acting as trustee for Lender,
receive, as the property of Lender, any monies, checks, notes, drafts
or any other payment relating to and/or proceeds of Accounts or other
Collateral which come into their possession or under their control and
immediately upon receipt thereof, shall deposit or cause the same to
be deposited in the Blocked Accounts, or remit the same or cause the
same to be remitted, in kind, to Lender. In no event shall the same be
commingled with any Borrower's own funds. Each Borrower agrees to
reimburse Lender on demand for any amounts owed or paid to any bank at
which a Blocked Account is established or any other bank or person
involved in the transfer of funds to or from the Blocked Accounts
arising out of Lender's payments to or indemnification of such bank or
person. The obligation of each Borrower to reimburse Lender for such
amounts pursuant to this Section 6.3 shall survive the termination or
non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account as
provided in Section 6.3 or such other place as Lender may designate from time to
time. Lender may apply payments received or collected from a Borrower or for the
account of a Borrower (including the monetary proceeds of collections or of
realization upon any Collateral) to such of the Obligations then due and
payable, in such order and manner as Lender determines. At Lender's option, all
principal, interest, fees, costs, expenses and other charges provided for in
this Agreement or the other Financing Agreements may be charged directly to the
loan account(s) of Borrowers. Each Borrower shall make all payments to Lender on
the Obligations free and clear of, and without deduction or withholding for or
on account of, any setoff, counterclaim, defense, duties, taxes, levies,
imposts, fees, deductions, withholding, restrictions or conditions of any kind.
If after receipt of any payment of, or proceeds of Collateral applied to the
payment of, any of the Obligations, Lender is required to surrender or return
such payment or proceeds to any Person for any reason, then the Obligations
intended to
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be satisfied by such payment or proceeds shall be reinstated and continue and
this Agreement shall continue in full force and effect as if such payment or
proceeds had not been received by Lender. Each Borrower shall be jointly and
severally liable to pay to Lender, and does hereby jointly and severally
indemnify and hold Lender harmless for the amount of any payments or proceeds
surrendered or returned. This Section 6.4 shall remain effective notwithstanding
any contrary action which may be taken by Lender in reliance upon such payment
or proceeds. This Section 6.4 shall survive the payment of the Obligations and
the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations to a Borrower based upon
telephonic or other instructions received from anyone purporting to be an
officer of such Borrower or other authorized person or, at the discretion of
Lender, if such Loans are necessary to satisfy any Obligations then due and
payable. All requests for Loans or Letter of Credit Accommodations hereunder
shall specify the date on which the requested advance is to be made or Letter of
Credit Accommodations established (which day shall be a business day) and the
amount of the requested Loan. Requests received after 11:00 a.m. New York time
on any day shall be deemed to have been made as of the opening of business on
the immediately following business day. All Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have been
made to, and at the request of and for the benefit of, a Borrower when deposited
to the credit of such Borrower or otherwise disbursed or established in
accordance with the instructions of such Borrower or in accordance with the
terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrowers shall use the initial proceeds of the Loans
provided by Lender to Borrowers hereunder only for: (a) payments to each of the
persons listed in the disbursement direction letter furnished by Borrowers to
Lender on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided by Lender to Borrowers pursuant to the provisions
hereof shall be used by Borrowers only for general operating, working capital
and other proper corporate purposes of Borrowers not otherwise prohibited by the
terms hereof. None of the proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or for the purposes 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 to be considered a "purpose credit" within the meaning of Regulation G
of the Board of Governors of the Federal Reserve System, as amended.
6.7 Appointment of Wyant as Agent for Borrowers. The Borrowers, other than
Wyant, hereby irrevocably appoint Wyant, and each officer thereof, as their
agent and attorney-in-fact to request Loans and Letter of Credit Accommodations
on their behalf, at Lender's option, to receive disbursements of Loans on their
behalf (which may be made to the same account of Wyant to which disbursements of
Loans to Wyant are made), to receive notices and statements of account from
Lender, to take such other actions on their behalf as is provided hereunder or
under any of the other Financing Agreements and generally to deal with Lender on
their behalf, for all matters pertaining to the financing arrangements under
this Agreement.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Each Borrower shall provide Lender with the
following documents in a form satisfactory to Lender in Lender's reasonable
determination: (a) on a regular basis as required by Lender, a schedule of sales
made, credits issued and cash received; (b) on a monthly basis or more
frequently as Lender may reasonably request, (i) perpetual inventory reports,
(ii) inventory reports by category and (iii) agings of accounts receivable; (iv)
agings of accounts payable, (c) upon Lender's reasonable request, (i) copies of
customer statements and credit memos, remittance advices and reports, and copies
of deposit slips and bank statements, (ii) copies of shipping and delivery
documents, and (iii) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by such Borrower; and (d) such other
reports as to the Collateral as Lender shall reasonably request from time to
time. If any of a Borrower's records or reports of the Collateral are prepared
or maintained by an accounting service, contractor, shipper or other agent, such
Borrower hereby irrevocably authorizes such service, contractor, shipper or
agent to deliver such records,
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reports, and related documents to Lender and to follow Lender's instructions
with respect to further services at any time that an Event of Default exists or
has occurred and is continuing.
7.2 Accounts Covenants.
(a) Each Borrower shall notify Lender promptly of: (i) any material delay
in such Borrower's performance of any of its obligations to any
account debtor or the assertion of any material claims, offsets,
defenses or counterclaims by any account debtor, or any disputes with
account debtors, or any settlement, adjustment or compromise thereof,
(ii) all material adverse information relating to the financial
condition of any account debtor of which such Borrower has actual
knowledge and (iii) any event or circumstance which, to such
Borrower's knowledge, would cause Lender to consider any then existing
Accounts as no longer constituting Eligible Accounts. No credit,
discount, allowance or extension or agreement for any of the foregoing
shall be granted to any account debtor without Lender's consent,
except in the ordinary course of a Borrower's business in accordance
with practices and policies previously disclosed to Lender. So long as
no Event of Default exists or has occurred and is continuing, each
Borrower may settle, adjust or compromise any claim, offset,
counterclaim or dispute with any account debtor. At any time that an
Event of Default exists or has occurred and is continuing, Lender
shall, at its option, have the exclusive right to settle, adjust or
compromise any claim, offset, counterclaim or dispute with account
debtors or grant any credits, discounts or allowances.
(b) Without limiting the obligation of Borrower to deliver any other
information to Lender, each Borrower shall promptly report to Lender
any return of Inventory by any one account debtor if the Inventory so
returned in each such case has a value in excess of $25,000. At any
time that Inventory is returned, reclaimed or repossessed, the Account
(or portion thereof) which arose from the sale of such returned,
reclaimed or repossessed Inventory shall not be deemed an Eligible
Account. In the event any account debtor returns Inventory to a
Borrower when an Event of Default exists or has occurred and is
continuing, such Borrower shall, upon Lender's request, (i) hold the
returned Inventory in trust for Lender, (ii) segregate all returned
Inventory from all of its other property, (iii) dispose of the
returned Inventory solely according to Lender's instructions, and (iv)
not issue any credits, discounts or allowances with respect thereto
without Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any invoice
delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except
payments immediately delivered to Lender pursuant to the terms of this
Agreement, (iii) no credit, discount, allowance or extension or
agreement for any of the foregoing shall be granted to any account
debtor except as reported to Lender in accordance with this Agreement
and except for credits, discounts, allowances or extensions made or
given in the ordinary course of a Borrower's business in accordance
with practices and policies previously disclosed to Lender, (iv) there
shall be no setoffs, deductions, contras, defenses, counterclaims or
disputes existing or asserted with respect thereto known to Borrowers
except as reported to Lender in accordance with the terms of this
Agreement, (v) none of the transactions giving rise thereto will
violate any applicable State or Federal laws or regulations, all
documentation relating thereto will be legally sufficient under such
laws and regulations and all such documentation will be legally
enforceable in accordance with its terms.
(d) Lender shall have the right at any time or times, in Lender's name, or
in the name of a nominee of Lender, to verify the validity, amount or
any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Each Borrower shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment, with full recourse to
Borrower, all chattel paper and instruments which such Borrower now
owns or may at any time acquire immediately upon such Borrower's
receipt thereof, except as Lender may otherwise agree.
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(f) Lender may, at any time or times that an Event of Default exists or
has occurred and is continuing, (i) notify any or all account debtors
that the Accounts have been assigned to Lender and that Lender has a
security interest therein and Lender may direct any or all accounts
debtors to make payment of Accounts directly to Lender, (ii) extend
the time of payment of, compromise, settle or adjust for cash, credit,
return of merchandise or otherwise, and upon any terms or conditions,
any and all Accounts or other obligations included in the Collateral
and thereby discharge or release the account debtor or any other party
or parties in any way liable for payment thereof without affecting any
of the Obligations, (iii) demand, collect or enforce payment of any
Accounts or such other obligations, but without any duty to do so and
apply such collected amounts to the Obligations then due and payable,
and Lender shall not be liable for its failure to collect or enforce
the payment thereof nor for the negligence of its agents or attorneys
with respect thereto and (iv) take whatever other action Lender may
deem necessary or desirable for the protection of its interests. At
any time that an Event of Default exists or has occurred and is
continuing, at Lender's request, all invoices and statements sent to
any account debtor shall state that the Accounts and such other
obligations have been assigned to Lender and are payable directly and
only to Lender and each Borrower shall deliver to Lender such
originals of documents evidencing the sale and delivery of goods or
the performance of services giving rise to any Accounts as Lender may
require.
7.3 Inventory Covenants. With respect to the Inventory: (a) each Borrower
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, such Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) each Borrower shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Lender may request on or after an Event of Default, and promptly
following such physical inventory shall supply Lender with a report in the form
and with such specificity as may be reasonably satisfactory to Lender concerning
such physical count; (c) no Borrower shall remove any Inventory from the
locations set forth or permitted herein, without the prior written consent of
Lender, except for sales of Inventory in the ordinary course of such Borrower's
business and except to move Inventory directly from one location set forth or
permitted herein to another such location; (d) on or after an Event of Default,
each Borrower shall, at its expense, at any time or times as Lender may request,
deliver or cause to be delivered to Lender written reports or appraisals as to
the Inventory in form, scope and methodology acceptable to Lender and by an
appraiser acceptable to Lender, addressed to Lender or upon which Lender is
expressly permitted to rely; (e) each Borrower shall produce, use, store and
maintain the Inventory, with all reasonable care and caution and in accordance
with applicable standards of any insurance and in conformity with applicable
laws (including, but not limited to, the requirements of the Federal Fair Labor
Standards Act of 1938, as amended and all rules, regulations and orders related
thereto); (f) each Borrower assumes all responsibility and liability arising
from or relating to the production, use, sale or other disposition of the
Inventory; (g) no Borrower shall sell Inventory to any customer on approval, or
any other basis which entitles the customer to return or may obligate such
Borrower to repurchase such Inventory; (h) Borrower shall keep the Inventory in
good and marketable condition; and (i) no Borrower shall without prior written
notice to Lender, acquire or accept any Inventory on consignment or approval.
7.4 Equipment Covenants. With respect to the Equipment: (a) on or after
an Event of Default, Borrowers shall, at their expense, at any time or times as
Lender may request, deliver or cause to be delivered to Lender written reports
or appraisals as to the Equipment in form, scope and methodology acceptable to
Lender and by an appraiser acceptable to Lender; (b) Borrowers shall keep the
Equipment in good order, repair, running and marketable condition (ordinary wear
and tear excepted); (c) Borrowers shall use the Equipment with all reasonable
care and caution and in accordance with applicable standards of any insurance
and in conformity with all applicable laws; (d) the Equipment is and shall be
used in each Borrower's business and not for personal, family, household or
farming use; (e) Borrowers shall not remove any Equipment from the locations set
forth or permitted herein, except to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of such Borrower
or to move Equipment directly from one location set forth or permitted herein to
another such location and except for the movement of motor vehicles used by or
for the benefit of Borrowers in the ordinary course of business; (f) the
Equipment is now and shall remain personal property and no Borrower shall permit
any of the Equipment to be or become a part of or 17
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affixed to real property; and (g) each Borrower assumes all responsibility and
liability arising from the use of the Equipment.
7.5 Real Property Covenants. With respect to the Real Property, on or
after an Event of Default, Borrowers shall, at their expense, at any time or
times as Lender may request, deliver or cause to be delivered to Lender written
reports or appraisals as to the Real Property in form, scope and methodology
acceptable to Lender and by an appraiser acceptable to Lender.
7.6 Power of Attorney. Each Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as such Borrower's true
and lawful attorney-in-fact, and authorizes Lender, in such Borrower's or
Lender's name, to: (a) at any time an Event of Default exists or has occurred
and is continuing (i) demand payment on Accounts or other proceeds of Inventory
or other Collateral, (ii) enforce payment of Accounts by legal proceedings or
otherwise, (iii) exercise all of such Borrower's rights and remedies to collect
any Account or other Collateral, (iv) sell or assign any Account upon such
terms, for such amount and at such time or times as the Lender deems advisable,
(v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign such Borrower's name on any
proof of claim in bankruptcy or other similar document against an account
debtor, (viii) notify the post office authorities to change the address for
delivery of such Borrower's mail to an address designated by Lender, and open
and dispose of all mail addressed to such Borrower, and (ix) do all acts and
things which are necessary, in Lender's determination, to fulfill such
Borrower's obligations under this Agreement and the other Financing Agreements
and (b) at any time to (i) take control in any manner of any item of payment or
proceeds thereof, (ii) have access to any lockbox or postal box into which such
Borrower's mail is deposited, (iii) such endorse Borrower's name upon any items
of payment or proceeds thereof and deposit the same in the Lender's account for
application to the Obligations, (iv) endorse such Borrower's name upon any
chattel paper, document, instrument, invoice, or similar document or agreement
relating to any Account or any goods pertaining thereto or any other Collateral,
(v) sign such Borrower's name on any verification of Accounts and notices
thereof to account debtors and (vi) execute in such Borrower's name and file any
UCC financing statements or amendments thereto. Each Borrower hereby releases
Lender and its officers, employees and designees from any liabilities arising
from any act or acts under this power of attorney and in furtherance thereof,
whether of omission or commission, except as a result of any such Person's own
gross negligence or wilful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.
7.7 Right to Cure. Lender may, at its option, (a) cure any default by a
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against a Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (c) pay any amount, incur any expense or perform any act
which, in Lender's judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral and the rights of Lender with respect thereto.
Lender may add any amounts so expended to the Obligations and charge the
applicable Borrower's account therefor, such amounts to be repayable by such
Borrower on demand. Lender shall be under no obligation to effect such cure,
payment or bonding and shall not, by doing so, be deemed to have assumed any
obligation or liability of either Borrower. Any payment made or other action
taken by Lender under this Section shall be without prejudice to any right to
assert an Event of Default hereunder and to proceed accordingly.
7.8 Access to Premises. From time to time as requested by Lender, at the
cost and expense of Borrowers, (a) Lender or its designee shall have complete
access to all of Borrowers' premises during normal business hours and after
notice to the applicable Borrower, or at any time and without notice to any
Borrower if an Event of Default exists or has occurred and is continuing, for
the purposes of inspecting, verifying and auditing the Collateral and all of
Borrowers' books and records, including the Records, and (b) each Borrower shall
promptly furnish to Lender such copies of such books and records or extracts
therefrom as Lender may reasonably request, and (c) use during normal business
hours such of each Borrower's personnel, equipment, supplies and premises as may
be reasonably necessary for the foregoing and if an Event of Default exists or
has occurred and is continuing for the collection of Accounts and realization of
other Collateral.
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SECTION 8. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to either Borrower:
8.1 Corporate Existence. Power and Authority; Subsidiaries. Each Borrower
is a corporation duly organized and in good standing under the laws of its state
of incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on either Borrower's financial
condition, results of operation or business or the rights of Lender in or to any
of the Collateral. The execution, delivery and performance of this Agreement,
the other Financing Agreements and the transactions contemplated hereunder and
thereunder are all within each Borrower's corporate powers, have been duly
authorized and are not in contravention of law or the terms of either Borrower's
certificate of incorporation, by-laws, or other organizational documentation, or
any indenture, agreement or undertaking to which either Borrower is a party or
by which either Borrower or its property are bound. This Agreement and the other
Financing Agreements constitute legal, valid and binding obligations of each
Borrower enforceable in accordance with their respective terms. No Borrower has
any subsidiaries except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to any Borrower which have been or may hereafter be
delivered by any Borrower to Lender have been prepared in accordance with GAAP
and fairly present the financial condition and the results of operation of the
applicable Borrower as at the dates and for the periods set forth therein.
Except as disclosed in any interim financial statements furnished by any
Borrower to Lender prior to the date of this Agreement, there has been no
material adverse change in the assets, liabilities, properties and condition,
financial or otherwise, of any Borrower, since the date of the most recent
audited financial statements furnished by Borrowers to Lender prior to the date
of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of each Borrower and each Borrower's Records concerning Accounts are
located only at the address set forth below and its only other places of
business and the only other locations of Collateral, if any, are the addresses
set forth in the Information Certificate, subject to the right of each Borrower
to establish new locations in accordance with Section 9.2 below. The Information
Certificate correctly identifies any of such locations which are not owned by
any Borrower and sets forth the owners and/or operators thereof and to the best
of each Borrower's knowledge, the holders of any mortgages on such locations.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Each Borrower has
good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically listed
on Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Each Borrower has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be
filed by it (without requests for extension except as previously disclosed in
writing to Lender). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each Borrower
has paid or caused to be paid all taxes due and payable or claimed due and
payable in any assessment received by it, except taxes the validity of which are
being contested in good faith by appropriate proceedings diligently pursued and
available to such Borrower and with respect to which adequate reserves have been
set aside on its books. Adequate provision has been made for the payment of all
accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.
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8.6 Litigation. Except as set forth on the Information Certificate, there
is no present investigation by any governmental agency pending, or to the best
of any Borrower's knowledge threatened, against or affecting any Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrower's knowledge threatened, against any
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against a Borrower
would result in any material adverse change in the assets, business or prospects
of any Borrower or would impair the ability of any Borrower to perform its
obligations hereunder or under any of the other Financing Agreements to which it
is a party or of Lender to enforce any Obligations or realize upon any
Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. After giving
effect to this Agreement and the application of the initial Loans hereunder
pursuant to the terms hereof, no Borrower is in default in any material respect
under, or in violation in any material respect of any of the terms of, any
agreement, contract, instrument, lease or other commitment to which it is a
party or by which it or any of its assets are bound and each Borrower is in
compliance in all material respects with all applicable provisions of laws,
rules, regulations, licenses, permits, approvals and orders of any foreign,
Federal, State or local governmental authority.
8.8 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrowers maintained at any bank or
other financial institution are set forth on Schedule 8.8 hereto, subject to the
right of Borrowers to establish new accounts in accordance with Section 9.13
below.
8.9 Employee Benefits.
(a) No Borrower has engaged in any transaction in connection with which
such Borrower or any of its ERISA Affiliates could be subject to
either a civil penalty assessed pursuant to Section 502(i) of ERISA or
a tax imposed by Section 4975 of the Code, including any accumulated
funding deficiency described in Section 8.9(c) hereof and any
deficiency with respect to vested accrued benefits described in
Section 8.9(d) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation has been or
is expected by any Borrower to be incurred with respect to any
employee pension benefit plan of either Borrower or any of its ERISA
Affiliates. There has been no reportable event (within the meaning of
Section 4043(c) of ERISA) or any other event or condition with respect
to any employee pension benefit plan of any Borrower or any of its
ERISA Affiliates which presents a risk of termination of any such plan
by the Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which any Borrower or any of
its ERISA Affiliates is required under Section 302 of ERISA and
Section 412 of the Code to have paid under the terms of each employee
pension benefit plan as contributions to such plan as of the last day
of the most recent fiscal year of such plan ended prior to the date
hereof, and no accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the Code), whether or not waived,
exists with respect to any employee pension benefit plan, including
any penalty or tax described in Section 8.9(a) hereof and any
deficiency with respect to vested accrued benefits described in
Section 8.9(d) hereof.
(d) The current value of all vested accrued benefits under all employee
pension benefit plans maintained by any Borrower that are subject to
Title IV of ERISA does not exceed the current value of the assets of
such plans allocable to such vested accrued benefits, including any
penalty or tax described in Section 8.8(a) hereof and any accumulated
funding deficiency described in Section 8.8(c) hereof. The terms
"current value" and "accrued benefit" have the meanings specified in
ERISA.
(e) To the best of each Borrower's knowledge, none of the Borrowers nor
any of their ERISA Affiliates is or has ever been obligated to
contribute to any "multiemployer plan" (as such term is defined in
Section 400l(a)(3) of ERISA) that is subject to Title IV of ERISA,
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8.10 Environmental Compliance.
(a) Except as set forth on Schedule 8.10 hereto, no Borrower has
generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Materials, on or off its
premises (whether or not owned by it) in any manner which at any time
violates any applicable Environmental Law or any license, permit,
certificate, approval or similar authorization thereunder and the
operations of each Borrower complies in all material respects with all
Environmental Laws and all licenses, permits, certificates, approvals
and similar authorizations thereunder.
(b) Except as set forth on Schedule 8.10 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim,
citation or notice by any governmental authority or any other person
nor is any pending or to the best of any Borrower's knowledge
threatened, with respect to any non-compliance with or violation of
the requirements of any Environmental Law by any Borrower or the
release, spill or discharge, threatened or actual, of any Hazardous
Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which
affects any Borrower or its business, operations or assets or any
properties at which any Borrower has transported, stored or disposed
of any Hazardous Materials.
(c) No Borrower has any material liability (contingent or otherwise) in
connection with a release, spill or discharge, threatened or actual,
of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any
Hazardous Materials.
(d) Each Borrower has all licenses, permits, certificates, approvals or
similar authorizations required to be obtained or filed in connection
with the operations of such Borrower under any Environmental Law and
all of such licenses, permits, certificates, approvals or similar
authorizations are valid and in full force and effect.
8.11 Accuracy and Completeness of Information. All information furnished
by or on behalf of each Borrower in writing to Lender in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate is true and correct in all material respects on the date as of which
such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading. No event or
circumstance has occurred which has had or could reasonably be expected to have
a material adverse affect on the business, assets or prospects of any Borrower,
which has not been fully and accurately disclosed to Lender in writing.
8.12 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
any Borrower shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Each Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or proposed to be
conducted. Each Borrower shall give Lender thirty (30) days prior written notice
of any proposed change in its corporate name, which notice shall set forth the
new name and such Borrower shall deliver to Lender a copy of the amendment to
the Certificate of Incorporation of such Borrower providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation of such
Borrower as soon as it is available.
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9.2 New Collateral Locations. Each Borrower may open any new location
within the continental United States provided such Borrower (a) gives Lender
thirty (30) days prior written notice of the intended opening of any such new
location and (b) executes and delivers, or causes to be executed and delivered,
to Lender such agreements, documents, and instruments as Lender may deem
reasonably necessary or desirable to protect its interests in the Collateral at
such location, including, without limitation, UCC financing statements.
9.3 Compliance with Laws, Regulations, Etc.
(a) Each Borrower shall, at all times, comply in all material respects
with all laws, rules, regulations, licenses, permits, approvals and
orders applicable to it and duly observe all requirements of any
Federal, State or local governmental authority, including, without
limitation, the Employee Retirement Security Act of 1974, as amended,
the Occupational Safety and Hazard Act of 1970, as amended, the Fair
Labor Standards Act of 1938, as amended, and all statutes, rules,
regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including,
without limitation, all of the Environmental Laws.
(b) Each Borrower shall insure its continued compliance with all
Environmental Laws in all of its operations, which system shall
include annual reviews of such compliance by employees or agents of
such Borrower who are familiar with the requirements of the
Environmental Laws. Copies of all environmental surveys, audits,
assessments, feasibility studies and results of remedial
investigations shall be promptly furnished, or caused to be furnished,
by each Borrower to Lender. Each Borrower shall take prompt and
appropriate action to respond to any non-compliance with any of the
Environmental Laws and shall regularly report to Lender on such
response.
(c) Each Borrower shall give both oral and written notice to Lender
immediately upon such Borrower's receipt of any notice of, or such
Borrower otherwise obtaining knowledge of, (i) the occurrence of any
event involving the release, spill or discharge, of any Hazardous
Material which could have a material adverse effect on the Borrower's
business or financial condition or (ii) any investigation, proceeding,
complaint, order, directive, claims, citation or notice with respect
to: (A) any non-compliance with or violation of any Environmental Law
by such Borrower or (B) the release, spill or discharge, threatened or
actual, of any Hazardous Material or (C) the generation, use, storage,
treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or (D) any other environmental,
health or safety matter, which affects such Borrower or its business,
operations or assets or any properties at which such Borrower
transported, stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever Lender
reasonably determines that there is non-compliance, or any condition
which requires any action by or on a Borrower in order to avoid any
material non-compliance, with any Environmental Law, such Borrower
shall, at Lender's request and such Borrower's expense: (i) cause an
independent environmental engineer acceptable to Lender to conduct
such tests of the site where such Borrower's non-compliance or alleged
non-compliance with such Environmental Laws has occurred as to such
non-compliance and prepare and deliver to Lender a report as to such
non-compliance setting forth the results of such tests, a proposed
plan for responding to any environmental problems described therein,
and an estimate of the costs thereof and (ii) provide to Lender a
supplemental report of such engineer whenever the scope of such
non-compliance, or such Borrower's response thereto or the estimated
costs thereof, shall change in any material respect.
(e) Each Borrower shall jointly and severally indemnify and hold harmless
Lender, its directors, officers, employees, agents, invitees,
representatives, successors and assigns, from and against any and all
losses, claims, damages, liabilities, costs, and expenses (including
attorneys' fees and legal expenses) directly or indirectly arising out
of or attributable to the use, generation, manufacture, reproduction,
storage, release, threatened release, spill, discharge, disposal or
presence of a Hazardous Material by or affecting any Borrower or any
of such Borrower's facilities, including, without limitation, the
costs of any required or necessary repair, cleanup or other remedial
work
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with respect to any property of any Borrower and the preparation and
implementation of any closure, remedial or other required plans. All
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Each Borrower shall duly pay and
discharge all taxes, assessments, contributions and governmental charges upon or
against it or its properties or assets, except for taxes the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to such Borrower and with respect to which adequate reserves have
been set aside on its books. Each Borrower shall be liable for any tax or
penalties imposed on Lender as a result of the financing arrangements provided
for herein and each Borrower agrees to indemnify and hold Lender harmless with
respect to the foregoing, and to repay to Lender on demand the amount thereof,
and until paid by such Borrower such amount shall be added and deemed part of
the Loans, provided, that, nothing contained herein shall be construed to
require any Borrower to pay any income or franchise taxes attributable to the
income of Lender from any amounts charged or paid hereunder to Lender. The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
9.5 Insurance. Each Borrower shall, at all times, maintain with
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. Such policies of insurance shall be satisfactory to Lender as to form,
amount and insurer. Each Borrower shall furnish certificates, policies or
endorsements to Lender as Lender shall require as proof of such insurance, and,
if a Borrower fails to do so, Lender is authorized, but not required, to obtain
such insurance at the expense of such Borrower. All policies shall provide for
at least thirty (30) days prior written notice to Lender of any cancellation or
reduction of coverage and that Lender may act as attorney for each Borrower in
obtaining, and at any time an Event of Default exists or has occurred and is
continuing, adjusting, settling, amending and canceling such insurance. Each
Borrower shall cause Lender to be named as a loss payee and an additional
insured (but without any liability for any premiums) under such insurance
policies and each Borrower shall obtain non-contributory lender's loss payable
endorsements to all insurance policies in form and substance reasonably
satisfactory to Lender. Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Lender as its interests
may appear and further specify that Lender shall be paid regardless of any act
or omission by a Borrower or any of its affiliates. At its option, Lender may
apply any insurance proceeds received by Lender at any time to the cost of
repairs or replacement of Collateral and/or to payment of the Obligations, in
any order and in such manner as Lender may determine or hold such proceeds as
cash collateral for the Obligations.
9.6 Financial Statements and Other Information.
(a) Each Borrower shall keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or
in relation to the Collateral and the business of each Borrower and
its subsidiaries (if any, other than the Canadian Subsidiary) in
accordance with GAAP, and each Borrower shall furnish or cause to be
furnished to Lender: (i) within thirty (30) days after the end of each
fiscal month, monthly unaudited combined and combining financial
statements for Borrowers and, upon Lender's request, monthly unaudited
financial statements of the Canadian Subsidiary (including in each
case balance sheets, statements of income and loss, statements of cash
flow and statements of shareholders' equity), all in reasonable
detail, fairly presenting the financial position and the results of
the operations of Borrowers and any subsidiaries (other than the
Canadian Subsidiary, except with respect to the financial statements
of the Canadian Subsidiary delivered pursuant hereto) as of the end of
and through such fiscal month (subject to year end adjustments) and
(ii) within ninety (90) days after the end of each fiscal year,
unaudited combining financial statements, audited combined financial
statements, and audited consolidated financial statements for
Borrowers and, if any Borrower has any subsidiaries (other than the
Canadian Subsidiary), audited financial statements for such Borrower
and its subsidiaries, and audited financial statements of the Canadian
Subsidiary (including in each case balance sheets, statements of
income and loss, statements of cash flow and statements of
shareholders' 23
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equity), and the accompanying notes thereto, all in reasonable detail,
fairly presenting the financial position and the results of the
operations of Borrowers and any subsidiaries as of the end of and for
such fiscal year, together with the opinion of independent certified
public accountants, which accountants shall be a nationally recognized
independent accounting firm selected by Borrowers, that such financial
statements have been prepared in accordance with GAAP, and present
fairly the results of operations and financial condition of Borrowers
and their subsidiaries as of the end of and for the fiscal year then
ended.
(b) Each Borrower shall promptly notify Lender in writing of the details
of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is
security for the Obligations or which would result in any material
adverse change in such Borrower's business, properties, assets,
goodwill or condition, financial or otherwise and (ii) the occurrence
of any Event of Default or event which, with the passage of time or
giving of notice or both, would constitute an Event of Default.
(c) Each Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which
such Borrower sends to its stockholders generally and copies of all
reports and registration statements which such Borrower files with the
Securities and Exchange Commission, any national securities exchange
or the National Association of Securities Dealers, Inc.
(d) Each Borrower shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the
Collateral and the business of such Borrower, as Lender may, from time
to time, reasonably request, and all work papers, reports, management
letters and any other documents prepared by each Borrower's
accountants or auditors and delivered to Borrowers, as Lender may,
from time to time, reasonably request. Lender is hereby authorized to
deliver a copy of any financial statement or any other information
relating to the business of any Borrower to any court or other
government agency or to any participant or assignee or prospective
participant or assignee. Any documents, schedules, invoices or other
papers delivered to Lender may be destroyed or otherwise disposed of
by Lender one (1) year after the same are delivered to Lender, except
as otherwise designated by a Borrower to Lender in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. No Borrower
shall directly or indirectly, (a) merge into or with or consolidate with any
other Person or permit any other Person to merge into or with or consolidate
with it, or (b) sell, assign, lease, transfer, abandon or otherwise dispose of
any stock or indebtedness to any other Person or any of its assets to any other
Person (except for (i) sales of Inventory in the ordinary course of business and
(ii) the disposition of worn out or obsolete Equipment or Equipment no longer
used in the business of such Borrower so long as (A) if an Event of Default
exists or has occurred and is continuing, any proceeds are paid to Lender and
(B) such sales do not include Equipment having an aggregate fair market value in
excess of $50,000 for all such Equipment disposed of in any fiscal year of such
Borrower) or (c) form or acquire any subsidiaries, or (d) wind up, liquidate or
dissolve or (e) agree to do any of the foregoing.
9.8 Encumbrances. No Borrower shall create, incur, assume or suffer to
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature whatsoever on any of its assets or properties, including the
Collateral, except (a) liens and security interests of Lender; (b) liens
securing the payment of taxes, either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to the applicable Borrower and with respect to which adequate
reserves have been set aside on its books; (c) non-consensual statutory liens
(other than liens securing the payment of taxes past due) arising in the
ordinary course of a Borrower's business to the extent: (i) such liens secure
indebtedness which is not overdue or (ii) such liens secure indebtedness
relating to claims or liabilities which are fully insured and being defended at
the sole cost and expense and at the sole risk of the insurer or being contested
in good faith by appropriate proceedings diligently pursued and available to the
applicable Borrower, in each case prior to the commencement of foreclosure or
other similar proceedings and with respect to which adequate reserves have been
set aside on its books; (d) zoning restrictions,
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easements, licenses, covenants and other restrictions affecting the use of real
property which do not interfere in any material respect with the use of such
real property or ordinary conduct of the business of any Borrower as presently
conducted thereon or materially impair the value of the real property which may
be subject thereto; (e) purchase money security interests in Equipment
(including capital leases) not to exceed $200,000 in the aggregate at any time
outstanding so long as such security interests do not apply to any property of
any Borrower other than the Equipment so acquired, and the indebtedness secured
thereby does not exceed the cost of the Equipment so acquired, as the case may
be; and (f) the security interests and liens set forth on Schedule 8.4 hereto.
9.9 Indebtedness. No Borrower shall incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except:
(a) the Obligations;
(b) trade obligations and normal accruals in the ordinary course of
business not yet due and payable, or with respect to which the
applicable Borrower is contesting in good faith the amount or validity
thereof by appropriate proceedings diligently pursued and available to
such Borrower, and with respect to which adequate reserves have been
set aside on its books;
(c) purchase money indebtedness (including capital leases) to the extent
not incurred or secured by liens (including capital leases) in
violation of any other provision of this Agreement;
(d) indebtedness of Wyant to New Jersey Economic Development Authority
("NJEDA") pursuant to the Loan Agreement dated as of December 1, 1993
in the aggregate original principal amount of $5,800,000, provided,
that: (i) such Borrower shall not, directly or indirectly, make any
payments in respect of such indebtedness, including but not limited to
any prepayments or other non-mandatory payments, except such Borrower
may make regularly scheduled payments of interest and payments of
principal in accordance with the terms of such agreement or instrument
as in effect on the date hereof, (ii) such Borrower shall not,
directly or indirectly, (A) amend, modify, alter or change any terms
of such indebtedness or any agreement, document or instrument related
thereto, or (B) redeem, retire, defease, purchase or otherwise acquire
such indebtedness, or set aside or otherwise deposit or invest any
sums for such purpose, and (iii) such Borrower shall furnish to Lender
all notices, demands or other materials concerning such indebtedness
either received by such Borrower or on its behalf, promptly after
receipt thereof, or sent by such Borrower or on its behalf,
concurrently with the sending thereof, as the case may be;
(e) indebtedness set forth on the Schedule 9.9 hereto; provided, that, (i)
the applicable Borrower may only make regularly scheduled payments of
principal and interest in respect of such indebtedness in accordance
with the terms of the agreement or instrument evidencing or giving
rise to such indebtedness as in effect on the date hereof, (ii) the
applicable Borrower shall not directly or indirectly, (A) amend,
modify, alter or change the terms of such indebtedness or any
agreement, document or instrument related thereto as in effect on the
date hereof, or (B) redeem, retire, defease, purchase or otherwise
acquire such indebtedness, or set aside or otherwise deposit or invest
any sums for such purpose, and (iii) the applicable Borrower shall
furnish to Lender all notices or demands connection with such
indebtedness either received by such Borrower or on its behalf,
promptly after the receipt thereof, or sent by such Borrower or on its
behalf, concurrently with the sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. No Borrower shall directly or
indirectly, make any loans or advance money or property to any person, or invest
in (by capital contribution, dividend or otherwise) or purchase or repurchase
the stock or indebtedness or all or a substantial part of the assets or property
of any person, or guarantee, assume, endorse, or otherwise become responsible
for (directly or indirectly) the indebtedness, performance, obligations or
dividends of any Person or agree to do any of the foregoing, except: (a) the
endorsement of instruments for collection or deposit in the ordinary course of
business; (b) investments in: (i) direct obligations of the United States
Government, (ii) negotiable certificates of deposit issued by any bank
satisfactory to Lender, payable to the order of such Borrower or to bearer and
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delivered to Lender, and (iii) commercial paper rated A1 or P1; provided, that,
as to any of the foregoing, unless waived in writing by Lender, the applicable
Borrower shall take such actions as are deemed necessary by Lender to perfect
the security interest of Lender in such investments and (c) the loans, advances
and guarantees set forth on Schedule 9.10 hereto; provided, that, as to such
loans, advances and guarantees (i) the applicable Borrower shall not directly or
indirectly, (A) amend, modify, alter or change the terms of such loans, advances
or guarantees or any agreement, document or instrument related thereto, or (B)
as to such guarantees, redeem, retire, defease, purchase or otherwise acquire
the obligations arising pursuant to such guarantees, or set aside or otherwise
deposit or invest any sums for such purpose, and (ii) the applicable Borrower
shall furnish to Lender all notices or demands connection with such indebtedness
either received by such Borrower or on its behalf, promptly after the receipt
thereof, or sent by such Borrower or on its behalf, concurrently with the
sending thereof, as the case may be.
9.11 Dividends and Redemptions. No Borrower shall, directly or indirectly,
declare or pay any dividends on account of any shares of class of capital stock
of such Borrower now or hereafter outstanding, or set aside or otherwise deposit
or invest any sums for such purpose, or redeem, retire, defease, purchase or
otherwise acquire any shares of any class of capital stock (or set aside or
otherwise deposit or invest any sums for such purpose) for any consideration
other than common stock or apply or set apart any sum, or make any other
distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing.
9.12 Transactions with Affiliates. No Borrower shall directly or
indirectly, (a) purchase, acquire or lease any property from or sell, transfer
or lease any property to, any officer, director, agent or other person
affiliated with any Borrower, except in the ordinary course of and pursuant to
the reasonable requirements of such Borrower's business and upon fair and
reasonable terms no less favorable to such Borrower than such Borrower would
obtain in a comparable arm's length transaction with an unaffiliated person or
(b) make any payments of management, consulting or other fees for management or
similar services, or of any indebtedness owing to any officer, employee,
shareholder, director or other person affiliated with Borrower or the other
Borrowers except (i) reasonable compensation to officers, employees and
directors for services rendered to Borrowers in the ordinary course of business
and (ii) the repayment by Wyant to the Canadian Subsidiary of $550,000,
provided, that, the Canadian Subsidiary pays certain costs and expenses of Wyant
owed to unaffiliated third parties in the aggregate amount of $550,000.
9.13 Additional Bank Accounts. Each Borrower shall not, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Blocked Accounts and the accounts set forth in Schedule 8.8 hereto, except;
(a) as to any new or additional Blocked Accounts and other such new or
additional accounts which contain any Collateral or proceeds thereof, with the
prior written consent of Lender and subject to so such conditions thereto as
Lender may establish and (b) as to any accounts used by Borrowers to make
payments of payroll, taxes or other obligations to third parties, after prior
written notice to Lender.
9.14 Compliance with ERISA. No Borrower shall with respect to any
"employee pension benefit plans" maintained by either Borrower or any of its
ERISA Affiliates:
(a) (i) terminate any of such employee pension benefit plans so as to
incur any liability to the Pension Benefit Guaranty Corporation
established pursuant to ERISA, (ii) allow or suffer to exist any
prohibited transaction involving any of such employee pension benefit
plans or any trust created thereunder which would subject either
Borrower or any such ERISA Affiliate to a tax or penalty or other
liability on prohibited transactions imposed under Section 4975 of the
Code or ERISA, (iii) fail to pay to any such employee pension benefit
plan any contribution which it is obligated to pay under Section 302 of
ERISA, Section 412 of the Code or the terms of such plan, (iv) allow or
suffer to exist any accumulated funding deficiency, whether or not
waived, with respect to any such employee pension benefit plan, (v)
allow or suffer to exist any occurrence of a reportable event or any
other event or condition which presents a material risk of termination
by the Pension Benefit Guaranty Corporation of any such employee pension
benefit plan that is a single employer plan,
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which termination could result in any liability to the Pension Benefit
Guaranty Corporation or (vi) incur any withdrawal liability with
respect to any multiemployer pension plan.
(b) As used in this Section 9.13, the term "employee pension benefit
plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them
in ERISA, and the term "prohibited transaction" shall have the meaning
assigned to it in Section 4975 of the Code and ERISA.
9.15 Adjusted Net Worth. Borrowers shall, at all times, maintain Adjusted
Net Worth of not less than $9,000,000.
9.16 Costs and Expenses. Each Borrower shall jointly and severally pay to
Lender on demand all costs, expenses, filing fees and taxes paid or payable in
connection with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Lender's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including: (a) all costs and expenses of filing or recording (including
Uniform Commercial Code financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees, if applicable);
(b) costs and expenses and fees for insurance premiums, environmental audits,
surveys, assessments, engineering reports and inspections, appraisal fees and
search fees; (c) costs and expenses of remitting loan proceeds, collecting
checks and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Lender's customary charges and fees with respect
thereto; (d) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; (e) costs and expenses of
preserving and protecting the Collateral; (f) costs and expenses paid or
incurred in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters); (g)
all out-of-pocket expenses and costs heretofore and from time to time hereafter
reasonably incurred by Lender during the course of periodic field examinations
of the Collateral and Borrowers' operations, plus a per diem charge at the rate
of $600 per person per day for Lender's examiners in the field and office, and
(h) the reasonable fees and disbursements of counsel (including legal
assistants) to Lender in connection with any of the foregoing.
9.17 Further Assurances. At the request of Lender at any time and from
time to time, each Borrower shall, at its expense, duly execute and deliver, or
cause to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of each
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In the
event of such request by Lender, Lender may, at its option, cease to make any
further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, each Borrower hereby
authorizes Lender to execute and file one or more UCC financing statements
signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) any Borrower fails to pay when due any of the Obligations or (ii)
any Borrower or any Obligor fails to perform any of the terms,
covenants, conditions or provisions contained in this Agreement or any
of the other Financing Agreements other than as described in Section
10.1(a)(i) and such failure shall continue for twenty (20) days;
provided,that, such twenty (20) day period shall not
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apply in the case of: (A) any failure to observe any such term,
covenant, condition or provision which is not capable of being cured
at all or within such twenty (20) day period or which has been the
subject of a prior failure within a six (6) month period or (B) an
intentional breach by any Borrower or any Obligor of any such term,
covenant, condition or provision, or (C) the failure to observe or
perform any of the covenants or provisions contained in Sections 6.3,
9.1, 9.5, 9.6(a), 9.7, 9.8, 9.9, 9.10, 9.11, 9.12 or 9.15 of this
Agreement or any covenants or agreements covering substantially the
same matter as such sections in any of the other Financing Agreements;
or
(b) any representation, warranty or statement of fact made by any Borrower
to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall
when made or deemed made be false or misleading in any material
respect;
(c) any Obligor revokes, terminates or fails to perform any of the terms,
covenants. conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) any judgment for the payment of money is rendered against any Borrower
or any Obligor in excess of $100,000 in any one case or in excess of
$200,000 in the aggregate and shall remain undischarged or unvacated
for a period in excess of thirty (30) days or execution shall at any
time not be effectively stayed, or any judgment other than for the
payment of money, or injunction, attachment, garnishment or execution
is rendered against any Borrower or any Obligor or any of their assets
which could reasonably be expected to have a material adverse effect
on any Borrower;
(e) any Obligor (being a natural person or a general partner of an Obligor
which is a partnership) dies or any Borrower or any Obligor, which is
a partnership, corporation or other legal entity, dissolves or
suspends or discontinues doing business;
(f) any Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or
sends notice of a bulk transfer or calls a meeting of its creditors or
principal creditors;
(g) a case or proceeding under the bankruptcy laws of the United States of
America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in
effect (whether at law or in equity) is filed against any Borrower or
any Obligor or all or any part of its properties and such petition or
application is not dismissed within thirty (30) days after the date of
its filing or any Borrower or any Obligor shall file any answer
admitting or not contesting such petition or application or indicates
its consent to, acquiescence in or approval of, any such action or
proceeding or the relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United States of
America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in
effect (whether at a law or equity) is filed by any Borrower or any
Obligor or for all or any part of its property;
(i) any default by any Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money
owing to any person other than Lender, or any capitalized lease
obligations, contingent indebtedness in connection with any guarantee,
letter of credit, indemnity or similar type of instrument in favor of
any person other than Lender, in any case in an amount in excess of
$150,000 which default continues for more than the applicable cure
period, if any, with respect thereto, or any default by any Borrower
or any Obligor under any material contract, lease, license or other
obligation to any person other than Lender, which default continues
for more than the applicable cure period, if any, with respect
thereto;
(j) the indictment or threatened indictment which may reasonably be
expected to result in an indictment of Borrower or any Obligor under
any criminal statute, or commencement or threatened commencement of
criminal or civil proceedings against any Borrower or any Obligor,
pursuant to
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which statute or proceedings the penalties or remedies sought or
available include forfeiture of any of the material property of any
Borrower or such Obligor;
(k) there shall be a material adverse change in the business, assets or
financial condition of any Borrower or any Obligor after the date
hereof; or
(l) there shall be an event of default under any of the other Financing
Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code
and other applicable law, all of which rights and remedies may be
exercised without notice to or consent by any Borrower or any Obligor,
except as such notice or consent is expressly provided for hereunder
or required by applicable law. All rights, remedies and powers granted
to Lender hereunder, under any of the other Financing Agreements, the
Uniform Commercial Code or other applicable law, are cumulative, not
exclusive and enforceable, in Lender's discretion, alternatively,
successively, or concurrently on any one or more occasions, and shall
include, without limitation, the right to apply to a court of equity
for an injunction to restrain a breach or threatened breach by any
Borrower of this Agreement or any of the other Financing Agreements.
Lender may, at any time or times, proceed directly against any
Borrower or any Obligor to collect the Obligations without prior
recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default exists
or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and
demand immediate payment thereof to Lender (provided, that, upon the
occurrence of any Event of Default described in Sections 10.1(g) and
10.1(h), all Obligations shall automatically become immediately due
and payable), (ii) with or without judicial process or the aid or
assistance of others, enter upon any premises on or in which any of
the Collateral may be located and take possession of the Collateral or
complete processing, manufacturing and repair of all or any portion of
the Collateral, (iii) require either or each Borrower, at such
Borrower's expense, to assemble and make available to Lender any part
or all of the Collateral at any place and time designated by Lender,
(iv) collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral, (v) remove any or all of the Collateral from
any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for
any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into
contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Lender or elsewhere) at
such prices or terms as Lender may deem reasonable, for cash, upon
credit or for future delivery, with the Lender having the right to
purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of
redemption of any Borrower, which right or equity of redemption is
hereby expressly waived and released by each Borrower and/or (vii)
terminate this Agreement. If any of the Collateral is sold or leased
by Lender upon credit terms or for future delivery, the Obligations
shall not be reduced as a result thereof until payment therefor is
finally collected by Lender. If notice of disposition of Collateral is
required by law, five (5) days prior notice by Lender to the
applicable Borrower designating the time and place of any public sale
or the time after which any private sale or other intended disposition
of Collateral is to be made, shall be deemed to be reasonable notice
thereof and each Borrower waives any other notice. In the event Lender
institutes an action to recover any Collateral or seeks recovery of
any Collateral by way of prejudgment remedy, each Borrower waives the
posting of any bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually received by
Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in
such order as Lender may elect, whether or not then due. Each Borrower
shall remain liable to Lender for the payment of any deficiency with
interest at the highest rate provided for herein and
29
<PAGE> 35
all costs and expenses of collection or enforcement, including
reasonable attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an Event of
Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without
notice, (i) cease making Loans or arranging for Letter of Credit
Accommodations or reduce the lending formulas or amounts of Revolving
Loans and Letter of Credit Accommodations available to either or each
Borrower and/or (ii) terminate any provision of this Agreement
providing for any future Loans or Letter of Credit Accommodations to
be made by Lender to either or each Borrower.
10.3 Certain Limitations. Lender hereby acknowledges and agrees that (a)
as a result of this Agreement or any of the other Financing Agreements, the
Lender does not have a lien upon or security interest in any shares of the
capital stock or other equity securities of the Canadian Subsidiary owned by
Wyant or any of the assets of the Canadian Subsidiary and (b) that the Canadian
Subsidiary has not guaranteed or otherwise agreed to be liable for the
Obligations.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
(a) The validity, interpretation and enforcement of this Agreement and the
other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort,
equity or otherwise, shall be governed by the internal laws of the
State of New York (without giving effect to principles of conflicts of
law).
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Supreme Court of the State of New
York for New York County and the United States District Court for the
Southern District of New York and waive any objection based on venue
or forum non conveniens with respect to any action instituted therein
arising under this Agreement or any of the other Financing Agreements
or in any way connected with or related or incidental to the dealings
of the parties hereto in respect of this Agreement or any of the other
Financing Agreements or the transactions related hereto or thereto, in
each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute with
respect to any such matters shall be heard only in the courts
described above (except that Lender shall have the right to bring any
action or proceeding against any Borrower or its property in the
courts of any other jurisdiction which Lender deems necessary or
appropriate in order to realize on the Collateral or to otherwise
enforce its rights against such Borrower or its property).
(c) Each Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set
forth on the signature pages hereof and service so made shall be
deemed to be completed five (5) days after the same shall have been so
deposited in the U.S. mails, or, at Lender's option, by service upon
such Borrower in any other manner provided under the rules of any such
courts. Within thirty (30) days after such service, such Borrower
shall appear in answer to such process, failing which such Borrower
shall be deemed in default and judgment may be entered by Lender
against such Borrower for the amount of the claim and other relief
requested.
(d) EACH BORROWER AND LENDER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING
AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT,
TORT, EQUITY OR OTHERWISE.
30
<PAGE> 36
EACH BORROWER AND LENDER HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL
COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to any Borrower (whether in tort,
contract, equity or otherwise) for losses suffered by any Borrower in
connection with, arising out of, or in any way related to the
transactions or relationships contemplated by this Agreement, or any
act, omission or event occurring in connection herewith, unless it is
determined by a final and non-appealable judgment or court order
binding on Lender, that the losses were the result of acts or
omissions constituting gross negligence or willful misconduct. In any
such litigation, Lender shall be entitled to the benefit of the
rebuttable presumption that it acted in good faith and with the
exercise of ordinary care in the performance by it of the terms of
this Agreement.
11.2 Waiver of Notices. Each Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on any Borrower which Lender may elect to give shall entitle any
Borrower to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of each
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Waiver of Counterclaims. Each Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Each Borrower shall jointly and severally indemnify
and hold Lender, and its directors, agents, employees and counsel, harmless from
and against any and all losses, claims, damages, liabilities, costs or expenses
imposed on, incurred by or asserted against any of them in connection with any
litigation, investigation, claim or proceeding commenced or threatened related
to the negotiation, preparation, execution, delivery, enforcement, performance
or administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the fees and expenses of
counsel. To the extent that the undertaking to indemnify, pay and hold harmless
set forth in this Section may be unenforceable because it violates any law or
public policy, each Borrower shall pay the maximum portion which it is permitted
to pay under applicable law to Lender in satisfaction of indemnified matters
under this Section. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
31
<PAGE> 37
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date three
(3) years from the date hereof (the "Renewal Date"), and from year to
year thereafter, unless sooner terminated pursuant to the terms
hereof; provided, that, Lender and Borrowers may, at their mutual
options, extend the Renewal Date to the date four (4) years from the
date hereof by giving each other notice at least sixty (60) days prior
to the third anniversary of this Agreement. Lender may terminate this
Agreement and the other Financing Agreements effective on the Renewal
Date or on the anniversary of the Renewal Date in any year by giving
to the other party at least sixty (60) days prior written notice;
provided, that, this Agreement and all other Financing Agreements must
be terminated simultaneously as to all Borrowers. Borrowers may
(subject to Lender's right to extend the Renewal Date as provided
above) terminate this Agreement and the other Financing Agreements at
any time (subject to subsection (c) below) upon twenty (20) business
days' written notice to Lender; provided, that, this Agreement and all
other Financing Agreements must be terminated simultaneously as to all
Borrowers. Upon the effective date of termination or non-renewal of
the Financing Agreements, Borrowers shall jointly and severally pay to
Lender, in full, all outstanding and unpaid Obligations and shall
furnish cash collateral to Lender in such amounts as Lender determines
are reasonably necessary to secure Lender from loss, cost, damage or
expense, including reasonable attorneys' fees and legal expenses, in
connection with any contingent Obligations, including issued and
outstanding Letter of Credit Accommodations and checks or other
payments provisionally credited to the Obligations and/or as to which
Lender has not yet received final and indefeasible payment. Such
payments in respect of the Obligations and cash collateral shall be
remitted by wire transfer in Federal funds to such bank account of
Lender, as Lender may, in its discretion, designate in writing to
Borrowers for such purpose. Interest shall be due until and including
the next business day, if the amounts so paid by Borrowers to the bank
account designated by Lender are received in such bank account later
than 12:00 noon, New York time.
(b) No termination of this Agreement or the other Financing Agreements
shall relieve or discharge any Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing
Agreements until all Obligations have been fully and finally
discharged and paid, and Lender's continuing security interest in the
Collateral and the rights and remedies of Lender hereunder, under the
other Financing Agreements and applicable law, shall remain in effect
until all such Obligations have been fully and finally discharged and
paid.
(c) If for any reason this Agreement is terminated prior to the end of the
then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages
and by mutual agreement of the parties as to a reasonable calculation
of Lender's lost profits as a result thereof, Borrowers agree to pay
to Lender, upon the effective date of such termination, an early
termination fee in the amount set forth below if such termination is
effective in the period indicated:
<TABLE>
<CAPTION>
AMOUNT PERIOD
------ ------
<S> <C> <C>
(i) 1.5% of Maximum Credit From the date hereof to and
including November 17, 1998
(ii) 1% of Maximum Credit November 18, 1998 to and including
November 17, 1999
(iii) .5% of Maximum Credit November 18, 1999 to and including
November 17, 2000 or if the term of
this Agreement is extended for an
additional year as provided above,
then to and including November 17, 2001.
</TABLE>
32
<PAGE> 38
Such early termination fee shall be presumed to be the amount of
damages sustained by Lender as a result of such early termination and
each Borrower agrees that it is reasonable under the circumstances
currently existing. The early termination fee provided for in this
Section 12.1 shall be deemed included in the Obligations.
(d) Notwithstanding anything to the contrary set forth in Section 12.1(c)
above, in the event that Borrowers terminate this Agreement and the
other Financing Agreements prior to the Renewal Date concurrently with
the consummation of a Qualified Business Sale (as hereafter defined),
the early termination fee payable by Borrower to Lender shall be
reduced to an amount equal to fifty (50%) percent of the early
termination fee otherwise payable pursuant to Section 12.1(c) upon the
effective date of such termination (the "Reduced Termination Fee")
provided that each of the following conditions is satisfied on such
termination date: (i) Lender shall have received not less than thirty
(30) days prior written notice of the intention of Borrowers to so
terminate this Agreement and the other Financing Agreements, which
notice sets forth the intended termination date (the "Termination
Notice"), (ii) no Event of Default or condition or event which, with
notice or the passage of time, or both, shall exist or have occurred
and be continuing on either the date Lender receives the Termination
Notice or on such termination date, and (iii) on such termination date
Lender receives full and final repayment of all outstanding
Obligations, cash collateral for all outstanding contingent
Obligations, each as provided in Section 12.1(a), and payment of the
Reduced Termination Fee from the proceeds of a Qualified Business
Sale.
(e) As used herein, the term "Qualified Business Sale" shall mean a bona
fide sale of Wyant's common stock to the public pursuant to an
effective registration statement under the Securities Act of 1933, as
amended, or a sale by Wyant of substantially all of its assets (other
than in the normal course of business), in which the net cash proceeds
received by Wyant therefrom (after deducting all fees, costs and
expenses related thereto) are not less than the amounts required to be
paid by Borrower to Lender pursuant to clause (iii) of Section 12.1(d)
upon termination of the Financing Agreements.
12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Wyant, on
behalf of each Borrower at its chief executive office set forth below, or to
such other address as either party may designate by written notice to the other
in accordance with this provision, and (b) deemed to have been given or made: if
delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next business day, one (l) business day after sending; and if by
certified mail, return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, each Borrower and their respective
successors and assigns, except that no Borrower may assign its rights under this
Agreement, the other Financing Agreements and any other document referred to
herein or therein without the prior written consent of Lender. Lender may, after
notice to Borrowers, assign its rights and delegate its obligations under this
Agreement and the other Financing Agreements and further may assign, or sell
participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person. in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
33
<PAGE> 39
12.5 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written.
IN WITNESS WHEREOF, Lender and Borrowers have caused these presents to be
duly executed as of the day and year first above written.
<TABLE>
<S> <C>
LENDER BORROWER
CONGRESS FINANCIAL CORPORATION WYANT CORPORATION
By: VIRGINIA PULVERENTI By: M. D'AMOUR
Title: Vice President Title: Vice President
Address: Chief Executive Office:
1133 Avenue of the Americas 100 Readington Road
New York, New York 10036 Somerville, New Jersey 08876
IFC DISPOSABLES, INC.
By: M. D'AMOUR
Title: Vice President
Chief Executive Office:
20 Phillips Road
Jackson, Tennessee 38301
BRIDGEWATER MANUFACTURING CORP.
By: M. D'AMOUR
Title: Vice President
Chief Executive Office:
100 Readington Road
Somerville, New Jersey 08876
</TABLE>
34
<PAGE> 40
EXHIBIT B
CERTAIN ACCOUNT DEBTOR CONCENTRATIONS
MEDLINE INDUSTRIES INC.
KIMBERLY-CLARK CORP.
35
<PAGE> 41
SCHEDULE 8.4
EXISTING LIENS
<TABLE>
<CAPTION>
SECURED PARTY DATE UCC NO. JURISDICTION COLLATERAL
------------- ------- ------- ------------ ----------
<S> <C> <C> <C> <C>
WYANT CORPORATION
Caterpillar Financial Services 7/24/97 1781634 NJ Two (2) Lift Trucks
Corporation
Caterpillar Financial Services 5/24/97 1781635 NJ Two (2) Lift Trucks
Corporation
Caterpillar Financial Services 4/19/93 1506050 NJ Two (2) Lift Trucks
Corporation
Advanta Leasing Corp. 9/18/96 1722649 NJ (5) Cordley Tenprite Point
Point of Use Water
Stations Hot & Cold
First Union National Bank $25,000 cash collateral
</TABLE>
36
<PAGE> 42
SCHEDULE 8.8
BANK ACCOUNTS
<TABLE>
<CAPTION>
BORROWER BANK ACCOUNT NUMBER
-------- ---- --------------
<S> <C> <C>
WYANT CORPORATION First Union National Bank 20632000894912
First Union National Bank 2030153105707
First Union National Bank 2079950009850
First Union National Bank 30153100595
First Union National Bank 2018900075510
First Union National Bank 2556002775
Fleet Bank 0099289819
The Bank of New York 172669
Bank of America (California) 00106-12038
BRIDGEWATER MANUFACTURING CORP. First Union National Bank 2079950009915
IFC DISPOSABLES, INC. Union Planters National Bank 007-826-3
Union Planters National Bank 007-827-1
</TABLE>
37
<PAGE> 43
SCHEDULE 8.10
ENVIRONMENTAL MATTERS
Potential environmental liability with respect to former Hosposable
Products, Inc. site at 5&6 Easy Street, Bound Brook, NJ, which is supported by a
$25,000 letter of credit issued by First Fidelity Bank, National Association,
New Jersey, for the account of Hosposable Products, Inc., in favor of Judith
Yaskin, Commissioner, New Jersey Department of Environment Protection.
38
<PAGE> 44
SCHEDULE 9.9
EXISTING INDEBTEDNESS
Amounts owed in connection with the guarantees listed in Schedule 9.10.
Cash collateral for the support of a letter of credit issued by First
Fidelity Bank, National Association, New Jersey, for the account of Hosposable
Products, Inc., in favor of Judith Yaskin, Commissioner, New Jersey Department
of Environment Protection, in the aggregate amount of $25,000.
Unsecured note, $40,000 outstanding, due March, 1998.
39
<PAGE> 45
SCHEDULE 9.10
EXISTING LOANS. ADVANCES & GUARANTEES
(1) Advances to former employees for the payment of insurance premiums, in an
aggregate amount not to exceed, at any one time, $1,000.
(2) Inter-company advances/loans among the Borrowers.
(3) Guarantee by Wyant Corporation of all payments under preferred shares of
Wood Wyant, Inc., a wholly owned Canadian subsidiary, in a maximum face
amount of Cnd$7,868,951 with an approximate dividend rate of 4% per annum.
40
<PAGE> 1
EXHIBIT 10.4
<PAGE> 2
LOGO
Commercial Banking Centre and Main Branch
Tour Scotia, 1002 Sherbrooke Street West, Montreal (Quebec) H3A 3L6
Tel.: (514) 499-5432
September 18, 1997
Wood Wyant Inc.
1475 -- 32nd Avenue
Lachine (Quebec)
H8T 3J1
Dear Sir:
We are pleased to confirm that, subject to acceptance by you, the Bank of
Nova Scotia (the "Bank") will make available to Wood Wyant Inc. (the "Borrower")
credit facilities on the terms and conditions set out in the attached Terms and
Conditions Sheet in Schedule "A".
If the arrangements set out in this letter, and in the attached Terms and
Conditions Sheet and Schedule "A" (collectively the "Commitment Letter") are
acceptable to you, please sign the enclosed copy of this letter in the space
indicated below and return the letter to us by the close of business on
September 30, 1997, after which date this offer will lapse.
This Commitment Letter replaces all previous commitments issued by the Bank
to the Borrower.
Yours very truly,
<TABLE>
<S> <C>
I. Langlois F. Camirand
Sr Account Manager For Vice-president and Manager
</TABLE>
The arrangements set out above and in the attached Terms and Conditions
Sheet and Schedule "A" (collectively the "Commitment Letter") are hereby
acknowledged and accepted by:
WOOD WYANT INC.
By: M. D'AMOUR
____________________
By: B. L. DAVIES
____________________
Date: September 30, 1997
__________________
1
<PAGE> 3
TERMS & CONDITIONS
CREDIT NUMBER: 01 AUTHORIZED AMOUNT: $6,000,000
TYPE
Operating
PURPOSE
General operating purposes
CURRENCY
Canadian dollars
AVAILMENT
The Borrower may avail the credit by way of direct advances evidenced by
Agreement re Operating Credit Line and/or Banker's Acceptances (in
multiples of $200,000 and having terms of maturity of 30 to 180 days
without grace) and/or Letters of Credit payable at sight with expiry dates
of credits not to exceed 365 days from date of issuance, and/or Standby
Letters of Credit and/or Letters of Guarantee (with each availment subject
to completion of an Application and Agreement for Standby Letters of
Credit/Letter of Guarantee in a form satisfactory to the Bank).
INTEREST RATE/FEES
(Canadian dollars): The Bank's Prime Lending Rate from time to time with
interest payable monthly.
(Bankers' Acceptances): The Bank's Commercial Bankers' Acceptance Fee,
(subject to revision at any time), subject to a minimum fee of $200 per
transaction, payable at the time of each acceptance.
The application fee or fees charged by the Bank for Letters of Credit.
Standby Letters of Credit and/or Letters of Guarantee as agreed between the
Borrower and the Bank from time to time.
REPAYMENT
Advances are repayable on demand.
CREDIT NUMBER: 02 AUTHORIZED AMOUNT: $2,000,000
TYPE
Non-Revolving
PURPOSE
To assist in financing a property located in Pickering.
CURRENCY
Canadian dollars
AVAILMENT
The Borrower has availed the credit by way of Direct Advances evidenced by
Demand Promissory Notes.
INTEREST RATE
The Bank's Prime Lending Rate from time to time, plus 3/4% per annum with
interest payable monthly.
REPAYMENT
The advance is repayable in equal monthly instalments of principal
($20,476.20) with balance of principal and interest then outstanding due
October 1, 2001. The term of the loan is 4 years and the amortization is 8
years.
2
<PAGE> 4
CREDIT NUMBER: 03 AUTHORIZED AMOUNT: $3,000,000
TYPE
Reducing Revolving
PURPOSE
To consolidate two Non-Revolving loans of $1,100,000 and $580,000 and to
assist in financing future equipment acquisitions.
CURRENCY
Canadian dollars
AVAILMENT
The Borrower may avail the credit by way of direct advances evidenced by
Demand Promissory Notes and/or Bankers' Acceptances in Canadian dollars (in
multiples of $200,000 and having terms of maturity of 30 to 180 days
without grace).
INTEREST RATE
The Bank's Prime Lending Rate from time to time, plus 3/4% per annum with
interest payable monthly.
The Bank's Commercial Bankers' Acceptance Fee, (subject to revision at any
time), plus 3/4% per annum, subject to a minimum fee of $200 per
transaction, payable at the time of each acceptance.
DRAWDOWN
Advances are limited to invoices and invoiced amounts satisfactory to the
Bank.
REPAYMENT
Availability is defined as the sum of approved advances less scheduled
reductions.
The authorized amount, and availability, are reduced by scheduled
reductions, i.e. 23 monthly reductions and/or repayments of principal
($50,000) commencing by October 31, 1997 plus one final reduction and/or
repayment of the principal and interest then outstanding due by September
30, 1999. The term of the loan is 2 years and the amortization 5 years.
CREDIT NUMBER: 04 AUTHORIZED AMOUNT: $2,000,000
TYPE
Equipment Financing -- Revolving Line (Scotia Leasing)
PURPOSE
To assist in financing computer hardware, software and related
implementation costs.
CURRENCY
Canadian dollars
AVAILMENT
Lease Agreement with appropriate supporting documentation.
3
<PAGE> 5
INTEREST RATE
Floating Rate Option
The base payment applicable to each contract will be set on the
commencement date of the contract based upon the Bank's Prime Lending Rate
plus 3/4% per annum, calculated and payable monthly. The total periodic
payment will be adjusted monthly with changes in the Bank's Prime Lending
Rate.
Fixed Rate Option
The payment applicable to each contract will be set on the commencement
date of the contract based on Scotia Leasing's Base Rate plus 1 3/4% per
annum, calculated and payable monthly.
DRAWDOWN
Each lease must not be less than $500,000.
The amount of financing shall not exceed 100% of the cost of the equipment,
software and related implementation costs being financed, exclusive of
relative taxes and the Borrower shall provide security deposits, advance
rentals and/or downpayments to reduce financing to this limit.
REPAYMENT
Leases are repayable in accordance with the terms and conditions of each
respective lease. The maximum term of any such lease shall not exceed 5
years. The total amortization of any such transaction shall not exceed 5
years.
At the end of the term to option, the lessee shall elect one of the
following options:
A. purchase the equipment for 35% of the original cost;
B. allow a third party to purchase the equipment for 35% of the original
cost;
C. rent the equipment for an additional term and revised rent payment to
be authorized by the Bank.
PREPAYMENT
No prepayments are permitted.
SPECIFIC SECURITY
The following security, evidenced by documents in form satisfactory to the
Bank and registered or recorded as required by the Bank, is to be provided
prior to any advances or availment being made under the Credit:
Lease Agreement(s) covering equipment leased/financed.
Scotia Leasing Progress Payment Agreement to cover interim funding.
Comprehensive General Liability insurance for a minimum of $2,000,000
per occurrence with the Bank recorded as an additional named insured.
All risks insurance covering the replacement value of the equipment with
the Bank recorded as loss payee and additional named insured.
Assignment Agreement granting a security interest in the respective
asset(s) and in the lease(s) together with notice and acknowledgement
from the Borrower.
Realty Owner's and/or Mortgagee's Waiver and Consent regarding
leased/financed equipment.
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<PAGE> 6
CREDIT NUMBER: 05 AUTHORIZED AMOUNT: $30,000
TYPE
Corporate Visa -- Availment, interest rate and repayment as per Cardholder
Agreement.
OTHER FEES APPLICABLE TO ALL CREDITS
An Administration Fee of $1,000 is payable monthly.
A Work Fee of $10,000 payable upon acceptance of this Commitment Letter.
An Overdue Reports Fee of $250 is payable by the Borrower each time the
Bank is required to follow up with the Borrower for receipt of reports that
are submitted after the time frame(s) stipulated elsewhere in this letter,
including accounts receivable, inventory figures, interim financial
statements and progress reports, annual statements, etc.*
A Breach of Credit Terms/Conditions Fee of $250 is payable by the Borrower
each time the terms/conditions of the Credit are not met by the Borrower,
including failure to maintain margin conditions, security deficiencies,
breach of minimum working capital/equity/coverage/debt servicing
requirements, etc.*
* The collection of these fees does not constitute an express or implied
waiver by the Bank of any provision of your banking agreements, any
security given by you to the Bank or the enforcement of the rights of the
Bank under any such documentation.
GENERAL SECURITY, TERMS, AND CONDITIONS APPLICABLE TO ALL CREDITS
GENERAL SECURITY
The following security, evidenced by documents in form satisfactory to the
Bank and registered or recorded as required by the Bank, is to be provided
prior to any advances or availment being made under the Credits:
General Assignment of Book Debts for all applicable Provinces.
Security under Section 427 of the Bank Act with appropriate insurance
coverage assigned to the Bank.
A Movable Hypothec in the amount of $24,000,000 on all present and
future movable property with appropriate insurance coverage loss, if
any, payable to the Bank.
General Security Agreement over all of the present and future personal
property and undertaking of the Borrower with replacement cost fire
insurance coverage and any other insurance coverage the Bank may
reasonably require, loss if any, payable to the Bank. A collateral
mortgage providing a first fixed charge in the amount of $4,000,000 over
1725 McPherson Court, Pickering, Ontario with replacement cost insurance
coverage, loss, if any payable the Bank.
Agreement re Operating Credit Line.
Bankers' Acceptance Agreement.
Agreement for Commercial Letter of Credit.
GENERAL CONDITIONS
Until all debts and liabilities under the Credits have been discharged in
full, the following conditions will apply in respect of the Credits:
Operating loans, Bankers' Acceptances, Letters of Guarantee and Standby
Letters of Credit are not to exceed at any time the "Borrowing Base"
which is defined 75% of good quality accounts receivable of the Borrower
(excluding accounts over 90 days, offsets, inter-company accounts,
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<PAGE> 7
statutory liens and amounts due from employees) less security interests
or charges held by other parties and specific payables which have or may
have priority over the Bank's security.
The ratio of Debt (including deferred taxes) to Tangible Net Worth (TNW)
is not to exceed 2.25:1. TNW is defined as the sum of share capital
including preferred shares, earned and contributed surplus and postponed
funds less (i) amounts due from officers/affiliates, (ii) investments in
affiliates, and (iii) intangible assets as defined by the Bank.
Tangible Net Worth (TNW) is to be maintained in excess of $10,000,000 at
all times.
The ratio of Current Assets to Current Liabilities is to be maintained
at all times at 1.25 or better.
The ratio of Cash Flow to Debt Service as at the end of each financial
quarter calculated on a rolling four quarter basis, is to be maintained
at all times at 1.4:1 or better.
Cash Flow is defined as net income after taxes and before extraordinary
items, plus depreciation and amortization expense less preferred share
dividends paid and/or accrued during the period.
Debt Service is defined as the sum of all current maturities in the
subsequent year of long term debt, capital leases, preferred shares and
other obligations as defined by the Bank.
No redemption of preferred shares is permitted unless the Bank is in
receipt of an Officer's Certificate providing full details of the
redemption, and confirming that all terms and conditions stipulated in
this Commitment Letter or amendments thereto are met and will continue
to be met after the redemption. This certificate must be provided 10
days prior to any redemption.
No change in ownership of the Company is permitted.
Additional terms and conditions in Schedule A are to apply.
GENERAL BORROWER REPORTING CONDITIONS
Until all debts and liabilities under the Credits have been discharged in
full, the Borrower will provide the Bank with the following:
Annual Audited Financial Statements of the Borrower and the parent,
Wyant Corporation, within 120 days of year end, duly signed.
Annual Projected Financial Statements of the Borrower and the parent,
Wyant Corporation within 120 days of year end.
Monthly Financial Statements of the Borrower within 30 days of period
end.
Quarterly Financial Statements of Wyant Corporation within 45 days of
period end.
A Borrowing Base monthly, to include information on inventory, accounts
receivable and accounts payable, within 30 days of period end.
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<PAGE> 8
SCHEDULE A
ADDITIONAL TERMS AND CONDITIONS APPLICABLE
TO ALL CREDITS
(IN THE EVENT OF A CONFLICT, THE TERMS AND CONDITIONS OF ANY LEASE AGREEMENT
SUPERSEDE THE TERMS AND CONDITIONS IN THIS SCHEDULE A WITH REGARD TO SUCH
LEASES).
CALCULATION AND PAYMENT OF INTEREST
1. Interest on loans/advances made in Canadian dollars will be calculated on a
daily basis and payable monthly on the 22nd day of each month (unless
otherwise stipulated by the Bank). Interest shall be payable not in advance
on the basis of a calendar year for the actual number of days elapsed both
before and after demand of payment or default and/or judgment.
INTEREST ON OVERDUE INTEREST
2. Interest on overdue interest shall be calculated at the same rate as
interest on the loans/advances in respect of which interest is overdue, but
shall be compounded monthly and be payable on demand, both before and after
demand and judgment.
CALCULATION AND PAYMENT OF BANKERS' ACCEPTANCE FEE
3. The fee for the acceptance of each Bankers' Acceptance will be payable on
the face amount of each Bankers' Acceptance at the time of acceptance of
each draft calculated on the basis of a calendar year for the actual number
of days elapsed from and including the date of acceptance to the due date
of the draft.
INDEMNITY PROVISION
4. Applicable to (i) Revolving Term Credits with terms in excess of one year;
(ii) any credit where the right to draw down or obtain advances exceeds one
year; (iii) all U.S. dollar credits. If the introduction of, or any change
in, or in the interpretation of, or any change in its application to the
Borrower of, any law or regulation, or compliance with any guideline from
any central bank or other governmental authority (whether or not having the
force of law) has the effect of increasing the cost to the Bank of
performing its obligations hereunder or otherwise reducing its effective
return hereunder or on its capital allocated in support of the credit(s),
then upon demand from time to time the Borrower shall compensate the Bank
for such cost or reduction pursuant to a certificate reasonably prepared by
the Bank.
(a) Prepayment without fee
In the event of the Borrower becoming liable for such costs, the
Borrower shall have the right to cancel without fee all or any
unutilized portion of the affected credit (other than any portion in
respect of which the Borrower has requested utilization of the credit
in which case cancellation may be effected upon indemnification of the
Bank for any costs incurred by the Bank thereby), and to prepay,
without fee the outstanding principal balance thereunder other than
the face amount of any document or instrument issued or accepted by
the Bank for the account of the Borrower, such as a Letter of Credit,
a Guarantee or a Bankers' Acceptance.
ENVIRONMENT
5. The Borrower agrees:
(a) to obey all applicable laws and requirements of any federal,
provincial, or any other governmental authority relating to the
environment and the operation of the business activities of the
Borrower;
(b) to allow the Bank access at all times to the business premises of the
Borrower to monitor and inspect all property and business activities
of the Borrower;
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<PAGE> 9
(c) to notify the Bank from time to time of any business activity
conducted by the Borrower which involves the use or handling of
hazardous materials or wastes or which increases the environmental
liability of the Borrower in any material manner;
(d) to notify the Bank of any proposed change in the use or occupation of
the property of the Borrower prior to any change occurring;
(e) to provide the Bank with immediate written notice of any environmental
problem and any hazardous materials or substances which have an
adverse effect on the property, equipment, or business activities of
the Borrower and with any other environmental information requested by
the Bank from time to time;
(f) to conduct all environmental remedial activities which a commercially
reasonable person would perform in similar circumstances to meet its
environmental responsibilities and if the Borrower fails to do so. the
Bank may perform such activities; and
(g) to pay for any environmental investigations, assessments or remedial
activities with respect to any property of the Borrower that may be
performed for or by the Bank from time to time.
If the Borrower notifies the Bank of any specified activity or change or
provides the Bank with any information pursuant to subsections (c), (d), or
(e), or if the Bank receives any environmental information from other
sources, the Bank, in its sole discretion, may decide that an adverse
change in the environmental condition of the Borrower or any of the
property, equipment, or business activities of the Borrower has occurred
which decision will constitute, in the absence of manifest error,
conclusive evidence of the adverse change. Following this decision being
made by the Bank, the Bank shall notify the Borrower of the Bank's decision
concerning the adverse change.
If the Bank decides or is required to incur expenses in compliance or to
verify the Borrower's compliance with applicable environmental or other
regulations, the Borrower shall indemnify the Bank in respect of such
expenses, which will constitute further advances by the Bank to the
Borrower under this Agreement.
INITIAL DRAWDOWN
6. The right of the Borrower to obtain the initial drawdown under the
Credit(s) is subject to the condition precedent that there shall not have
been any material adverse changes in the financial condition or the
environmental condition of the Borrower, Wyant Corporation, or any
guarantor of the Borrower.
PERIODIC REVIEW
7. The obligation of the Bank to make further advances or other accommodation
available under any Credit(s) of the Borrower under which the indebtedness
or liability of the Borrower is payable on demand, is subject to periodic
review and to no adverse change occurring in the financial condition or the
environmental condition of the Borrower or any guarantor.
EVIDENCE OF INDEBTEDNESS
8. The Bank's accounts, books and records constitute, in the absence of
manifest error, conclusive evidence of the advances made under this Credit,
repayments on account thereof and the indebtedness of the Borrower to the
Bank.
ACCELERATION
9. (a) All indebtedness and liability of the Borrower to the Bank payable on
demand, is repayable by the Borrower to the Bank at any time on
demand;
(b) All indebtedness and liability of the Borrower to the Bank not payable
on demand, shall, at the option of the Bank. become immediately due
and payable, the security held by the Bank shall immediately become
enforceable, and the obligation of the Bank to make further advances
or other
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<PAGE> 10
accommodation available under the Credits shall terminate, if any one of
the following Events of Default occurs:
(i) the Borrower or any guarantor fails to make when due, whether on
demand or at a fixed payment date, by acceleration or otherwise,
any payment of interest, principal, fees, commissions or other
amounts payable to the Bank;
(ii) there is a breach by the Borrower of any other term or condition
contained in this Commitment Letter or in any other agreement to
which the Borrower and the Bank are parties;
(iii) any default occurs under any security listed in this Commitment
Letter under the headings "Specific Security" or "General
Security" or under any other credit, loan or security agreement
to which the Borrower is a party;
(iv) any bankruptcy, re-organization, compromise, arrangement,
insolvency or liquidation proceedings or other proceedings for
the relief of debtors are instituted by or against the Borrower
or Wyant Corporation and, if instituted against the Borrower or
Wyant Corporation, are allowed against or consented to by the
Borrower or Wyant Corporation or are not dismissed or stayed
within 60 days after such institution;
(v) a receiver is appointed over any property of the Borrower or
Wyant Corporation or any judgement or order or any process of any
court becomes enforceable against the Borrower or Wyant
Corporation or any property of the Borrower or Wyant Corporation
or any creditor takes possession of any property of the Borrower
or Wyant Corporation;
(vi) any adverse change occurs in the financial condition of the
Borrower or any guarantor;
(vii) any adverse change occurs in the environmental condition of:
(A) the Borrower or any guarantor of the Borrower; or
(B) any property, equipment, or business activities of the
Borrower or any guarantor of the Borrower.
COSTS
10. All costs, including legal and appraisal fees incurred by the Bank relative
to security and other documentation, shall be for the account of the
Borrower and may be charged to the Borrower's deposit account when
submitted.
REQUEST FOR ENGLISH
11. This document and all related documents have been drafted in English at the
Borrower's request. Ce document et tous les documents y afferents ont ete
rediges en anglais a la demande de l'emprunteur.
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<PAGE> 11
AGREEMENT RE: OPERATING CREDIT LINE
<TABLE>
<S> <C>
Wood Wyant Inc. September 18, 1997
- --------------------------------------------
CUSTOMER NAME
1475 -- 32nd Avenue
- --------------------------------------------
CUSTOMER ADDRESS
Lachine, Quebec H8T 3J1
- --------------------------------------------
</TABLE>
DEAR CUSTOMER:
1. We are pleased to advise that, subject to acceptance by you, we have
established an operating credit line (the "Credit Line") in your favour in
the amount of $6,000,000.00 subject to the terms of this agreement and any
Schedule attached hereto (this "Agreement"). You may utilize the Credit
Line at The Bank of Nova Scotia (the "Bank") at its 1002 Sherbrooke St. W.,
Montreal, Quebec H3A 3L6 Branch from time to time by way of direct advances
to be deposited to your Account, No. 90001 0044210, or a replacement
account in your name as agreed by us from time to time (the "Account"),
and/or by way of any other availment option authorized under this
Agreement.
2. Upon the date of acceptance by you of this Agreement, your obligations to
repay your indebtedness and liability:
(a) in respect of direct advances under all existing operating credit
lines and under the Credit Line shall be subject to this Agreement
exclusively; and
(b) in respect of utilizations under any other availment option authorized
under this Agreement shall be subject to any applicable agreement(s)
referred to in Schedule A ("Special Agreement(s)") to which you and
the Bank are or may become parties.
3. You acknowledge that the outstanding principal balance by way of direct
advances owing to the Bank under existing operating credit lines is
$1,305,000.00, as at the close of business on September 17, 1997 which will
be adjusted to reflect direct advances and repayments of direct advances
under the existing credit lines occurring between that date and the date of
acceptance of this Agreement. You acknowledge that the hypothecs or other
security interests previously granted to the Bank to secure existing
operating credit lines continue to constitute security for indebtedness and
liability under the Credit Line.
4. The Credit Line may be utilized by:
(a) you notifying the Bank from time to time as to the amounts you wish to
borrow by way of direct advances and the Bank crediting such amounts
to the Account; and/or
(b) you authorizing the Bank to ascertain from time to time the position
between us in respect to the Account and, if such position is a debit
in favour or the Bank or is a credit in favour of you that is less
than any minimum credit position for the Account as agreed upon
between us from time to time, the Bank is authorized to make a direct
advance under the Credit Line, by crediting the Account, to provide
cover for such debit position or to place the Account in the
appropriate minimum credit position; and/or
(c) you providing the Bank with the documentation required by the Bank
from time to time to utilize the Credit Line under any other availment
option authorized under this Agreement.
5. You will repay on demand all your indebtedness and liability under the
Credit Line and interest and interest on overdue interest under this
Agreement and you hereby irrevocably authorize and direct us, while the
Credit Line is in existence, but the Bank is not so obligated, to apply all
amounts standing to your credit, and above any agreed upon minimum credit
position, in the Account at the end of each business day to repay your
indebtedness and liability under the Credit Line.
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<PAGE> 12
6. Amounts may be borrowed, repaid and reborrowed or otherwise utilized or
reutilized under the Credit Line from time to time, provided that, upon our
periodic review of your financial affairs or upon the occurrence of an
event of default, we may refuse to allow you to borrow further by way of
direct advances or to otherwise utilize the Credit Line and/or we may
terminate the Credit Line entirely and demand payment of all your
indebtedness and liability under the Credit Line together with interest and
interest on overdue interest. A default shall occur if:
(i) you or any guarantor fail to make when due, either on demand or on a
fixed payment date, by acceleration or otherwise, any payment of
interest, principal, fees, commissions or other amounts payable to
the Bank or any other lender;
(ii) you breach any other term or condition contained in this Agreement
or in any other agreement to which you and the Bank are parties;
(iii) any default occurs under any security under this Agreement or in any
Special Agreement or under any credit, loan or security agreement to
which you are a party;
(iv) any bankruptcy, reorganization, compromise, arrangement, insolvency
or liquidation proceedings or other proceedings for the relief of
debtors are, instituted by or against you and, if instituted against
you, are allowed against or consented to by you or are not dismissed
or stayed within 60 days after institution;
(v) a receiver is appointed over any of your property or any judgment or
order or any process of any court becomes enforceable against you or
any of your property or any creditor takes possession of any of your
property;
(vi) any course of action is undertaken by you or with respect to you
which would result in your re-organization, amalgamation or merger
with another corporation or the transfer of all or substantially all
of your assets;
(vii) any guarantee of indebtedness and liability under the Credit Line is
withdrawn, determined to be invalid or otherwise rendered
ineffective;
(viii) any adverse change occurs in the financial condition of yourself or
any guarantor of indebtedness and liability under the Credit Line;
(ix) any adverse change occurs in the environmental condition of:
(a) yourself or any guarantor of indebtedness and liability under
the Credit Line; or
(b) any of the property, equipment or business activities of
yourself or any guarantor of indebtedness and liability under
the Credit Line;
and you agree that if any default occurs under this Agreement, we may
immediately exercise all our rights and remedies under any Special
Agreement(s) as if default had occurred under the Special Agreement(s).
In the event where a default arises from the non-fulfilment of an
obligation in a prescribed period of time, you shall be considered in
default by the mere lapse of time, without the necessity of any notice or
demand.
7. Upon failure to pay amounts due to the Bank on demand under the Credit
Line, the Bank shall be entitled at your cost to take such steps as may be
permitted by law or as provided under this Agreement, any Special Agreement
or any other credit, loan or security agreement and as it deems fit to sue
for and recover payment for your indebtedness and liability to the Bank,
including realization of any security held. Upon your default and subject
to applicable law, you will pay to us on demand all of our reasonable
costs, including but not limited to legal fees and expenses (on a solicitor
and his own client basis) incurred (i) in collecting the balance due to the
Bank under the Credit Line, whether or not a legal action is brought
against you; and (ii) in protecting the Bank from any loss which the Bank
may suffer as a result of your default.
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<PAGE> 13
8. All amounts borrowed by way of direct advances will bear interest at the
Bank's Prime Lending Rate from time to time plus 0.00% per annum (Prime
Lending Rate being a variable per annum reference rate of interest as
announced and adjusted by the Bank from time to time for loans made by the
Bank in Canada in Canadian dollars). Interest shall be calculated daily for
the actual number of days elapsed and be payable monthly and you authorize
the Bank, but the Bank is not so obligated, to debit the Account or any
other account specified by you monthly in arrears on the 22nd day of each
month or, if such day is a Saturday, Sunday or a day on which banks are
closed for business, on the first subsequent business day with the amount
of interest accrued and unpaid by you. Interest on overdue interest amounts
shall be calculated at the same rate, but shall be compounded monthly and
be payable on demand, both before and after demand and judgment.
9. You will provide us with financial and net worth statements and such other
information respecting your financial affairs as we may reasonably require
from time to time. You will cause any guarantor to provide us with
financial and net worth statements and such other information respecting
the guarantor's financial affairs as we may reasonably request from time to
time.
10. You agree to:
(a) obey all applicable laws and requirements of any federal, provincial,
or any other governmental authority relating to the environment and
the operation of your business activities;
(b) allow us access at all times to your business premises to monitor and
inspect all property and business activities;
(c) notify us from time to time of any business activity conducted by you
which involves the use or handling of hazardous materials or wastes or
which increases your environmental liability in any material manner;
(d) notify us of any proposed change in the use or occupation of your
property prior to any change occurring;
(e) provide us with immediate written notice of any environmental problem
and any hazardous materials or substances which have an adverse effect
your property, equipment or business activities and with any other
environmental information requested by us from time to time;
(f) conduct all environmental remedial activities which a commercially
reasonable person would perform in similar circumstances to meet its
environmental responsibilities and if you fail to do so, we may
perform such activities; and
(g) pay for any environmental investigations, assessments or remedial
activities with respect to any of your property that may be performed
by or for us from time to time.
11. If you notify us of any specified activity or change and provide us with any
information pursuant to paragraph 10(c), (d) or (e), or if we receive any
environmental information from other sources, we, in our sole discretion,
may decide that an adverse change in your environmental condition or any of
your property, equipment or business activities has occurred which decision
shall constitute, in the absence of manifest error, conclusive evidence of
the adverse change. Following this decision being made by us, we shall
notify you of our decision concerning the adverse change.
12. If we decide or are required to incur expenses in compliance or to verify
your compliance with applicable environmental or other regulations, you
shall indemnify us in respect of such expenses, which will constitute
further advances by us to you under this Agreement.
13. The Bank will maintain records of your indebtedness and liability to the
Bank under the Credit Line and such records shall evidence such indebtedness
and liability. The Bank shall render a monthly statement of account of your
indebtedness by way of direct advances under the Credit Line. In the absence
of manifest error, such statement shall be considered conclusively binding
upon you as to your indebtedness and liability to the Bank by way of direct
advances under the Credit Line unless you notify the Bank to the contrary
within thirty (30) days from the date on which the statement was sent to
you, provided that any
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<PAGE> 14
error by the Bank in keeping its records or in the statement shall not
affect your obligation to pay or repay your indebtedness and liability under
the Credit Line.
14. The terms and conditions of this Agreement including, but not limited to,
the annual percentage rate specified in paragraph 8, may be amended at any
time by the Bank by mailing or delivering notice in writing of the amendment
to you. If the Bank mails the said notice in writing by ordinary mail it
shall be effective from the date of mailing. Please acknowledge acceptance
of the terms and conditions of this Agreement by signing and delivering to
the Bank a copy hereof.
15. The parties require that this Agreement and all related documents be drawn
in English. Les parties exigent que cette convention et tous documents qui
s'y rattachent soient rediges en anglais.
The Bank appreciates this opportunity to be of service to you.
Yours truly,
THE BANK OF NOVA SCOTIA
Per INGRID LANGLOIS
-------------------------------
ACCEPTED this 30th day
of September, 1997
Wood Wyant Inc.
- ------------------------------------
(NAME OF CUSTOMER)
M. D'AMOUR
- ------------------------------------
(AUTHORIZED SIGNATURE)
B. L. DAVIES
- ------------------------------------
(AUTHORIZED SIGNATURE)
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<PAGE> 15
SCHEDULE A
This Schedule is part of the Agreement re: Operating Credit Line dated
September 18, 1997 between The Bank of Nova Scotia and Wood Wyant Inc. (the
"Customer").
[X] The Credit Line is subject to provisions of a Commitment Letter dated
September 18, 1997, as it may be amended from time to time.
OR
[ ] The Credit Line is subject to the following additional terms and conditions.
AVAILMENT OPTIONS
The Credit Line may also be utilized by way of the following options,
provided that the total amount outstanding by way of direct advances and other
availment options does not exceed the principal amount of the Credit Line:
[ ] Bankers' Acceptances in Canadian Dollars (in multiples of $100,000) and
having terms of maturity of 30 to 180 days without grace. Availment is
subject to completion of Agreement re Bankers' Acceptance in a form
satisfactory to the Bank.
Fees: The Bank's Commercial/Corporate/Government Bankers' Acceptance fee
(delete whichever is not applicable), plus
__________________% per annum, (subject to revision at any time),
subject to a minimum fee of $100.00 per transaction, payable at the
time of each acceptance.
[ ] Commercial Letters of Credit/Letter of Credit Acceptances with expiry dates
not to exceed ________________ days from date of issuance. Drafts are to be
payable at sight and/or up to ________________ days sight. Availment is
subject to completion of Agreement for Commercial Letter of Credit in a form
satisfactory to the Bank.
Fees: The applicable fee or fees charged by the Bank for Letters of Credit
as agreed between you and the Bank from time to time.
[ ] Letters of Guarantee. Availment is subject to completion of a Reimbursement
Agreement for Letters of Guarantee in a form satisfactory to the Bank.
Commission: The applicable commission or commissions charged by the Bank
for Letters of Guarantee as agreed between you and the Bank
from time to time.
[ ] Standby Letters of Credit. Availment is subject to completion of a
Reimbursement Agreement for Standby Letters of Credit in a form satisfactory
to the Bank.
Commission: _______________% per annum calculated on the issue amount on
the basis of a calendar year for the actual number of days
elapsed from and including the date of issue to the
termination date, subject to the Bank's minimum fee as well as
revision at anytime, payable upon issuance.
Your obligations to repay your indebtedness and liability under any
Agreement re Bankers' Acceptance, Agreement for Commercial Letter of Credit,
Reimbursement Agreement for Letters of Guarantee or Reimbursement Agreement for
Standby Letters of Credit entered into with the Bank will be subject to the
terms of those Special Agreements and not this Agreement.
SECURITY
The following security, evidenced by documents in form satisfactory to the
Bank and registered or recorded as required by the Bank, is to be provided prior
to any advances or availment being made under the Credit Line:
[ ] General Assignment of/Hypothec on Book Debts.
[ ] Security under Section 427 of the Bank Act with appropriate insurance
coverage assigned/hypothecated to the Bank.
[ ] Assignment/Hypothec of insurance over; Inventory $ ____________, Buildings
$ ____________, Equipment & Furniture $ _______________.
[ ] Security Agreement/Hypothec over all inventories.
[ ] General Security Agreement/Hypothec over all of your property and
undertaking.
[ ] Postponement Agreement covering an amount of $ ____________.
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<PAGE> 16
SCHEDULE A
[ ] Assignment of Life Insurance -- Face Value $________________________
[ ] Guarantees:
Name Amount
[ ] Collateral Mortgage/Hypothec in the amount of $___________ providing a
fixed charge over certain lands known as ______________ (prior
encumbrances $____________________) with replacement cost fire insurance
coverage, loss, if any, payable to the Bank as mortgagee.
[ ] Demand Debenture in the principal amount of $____________ secured by a
fixed charge/hypothec over lands known as_____________ (prior
encumbrances $_____________) together with a fixed/floating
charge/hypothec over all other assets now or hereafter acquired with
replacement cost fire insurance coverage, loss, if any, payable to the
Bank as mortgagee/hypothecary creditor.
[ ]
[ ]
[ ]
CONDITIONS
Until all the debts and liabilities under the Credit Line have been discharged
in full, the following conditions will apply in respect to the Credit Line:
[ ] Direct advances, Bankers' Acceptances, Letter of Credit Acceptances,
Letters of Guarantee (delete whichever is not applicable) are not to
exceed the "Borrowing Base" which is defined as the aggregate of
[ ] _________% of good quality accounts receivable (excluding accounts
over 90 days, off-sets and inter-company accounts);
[ ] _________% of inventory;
less security interests or charges held by other parties and
specific payables which have or may have priority over the Bank's
security.
[ ] Advances against inventory are limited to $____________________ .
[ ] The aggregate of
[ ] _________% of good quality accounts receivable (excluding accounts
over 90 days, off-sets and inter-company accounts);
[ ] _________% of inventory;
is to provide full cover/a margin of _________% (delete whichever is
not applicable) at all times over direct advances, Bankers'
Acceptances, Letter of Credit Acceptances, Letters of Guarantee
(delete whichever is not applicable), security interests or charges
held by other parties and specific payables which have or may have
priority over the Bank's security.
[ ] The maximum inventory allocation is $____________________________.
[ ]
[ ] Working capital is to be maintained at all times in excess of
$_____________ .
[ ] Tangible Net Worth (TNW) is to be maintained in excess of
$__________________ at all times. TNW is defined as the sum of share
capital, earned and contributed surplus and postponed funds less (i)
amounts due from officers/affiliates, (ii) investment in affiliates,
and (iii) intangible assets as defined by the Bank.
[ ] The ratio of Debt (including deferred taxes) to Tangible Net Worth
is not to exceed _________________: 1.
[ ]
REPORTING
Until all debts and liabilities under the Credit Line have been discharged in
full, you will provide the Bank with the following:
[ ] Annual Financial Statements -- audited/prepared* within ___________
days of your fiscal year end.
[ ] Interim Financial Statements -- monthly/quarterly* within _________
days of period end. [ ] Statement of Security/Borrowing Base
Calculation* monthly/quarterly* within _________ days of period end.
[ ]
*DELETE ONE
_________________________
CUSTOMER'S INITIALS
15
<PAGE> 1
EXHIBIT 10.5
<PAGE> 2
THIS EMPLOYMENT AGREEMENT entered into as of November 11, 1996.
BETWEEN: JAMES A. WYANT, resident and domiciled in the
Province of Quebec
(hereinafter referred to as the "Senior Executive")
AND: G.H. WOOD + WYANT INC., a corporation incorporated
under the Canada Business Corporations Act
(hereinafter referred to as the "Corporation")
WHEREAS, conditional upon the closing of the transaction contemplated in
the asset purchase agreement dated as of November 11, 1996 whereby the
Corporation agreed to sell all of its business and substantially all of its
assets to Hosposable Products, Inc. (the "Hosposable Transaction"), the
Corporation desires to employ the Senior Executive, and the Senior Executive
desires to accept such employment, upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the foregoing, of the mutual covenants
and agreements herein contained and for other good and valuable consideration,
the receipt, adequacy and sufficiency of which are hereby acknowledged, the
parties, intending legally to be bound, hereby agree as follows:
1. EMPLOYMENT
The Corporation hereby employs the Senior Executive as the Vice-Chairman of
the Corporation commencing January 1, 1997 (the "Employment Date").
2. DUTIES OF THE SENIOR EXECUTIVE
The Senior Executive shall devote his full time and attention to, and use
his best efforts to promote, the business and affairs of the Corporation and
shall perform duties and have such responsibilities as are customarily performed
and enjoyed by persons employed in comparable positions, subject, however, to
the direction and control of the Board of Directors of the Corporation.
3. TERM
3.1 The initial term of the employment of the Senior Executive pursuant
to this Agreement shall be five (5) years (the "Initial Term"),
beginning on the Employment Date;
3.2 The term of employment of the Senior Executive pursuant to this
Agreement shall be automatically renewed for One (1) year (a "Renewal
Term") upon the expiry of the Initial Term and on each anniversary of
the Employment Date thereafter, unless the Corporation or the Senior
Executive gives notice of intention not to renew:
(i) in the case of the Initial Term, six (6) months prior to the
expiry of the Initial Term;
(ii) in the case of a Renewal Term, three (3) months prior to the
expiry of such Renewal Term.
3.3 Notwithstanding the foregoing, this Agreement shall terminate
immediately in the event of:
(i) the termination of the employment of the Senior Executive by
the Corporation with Cause;
(ii) the Permanent Disability (as hereinafter defined) of the Senior
Executive;
(iii) the death of the Senior Executive; or
(iv) the Corporation becoming obligated to pay the amounts set out
in Section 5.1 pursuant to one of the events set out therein
(provided that the obligation to pay such amount and to provide
the other benefits set out in Section 5.1 shall survive such
termination).
3.4 If the closing of the Hosposable Transaction does not occur on or
prior to January 31, 1997, then this Agreement shall be null and void
with retroactive effect, as though it had never existed and the
Senior Executive shall be entitled to the salary and benefits that he
enjoyed for the year ended
1
<PAGE> 3
December 31, 1996 and necessary adjusting payments shall be made
between the Senior Executive and the Corporation.
4. SALARY
4.1 The Corporation agrees to pay the Senior Executive for the services
rendered by him as Vice-Chairman of the Corporation in accordance with
this Agreement, and the Senior Executive agrees to accept as
compensation a base salary at the annual rate of Two Hundred and
Fifteen Thousand Dollars ($215,000) in lawful money of Canada, payable
in equal bi-weekly instalments, less deductions and withholdings in
accordance with the Corporation's usual payroll policies and
applicable laws.
4.2 The base salary for each year of the term of this Agreement after the
first year shall be adjusted upward effective on each anniversary of
the Employment Date in accordance with any increase in the annual
Consumer Price Index (all regions) prepared by Statistics Canada for
the immediately preceding year over such Consumer Price Index for the
prior year provided that (i) the base salary shall in no case be less
than that of the preceding year, and (ii) the annual increase may not
exceed five percent (5%).
5. SEVERANCE
5.1 The Senior Executive shall be entitled to receive, as severance, for
a period of two (2) years following:
(i) the dismissal of the Senior Executive without Cause by the
Corporation during a Renewal Term;
(ii) the resignation of the Senior Executive at any time following or
in connection with (a) a change in control of the Corporation or
(b) the sale by the Corporation of all or substantially all of its
assets; for the purposes of this Section 5.1(ii), the Hosposable
Transaction shall not be considered a change in control or a sale
of all or substantially all of the assets of the Corporation;
the payment of an amount equal to his base salary immediately prior to
such termination payable in equal bi-weekly instalments, less
deductions and withholdings as well as the benefits set out in Section
7.1 and the right to a leased vehicle set out in Section 8, payable as
if he were an employee of the Corporation:
6. BONUS COMPENSATION
In addition to the compensation described in Section 4.1 and Section 4.2
above, the Senior Executive shall be entitled to bonus compensation in
accordance with the Corporation's bonus policy for vice-presidents of the
Corporation.
7. BENEFITS AND EXPENSES
7.1 The Senior Executive shall, during the Initial Term and Renewal Terms
of this Agreement, be entitled to all such, employment benefits as
may, from time to time, be made generally available to senior
management employees of the Corporation.
7.2 Upon presentation of appropriate vouchers in accordance with the
Corporation's policies and practices, the Senior Executive shall be
reimbursed for all reasonable expenses which are incurred by him in
the performance of his duties hereunder.
8. VEHICLE
The Corporation shall supply the Senior Executive with a leased vehicle in
accordance with the Corporation's Executive Car Policy.
2
<PAGE> 4
9. VACATIONS
The Senior Executive shall be entitled to six weeks' paid vacation per
twelve month period ending April 30 during the Initial Term and any Renewal
Term. Unused vacations shall lapse at the end of each such twelve month period
and shall not carry over to any subsequent year. The vacations shall be taken at
times agreeable with the Corporation and consistent with the Senior Executive's
duties. No payment shall be made to the Senior Executive for vacation days which
are not taken.
10. COVENANT NOT TO COMPETE
10.1 The Senior Executive hereby covenants and agrees that he shall not,
within North America:
(i) directly or indirectly engage in, or have any interest in
(either individually, or as a joint venturer, partner, member
of any firm, officer, director, stockholder, lender, financial
or other consultant or employee of any person, firm, joint
venture, partnership or corporation, or otherwise) any person,
firm, corporation or business that engages in a business which
is competitive, directly or indirectly, with the business of
the Corporation;
(ii) divert or attempt to divert or take advantage of any business
or opportunities of any type whatsoever which are directly or
indirectly competitive with the business of the Corporation;
(iii) solicit or attempt to solicit any existing or future customer
or clients which use the services of or provide services to the
Corporation, except where such solicitation or attempted
solicitation concerns business activities which are not
directly competitive with the business of the Corporation; or
(iv) solicit or induce or attempt to solicit or induce any employee
of the Corporation to leave or terminate such employment;
(collectively, the "Covenant Not To Compete"), for a period commencing
on the Employment Date and terminating on the third anniversary of the
termination of this Agreement.
10.2 The Senior Executive confirms that the restrictive provisions of the
Covenant Not To Compete are reasonable and that a breach thereof will
cause the Corporation irreparable harm, and the Senior Executive
agrees that the Corporation shall be entitled to equitable relief,
including remedies of injunction and specific performance, with
respect to any breach or attempted breach of the Covenant Not To
Compete.
11. CERTAIN DEFINED TERMS
For purposes of this Agreement the following terms and phrases shall have
the following meanings:
11.1 "Permanent Disability" shall mean the inability of the Senior
Executive to perform substantially all his duties and responsibilities
to the Corporation by reason of a physical or mental disability or
infirmity for either:
(i) a continuous period of nine months, or
(ii) 270 days during any consecutive twelve month period.
The date of such Permanent Disability shall be, in the case of clause
(i) above, the last day of such nine month period or in the case of
clause (ii) above, such date as determined in good faith by the Board
of Directors.
11.2 "Cause" shall mean:
(i) conviction of a crime involving the misappropriation of funds or
property of the Corporation or otherwise constituting a felony
under applicable law, or the entering of a plea of guilty or nolo
contendere in respect of the same; or
3
<PAGE> 5
(ii) a determination by a majority of the members of the Board of
Directors of the Corporation that the Senior Executive has
neglected his duties hereunder after written notice thereof from
the Corporation and failure to correct any alleged deficiency
(as determined by a majority of the members of the Board of
Directors of the Corporation) in sixty (60) days; for such
purposes, the Board of Directors of the Corporation will be
deemed not to include a member who is a Related Party to the
Senior Executive;
(iii) a unanimous determination by the members of the Board of
Directors of the Corporation, other than the Senior Executive,
which determination shall be final, binding and conclusive, that
the Senior Executive has committed an act involving dishonesty
or gross negligence, or any other act which in the reasonable
judgment of such members of the Board of Directors of the
Corporation could materially harm the business reputation of the
Corporation in the community.
11.3 "Related Party" shall mean with respect to any person who is an
individual, a child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law of that
person, including adoptive relationships.
12. NOTICE
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given upon receipt of: hand delivery;
certified or registered mail, return receipt requested; or telecopy transmission
with confirmation of receipt:
12.1 If to the Corporation, to:
G.H. Wood & Wyant Inc.
1475 32nd Avenue
Lachine, Quebec H8T 3J1
Attention: Donald C. MacMartin
Telecopier: (514) 636-1148
Telephone: (514) 636-9926
with a copy to:
Hosposable Products, Inc.
100 Readington Road
Somerville, New Jersey 08876
Attention: Joseph H. Weinkam, Jr.
Telecopier: (908) 707-1549
Telephone: (908) 707-1800
12.2 If to the Senior Executive, to:
G.H. Wood + Wyant Inc.
1475 32nd Avenue
Lachine, Quebec H8T 3J1
Attention: James A. Wyant
Telecopier: (514) 636-1148
Telephone: (514) 636-9926
4
<PAGE> 6
with a copy to:
McCarthy Tetrault
1170 Peel Street
Montreal, Quebec
H3B 4S8
Attention: Thomas R.M. Davis
Telecopier: (514) 397-4170
Telephone: (514) 397-4126
13. MISCELLANEOUS PROVISIONS
13.1 Withholding. The Corporation shall be entitled to withhold the
amount, if any, of all taxes or other amounts which in accordance with
the applicable laws of any jurisdiction are required to be withheld by
an employer with respect to any amount paid to the Senior Executive
hereunder. The Corporation, in its sole and absolute discretion,
acting reasonably, shall make all determinations as to whether it is
obligated to withhold any taxes or other amounts hereunder and the
amount thereof.
13.2 Deceased Employee. In the event that the Senior Executive shall die
while entitled to benefits hereunder which have accrued but have not
been paid, the payment which would otherwise be made to the Senior
Executive, shall be made to his estate or its appropriate personal
representative.
13.3 No Assignment. The Senior Executive shall not, and shall not have any
right to, sell, assign, transfer or pledge any rights under this
Agreement by operation of law or otherwise.
13.4 Severability. If any provision of this Agreement is held by a court
of competent jurisdiction to be invalid, illegal or unenforceable,
such provision shall be severed and enforced to the extent possible or
modified in such a way as to make it enforceable, and the invalidity,
illegality or unenforceability thereof shall not affect the validity,
legality or enforceability of the remaining provisions of this
Agreement.
13.5 Successors. This Agreement and all the terms and provisions hereof
shall be binding upon and shall inure to the benefit of all of the
parties hereto, and their legal representatives, heirs, successors and
assigns, except as expressly herein otherwise provided.
13.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Quebec.
13.7 Counterparts. This Agreement may be executed in counterparts, each of
which shall be original, but all of which shall constitute one and the
same instrument.
13.8 Pronouns and Headings. As used herein, all pronouns shall include the
masculine, feminine, neuter, singular and plural thereof wherever the
contest and facts require such construction. The headings, titles and
subtitles herein are inserted for convenience of reference only and
are to be ignored in any construction of the provisions hereof.
13.9 Amendments. This Agreement can be amended in any respect upon the
written agreement of all of the parties hereto.
13.10 Jurisdiction. Any judicial proceeding brought against any of the
parties to this Agreement with respect to any dispute arising out of
this Agreement or any matter related hereto may be brought in the
courts of the Province of Quebec, and by execution and delivery of
this Agreement, each of the parties to this Agreement accepts for
himself or itself the exclusive jurisdiction in the aforesaid courts,
and irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Agreement.
5
<PAGE> 7
13.11 Language clause. The parties hereto have requested and hereby
confirm their request that this agreement and all notices relating
thereto be drafted in the English language. Les parties aux presentes
ont demande et par les presentes confirment leur demande que le
present contrat et tout avis y afferent soient rediges en anglais.
In WITNESS WHEREOF, the parties have signed this Agreement as of the date
first above written.
--------------------------------------
JAMES A. WYANT
G.H. WOOD + WYANT INC.
Per: J. B. WIGHT
---------------------------------
6
<PAGE> 8
AMENDMENT entered into as of January 23, 1997 to the Employment Agreement
entered into as of November 11, 1996.
BETWEEN: JAMES A. WYANT, resident and domiciled in the
Province of Quebec
(hereinafter referred to as the "Senior Executive")
AND: G.H. WOOD + WYANT INC., a corporation incorporated
under the Canada Business Corporations Act
(hereinafter referred to as the "Corporation")
WHEREAS Senior Executive and the Corporation entered into an Employment
Agreement as of November 11, 1996 (the "Employment Agreement") conditional upon
the closing of the Hosposable Transaction (as defined in the Employment
Agreement);
WHEREAS article 3.4 of the Employment Agreement provides that if the
closing of the Hosposable Transaction does not occur on or prior to January 31,
1997, then the Employment Agreement shall be null and void with retroactive
effect;
WHEREAS the closing of the Hosposable Transaction will not occur on or
prior to January 31, 1997;
WHEREAS notwithstanding the fact that the Hosposable Transaction will not
occur on or prior to January 31, 1997, the Senior Executive and the Corporation
wish the Employment Agreement to remain in effect beyond January 31, 1997;
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. Article 3.4 of the Employment Agreement is amended by deleting the words
"January 31, 1997" in the second line and replacing them with the words
"April 30, 1997".
2. Save as amended by section 1 hereof, the Employment Agreement is unamended.
3. The parties hereto have requested and hereby confirm their request that
this Agreement and all notices relating thereto be drafted in the English
language. Les parties aux presentes ont demande et par les presentes
confirment leur demande que le present contrat et tout avis y afferent
soient rediges en anglais.
4. All the Employment Agreement is incorporated by reference into this
Amendment and the Employment Agreement as amended represents the entire
agreement of the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
first above written.
--------------------------------------
JAMES A. WYANT
G.H. WOOD + WYANT INC.
Per: D. C. MACMARTIN
---------------------------------
7
<PAGE> 9
THIS ADDENDUM dated as of March 10, 1998 to the Employment Agreement entered
into as of November 11, 1996, as amended as of January 1, 1997.
BETWEEN: JAMES A. WYANT, business executive resident and
domiciled in the Province of Quebec
(the "Senior Executive")
AND: WOOD WYANT INC., a corporation incorporated under
the Canada Business Corporations Act, formerly
known as 3290441 Canada Inc.
(the "Corporation")
WHEREAS the Senior Executive entered into an employment agreement with G.H. Wood
+ Wyant Inc. ("GHWW") as of November 11, 1996, as amended as of January 1, 1997
(the "Senior Executive Employment Agreement"), conditional upon the closing of
the transaction contemplated in the asset purchase agreement dated as of
November 11, 1996 among Wyant Corporation (formerly known as Hosposable
Products, Inc.) ("Wyant"), the Corporation and GHWW whereby GHWW agreed to sell
all of its business and substantially all of its assets to the Corporation (the
"Hosposable Transaction");
WHEREAS pursuant to completion of the Hosposable Transaction on March 18, 1997,
the Corporation assumed the obligations of GHWW under the Senior Executive
Employment Agreement;
WHEREAS the Senior Executive and the Corporation have agreed to amend the Senior
Executive Employment Agreement in the manner herein set forth;
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. SECTION 6 -- BONUS COMPENSATION of the Senior Executive Employment
Agreement is hereby amended, effective January 1, 1998, as follows:
"6. BONUS COMPENSATION
Effective January 1, 1998, in addition to the compensation described in
Sections 4.1 and 4.2 above, the Senior Executive shall be entitled to
receive bonus compensation annually for each year of the remainder of
the Initial Term and for each Renewal Term of his employment with the
Corporation. Bonus compensation will be determined as a percentage of
the base salary of the Senior Executive for the relevant year based on
(i) the actual consolidated net earnings before tax of Wyant ("Wyant's
Results") compared with the budgeted consolidated net earnings before
tax of Wyant ("Wyant's Budgeted Results") and (ii) the actual
consolidated net earnings before tax of the Corporation ("Corporation's
Results") compared with the budgeted consolidated net earnings before
tax of the Corporation ("Corporation's Budgeted Results") in accordance
with the following formula:
6.1 Bonus Entitlement based on Consolidated Net Earnings Before Tax of
Wyant
<TABLE>
<CAPTION>
WYANT'S RESULTS AS A BONUS ENTITLEMENT AS
PERCENTAGE OF WYANT'S A PERCENTAGE OF
BUDGETED RESULTS BASE SALARY
--------------------- --------------------
<S> <C>
<100% 0%
100% to <105% 7.50%
105% to <110% 8.75%
110% to <115% 10.00%
115% to <120% 11.25%
120% to <125% 12.50%
125% to <130% 13.75%
130% or more 15.00%
</TABLE>
8
<PAGE> 10
6.2 Bonus Entitlement based on Consolidated Net Earnings Before Tax of
the Corporation
<TABLE>
<CAPTION>
CORPORATION'S RESULTS AS A BONUS ENTITLEMENT AS
PERCENTAGE OF CORPORATION'S A PERCENTAGE OF
BUDGETED RESULTS BASE SALARY
--------------------------- --------------------
<S> <C>
<100% 0%
100% to <105% 2.50%
105% to <110% 3.75%
110% to <115% 5.00%
115% to <120% 6.25%
120% to <125% 7.50%
125% to <130% 8.75%
130% or more 10.00%
</TABLE>
6.3 Wyant's Budgeted Results and Corporations's Budgeted Results
"Wyant's Budgeted Results" means the budgeted consolidated net
earnings before tax of Wyant approved by Wyant's board of
directors, as the same may be amended by Wyant from time to time
for purposes of calculating bonus compensation payable to other
officers of Wyant to take into account significant acquisitions or
divestitures which would materially affect Wyant's performance.
"Corporation's Budgeted Results" means the budgeted consolidated
net earnings before tax of the Corporation approved by the
Corporation's board of directors, as the same may be amended from
time to time by the Corporation for purposes of calculating bonus
compensation payable to other officers of the Corporation to take
into account significant acquisitions or divestitures which would
materially affect the Corporation's performance."
2. Save as amended by Section 1 hereof, the Senior Executive Employment
Agreement is unamended.
3. The Senior Executive Agreement is incorporated by reference into this
Agreement and the Senior Executive Employment Agreement as so amended
constitutes the entire agreement of the Parties hereto with respect
to the subject matter hereof.
4. The Parties have requested that this Agreement be drawn up in the
English language. Les parties aux presentes ont demande que cette
entente soit redigee en anglais.
IN WITNESS WHEREOF, the Parties have signed this Agreement as of the date
first above written.
--------------------------------------
JAMES A. WYANT
WOOD WYANT INC.
Per: ---------------------------------
Donald C. MacMartin, President
9
<PAGE> 1
EXHIBIT 10.6
<PAGE> 2
RETIREMENT ARRANGEMENT
FOR
DESIGNATED EMPLOYEE OF
G.H. WOOD + WYANT INC.
MARCH 1996
1
<PAGE> 3
G.H. Wood + Wyant Inc.
1475 32nd Avenue
Lachine, Quebec
J6X 3K1
RETIREMENT ARRANGEMENT
AGREEMENT MADE AS AT JUNE 27, 1994
<TABLE>
<S> <C>
BETWEEN: AND:
G.H. Wood + Wyant Inc., Donald MacMartin
a corporation incorporated, having an Chief Operating Officer of G.H. Wood +
office Wyant Inc. of the City of Lachine, in the
in the City of Lachine, in the Province Province of Quebec.
of Quebec.
</TABLE>
------------------------------------
WHEREAS COO is employed by G.H. Wood + Wyant Inc., in an executive capacity and
is performing his duties capably and efficiently; and
WHEREAS in consideration of the foregoing, G.H. Wood + Wyant agrees to provide
on retirement a Supplementary Retirement Benefit in the manner and upon terms
and conditions hereinafter described.
1. DEFINITIONS
The following words and phrases, when used in this document, shall have the
meanings set forth below, unless the context clearly indicates otherwise.
1.1 "Actuarial Equivalent" means a benefit of equal value computed using
the same actuarial assumptions and methods as those adopted by the
Company for the Pension Plan at the time of computation of the
benefit.
1.2 "Beneficiary" means the person or persons legally designated by the
Member to receive any benefits payable under the Plan as a result of
the death of the Member, or, where by reason of an option elected by
the Member under Section 5.2 the person or persons entitled to
receive benefits as a result of the death of such contingent
annuitant. If at the time when any payment is to be made to a
Designated Beneficiary there is no Designated Beneficiary living,
Designated Beneficiary shall mean the estate of the Member.
1.3 "Company" means G.H. Wood + Wyant Inc. or successor companies.
1.4 "Continuous Service" means service with the Company since the
Member's last date of hire. The following interruptions in employment
do not constitute a break in service:
(i) paid vacation;
(ii) paid sick leave;
(iii) periods during which the Member is eligible to receive benefits
under the Company's L.T.D. plan;
(iv) paid leaves of absence; and
2
<PAGE> 4
(v) unpaid leaves of absence of up to one year, with company
consent.
1.5 "Credited Service" means a Member's period of service credited to him
in the Pension Plan or such other period as specified by the Company.
1.6 "Earnings" means all salary, wages, bonuses, vacation pay, honoraria,
commissions, taxable allowances, the value of taxable benefits but
excluding stock option benefits and including any other payments of
service received as an officer or Employee of the Company and
reported on the individual's T4 slip.
1.7 "Employee" means an individual employed by the Company on a permanent
basis.
1.8 "Member" means an Employee who has been so designated by the Company
for the purposes of the Plan.
1.9 "Pension Plan" means the registered pension plan of the Company under
which the Member has an entitlement, namely the G.H. Wood + Wyant
Inc. defined benefit pension plan. It shall also include any other
registered pension plan which may, in the future, replace in part of
in whole, or supplement, said Pension Plan.
1.10 "Plan" means the Retirement Arrangement for Donald MacMartin, COO of
G.H. Wood + Wyant Inc. as set out herein and as amended from time to
time.
1.11 "Spouse" means the spouse of the Member as defined in the Pension
Plan.
Words importing the masculine include the feminine and words importing the
singular include the plural, or vise versa, as the context requires.
2. MEMBERSHIP
2.1 Donald MacMartin shall become Member of the Plan as at June 27, 1994.
3. RETIREMENT DATES
3.1 The Normal Retirement Date of the Member shall be the first day of
the month coincident with or immediately following his 65th birthday.
3.2 The Member may elect to retire early on the first day of the month
coincident with or on the first day of any month following the date
has attained age 55. Such date shall be his Early Retirement Date.
3.3 A member who remains in the service of the Company may postpone his
retirement to the first day of any month no later than 5 years beyond
his Normal Retirement Date.
4. CONTRIBUTIONS
4.1 COO shall make no contribution under this Agreement.
4.2 G.H. Wood + Wyant Inc. shall not be required to make any
contributions to any fund under this Agreement.
4.3 G.H. Wood + Wyant Inc. shall be required to provide the benefits
described hereunder as and when they become due; G.H. Wood + Wyant
shall have the option to set up a fund and make contributions to such
fund in order to guarantee the payment of the benefits to be provided
hereunder. If a fund is set up, the Member shall have no right to
such fund except to receive therefrom any benefits hereunder as and
when they become due.
5. RETIREMENT BENEFITS
5.1 If the member retires on or after his Normal Retirement Date in
accordance with Sections 3.1 or 3.3, he shall be entitled to an
annual pension commencing on his Normal Retirement Date in an
3
<PAGE> 5
amount equal to 2%, or such other percentage specified by the
Company, of his best annual earnings received multiplied by his
Credited Service, less the amount payable from the Pension Plan. In
addition, the member shall be entitled to such other pension amount
as specified by the Company.
For the purposes of this section, the Actuarial Equivalent of any
benefits payable under the Pension Plan shall be determined in the
form of a pension payable in accordance with Section 5.1.
5.2 A Member who retires early in accordance with Section 3.2, may elect
to receive an annual pension commencing on his actual retirement date
equal to the Actuarial Equivalent of the pension determined with
Section 5.1.
6. FORMS OF RETIREMENT BENEFIT
6.1 The pension payable by the Plan from the Member's date of retirement
shall normally be paid monthly for the Member's lifetime, but in no
event for less than 120 months. Furthermore, after the Member's
death, or at the expiration of the 10-year if later, 60% of the
amount of the Member's pension shall continue to be paid to his
surviving Spouse, for her lifetime. Spousal status is established as
of the day payment of the pension begins.
Notwithstanding the above, a Member who, upon retirement, has a
Spouse who is more than ten (10) years younger than him shall receive
a pension, the amount of which shall be the Actuarial Equivalent of
the pension he would have received had his Spouse been ten (10) years
younger than him.
6.2 The Member shall be entitled to elect an optional form of payment
provided his pension under the Pension Plan is payable in such form.
The amount of any optional form shall be the Actuarial Equivalent of
the pension payable in accordance with Section 5.1. Such election
shall be made in writhing by the Member at least 30 days prior to his
date of retirement.
7. DISABILITY
7.1 The Member shall be deemed to be disabled from the date he is
eligible to receive benefits under the Company's Long Term Disability
Plan and he shall be deemed to cease to be disabled when he is no
longer eligible to receive benefits under such plan or, if earlier,
when he reaches his Normal Retirement Date.
7.2 No benefits shall be payable to the Member under the Plan while he is
disabled but he shall continue to accrue Credited Service as long as
he is so disabled. The Benefits, if any, of the member who is
disabled shall be determined after he ceases to be disabled in
accordance with the retirement, death, or termination of service
provisions whichever may first apply. Furthermore, in the event the
Member, who ceases to be disabled, returns to work, he shall continue
to accrue benefits as provided by the Plan.
7.3 For any period while he is disabled, the Earnings of the Member will
be deemed to be at the rate of basic salary in effect on the date
immediately preceding such period.
8. DEATH
8.1 In the event of the death of the Member before the commencement of
his pension payments and prior to his Normal Retirement Date, a lump
sum benefit in an amount equal to the Actuarial Equivalent of the
pension accumulated by the Member on the date of his death and
determined in accordance with Section 4.1 shall be paid to the
Member's Spouse. Should there be no Spouse, the benefit shall be paid
to the Beneficiary.
8.2 In the event of the death of the Member who has postponed his
retirement in accordance with Section 3.3, he shall be deemed to have
retired on the day preceding the day of his death and benefits shall
be payable in accordance with Section 7.3.
4
<PAGE> 6
8.3 In the event of the death of the Member who is receiving a pension,
any benefits payable as a result of his death will be determined in
accordance with the form of pension elected by the Member under
Section 5 (forms of retirement benefits).
9. TERMINATION OF SERVICE
9.1 If the service of the Member terminates prior to his Normal
Retirement Date, he shall be entitled to receive a deferred monthly
pension commencing on his Normal Retirement Date and determined in
accordance with Section 4.1.
Instead of the deferred pension, the Member may elect at any time
thereafter prior to his Normal Retirement Date to receive a lump sum
payment equal to its Actuarial Equivalent in final settlement of his
rights under the Plan.
The Company may, for good and valid reason to be provided, elect to
defer the payment of any lump sum amount provided under this Section
8 for up to one year following the request of the Member. In such
case, however, interest will be added to the lump sum amount using
the rate and compounding method used to determine the Actuarial
Equivalent of the Member's deferred pension or, if greater, a rate of
bank prime, as charged by the Company's principal banker, plus 2%.
10. PAYMENTS OF BENEFITS
10.1 Amounts of benefits due under the Plan shall be paid directly by the
Company.
11. AMENDMENT
11.1 The Company reserves the right to alter, amend or vary the Plan from
time to time but no such alteration, amendment or variation of the
Plan shall be valid without a written notice to the Member. No such
amendment shall have the effect of diminishing the accrued benefits
of the Member with respect to his Credited Service that is prior to
the effective date of the amendment, which cannot be prior to the
date of the notice.
11.2 The Company intends to maintain the Plan in force indefinitely, but
reserves the right to terminate at any time. The termination of the
Plan shall not affect the rights of the Member to accrued benefits
with respect to Credited Service prior to the effective date of such
termination.
12. GENERAL
12.1 The establishment of the Plan does not give the Member the right to
be retained in the service of the Company nor shall it prevent the
Company from discharging the Member at any time.
12.2 No benefits payable under the Plan may be assigned, charged,
anticipated or given as security. No benefits payable under the Plan
may be subject to execution, seizure or assignment.
12.3 All benefits payments under this Plan shall be made in lawful
currency of Canada.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day, month and year first above written.
<TABLE>
<S> <C>
G.H. WOOD + WYANT INC.
per: J.A. WYANT D.C. MACMARTIN
------------------------------- -----------------------------
</TABLE>
Agreed to this 16th day of May 1996
5
<PAGE> 1
EXHIBIT 21.1
<PAGE> 2
WYANT CORPORATION
EXHIBIT 21
SUBSIDIARIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
------------------ -----------------------------
<S> <C>
Bridgewater Manufacturing Corp.............................. New Jersey
IFC Disposables, Inc........................................ Tennessee
Wood Wyant Inc.............................................. Canada
</TABLE>
1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 156,131
<SECURITIES> 0
<RECEIVABLES> 12,920,004
<ALLOWANCES> 0
<INVENTORY> 8,245,125
<CURRENT-ASSETS> 23,103,927
<PP&E> 19,318,814
<DEPRECIATION> 0
<TOTAL-ASSETS> 43,832,883
<CURRENT-LIABILITIES> 20,344,624
<BONDS> 5,548,021
4,379,527
0
<COMMON> 27,037
<OTHER-SE> 11,752,948
<TOTAL-LIABILITY-AND-EQUITY> 43,832,883
<SALES> 91,219,621
<TOTAL-REVENUES> 91,219,621
<CGS> 62,199,321
<TOTAL-COSTS> 89,617,095
<OTHER-EXPENSES> (295,087)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 968,128
<INCOME-PRETAX> 929,485
<INCOME-TAX> 510,987
<INCOME-CONTINUING> 418,498
<DISCONTINUED> 0
<EXTRAORDINARY> 91,958
<CHANGES> 0
<NET-INCOME> 510,456
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.15
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 157,625
<SECURITIES> 446,812
<RECEIVABLES> 11,299,555
<ALLOWANCES> 0
<INVENTORY> 10,012,033
<CURRENT-ASSETS> 25,119,325
<PP&E> 19,281,210
<DEPRECIATION> 0
<TOTAL-ASSETS> 45,572,081
<CURRENT-LIABILITIES> 19,491,954
<BONDS> 10,186,656
2,267,900
0
<COMMON> 27,037
<OTHER-SE> 11,784,645
<TOTAL-LIABILITY-AND-EQUITY> 45,572,081
<SALES> 92,845,180
<TOTAL-REVENUES> 92,845,180
<CGS> 63,530,650
<TOTAL-COSTS> 91,375,519
<OTHER-EXPENSES> 226,530
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 751,106
<INCOME-PRETAX> 492,025
<INCOME-TAX> 347,635
<INCOME-CONTINUING> 144,390
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144,390
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 91,355,610
<TOTAL-REVENUES> 91,355,610
<CGS> 62,113,937
<TOTAL-COSTS> 88,905,528
<OTHER-EXPENSES> 1,542,366
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,064,149
<INCOME-PRETAX> (156,433)
<INCOME-TAX> (250,381)
<INCOME-CONTINUING> 93,948
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 93,948
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
